To understand the sad demise of the unions, consider the case of the unions spat with United and American Airlines. United and American both lost roughly $3 billion last year, or almost $5 million a day. Both these once great and profitable airlines are perilously close to being grounded permanently — as were Eastern and TWA in the 1990s. One factor behind the sudden fall of these airlines is extravagant unionized salaries that have risen to in some cases 50 percent above the industry average.
The machinists, pilots and flight attendant unions have refused to budge in renegotiating contracts with these companies that are bleeding cash. Meanwhile, discount airlines that are much less hamstrung by unions, like Jet Blue and Southwest, are whipping United in every category of service and efficiency.
One can only wonder whether the union bosses fighting United and American have lost all sense of economic reality. With salaries that can exceed $100,000 per worker, if labor costs are not cut in the next several months, there will be no jobs at all for the union to fight for. Federal officials cited out-of-control salaries as a primary cause for turning down United’s recent $1.5 billion bailout request.
The purpose of unions is to negotiate favorable salaries for their workers — but certainly not at the expense of extinguishing jobs. The union movement in America is losing hundreds of thousands of card-carrying members every year precisely because new 21st-century industries refuse to deal with militant unions.
The airlines case is not the only one where unions have engaged in self-destructive behavior of late. Last year, Transit workers went on strike demanding massive pay increases from an all-but-bankrupt municipal agency.
The transit workers already receive salaries 30 percent to 40 percent above comparable skilled private sector jobs.
The dockworker work stoppage in California this past October involved union complaints against the evils of technological progress.
Before President Bush invoked the Taft-Hartley Act to suspend the work stoppage, the American economy was losing an estimated $1 billion a day in output and throughout the economy.
Most recently, the Communications Workers of America launched a $2 million ad campaign against Verizon, the Baby Bell of the Northeast. As even the most casual investor knows, the last three years have been brutally unkind to the telecom industry. In 2000, the telecom sector contracted by 28 percent and bled almost $1.7 trillion in lost share values. More than half-a-million telecom workers have lost their jobs.
The CWA strategy of blasting Verizon for laying off 3,500 workers makes as much sense as Kobe Bryant and Allen Iverson running TV ads encouraging fans not to go to anymore NBA games.
Union membership as a share of the work force has fallen by half over the past 30 years or so, according to the Public Service Research Foundation. Today only roughly 1 in 6 workers is a dues-paying union member and the percentage of private sector union workers is much lower than that. Only public sector unionism is growing. Pollster Scott Rasmussen has pointed out that on Election Day, 3 times as many voters were stockowners than union members. These workers understand that their 401(k) plans and their individual retirement account nest eggs depend on the profitability of American industry.
As a United Airlines frequent flyer traveler, I sure hope the unions come to their senses and allow new management to make the reforms necessary to cut costs. There is no law of economics that says airlines have to lose money. Southwest has proven that.
Saving United and American airlines will save union jobs. But only when union officials realize that in this industry, as with telecom, and so many others, when they destroy the companies that hire their workers, they destroy themselves.