The Future of the Union Movements; C. Baird

The overwhelming majority of American labor is union-free. Only 10 percent of the private-sector work force is unionized. That number has been declining since 1953, when itwas 36 percent, and it will continue to de cline. By 2000 it will be, at most, 7 percent, the same as it was in 1900. Neither the UPS strike nor all the bluster of Sweeney, Carey, and their surrogates about bold new ven tures in·union organizing can stem the tide. The future of the American union move ment as we know it (at least in the private sector) is decay. In contrast; the future of the American labor movement is increasing Charles Baird is prOfessor of· economics and director of The Smith Center for Private Enterprise Studies at California State. University, Hayward. prosperity based on competition and entre preneurship. Economists have always understood that., a labor union is merely a carteL It is a group of sellers of labor services in collusion to eliminate competition among themselves and to try to quash competition from others.

The unions' rallying cry has always been, "Take wages out of competition." Competition is the enemy· of all cartels. Even if a union can impose discipline on its own members, it always has to contend with union-free workers and union-free firms. In the modern American economy, with substantial (albeit insufficient) dereg ulation in hitherto heavily unionized indus- .. tries-for example, trucking and airlines~ even unionized firms . cannot pass above market wage costs forward to customers. Moreover, competition is increasingly global in scope. Every entrepreneur in every country has the potential of causing unex pected changes in market .conditions •.. to which American firms and American work ... ers must respond. Firms and workers under the yoke of Sweeney-style unionism are too inflexible to respond adequately to rapidly changing market conditions. And John Sweeney knows it. That is why he and his agents in 738 Congress always struggle against free trade.

As free trade expands, Sweeney-style unions must wither. A Worker Victory or a Union Victory? The 1997 strike of the Teamsters against UPS certainly looked like a union victory. UPS capitulated on the two key issues in the dispute-converting part-time jobs into full-time jobs and preventing UPS from withdrawing from 21 Teamster-controlled multi-employer pension funds and setting up its own fund for its own workers. How ever, it never looked like a victory for all UPS workers. First, the additional full-time jobs were to be created by combining large numbers of part-time jobs. Thus, many of the 75 percent of part-time workers who didn't want full-time jobs were hurt. Sec ond, if UPS had set up its own pension fund for its own workers, all beneficiaries would have received 50 percent higher pensions than they do in the Teamsters' multi employer plans. One clear winner in the strike was, pre sumably, Ron Carey, whose earlier election as president of the Teamsters was under a cloud of suspicion concerning illegal cam paign financing. (I guess his defense was that everyone does it.) Because of its past record of corruption, Teamster elections must be certified by a federal elections overseer. Right after the strike, the over seer, Barbara Ouindel, announced that a new election had to be held. Carey knew of Ouindel's decision before he called the strike on August 4. He knew he would have to stand for re-election against his rival, James P. Hoffa, the son of the notorious Teamster leader of the 1970s.The strike was an ideal way for Carey to prove his ma chismo to Teamster voters. I have no doubt that was a major reason why he called the strike rather than continue negotiations.

After the strike Carey also raised pension benefits in the midwestern states, the area in which Hoffa's support is strongest. (At press time, the new election had not been held.) 739 Striking a Blow Against UPS Workers Despite the general impression, the UPS strike was no long-term victory for the company's employees. Before the strike, UPS had an 80 percent market share in package deliveries in the United States. Although it had always been unionized, it had never before been subject to a nation wide strike. It had a well-deserved reputa tion for dependability at competitive prices. It no longer enjoys such a reputation. Dur ing the 15-day strike most of its customers discovered that they were totally dependent on UPS. They tried desperately to find alternative ways to deliver their packages, but most of them failed. While UPS has many competitors-for example, the U.S. Postal Service, FedEx, Emery Worldwide, ETA Express, DHL Worldwide Express, RPS Inc., and even Greyhound Bus Lines they were not able to handle anywhere near the 12 million packages that UPS shipped each day. FedEx has been UPS's strongest and most aggressive competitor, actively trying to capture market share at UPS expense, but most of the others seem to have been resigned to UPS dominance.

They no longer are. The strike alerted existing and potential competitors to the profit opportunities in fighting UPS for market share. Apart from the Postal Service, most of the other com petitors are union-free and thus are able quickly to respond to profit opportunities. They are unburdened with the yoke of union work rules and union costs. UPS inevitably will try to push its increased union costs forward onto its customers. When it does so, even more profit opportunities will open up for competitors. Since UPS customers have been reminded that it is unwise to rely on a monopoly provider of anything, they will be receptive to the blandishmentsof competitors. Moreover, as this is written UPS faces the threat of another strike. The Independent Pilots Association (IPA), the union that represents the pilots who fly UPS planes, refused to cross Teamster picket lines in the August strike, and the Teamsters promised 740 THE FREEMAN • DECEMBER 1997 they would not cross IPA picket lines in the event it strikes. Even if IPA doesn't strike, the reality of the strike-threat presents another opportunity for UPS competitors to remind UPS customers of how unreliable, and costly, a union-dominated firm can be.

As it becomes clear that UPS and the Teamsters are losing market share in the package delivery business, workers will re alize that in this globalized, competitive economy unions are not their friends. At best, unions can generate short-run gains for workers they represent. But, since unionized firms have a competitive disad vantage in the modern economy, those same workers will eventually discover that their employers have fewer and fewer jobs to offer. Unionism has always depended on hoary myths: that employees and employers are natural enemies, that employees have an inherent bargaining power disadvantage relative to employers, that the only way employees can gain bargaining power is through unions, and that unions are respon sible for the improvements in living stan dards enjoyed by workers over the last one hundred years. The UPS strike will hasten the day when most workers come to realize that compe tition and entrepreneurship, not unions, are the source of lasting prosperity for workers and investors alike. When that day comes, the labor movement will, at last, be free from the union movement. D The Industrial Revolution and Free Trade Edited by Burton W. Folsom, Jr.

M ost historians give the Industrial Revolution low marks. This volume tells the rest of the story. The advent of the factory system and mass production made more goods available to more people less expensive ly than ever before. Even though factory workers often labored long hours under hard conditions, they also increased their wealth, lengthened their lives, and improved their standard of living. The economic policy of free trade, which often followed when nations industrialized, fostered increased commerce, the exchange of information, and greater understanding among countries. "The Industrial Revolution and Free Trade is a rich, informative anthology.A veritablegold mine offacts about the historyoffree tradeand of thefree market,it is a book worthowningand consulting.ProfessorFolsom has done well to provideus with this collectionand with his own learnedintroduction./I -PAUL GOTTFRIED, Professor of History Elizabethtown College, Pennsylvania DR. BURTON W. FOLSOM, JR., is a Senior Fellow in Economic Education at the Mackinac Center for Public Policy in Midland, Michigan. A former college pro fessor, he is the author of several books and many essays on economic history.

Published by The Foundation for Economic Education, Inc. 30 South Broadway, Irvington-an-Hudson, NY 10533 ISBN 1-57246-057-1 • Paperback $14.95 Availablein bookstoresnationally,or call FEE: 1-800-452-3518 Potomac Principles Kill Big Business's Bank T he federal government is full of pro grams designed to benefit one or an other special interest. Like the Export Import Bank. The Bank, which provides loans, loan guarantees, and loan insurance for the purchase of American goods, has long been known as Boeing's Bank, given its support for Boeing aircraft sales. But most major U.S. exporters share in the windfall. In fact, ExIm beneficiaries are a Who's Who of the Fortune 500: 80 percent of its subsidies go to medium and large companies, with about half of those benefits collected by just 15 big firms. Like Boeing, which, after its merger with McDonnell Douglas, will have total sales of $48 billion.