When will people realize that unions are bad for business? Look at the “Big 3” car companies here in the U.S.; they are failing, no surprise there. They want money from the government, and more of it, and more of it. But why is it that I should willingly give them my hard earned dollars to support their idiotic decisions? 

Let’s look at some data, compliments of Forbes. In 2006, Forbes reported that the average compensation, wages and benefits, for workers at the “Big 3” car companies and Toyota, Honda, and Nissan. Chrysler workers received an annual average of $151,720 each, GM workers received an annual average of $146,520, Ford workers received an annual average of $141,020 each, and workers for Toyota, Honda, or Nissan received an annual average of $96,000 each. Breaking those numbers down into hourly wages, Chrysler paid the workers $75.86 an hour of compensation, GM paid $73.26 an hour of compensation, Ford paid $70.51 an hour for compensation, and Toyota, Honda, or Nissan paid $48.00 hour for compensation. 

How many jobs do you know of, especially jobs requiring a mere high school degree, that will pay comepensation of even $48.00 an hour, not to mention almost $76.00 an hour of total compensation? How can it be that a high school degree can earn someone over $150,000 a year? And why is it that Toyota, Honda, or Nissan workers make almost $30 less an hour or $55,000 less than Chrysler workers? The “Big 3” car companies have the United Auto Workers (UAW) union working for them, the Japanese companies do not.

The UAW is responsible for the astronomical wages that these workers earn, the enormous compensation packages they receive, and the lavish pensions rewarded to the workers. Sure the workers love it, but it is extremely difficult for a business to undertake such enormous costs and be profitable. And what are the car companies at the current time? Unprofitable.

It is true, however, that Chrysler, GM, and Ford don’t absorb these exorbitant prices. They do what any business does when the cost of doing business increases: change things like passing the increased cost along to the customer. Imagine how much cheaper a new car would be if the average UAW worker screwing in the headlights was not getting $75.00 an hour, if that worker was not earning over $150,000 a year. Moreover, in addition to passing these costs on to the consumer, spending such money unnecessarily hampers innovation, research, and expansion.

When Chrysler got bailed out the first time back in the late 1970s there workers were making two and a half times the amount the national average was for someone in their line of work. Two and a half times more! It’s no wonder they were failing when they were basically throwing money away at paying their workers. Reviewing the aforementioned numbers, it seems as if the car companies still throw away an unnecessary amount of money on their high school educated workers. Why don’t they learn from the past? Speaking of learning from the past, why is it that American car companies take so long to adjust production to align it better with demand? Anyway, workers at the American Toyota, Honda, and Nissan plants aren’t part of the UAW and they still are nicely compensated. They also aren’t apparently on the verge of collapse. Coincidence? 

Even if you may consider yourself more patriotic for buying an American car, as in from one of the “Big 3” car companies, doing so only makes the UAW union stronger because they see the money. Conversely, if you buy an American made Japanese car, such as a Toyota Camry built inside the U.S. you are paying the American workers, not the union to pay the workers.

Other than requiring companies to pay ridiculous wages, unions are bad for business for other reasons. In a union you advance in the workplace based on seniority, which is a good concept in theory. But what happens when you work at a unionized place for two years and know infinitely more than someone that has been employed there for 25 years? Even if you would deserve the promotion due to your knowledge and skill, the other person would get it because they have been there longer, regardless of knowledge and skill. It is not difficult to see that such a scenario is disastrous for businesses. Unions also take away the worker’s voice. They claim to represent the worker’s, but really they represent the union’s own self interest. If the worker wants the same thing, then fine, they represent it. However, if the worker has an opposing want, good luck getting union support. Lastly, unions, and their policies and demands, also have a negative effect on the economy, particularly the GDP. Reverting to the asinine price of wages, assuming aggregate demand does not change, a higher paid wage leads to a decreased aggregate supply, which means a lower number of total goods and services produced, increased price levels, and a decreased real GDP.  Not only is this bad for the business, but it is also bad for the economy as a whole.

How inefficient must a business become before it realizes that unionization was a bad idea?