Q&A - Union naivete: UAW Local Rejects Deal With Ford - WSJ.com

UAW Local Rejects Deal With Ford - WSJ.com

Question:

(CB)"...What amazes me is how naive people like you are to the education level of people in the labor unions...."


Answer:

What's sad is how simplistically you miss the point and the issue.

The unions have the mentality that they want high wages and benefits (including legacy benefits) and thus the world has to change to provide them.

The alternative is to recognize the complex interactions of a changing world and then try to make the best of them.

The unions are ignoring larger economic issues (as is the President). That is one of the problems with a Keynesian approach to economics.

Keynesians also ignore the basic forces that drive their own economic lives (such as grocery shopping) when they expand their economic view to include the macro-economy.

There is a basic equation that describes the relationship of jobs, etc.
Production = labor costs + capital costs + raw materials costs

It's all well and good to try to boost labor costs (gross to employer), but the 'production' or product cost is determined by competition - not the wishes of unions.

Capital costs include the cost of borrowed capital and the return on investors' funds put into the business (think of how the UAW and the Obama administration wiped out stock and bond investors).

Raw material costs are bought from global markets.

Thus, as an example, the unions and the Obama administration boost the cost of labor. They increase both regulations and regulatory risk (another cost factor impacting 'labor' costs vis-a-vis ObamaCare, for example; impacting capital costs vis-a-vis Dodd-Frank, FDIC regulations, bank bashing, higher taxes on entrepreneurs and investors; increasing raw material costs by having an anti-oil policy and misdirecting funds to favored new clean-energy policies, etc.).

So, the government is driving up costs across the board. The unions are at-a-minimum supportive and complicit.

Thus, one shouldn't be surprised that the only part of the American economy doing well are those companies that can overcome all of the economic obstacles of labor, government, etc.

There are various ways in which these obstacles can be overcome - such as:

1. Outsource production (both in the USA (i.e. non-union, etc.)
2. Substitute equipment (i.e. capital) for labor.
3. Increase per worker productivity (technology)

You get the idea.