Will Unionizing Your Business Help Rebuild the Middle Class?

It’s nere, and it’s going to revolutionize the corporate office

I have to wonder if what the Vice-President said was true or just another one of his personable gaffes, like advising (on national TV) that people avoid planes and other crowded, enclosed places during the height of the swine flu scare. I mean, was it Joe being Joe, or does he have a point? Is a renewal of trade unions key to the rebuilding of the American middle class?

His comments, made to a conference of the American Federation of State, County and Municipal Employees, presuppose that there is a connection between the labor movement and the middle class and it likewise presupposes that the Vice-President can, in fact, define the term “middle class.” People talk about the middle class all the time, yet if you try to pin it down to some concrete demographic, things get a bit hazy. Do you define it by income? If so, plenty of people making six digits but living in expensive areas could be middle class. How about using the poverty line as a baseline? How much money on the upper end of the scale would you have to make in order to be upper class? On the other hand, it could all be a mindset. Warren Buffet is a wealthy guy, yet he has a fairly middle class mindset.

That is the problem. The idea of “class” in the US is, at best, an artificial one. We have no nobility, no serfs, no peasants—the stratified class society of old Europe—it has all been eliminated and replaced by political power, profession and money, all of which are available to anyone with the drive and the connections and a bit of luck. So, what does it mean to “rebuild” the middle class and, more to the point, what does union membership have to do with it?

If you look at it strictly from the point of view of income, the more union members there are, the more people will be earning what many people think of as a middle class wage. If the reasoning could end there, and that is where the unions and their supporters would have end, with that simple relationship, then all would be well. Unfortunately, that is not where it ends.

Biden drew a comparison between government employees, 37% of which are unionized and private sector employees, 7.5% of which are union members, saying that private sector managers “use every trick in the book to undermine unions.”

Of course they do! Not, as some in the labor movement would have you believe, in order to take advantage of their workers, but in order to remain competitive in an increasingly difficult marketplace. Unions mean higher wages, more expensive benefits, more rigid work rules, an adversarial relationship between labor and management, and all sorts of other issues that don’t exist when unions are not involved.

It falls upon the business owner to figure out how he can make a reasonable profit while keeping prices low enough to encourage sales and wages and benefits high enough to satisfy the union. These higher personnel-related costs lead employers to raising their prices, which tends to lower their sales as consumers look for better deals elsewhere, which leads to lower income, which leads to layoffs. Likewise, the employer may well understand that he will have to raise prices and so cuts his workforce in order to keep from doing that. Again, job loss.

We hear a lot about “fair” wages and benefits, but fair has to go both ways. People who own businesses are not in business to create jobs. This may seem like an odd thing to say, but it is true. Job creation is a side effect of doing business. Entrepreneurs are in business to make a living; companies are in business to make money. Prices are determined for the most part by the market and labor costs have to fit into this scheme along with every other cost of doing business. If they don’t, you end up with situations like GM and Chrysler, neither one of which are role models for anyone to emulate. Unless a fair, market-based wage can be negotiated, employers faced with a situation where their labor costs are too high will reduce their workforce. Those employees that survive will make the higher wages, but what of those who have to lose their jobs in order for the rest to benefit? That is what it really boils down to, a sacrifice on the union altar. How is that “fair” to them?

The Bottom Line

If Joe Biden is really serious about stimulating the growth of the middle class—any class, for that matter—he would not be counting on union membership to do it. Membership declined over the years for a reason—it has lost most of its relevance—and the Employee Free Choice Act is an attempt to force workers to join-up, whether the union is relevant to their needs or not. No, Biden and his own employer, President Obama, would be looking for ways to stimulate business growth and the by-product of that growth—job creation—through lower taxes and lighter regulations. They would be making it easier for businesses to take on employees, but they are not. The nation is already at 8.9% unemployment and it is poised to keep climbing. Can small business—can our economy, can you—afford to take the hit that will come when the unions get their big pay back?