To maximize a company’s market value, it must maximize its expected profits over time (its current market price reflects the discounted present value of expected future profits). To do so it must offer products or services that the public wants at prices they are prepared to pay that exceed the cost of supplying them. These products must be produced with the quality desired and as cheaply as possible. But that requires hiring workers of appropriate skills and providing them with appropriate tools (investments in equipment and other inputs) while paying them no more than is required to attract and retain them. “Appropriate” in these contexts means cost effective (best output at lowest cost).
Unions can help a firm’s management find, train, keep and manage the most appropriate workers. The general work environment is part of what attracts workers in addition to wages and related benefits. The optimal mix of the “right” capital and the “right” labor to produce market demanded products, produces the biggest pie to split between labor and shareholders (i.e., maximizes profits). So, both labor and owners share an interest in getting it right (maximizing). When unions deal with management in this positive sum, win-win frame of mind both they and shareholders benefit. But unions that see the process as zero sum and simply seek to maximize their share of the pie, reduce the size of the pie (loss-loss). American unions too often fall into this trap.
My personal experiences with American unions have not been good. I will share the experiences of my parents and myself that have influenced my views.
During the summers of my undergraduate studies at the U of California at Berkeley, I worked in the oil fields of Kern County for Shell Oil. Children of Shell employees like my dad were given preference for such jobs (typical profit maximizing behavior). A typical summer day in Kern County was dry, with temperatures ranging from 105 degrees to an occasional 112. This was more comfortable than a typical humid day of 95 degrees here in the Washington DC area. The first summer I worked in the fields north of Bakersfield, and the second summer at the ten-section refinery fields where my dad had worked in the refinery west of Bakersfield.
The full-time Shell employees I worked with, along with two other summer hires, were all pleasant and talked about their families and such things during our lunches together in the “doghouse,” as they called it. I had no idea whether they were union members or not. Digging up leaky pipes as a roustabout in such heat was a challenge.
My second year I was promoted to working on a well pulling rig. The traditional rocker-arm wells that you have surely seen in pictures are fairly shallow and push the oil up a pipe as the rocker moves up and down. The pump is attached to the bottom of this pipe and opens to let the oil in, and then closes as it pushes it up the pipe with each rock. We pulled the pipes, with their pump on the bottom end, out of existing wells for repair.
Every now and then the pump at the bottom failed to open to allow the oil to flow out as our rig pulled it up. Those were called wet wells as rather than draining out, the oil spouted out the top and rained down on the rig platform. The first time I encountered a wet well, the guys recommended that I put on a wet suit to keep the oil off me. As I recall it was 110 degrees that day and I turned down the wetsuit. However, as I become covered in oil my sweat stopped evaporating and I almost passed out. I had to sit out the rest of the day in great embarrassment.
My third summer I was paired with the full-time employee in the supply yard behind Shell’s Kern County headquarters that provided all the parts needed out in the fields. We rode around in a forklift to load needed supplies onto trucks that delivered them to the fields. My “partner” was a union member, All he could talk about was how Shell was exploiting us. I hated it and hated him and his antagonistic rather than cooperative attitude. This added to my dislike of American unions.
Many years earlier when Shell workers went on strike, my dad had to strike as well, as he had to belong to the union to work in the refinery. After a month or two, when it was clear that the strike was about to end, several union guys came to our house and threatened my pregnant mother (with my seven-year younger brother), that it would be unhealthy for her if my dad went back to work already.
Many years later, when my mother had become an elementary school teacher, she disliked the teacher’s union as having little real interest in the kids, but spent their time protecting the jobs of mediocre teachers.
It seems to me that unions are helpful or detrimental (good or bad) depending on whether they see their negotiations with their companies in positive sum or zero-sum terms. Mandatory union membership is more likely to result in the latter, detrimental relationship.
Warren's space 