Friday, December 12, 2008

Why do we blame unions for the current auto crisis?

GWS loves 10am because it means he gets to see his boyfriend, Tom Ashbrook. On Point is a beautiful thing for the reasons as most NPR shows: intelligent discussion, hard news, and an articulate host who rarely parrots interested parties' sound bites. But GWS is curious about part of the lead-in to today's show. Discussing the auto bailout bill's Senate failure, the script read, "Senate Republicans wouldn't budge, unions wouldn't budge," and GWS couldn't hide his surprise about NPR buying into the unions-are-killing-Detroit meme.

Of the players in this mess---automakers, consumers, regulators, unions---the unions were the only ones who acted in the long-term best interest of their constituents. The unions, in particular the UAW, have been getting a bad rap about their inflexibility and their exorbitant compensation. The Times's David Leonhardt blew this argument out of the water three days ago, but the myth of the greedy or stubborn unions persists.

The UAW has already made major concessions this year and in previous years. GWS has a hard time believing that union auto workers are rich or greedy or so stupid that they can't see what's in their own best interest. Yes, if the unions would just take another one for the team, we might be able to keep the Big Three going. But as Leonhardt points out in his Times piece, Detroit's problems really don't have much to do with the need for cost reductions. GM, Chrysler, and Ford's biggest problems are that no one wants to buy their cars anymore. And there's another, better reason why the UAW was right to stand firm.

The largest cost-reduction option available to the UAW---that is, the biggest favor the unions could do the automakers out of the goodness of their collective hearts---is obvious: abandon claims on retirees' health benefits. The cost of those benefits to automakers is astronomical, in part because they created so many retirees and in part because healthcare costs have skyrocketed. But the UAW gained those long-term health benefits for their employees by compromising on salaries for decades, in turn giving management what it wanted in the form of higher short-term profits. For decades, the UAW came to the bargaining table knowing that it would have to concede on either retiree benefits or current employee benefits in the form of salaries, and the UAW chose wisely. They refused to sell out their constituents long-term interests and faced up to painful economic realities. Fine, the unions said, we understand the Japanese and Europeans are beating us up and down the field, you can pay us less if you need to, but we're only willing to take that pay cut in exchange for long-term health benefits. Detroit was given the option of paying its workers now or later, and the management of GM, Ford, and Chrysler chose to pay later. Those long-term benefits have sheltered UAW's retirees in what would have otherwise been a devastating storm. If the Big Three's aging retirees were to suddenly lose their private health insurance, we would see increases in the Medicare or uninsured rolls; if events reach that point, this crisis will have morphed from an economic meltdown to a serious public health issue. Why is the only actor in this tragedy who thought and acted strategically in its constituents' best interest being punished for its foresight? If capitalism requires failure for poor decisions, isn't it also supposed to reward wise decisions?

Then again, maybe those workers should have gone to the Honda plant down the road...

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