To “save” the domestic auto industry, the union may end up killing itself

Columnist for the Nation Max Fraser made this his principle assessment of that last, mad rush to close the Summer and the Summer’s negotiations, for the United Auto Workers.

The historic concessions made by the United Auto Workers, billed as necessary measures to keep the reeling Big Three from bankruptcy, in fact represent something far more ominous. To “save” the domestic auto industry, the union may end up killing itself.

This is a fair assessment (allowing for the trouble the union is having with ratification for the Chrysler deal. The GM deal was ratified – just). The union has protected – more or less – its current members, but has done so at the cost of getting many more. Having established two tiers of auto workers – the new hires, the “non-core” hires, will cost around a third less (depending upon the estimates I see), so the odds of them giving any of what’s left to the union that created that tier is small. Even allowing for the argument that, without that concession, the jobs wouldn’t exist, on any tier (Communication Workers Union, if you’re reading…).

Fraser looks, with some clarity (and some subjectivity, but that’s cool, too) to the future:

… the proliferation of Toyota, Honda and other foreign-owned plants has accounted for virtually all recent growth in domestic auto manufacturing. After decades of watching plants close down and jobs move overseas, the UAW finds itself beset by a process of globalization-in-reverse, as foreign automakers increasingly “insource” production with cheap nonunion labor in right-to-work and Rust Belt states. The global South has arrived in Detroit’s backyard.

If the UAW is to have a future, it must figure out a way into these foreign-owned factories.

More easily said than done. Amongst other things, we’re talking about foreign firms building factories in the US. They aren’t stupid: in the Age of Waltons and Monopsony Employers, they know exactly how to keep both unions, and out-of-work-union-labour-from-out-of-state (read: Detroit) from buggering up their game – while also having learned exactly how Big Firms Appeal to State Legislatures. The UAW probably only had employed, unionised workers for them, and they just mortgaged off most of their future of that resource.

Ultimately, the debate is larger than this, entirely, including such questions as, should the US even make its own cars anymore? Can it compete in the world for the production of elaborately-transformed manufactures? At some point even the protectionist resource allocators may need to decide that there just isn’t a margin in pursuing that final value-added step in production.

Eco 1 students: this is comparative advantage, specialisation and gains from trade. Come the day, we may well look back on the death of Big Union with gratitude, for allowing unimpeded pursuit of points of consumption well outside our production possibilities frontiers. We may also deeply regret it – that’s half the fun of economics (we’re never the ones being squeezed out of our mortgages, you see).

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1 comment so far

  1. Anonymous on

    UAW is Bullshit DEATH to UAW


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