Monday, January 12, 2009

Union contracts (class example)


Cartoon from Investors Business Daily (12/19/2008)
Part III. Factor Markets - Labor, Land, and Capital
Chapter 13. The Labor Market
Unions negotiate wages and other benefits for workers via collective bargaining. Recently the total compensation of workers in the UAW has been blamed for the demise of the US automobile manufacturers. This cartoon illustrates the difficulty Congress has had with getting the UAW to agree to terms that would help the Big Three stay afloat.
In my opinion it was wrong for Congress to bailout the automobile manufacturers. The UAW banked on a bailout and they were right. The bailout left their contracts intact, whereas bankruptcy would have made them impotent. If Congress would have let the firms fail, unions would have been useless to workers. Congress should have let the manufacturers declare bankruptcy, which would have negated some of the power that the UAW retains and helped bring labor costs down. Now the taxpayers are stuck propping up bloated labor contracts. It seems unfair that a worker earning minimum wage with no retirement benefits pays taxes to bailout unionized autoworkers who are paid $79/hour so that they can keep their retirement package intact.