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Higher commodity costs and increased fuel prices are increasingly being
cited by companies as the causes of their bankruptcy filings. Will
union-induced labor problems make that list soon, too?
Union issues are cropping up lately after what seems like a long hibernation, and a labor vs. management showdown could even have repercussions for November's Presidential election. Negotiations between Qwest Communications International Inc. and its 20,000-strong telecom union stalled over the weekend and are at an impasse. Meanwhile, that old union nemesis, Wal-Mart Stores Inc., was ordered to impose a union contract at a shuttered auto center in Quebec Province by an arbitrator appointed by a Canadian court. Times have clearly changed
since the 1960 presidential election, when then-Vice President Richard
Nixon pushed for a settlement of a nationwide strike by the United
Steelworkers Union as he readied his bid for the presidency. Roughly 15,000 steelworkers had gone on strike nationwide in summer 1959 over a contract clause that would have given management the right to control the number of workers under tightly controlled USW work rules. While the union won the strike, its lingering fallout eventually devastated the U.S. steel industry and huge shipments of imported steel showed up at ports for the first time in history. Times have changed. Gone are the days when factory workers toting lunch pails trekked home from work on the New York City subway. Or when massive steel mills dotted Pennsylvania. Even Bethlehem, Pa.-based Lehigh University has shifted away from its strong engineering slant since Bethlehem Steel, the one-time largest U.S. steelmaker, has long been shuttered. To be sure, the U.S. manufacturing base isn't anywhere close to what it used to be. But union problems have persisted
even in the service economy at Wal-Mart and elsewhere, and the giant
discounter is even willing to go to war against the Democratic Party
over it, encouraging its managers to try to prevent a Barack Obama
victory. The AFL-CIO responded by filing a complaint against union-free Wal-Mart with the Federal Election Commission last week by claiming that Wal-Mart is illegally mixing business with politics. If
food and fuel costs continue to rise, expect wages to inflate, as well.
And that means more battles between labor and management. Whether that
translates into more bankruptcies is another matter, but in recessions
and down economic down cycles in the past, it certainly hasn't helped.
- Terry Brennan CategoriesComments Deal Video
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There are several factors that come into play on this issue. The most important of which may be that for some firms the only way to escape a ruinous union contract is to declare bankruptcy. Organized labor tried and failed to exempt union contracts from bankruptcy in the 1985 reform legislation. If forces sympathetic to union interests capture the White House and a filibuster proof majority in the Senate in the 2008 elections, it will be interesting to see whether they decide to take another shot at this issue. That could be particularly important if they succeed in enacting the perversely named "Employee Free Choice Act." That could trigger a round of union organizing the would be sufficient to bring many firms that are marginally competitive in the global economy under. Unions are corporatist institutions in a competitive world. We would be better off if they had fewer special privileges and legal immunities, not more.