Chart of the Day: Union Membership in the U.S. Falls Below 12% in 2010 for the First Time
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Professor Mark J. Perry's Blog for Economics and Finance
Sunday, January 30, 2011
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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48 Comments:
well, that's what happens when a parasite is too successful: it kills the host and thereby itself.
unions in the US have largely been responsible for their own destruction by making their employers uncompetitive and repeatedly driving them into bankruptcy. (except, of course, the government unions which thrive by doing this, though it looks as though the ones at the local and state level are about to get some hard lessons in fiscal reality)
seriously, name one heavily unionized industry in the US that is globally competitive and does not rely upon government subsidies and bailouts.
What happened between the mid-70s and mid-80s that caused union penetration to drop so suddenly? It was only drifting down before that. Manufacturing employment was fairly stable in the 70s and 80s, so I doubt that's it.
...not low enough.
When you do the private/public sector breakdown, I'd suggest that much of the UAW should be shown as public sector...
Not low enough.
Unfortunately we also have not insignificant interventions that haven't faced such declines like licensing (probably rising substantially from '48 to '10) and the minimum wage (probably relatively the same for '48 and '10) that probably have the same economic negatives as union membership.
"In 2010, among full-time wage and salary workers, union members had median usual weekly earnings of $917, while those who were not represented by unions had median
weekly earnings of $717. (See table 2.)" (Source: BLS)
Fewer workers in unions, but I guess better pay for the ones left. And the ones who are left seem to have some political clout. It will be interesting to see how Bob King, the UAW president, tries to organize the transplants.
Walt, Bob King won't organize the transplants.
Morganovich said it best, name a company that is still competitive and unionized? Boeing is on the death march now as its unions slowly strangle it. I feel for the Boeing engineering staff, because I've seen this unfold before. Caterpillar has sytematically crushed its unions so it can stay competitive.
The next thing to go will be the sybiotic relationship unions have with governments: Where government allows unions to help enforce laws and regulations. Once this link is gone, maybe, just maybe we'll see some factories pop up north of the Mason-Dixon line again.
This comment has been removed by the author.
Jason, New-hire GM employees make less than the current transplants pay. I never thought I would see that.
I don't think the way unions operated in the past will be how they operate in the future. If they do, they will not be around much longer (in the private sector).
The good union news is tempered by the rapid increase in the number of Americans in licensed occupations. In 2008 Morris Kleiner said:
"Occupational licensing has skyrocketed. Fifty years ago, only about five percent of the workforce was licensed. Last year the number was almost 30 percent. By contrast, 50 years ago, 35 percent of the workforce was unionized; now that number is about 12 percent.”
http://liten.be//sp0rX
You guys might want to use the rulemaking policy process to let your feelings about unions be known. You have until February 22, 2011 to comment on this rule.
New Union Posting Rule
Re licensure: want to go to an unlicensed lawyer not subject to losing license for breach of ethical rules; how about an unlicensed surgeon or nurse anesthesist?
State legislatures responded to harm to the public occasioned by hacks in creating licensed occupations Ever wonder why bankers aren't licensed? Even now the SEC is considering requiring Merill Lynch salesmen to adhere to fiduciary standards as part of the Series 7 license.
Re unions: why does one understandably appreciate the state-created legal form known as a corporation, which allows a group of individuals to combine their capital without personal liability; and yet unions are vilified simply by desiring to combine labor under an umbrella of state sanction.
Does it depend on whose ox is being gored?
WALT G. thanks for your comments and the posting rule. It's interesting that they didn't have this in writing.
hswalj, and the govt licensing requirements kept the hacks out? Nonsense, the licensed professions just embraced the licensing process to keep their competition out. Some sort of private certification or BBB-type record keeping will always be around, govt licensing is just a way for the guild to keep competition at bay. As for corporations vs unions, I have no problem with people organizing in either form, which is why I also cheered the Citizens United ruling that allowed both to speak their mind before an election. The problem occurs when either abuses their power, whether by lobbying/bribing politicians for dumb laws that support them or when public sector unions steal money from taxpayers by paying off the politician intermediaries who negotiate their contracts in their stead.
Jason: "Morganovich said it best, name a company that is still competitive and unionized?"
I think morganovich asked us to name an industry, not a company.
In answer to your request, Jason:
Southwest Airlines, the most unionized of all U.S. carriers, just reported its 38th consecutive year of profitability. Southwest does not yet compete globally. But I do not believe its unions will impede the company's efforts to do so in the future.
I believe the U.S. petroleum refining industry is still heavily unionized. It may not be economical to transport refined products across oceans in large amounts.
Jason: "name a company that is still competitive and unionized?"
UPS is a unionized company that competes successfully with a non-union company (only the pilots at FedEx are unionized).
Jet, good examples. Southwest was able to put good union deals together because of good leadership and better wisdom after viewing a few airline bankruptcies. Correctly hedging the run up in oil helped too.
UPS is starting to see some financial strains. And let's not forget it used to be competition against the most uncompetitive of all the government sponsored entities there is: The USPS. And FedEx has a far more competitive model I think. Let's see how this one goes, after all it takes along time to kill a dinosaur, or so I've been told.
Oil is heavily unionized by guilds and trades. Easy to make money when everyone needs what you produce.
Jason,
We'll see about UPS. I have a lot of respect for that company. Twenty years ago I was a strategic planner for FedEx. We were definitely competing with them then.
southwest may be a good example of unions that work. part of the reason is a unique culture and hiring practices (based on personality tests, not prior experience for all the customer facing employees). i think another part is that employees at SWA have always have significant equity compensation.
i agree that they are a high quality airline, though i'm not so sure they are globally competitive, just better that the rest of our domestic trash. US airlines are hands down the worst in the developed world.
as a domestic air carrier, southwest is heavily protected and coddled. i suspect that if ryanair were allowed to compete in the US, you might see a very different story.
i just ran a search for ryanair fares from london to madrid. i got 47.99 GBP roundtrip. that's about $77, not even 1/4 the price of the southwest flight from oakland to park city, a shorter route.
do you think SWA could compete with that? i don't. they have 4% net margins.
alternately, i recently flew austria airlines from amsterdam to sofia changing places in vienna. this was a very "southwest" kind of route and i paid less that i would have for a comparable SWA flight and got free booze and a hot meal on each leg of the flight.
so, while SWA may look good in the walled little garden of the US, they are nothing like globally competitive.
overall, you gotta admit, unions were pretty much death for the airlines as a whole. it was only by getting out from under them through BK in many cases that has allowed many of them to continue to exist. SWA did not really go interstate until the early 80's which let them negotiate at a time when the unions in the industry were on the run. i don't know enough to say whether their union relationships were just an accident of history or not.
i don't buy the UPS example at all.
their unions are eating them alive and they are actively trying to force fedex under the teamsters yoke.
"If you can't beat 'em, have Congress hobble 'em. That's the motto of some in corporate America, and Exhibit A might be United Parcel Service's campaign to get Washington to impose its labor woes on rival Federal Express. This would be one more union bailout at the expense of business competition and economic efficiency.
House Transportation Chairman James Oberstar (D., Big Labor) last year slipped 230 words into a spending bill that would make it easier for the Teamsters to unionize FedEx. This ambush was included at the urging of UPS, which has been saddled with the Teamsters for decades and wants FedEx to feel its pain. "
from the WSJ -
http://online.wsj.com/article/SB10001424052748704133804575198232906957778.html
remember the UPS strike?
also worth noting is that UPS saw revenues drop 10% in the downturn while fedex stayed flat and that UPS has a huge unfunded pension issue that will sink the company if nothing is done.
UPS is sunk and they know it, hence, they lobby to force fedex to drown with them.
if they can keep the teamsters out, fedex is going to eat UPS alive over the next 3-5 years.
Sprewell said: "Some sort of private certification or BBB-type record keeping will always be around, govt licensing is just a way for the guild to keep competition at bay."
Like private bond rating companies that rated toxic mortgage packages AAA. No thanks.
morganovich: "i don't buy the UPS example at all."
OK. I still think they do a hell of a job, and their stockholders seem to be approving. Here's a few more pieces of information:
- UPS recently reported their 40th consecutive year of stable or increasing dividends;
- UPS operating margins regularly exceed those of FedEx;
- UPS stock price has returned to levels of 5 years ago, while FDX has not.
morganovich: "UPS is sunk and they know it, hence, they lobby to force fedex to drown with them."
I'm positive UPS is not "sunk". I'm also positive that Fred Smith has done a tremendous amount of lobbying for his company, FedEx, over the past three decades. So what?
morganovich: "i suspect that if ryanair were allowed to compete in the US, you might see a very different story."
You can believe whatever you wish.
I was responding to Jason who asked us to:
"name a company that is still competitive and unionized?"
Both Southwest Airlines and UPS are heavily unionized and still competitive in the markets in which they operate.
As far as I am concerned, both UPS and Southwest Airlines are outstanding companies.
morganovich: "overall, you gotta admit, unions were pretty much death for the airlines as a whole."
I'm not sure I agree completely. In my view, it was continued government interference in markets which caused the deregulation shakeout to last for three decades. Government has propped up failing airlines with loans (U.S. Airways and American West), prevented consolidation (United and U.S. Airways), and restricted growth of airports. Further, the Pension Benefits Guarantee Corporation allowed several airlines to remain in business.
Also, morganovich, the unions were only half of the bargaining process. Airline management continued to agree to all those outrageous benefits packages even when they had opportunities to change them. The problem, IMO, is that management's focus was on the short term rather than the long term.
Also, morganovich, the unions were only half of the bargaining process. Airline management continued to agree to all those outrageous benefits packages even when they had opportunities to change them. The problem, IMO, is that management's focus was on the short term rather than the long term.
Jet, true. But the terms of the negotiation are like those you would encounter in a shakedown. Union: Give me more or I'll strike. What is management supposed to say, "Go ahead!" ? Given how companies operate, managing cash-flow and such, who have the absolute ability to survive a strike without bankruptcy? General Motors should have told the UAW to pound sand 30 years ago, but knew it couldn't survive a strike. They had to play the hand dealt to them.
It's not so simple as short term long term. It's "retreat to fight another day" or "It's on like Waterloo, baby!" There aren't many CEOs who want to embark on a suicide mission.
"i just ran a search for ryanair fares from london to madrid. i got 47.99 GBP roundtrip. that's about $77, not even 1/4 the price of the southwest flight from oakland to park city, a shorter route."
I'm not sure comparing rates for different routes of similar distance is a valid measure. Would it make a difference if thousands of Londoners were headed to the ski slopes in Madrid this time of year? And, how many other choices of carrier are available on these two routes?
jet-
look at the UPS pension obligation.
still underfunded. they are just running up debt trying to buy their way out. those bills tend to come due. watch and see.
regarding southwest, jason was paraphrasing my question which was:
"seriously, name one heavily unionized industry in the US that is globally competitive and does not rely upon government subsidies and bailouts."
southwest would not be able to compete globally. pretty much none of the US airlines can. for the same price, you get much better service (austria air), or, for the same service (ryanair) you pay 75%.
if the US had "free skies" southwest could not compete.
i don't have to "believe whatever i want". the numbers are the numbers. if you can show me how southwest could compete with someone underpricing them by 50% + when they have 2% net margins, then i'll happily retract my statement. note that in the 2010 FY (ends march), despite these low prices, ryanair after tax margins of 10%+ vs sub 1% for LUV in CY 2009 (pretty much the comparable period)
regarding airline unions, airlines in particular have incredibly low bargaining power vs their unions. even a mild strike or walkout does horrific damage to the company, its passengers, and it's profits. grounding an airline for the 15 days that the UPS strike lasted would pretty much put it out of business.
blaming management for being so vulnerable is like blaming your kid for getting his lunch money taken by a gang of playground thugs. hey, he could have stood up to them...
Government interference and regulation has made union benefits so expensive it is forcing unions out of a legitimate business.
morganovich: "if you can show me how southwest could compete with someone underpricing them by 50%"
If that were possible, "someone" would already have done so. I do not believe Ryanair or anyone else could operate in the U.S. and price their fares anywhere near 50% below those of Southwest. They could not do so even if the pilots and flight attendants worked for minimum wage.
Government regulation makes goods and services more expensive. But not as expensive as unregulated shoddy goods and services provided to maximize private profit while increasing public expense. You must define the system boundaries before making pronouncements as to what is best.
morganovich: " jason was paraphrasing my question"
No, he wasn't. He may have thought that he was, but he wasn't. You said "industry", he said "company". I responded to his statement, not to yours.
I specifically referred to the airline industry. In the passenger airline industry collective bargaining concessions have resulted in sustained losses to the industry but not to every unionized company in that industry.
Just so you don't misinterpret what I write, I still believe that the collective bargaining failure was management's failure. I do not view unions as thugs. I believe workers should have the right to bargain collectively.
ron-
so pick another route that you think is comparable.
the SLC route is actually a cheap one as it gets subsidized by the ski areas etc.
dallss to phoenix is $700 RT.
chicago to omaha is $250 (before taxes and fees, the ryanair number includes them).
chicago to new york, also $250 before fees. boston to dulles, also similar.
i doubt you can find me a 900 mile flight on southwest for $77 one way pre taxes and fees, much less round trip and inclusive of them.
those who have not used them seriously underestimate how cheap ryan air is. there is nothing comparable in the US except for a few ultra competitive routes (like SF to JFK) and then those rates are always on new airlines like jet blue or virgin.
"Government regulation makes goods and services more expensive. But not as expensive as unregulated shoddy goods and services provided to maximize private profit while increasing public expense."
Hydra, your ignorance of how markets work is showing.
"so pick another route that you think is comparable."
After further study, I see that you are correct. I spoke too soon. Removing foot now. :-)
jet-
"If that were possible, "someone" would already have done so. I do not believe Ryanair or anyone else could operate in the U.S. and price their fares anywhere near 50% below those of Southwest. They could not do so even if the pilots and flight attendants worked for minimum wage."
not so at all. they just have a better system. the euro carriers that do manage to get into the US (like virgin) cut prices dramatically and take over routes. when they entered the US market, virgin america was pricing at $99 each way SFO to JFK, less than half of what their competitors were charging. as someone who was flying that route at least once a month, i was very familiar with their pricing.
they are still $129 each way for that route. their entrance drove everyone else's prices way down. the US carriers lose money on that route now. the effect would be even more pronounced except for one thing which you are leaving out of you analysis: there is no free entry into the airline business.
this short circuits your "someone else would be doing it" idea. i'm not even talking about buying/leasing the planes. i'm talking about getting flight slots, take off and landing slots, gate access etc. that is a massive barrier to entry. it's why airlines tend to grow by acquisition - they aren't buying the operator, they are buying the landing slots.
this perpetuates an oligopoly.
labor indeed ought to have a right to organize. and management should have a right to fire them if they want. but labor should never have the right to declare a close shop and prevent anyone else from legally working there, which is how they took over so many of these industries.
what right does labor have to win 51% of the vote and force the other 40% to join a union and prevent management from hiring non union employees?
that's where they get their power, and that is totally unfair and unreasonable.
it's like ATT voting that you can only use them for your phone, suing you if you use anyone else, and then sitting down to negotiate your monthly bill. do you really think that is a fair negotiation?
hydra-
ron pretty much nails you here.
""Government regulation makes goods and services more expensive. But not as expensive as unregulated shoddy goods and services provided to maximize private profit while increasing public expense."
Hydra, your ignorance of how markets work is showing."
unregulated markets lead to shoddy goods? is that why it's impossible to buy a high quality shirt or sofa or pogo stick? what on earth are you talking about?
unregulated markets create choice. some of those choices may be low quality (and likely low price). some will be high quality and high price. there will be kias and porsches. that's a good thing.
you pick the one that appeals to you and you buy it. no one is going to force you to consume shoddy goods.
morganovich: "as someone who was flying that route at least once a month, i was very familiar with their pricing. "
As someone who has worked as a planner for freight and passenger airlines for the past 25 years, I am very familiar with airline costs in the U.S. As I said before, no airline is going to come into Southwest Airlines markets and permanently reduce fares anywhere close to 50%.
FYI, airlines do not grow only by acquisition. Only a very few landing slots operated by Southwest Airlines were acquired via acquisitions. Landing slots have not been a barrier to entry in its growth.
"Only a very few landing slots operated by Southwest Airlines were acquired via acquisitions"
you might want to ask ATA and air tran about that. those acquisitions were purely about the routes. there may have been a time when you could get gates organically, but nobody seems to be able to do much of that anymore and even southwest is pursuing an acquisition driven strategy.
you claim no airline can do to southwest what virgin did to delta, but you provide zero data. ryan operates much more cheaply than southwest, just as virgin did to delta. RA's prices are 75% lower than LUV and their profit margins are immensely higher.
so what is it about coming to the US that would change all that?
if their costs doubled by coming to the US, they would still be much cheaper and more profitable just by doubling their prices.
why do you think it would cost them more than twice as much to fly here?
morganovich: "you might want to ask ATA and air tran about that. those acquisitions were purely about the routes."
Southwest Airlines has not yet acquired Airtran. The pending Airtran acquisition is not "purely about the routes". It is also about the aircraft and the crews to fly them. It is also about eliminating a low cost competitor in the Atlanta markets Southwest desires to enter.
In any case, my statement was that Southwest has grown without acquiring landing slots. Airtran is not yet part of Southwest.
Southwest also did not acquire ATA. Rather, the airline purchased a mere 14 landing slots at LaGardia as a result of the ATA bankruptcy. That was enough for only 7 arrivals and 7 departures daily. Southwest Airlines aircraft make 3,100 departures and 3,100 landings every day. So the purchase of the LaGuardia landing slots represents a very tiny portion of Southwest's operations.
My statement:
"Only a very few landing slots operated by Southwest Airlines were acquired via acquisitions."
is absolutely correct.
morganovich: " RA's prices are 75% lower than LUV"
I don't think that is correct.
Ryanair reported that it collected 2.942 billion Euros from 66 million enplaned passengers in its latest fiscal year. That's 44.56 euros, or $61, per enplaned passenger.
Southwest Airlines reported that in 2010 it collected $10.549 billion from 106,227,821 enplaned passengers. That's $99 per enplaned passenger.
So Ryanair's prices, including ancillary fees, appear to be only 39% lower than Southwest's.
morganovich: "so what is it about coming to the US that would change all that?"
I do not believe Ryanair could find employees in the U.S. who will work for the wages they pay in Europe. That's especially true for pilots and aircraft mechanics.
Ryanair will be forced to pay U.S. level benefits to its U.S. employees. Health care, in particular, will be much higher in the U.S.
Ryanair's current fleet is very new. Maintenance repairs for half the fleet are still covered by warranties. As its fleet ages, Ryanair's maintenance costs will increase.
That's three reasons I believe Ryanair's U.S. cost structure could not match that of its European operations. If I had the inclination, I'm sure I could find more.
hswalj, As I've commented elsewhere on this blog, the ratings agencies had a govt-enforced oligopoly and were very far from a private ratings market. Next you'll tell me Fannie/Freddie were private too. ;) Funny how your beloved govt can fuck up even private markets by keeping competition out.
Morganovich, how is RyanAir able to keep costs so low? I've read before that they have no frills and provide a very budget experience but that can't account for much of the fare difference. Is it that their labor costs are much lower, possibly because they use less union labor?
Ron: no response but ad hominem?
I just bought an ignited for my stove that cost half as much as the stove. There is no excuse for that crap.
No one forces you to buy shoddy goods.
Horse manure. Your argument assumes perfect knowledge, which suppliers will not and sometime cannot give you. Government regulations do cost money, but often they act to level the playing field in a way that makes for better products and lower overall or system costs.
Consider government mileage ratings. They are not perfect and manufacturors game the tests, but overall, they are conducted uniformly and give consumers a consistent measure they would not otherwise have. Name brands are no guarantee of quality or service. I've already mentioned the case where every heat pump in one development failed one or two months after the warranty expired. The situation was spotted by someone who worked nights and saw the repair trucks day after day. It was just faulty equipment but it took a class action suit and government action to get it rectified.
I've been screwed over by government, but I've been screwed over by cheap ass private enterprise scamsters far more often.
Sure, private enterprise has given us far more products and more"choices" I get it.
It is only that the vast majority of them are incredibly bad. And many would be even worse without government interference.
Really, how many baby cribs have to be recalled before maenufacturors can make safe ones?
This comment has been removed by the author.
"Government regulations do cost money, but often they act to level the playing field in a way that makes for better products and lower overall or system costs."
Really? How about government screwing you over by forcing you to buy shoddy products like CFLs that are inferior in every way to the product they replace, while costing more, and creating toxic waste?
Hydra,
"Ron: no response but ad hominem?"
That's not actually an ad hom.
If you understood how markets actually work, and what motivates producers and sellers, as well as buyers, you wouldn't have made the comment you did.
"I just bought an ignited for my stove that cost half as much as the stove. There is no excuse for that crap."
What fraction of the price of a stove do you believe an igniter should cost?
Do you believe government should control the price of igniters to protect you from greedy producers? What do you suppose would happen to the availability of after market igniters if they did?
Hydra,
Private organizations such as Underwriters Laboratories and Consumers Union (publisher of Consumer Reports) do an excellent job of solving the consumer knowledge problem. Absent government regulators, many more such private organizations would arise.
There is no guarantee that either government or private organizations will be free of corruption. But private organizations cannot risk the bad publicity and loss of revenue if they get caught. So private organizations at least have some incentive to remain honest.
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