Wednesday, October 10, 2007

UAW Strikes Chrysler, Autoworkers = Musicians?

The UAW is now on strike against Chrysler, and it made me think of this old joke:

A kid says, "Dad, I want to grow up and be a musician." And the dad says, "I'm sorry Son, but you can't have it both ways."

Isn't this a little bit like the UAW's position? It wants both: a) job security, and b) rising, above-market compensation.

1. If the UAW wants job security, it might have to give up wage increases, and might even have to accept falling wages. Just like stock prices, home prices, commodity prices and currency values rise and fall in response to changing market forces, the UAW would have to accept lower wages to maintain jobs when market conditions change. However, wages (especially union wages) are "sticky," meaning that they'll adjust upward easily, but won't easily adjust downward when market conditions change and demand for unionized labor falls.

2. If the UAW's priority is rising real wages/compensation, it might have to give up its position of maintaining job security, especially if rising wages are accompanied by rising productivity. Higher-paid and more productive, but fewer workers might be possible; but maintaining the same number of higher-paid and more productive workers might not be possible.

Bottom Line: Unlike the past, rising real union wages and union job security are mutually inconsistent positions in today's competitive, global marketplace. Like the message from the father above, "I'm sorry UAW, but you can't have it both ways."


At 10/10/2007 12:30 PM, Blogger james said...

I think you are right on! If their wage is directly tied to the current stock price for the company perhaps it would get them invested in LEAN production models and get them producing some competative products.

At 10/10/2007 12:47 PM, Anonymous Anonymous said...

Professor Perry:

These are excellent analyses about current conditions in the auto industry. This may surprise you, but I agree with you 100%.

Although we achieved pseudo job security in our UAW/GM contract, any real job security will depend on being competitive in price and product with all the other car makers. We are not entitled to future success, and success can’t be written on a piece of paper—we have to earn it.

Times change, and we must change, too. What worked the last 50 years will not work the next 50 years.

At 10/12/2007 2:37 AM, Anonymous Anonymous said...

Walt, the American manufacturers' positions are skewed by the precedent of Chrysler under Iacocca. The unions and their constituents think that their companies really can't go out of business, and this emboldens them. Further, the federal government exacerbates this mindset by assuming pension payment responsibility if a corporation does go bankrupt. Both factors bolster a confrontational stance within the auto unions.

Personally, I have always owned General Motors vehicles. I never will again. Union thugs and their socialistic behavior are diametrically opposed to what I, and many millions of other free marketeers, believe in. I will not enable them further.


At 10/12/2007 6:16 AM, Anonymous Anonymous said...

Anonymous said: "Personally, I have always owned General Motors vehicles. I never will again. Union thugs and their socialistic behavior are diametrically opposed to what I, and many millions of other free marketeers, believe in. I will not enable them further."

You should buy the best product regardless of where it is made. Saying that you will not buy a vehicle because it is union made is as illogical and foolish as saying you should buy a vehicle because it is union made. Make all the companies work for your hard-earned dollar. You’re the boss.

Make sure you try all the cars before you buy. Don't let yesterday's products turn into today's misconceptions. Shop around; you may be pleasantly surprised, or not, but you will be an informed shopper.

At 10/12/2007 7:23 AM, Blogger james said...

Two great points you guys! Chrysler did execute the one of the largest undermining actions of the free market and the American auto industry with the acquisition of government bail outs in the 70s. Hopefully we can learn from this when it comes to air lines and the such. I also agree that purchases made on ideology and not competitive products undermines our economic model as well. We need to stop the idea of "Free market will correct the market, except...". Stop it with the except with the individual agendas and let the thing work.


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