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Killing the company that made the Twinkies

Killing the goose that lays the golden egg is one of those tales for children that has a heavy message a lot of adults should listen to.

The labor unions, which have driven the makers of Twinkies into bankruptcy, potentially destroying 18,500 jobs, could have learned from that fairy tale.

Many people think of labor unions as organizations to benefit workers, and think of employers who are opposed to unions as just people who don't want to pay their employees more money.

But some employers make it a point to pay their employees more than union wages just to keep them from joining a union.

Why do that if it is just a question of not wanting to pay union wages?

The Twinkies bankruptcy is a classic example of costs created by labor unions that are not confined to paychecks.  

The work rules imposed in union contracts required the company that makes Twinkies, which also makes Wonder Bread, to deliver these two products to stores in separate trucks.

Moreover, drivers were not allowed to load either of these products into their trucks.

And the people who did load Twinkies into trucks were not allowed to load Wonder Bread, and vice versa.

All of this was obviously intended to create more jobs for unions' members.

But the needless additional costs that these make-work rules created ended up driving the company into bankruptcy, which can cost 18,500 jobs.

The union is killing the goose that laid the golden egg.

Not only are there reasons for employers to pay their workers enough to keep them from joining unions, there are reasons why workers in the private sector have increasingly voted against joining unions.

They have seen unions driving jobs away to non-union competitors at home or driving them overseas with costly work rules or in other ways.

John L. Lewis called so many strikes in the coal mines that many people switched to using oil instead, because they couldn't depend on coal deliveries. A professor of labor economics at the University of Chicago called  Lewis "the world's greatest oil salesman."

There is no question that Lewis' United Mine Workers raised pay and benefits for coal miners.

But the higher costs of producing coal also led coal companies to substitute machinery for labor, reducing the number of miners.

By the 1960s, many coal-mining towns were almost ghost towns. But few people connect the dots to the glory years of John L. Lewis.

The United Mine Workers did not kill the goose that laid the golden eggs, but it created a situation where fewer of those golden eggs reached the miners.

It was much the same in the automobile and steel industries,  where large pensions and costly work rules drove up the price of finished products and drove down the number of jobs.

There is a reason why there was a major decline in the proportion of private-sector employees who joined unions.

It was not just the number of union workers who ended up losing their jobs. Other workers saw the handwriting on the wall and refused to join unions.  

There is also a reason why labor unions are flourishing among people who work for government.

No matter how much public-sector unions drive up costs, government agencies do not go out of business. They simply go back to the taxpayers for more money.

Consumers in the private sector have the option of buying products and services from competing, non-union companies - from Toyota instead of General Motors, for example, even though most Toyotas sold in America are made in America.

Consumers of other products can buy things made in non-union factories overseas.

But government agencies are monopolies. You cannot get your Social Security checks from anywhere except the Social Security Administration or your driver's license from anywhere but the DMV.

Is it surprising that government employees have seen their pay go up, even during the downturn, and their pensions rise to levels undreamed of in the private sector?

None of this will kill the goose that lays the golden egg, so long as there are both current taxpayers and future taxpayers to pay off debts passed on to them.

Sowell is a senior fellow at the Hoover Institution at Stanford University in California. His website is www.tsowell.com.

 


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