Unions: The Cause of Michigan's Malaise

The Great Lakes state's burgeoning right-to-work movement is a backlash against aggressive union demands.

The Detroit Free Press’ front page a week ago was a rich display of irony. It featured two stories, one celebrating the quadrennial contract deal that GM and the United Auto Workers had reached, declaring that the “Deal Is a Victory for All.” And the other reported: “Right-to-Work Debate Fires Up in State.” That about sums up the state of the labor movement nationwide: Still a player, but no longer sacrosanct.

A right-to-work law, which would allow workers to join unionized companies without having to pay mandatory union dues, is far from a done deal in Michigan. But 22 states already have such laws, and that it is even on the table in the union capital of the country shows the new political reality confronting unions.

Union membership has dropped from 36 percent of the work force in 1945 to 11.9 percent now. To reverse this slump, unions pumped $400 million into President Obama’s campaign, hoping he would pass the so-called card check bill. This would allow labor bosses to avoid secret elections and unionize companies by getting a majority of workers to sign a card.

But Obama has proved a union dud, not a union dude: Far from pushing grand initiatives, his labor agenda has consisted of—in the words of AFL-CIO president Richard Trumka—“little, nibbly things.”

This is not surprising. Aggressively pursuing a pro-union agenda with unemployment stubbornly stuck at 9.1 percent would work if Obama wanted to be a kamikaze president, hell-bent on self-destructing. Unions protect wages at the cost of jobs—the main reason they are in trouble in Michigan.

Michigan’s unemployment rate, consistently higher than the national average, soared above 15 percent between 2009 and 2010. No state, not even Katrina-stricken Louisiana, had seen this kind of unemployment in 25 years.

Not all of this is Big Labor’s fault—but much of it is.

Grand Valley State University economist Hari Singh found that if Michigan had been a right-to-work state, the auto industry would have seen a 25 percent gain in jobs since 1965. Instead, it lost 56.6 percent just between 2002 and 2009, shrinking its work force by 165,777. In a functioning market, high unemployment would lead to lower wages. But in Michigan’s auto industry, Singh found, wages actually rose 18.1 percent during that time.

Unions congratulate themselves for protecting workers’ wages, but they have imposed a heavy price on everyone else. Not a single foreign automaker has ever taken advantage of Michigan’s legions of out-of-work but highly trained employees, preferring to train novices in right-to-work states.

The upshot is that the economies of these states grew on average 18.1 percent between 2001 and 2006, according to Paul Kersey of the Mackinac Center for Public Policy. Michigan’s? It grew too—a grand total of 3.4 percent over the same five years.

Since jobs can’t come to Michigan, Michigan residents have followed the jobs. Michigan lost 11.7 percent of its 25-34 age group between 1993 and 2003—while right-to-work states gained 3.8 percent. Indeed, the 2009 Census revealed that Michigan had experienced the third-highest emigration in the country. Otherwise, Michigan’s unemployment situation would be even grimmer.

But the hidden costs of labor unions have become impossible to ignore, partly because Michigan’s collapsing real estate market has made it hard for homeowners to sell and relocate. There is a new desperation to do something to jumpstart job growth, which is why unions are in the cross hairs.

Various polls have found that 50 to 60 percent of likely Michigan voters support a right-to-work law. Several Republican gubernatorial candidates in the last election openly discussed making Michigan a right-to-work state, something previously unimaginable. Tea party rallies increasingly tout right-to-work among the top items on their agenda. The Michigan Senate and House, both of which are under Republican control along with the Supreme Court and the governorship, have sponsored right-to-work bills.

The only weak link is Gov. Rick Snyder, who has declared that he won’t push such a divisive bill, but will sign it if it comes to his desk. But even Snyder, emboldened by Indiana and Wisconsin, wants a right-to-work bill for teachers unions (whose demands have made it difficult for him to balance the state budget). If this goes through, however, it will become hard to force private companies to operate under different labor rules than the public sector, opening the floodgates to wider reform.

Either way, Michigan’s efforts will encourage other Rust Belt states, all of which are grappling with moribund economies and high unemployment. Unions could stop the trend by radically scaling back their wages to spur job growth. But the new auto contract, which pretends to be all about creating “jobs, jobs, jobs,” doesn’t hold much hope for that. The UAW gave up mandatory raises and cost-of-living adjustments, but got hefty bonuses. More to the point, the compensation packages of older workers—95 percent of the work force—remain higher than competitors and almost certainly too high for another economic dip.

The Great Depression launched the labor movement, which promised prosperity and jobs. But the Great Recession might spell its end because it can’t deliver, the jubilation about the new contract notwithstanding.

Reason Foundation Senior Analyst Shikha Dalmia is a columnist at The Daily, where this column originally appeared.

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  • ChrisO||

    I've long maintained that Michigan would rebound almost overnight if it became a right-to-work state. The industrial infrastructure and knowledge base is there, just waiting to be used. However, the knowledge base is draining away to other states, so the state government had better act soon if it intends to do this.

    One anecdotal story: Gibson Guitars used to be located in Kalamazoo (it was started there). The company that bought them in the late '60s decided to move production to Tennessee starting in the mid '70s because of the union stuff.

    The Gibson production manager at the time was tasked with setting up a new factory in Nashville from scratch. He had a hell of a time doing it because of all of the tooling manufacturers and experts were in Michigan. He essentially had to import everything into Tennessee.

    Ultimately, he and other senior employees stayed behind in Kalamazoo when Gibson finally closed that plant in 1984. They bought part of the Gibson plant and started Heritage Guitars, which makes guitars equivalent in quality to the high-dollar custom shop Gibson for about half the price. They're a small, close-knit shop and not unionized, of course.

  • ||

    I've got a Heritage that I bought in the '90s, it's a nice axe.

  • ChrisO||

    I've got a couple of them. I don't even bother looking at Gibsons anymore, except for a few models that Heritage doesn't make equivalents to, like the SG.

  • Juice||

    If they tried moving the plant today, I guess the NLRB would shut it down.

  • ChrisO||

    Yeah, I wonder about that, too.

    Gibson didn't replace the Kalamazoo plant with the Nashville one overnight. The original idea was to maintain the Kalamazoo factory to make certain guitars that require more specialized expertise, like hollowbody electrics, while farming out the cheaper and easier stuff to the less-skilled Nashville workforce. It took Gibson a decade to finally relocate completely, and I'm not sure that was the original plan.

    That said, the Boeing analogy is a good one. It's not like Boeing is trying to use the South Carolina factory to replace existing factories. At least they're not saying that publicly.

  • BakedPenguin||

    ...while farming out the cheaper and easier stuff to the less-skilled Nashville workforce...

    So basically, any Epiphone.

  • Michigan Dave||

    Frankly, Boeing's motivations are utterly irrelevant. It should be a basic right to locate a company in whichever state one chooses - for whatever reason. It should also be a basic right to work without being forced to join a union and having your earnings confiscated for union dues. There should be a basic recognition of individual economic rights in this country. Without basic economic rights, our other rights become worthless. Maybe we need another Constitutinal Amendment.

  • ChrisO||

    BTW: lack of alt-text FAIL!

  • Ska||

    Seriously, you've got BO giving George Papadopolous a back rub, and you don't even make a Webster joke. WTF...

  • Realist||

    "Unions: The Cause of Michigan's Malaise"
    And the rest of the country too.

  • wallstreet fatcatz||

    that's right, the [UNIONZ] caused the crash ! good lil realist

  • Mr. FIFY||

    Didn't cause the crash, but did contribute to it, stOOpid.

  • Frick the unions||

    Unionz. Propping up people too dumb and lazy to get a real job since the great depression.

  • pilots||

    what?

  • Sleeper Cell||

    He said too dumb and lazy NOT drunk and lazy!

  • Mr. FIFY||

    The past two Labor Days, I have been told - by union employees - that I am an inferior worker drone because I don't belong to a union.

    Fuck that shit, I tell them. Almost got my ass beat for it, too.

    What wonderful people Teamsters are.

  • Realist||

    Are you implying pilots are not dumb?

  • Realist||

    Exactly....and before.

  • Realist||

    Caption: "When I get done doing you....you can do me!"

  • ||

    Caption: "No homo."

  • BoscoH||

    Alternate caption... "It's OK, if it's a three way. If there's some money in the middle, there's some leeway."

  • Sparky||

    With a tip of the hat to SugarFree:

    Caption: "Let me show you what I mean by dolphin sex."

  • ||

    Excellent.

  • ||

    "The Detroit Free Press' front page a week ago was a rich display of irony.

    Pedant protest: The name of the paper is simply "Detroit Free Press." Your "the" shouldn't be italicized.

  • Almanian||

    C'mon, REAL Michiganders know it's "The Freep". Or, "that liberal piece of shit that should have died but they did the JOA with the Detnews and saved those idiots".

    Either way.

  • Almanian||

    Also, fuck Michigan.

    WAIT! No need - Michigan's populace has fucked itself. Thanks for taking the rest of us down with you, Unionistas!

  • JohnS||

    REAL Michiganders know that Detroit caused this problem, not Michigan. Unfortunately, there aren't enough of us non-Eastsiders to pick up the slack.
    I've lived in Michigan for more than 37yrs and visited Detroit maybe 10 times. It's a giant swirling vortex of malfeasance.
    Ironically, the destruction of the auto production industry may be the best thing that's happened to this state if it finally means the unions get crushed.

  • Old Salt||

    Funny how most of the residents of New York, Washington, Illinois, and California all say similar things about New York City, Seattle, Chicago, and Los Angeles!

  • ||

    From Upstate New York: It's true. Unfortunately, we have enough public sector union swarf to elect politicians, otherwise; we would be looking at RTW policies as well.

  • Pinkerton Man||

    < Gazes across the blasted cityscape of Detroit >

    I, couldnt Save them.. I tried

    < Fade to black >

  • ||

    So why is there greater poverty in Texas than in Michigan???

  • Britt||

    Because Texas has 10 million Third World peons doing the shitty jobs Americans don't want to do.

    Oh wait, here's a commercial featuring Eminem. That will fix everything.

  • wingnutz||

    [ALIENZ] !

  • Britt||

    Fuck off, I'm not opposed to people working for a living. It kind of pisses me off that able bodied Americans would rather collect a welfare check then do honest work, but that's not the fault of Mexicans or those that need those jobs filled.

  • Sandman||

    Because Michigan borders Canada and not Mexico?

  • EasyPeasy||

    Any stats on how much of that poverty is from U.S. citizens?

  • ||

    Because so many poor and unemployed Michiganders moved to Texas, where they at least have a fighting chance of getting a job?

  • ||

    Population size? Wildfires? Drought? Mexicans?!?!

  • ||

    To reverse this slump, unions pumped $400 million into President Obama’s campaign, hoping he would pass the so-called card check bill.

    Somebody needs to review their Schoolhouse Rock.

  • ||

    They're a small, close-knit shop and not unionized, of course.

    Wrecking the middle class, one guitar at a time.

  • ChrisO||

    Caption: "That's not my kneecap."

  • ||

    Unions only exist in their present extortionists form because of the Wagner Act, which requires companies to negotiate with their employee's union.
    The Wagner Act needs to be repealed - as a violation of the anti-trust Sherman Act. Unions are engaged in price-fixing of wage rates, which screw consumers thru higher priced goods.
    There is no free market or competition amongst workers when unions are in town. Their wages are the result of extortion, pure and simple.

  • Michigan Dave||

    Yes, the pro-union Wagner Act violates the rights of employers AND employees to freely negotiate or associate. It should be repealed.

  • ||

    Unions: Propping up the chosen few middle class by screwing over the rest of the middle class.

  • cynical||

    I'm not sure shop union workers are even really middle class. They're paid well enough to have a lifestyle comparable to the typical member of the middle class, but lifestyle is a generalization about the result of belonging to a class, not the definition of that class. If trailer trash wins the Mega Millions, he's still lower class. A British peer whose family has fallen on hard times financially is still upper class.

  • sreedy||

    It is important to realize that Union impact on high wages is not the only cause for the demise of the auto industry. Of course there is the basic economic principle of supply and demand. The demand increased for vehicles that had higer mpg based on the drastic increase in gas prices.

    SUVs and pickup trucks had been previously very popular, paired with the relatively high profit margins of these vehicles, the auto manufacturers made them their primary focus. The decrease in sales is also a HUGE factor in why the industry suffered. I think undue criticism is placed on the Unions while completely ignoring the major issue of decreased sales...any business would falter under such sharp decreases in sales.

    FACT CHECK: This article states that "Not a single foreign automaker has ever taken advantage of Michigan’s legions of out-of-work but highly trained employees..." That is a completely false statement. It is widely known that many of the highly trained and educated workers that were laid-off by the Big Three have been working for Toyota and Hyundai. That quote is a pretty grand, and FALSE, statement.

  • Michigan Dave||

    Your statements are inaccurate.

    First of all, it's arguable that unions are the PRIMARY cause of the dysfunction of American auto companies. Union policies led to crappy quality and poor adaptability to the marketplace - this led to lower sales. American auto brands turned to complete crap due to shoddy workmanship.

    Secondly, many of the former American auto workers may be working for foreign auto companies but they have not been working in Michigan. Toyota has no auto plants in Michigan but many in other states while Hyundai has only an auto supplier plant in Michigan. Why has this happened? Union power/thuggery, plain and simple.

  • sreedy||

    Toyota has a huge site just minutes from my house...and many previous Big Three employees are working the presently.

    How exactly does the Union have an impact on the decreased sales??? It is up to the company to create quality standards, not up to the Union. If they are offering a poor product, then yes, they deserve to see sales decrease. Poor product offering has nothing to do with Union bargaining.

  • Jim||

    Toyota and Hyundai have been hiring the salaried folks for their tech centers (I know I'm one of them). These folks weren't union to begin with. Some technicians and such have been hired that were formerly union, but due to the skills required I don't think there is a big difference in wages. The point of the article still stands, that all of the MANUFACTURING jobs that were controlled by the union have gone to 'right to work' states.

    As far as unions affecting quality, when the union defends employees from being fired for showing up drunk or high on the job, or regardless of work quality, yeah it can affect quality.

    The high costs of union labor is part of the reason the big 3 heavily invested in trucks and SUV's and abandoned the small car market, because they couldn't make money on those vehicles. Toyota, Honda and Hyundai apparenlty can make small cars in the US profitably.

    Not all of it is the union's fault, but the climate they created lead in part to the bad management decisions that got quite a bit more headlines.

  • Another Phil||

    Oh. It's widely known? I guess that settles it then.

  • sreedy||

    Didn't say it "settled" anything...just wanted to make it known that part of the article isn't entirely correct.

  • ||

    If the Repubs were smart, they'd push these right-to-work bills hard in every closed-shop state, just to open a diversionary front to drain off union resources.

  • ||

    IF they were smart.

  • ||

    I dunno, I buy Mitch Daniels' point that "right to work" can be as much a violation of contract as union-only. There should be no law preventing an employer from making their business union-only by contract.

  • Nicholas Card||

    No employer ever wants their shop to be union-only. It's the unions, not the businesses, that are closed. What happens is that employers are strong-armed into requiring union membership because that's what the pro-union government has forced on them.

  • ||

    Obviously union only mandated by law is crap, but I don't buy the idea that no business would ever want a union shop. A union could tell the employer that their workers won't work for them unless it's union-only by contract. That's a voluntary arrangement whereby the union controls the labor supply and the employer would have to either work with them or work around them. Of course, the union has no right to prevent him from hiring non-union labor if he hasn't established a contract granting union exclusivity.

  • NL_||

    If unions didn't already exist in the US, then right-wing columnists would use them as an example of Europe's sclerotic socialism and left-wing politicians would be offended at the implication that they would ever support unions coming to the US.

  • brec||

    Michigan Republicans and Tea Party activists have set their sites on bringing right-to-work legislation to the Great Lakes state.

    What are the URLs of these sites that have been set?

  • ||

    It is up to the company to create quality standards, not up to the Union.

    Wow.

  • Nicholas Card||

    It's great to see people talking about Right-to-work, but unfortunately we're having the wrong conversation, which means that pro-unions are already winning. Right-to-work isn't a privilege that people should have to vote on; right-to-work is a right granted to us by the Constitution.

  • Kevin Carson||

    Right-to-work is an infringement of freedom of contract. It prohibits an employer and bargaining unit from negotiating a contract by which union membership is a condition of employment.

    FWIW, both Murray Rothbard and the 2000 LP platform agreed. We should abolish Wagner, Taft-Hartley, AND RTW.

  • ||

    Agree completely. The government should not interfere with market contracts one way or the other and should not be biased towards either business or labor.

    By the way, you should come around here more often - Reason could benefit from engaging the mutualist perspective. I think you bring a lot of issues to the table that standard libertarianism neglects.

  • moncler||

    I agree with your point. Thank you to share

  • Kevin Carson||

    Thanks, P.

  • ||

    The whole idea of unions is to get the most pay and benefits for the least amount of work. They ARE RUINING THE COUNTRY.

  • ||

    Great stats. Why are there no stats from the 1980's when the automobile industry was demolished and what was left is nothing.. Yet you take that nothing and try to make it seem like the 1990's and 2000's are when the shit hit the fan.

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