BACKGROUND
For as long as I can recall (at least as far back as the 1960′s) union and even many non-union workers were great backers of strikes and other actions designed to increase wages and benefits. Rising UAW costs in Michigan resulted in rising wages in other businesses, as they tried to compete with the UAW for workers.
As the U.S. auto industry began its decline starting around 1997, suppliers like me had to continue to hold or cut worker wages in order for our customers to continue to increase the wages of their own workers, even while they headed toward insolvency. I once questioned our union’s representative as to why they weren’t picketing the UAW for taking so much of the pie, that their own members couldn’t get ahead.
FIRST CRACKS IN THE SOLIDARITY
In 2005 there was a transit strike while I was visiting New York City. Of course the strike was over demands for higher wages and benefits, and particularly a 1% pay contribution to for health insurance. Previously there was no co-pay or contribution. Being a mostly democrat liberal city I had expected wild support for the strikers. I was shocked to witness total antagonism. People were furious at the strikers for the terrible inconvenience being caused — by demanding things that most other New Yorkers don’t even get. In essence they were no longer supporting strikers’ demands for pension, health care, and wage benefits that they themselves do not get.
THE AUTO INDUSTRY
All major calamities are caused by many reasons. One of the reasons for the failure of GM and Chrysler, and huge losses at Ford was similar to the transit strike issue. Where people historically supported union and local workers by buying their products, they no longer were going to be loyal to people who were earning significantly more in salaries, demanding even more, and insisting on pension and health care benefits that no one else receives any longer. Detroit could no longer count on people to buy their products in solidarity with the auto workers.
GOVERNMENT WORKERS AND THE ANTI-GOVERNMENT MOVEMENT
I see great parallels in these occurrences with the anger building among voters against the government. We are going through difficult and somewhat deflationary times. There is great pressure on wages and benefits in order for businesses to survive and continue to provide employment.
However, recent analysis suggests that average government wages for similar work is around 30% more than is paid for private sector work. I’m sure benefits are similarly not competitive.
SUMMARY
High union wages in Michigan resulted in the auto industry no longer being able to compete with plants in the South or in Mexico. UAW workers essentially priced themselves out of work as automation and lower-cost states, became more cost-effective.
Union leaders and their political friends failed to recognize the obvious. The huge loss of jobs in Michigan has resulted in a collapse of the real-estate market. So not only are people out of work due to high wage demands, but their homes – along with all others in Michigan – have suffered severe loss in value. And this is in a state which never had a real-estate bubble!
Companies can typically downsize or even go through bankruptcy to reduce costs. How are the schools, municipalities, states, and federal government entities going to bring their costs in line? This is the big issue of the day and why so many voters are expressing anger at their leadership.
