Household Unions: You Move, We Sue

Imagine two scenarios.

Scenario 1: Get Me Out of California

You own a home in lovely Northern California. Because you work 70-80 hours a week to pay your mortgage, you hire a landscaper to maintain your lawn twice a month for $200.

That landscaper is a member of the Northern California Landscapers’ Union (NOCLU).

At first, the landscaper does a decent job. However, over time the quality of his work declines. When you confront him about his lagging performance, he demands a pay increase of an additional $200 and demands that NOCLU’s work rules stipulate he can only work on days where the temperature is below 90 degrees.

Unfortunately, you can not hire anyone else to replace him because the law requires that every landscaper in Northern California must below to NOCLU.

Now, you are paying $400 a month for lawn service that continues to exhibit a lower quality standard than you would like.

The next month, your landscaper demands an additional $200 per month for his sub par services.

At this point, you have had enough. You tell him you will only pay $400.

The following week, he goes on strike and refuses to care for your lawn. When you attempt to do it yourself, the authorities cite you because you do not belong to a union.

As a result, you let your lawn deteriorate, and the property value of your house declines.

At this point, you are fed up with NOCLU, and decide to put your home up for sale at a 20% discount to your original purchase price.

Just when you are about to close on a new house in Nevada, NOCLU sues you for retaliating against the union. It claims you are relocating the landscaping job that you created in California to Nevada to retaliate against NOCLU.

Scenario 2: Vacation Home in Vegas

Imagine the same situation as Scenario 1, only instead of moving away from California, you decide to buy a second home in Nevada.

This time you decide to pay the NOCLU landscaper $600 per month to maintain your lawn in Northern California. However, you also employ a second non-union landscaper to maintain the lawn at your second home in Nevada for the low price of $100 per month.

Again, NOCLU sues you for unjust retaliation against the union.

The Analogy

Most sensible people would consider NOCLU’s behavior in both scenarios absurd. Futhermore, most would agree that NOCLU should have absolutely no say when and where you decide to move.

Yet, the National Labor Relations Board (NLRB) is investigating Boeing for a business decision that is strikingly similar to Scenario 2. It claims that Boeing’s intent in creating 1,000 jobs in South Carolina was to retaliate against unions in Washington State. Yet, Boeing is also creating 2,000 additional jobs there as well.

In effect, unions are trying to make the argument that they should be able to block a corporation’s ability to allocate shareholder capital to whatever location will provide the best return for its shareholders.

Would it be fair if your landscaper could block you from purchasing a house in another state?

Of course not. It would be completely ridiculous.

Why then is so different with a corporation?

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About Sean Patrick Hazlett

Conservative clean energy crusader, national security hawk, financial analyst, engineer, and former military officer.
This entry was posted in Business, California, Policy, Politics, Unions and tagged , , , , , , . Bookmark the permalink.

20 Responses to Household Unions: You Move, We Sue

  1. nickgb says:

    The analogy aside for a second, because it’s 6:30 and I haven’t had my coffee, I’d just like to comment on the rhetorical aspect: When Republicans analogize corporations to people, it carries absolutely no weight with most liberals. In our minds, corporations are entirely different than people and there is simply no reason to analogize back and forth.

    Corporations can move freely whenever they want. Corporations can act with impunity to criminal statutes because you can’t put a corporation jail, you can simply fine it for what it knows to be an efficient breach. Corporations are not loyal, corporations have no morals, corporations simply do not care about people (especially in a market such as this where workers can be abused due to their desperation). And most importantly, corporations actually have direct bargaining power with the government and immense ability to influence the only negotiating power the people have.

    There’s this awkward tendency among many Republican candidates (and I certainly don’t think you do this, to be clear) to do the folksy, “Well, I don’t know about all their fancy theories, but that just don’t make sense to me” crap. The “will it play in Peoria” approach. When people try to justify corporate action/treatment by asking if the same would be true if it were a person, I just hear white noise.

    • pino says:

      In our minds, corporations are entirely different than people and there is simply no reason to analogize back and forth.

      Clearly.

      If it helps, remember that corporations are considered in the same legal sense that unions are. If you have complaint that corporations can negotiate with the government, I would expect you to have that same complaint against a union. Unions are not loyal, have no morals and also don’t care about their people.

      Further, consider not an individual moving from Northern California to Nevada, but a household.

      • nickgb says:

        I’m not saying that corporations shouldn’t be able to directly lobby (though there ought to be much better regulations on lobbying in general), I’m saying that there are significant differences between individuals and corporations that make analogies between the two inapt. The landscaper example offends because it’s an absurd affront to our personhood and self-determination. Corporations don’t have those things. It would be unconstitutional for the government to restrict my choice of state simply to regulate the economy, but if the government put limits on the corporation-driven race-to-the-bottom on state taxes, that’s a much closer question. It’s possibly still unconstitutional, and it probably offends many people, but for vastly different reasons.

        • pino says:

          I’m saying that there are significant differences between individuals and corporations that make analogies between the two inapt.

          First I should say that I agree with you. There is something about an individual and about a corporation that is different. In many cases, corporations are given the rights of an individual; I suspect in many other cases they DON’T have the rights of an individual. Like the right to marry or the right to vote or the right to hold office.

          It would be unconstitutional for the government to restrict my choice of state simply to regulate the economy

          Interesting question. I wonder if that is strictly true. Suppose I’m a farmer and wanna move from Minnesota [corn and beans] to North Carolina [tobacco] and keep farming. Could congress regulate that move [including the decision to switch crops] under the Commerce Clause? Remembering that it was a farmer that got us into trouble to begin with. [He couldn’t grow his own wheat on his own land for his own personal use because it distorted markets].

          but if the government put limits on the corporation-driven race-to-the-bottom on state taxes, that’s a much closer question.

          I do this often and I should ‘prolly work on it….maybe later 😉

          My point is that you make the case that corporations are not people yet have no problems letting organizations that liberals trend to favor doing the same things. If you object to corporations contributing to a campaign, surly you must object to a union doing the same thing? In fact, in the case of a union, it’s even more egregious: To qualify for the job, you HAVE to be part of the union; political affiliation be damned. Further, you HAVE to pay dues to be a member. And then those dues are used to elect someone you don’t wanna see elected.

          Similarly, unions can’t be put in jail, they can’t be arrested.

          On some level, not an insignificant one, I resonate with the corporation/individual thing. I’m not sure how corporations being giving some “individual rights” makes them more powerful, but anyway. Your point would have more weight if you did not exclude your political ally organizations like unions.

        • nickgb says:

          Could congress regulate that move [including the decision to switch crops] under the Commerce Clause?

          They can’t regulate the move, but they can regulate the agricultural business to a large extent (under a series of cases that I have SERIOUS problems with, trust me). That said, to my knowledge the government doesn’t (and I’d argue cannot) regulate agribusiness on a state-by-state discriminatory basis, so a farmer wouldn’t be forced into that position.

          If you object to corporations contributing to a campaign, surly you must object to a union doing the same thing?

          Notice I never said I think unions should get to do these things either. I don’t think unions have the same free speech rights as individuals. I think unions should be allowed to argue their political preferences, and so should corporations, but subject to real limits.

    • Thanks, Nick for the perspective. I am also not a big fan of the anti-intellectual strain of the conservative wing. You also make a fair point that you cannot put a corporation in prison.

      Analogies can be crude things. The main point of this analogy is to focus on what I believe is an unprecedented attempt for unions to extend their authority over shareholders’ ability to allocate capital. I see this attempt as a significant overreach crudely comparable to the analogy of this post.

      As an aside, have you ever seen the documentary, The Corporation? It makes the argument that if corporations were people, they’d be psychopaths. A lefty documentary to be sure and it is also a bit over the top, but it is definitely entertaining.

      I think your distinction that you cannot put corporations in prison is a fair one. That said, you can certainly put the people who run them there – just ask Jeff Skilling.

      I am also going to have to strongly disagree with one of your opinions about corporations (and this is more philosophical than anything else and indicative that you’ve likely been surrounded by good people in your life). You argue that corporations have no loyalty or morals. While this is likely true, my experience with most people is that they lack these attributes as well. The only place I’ve seen loyalty is in the military. Since then, not so much. My opinion of humanity is that we are nothing but clever animals who are motivated by incentives. Provide ill thought incentives and people will behave badly. Take away comfort, shelter, food, and electricity, and we are nothing more than animals.

      • stanooch says:

        “…shareholders’ ability to allocate capital.”

        I assume this exercise is about Boeing, its decision to open a plant in South Carolina, and the union in Washington state crying foul.

        The shareholders’ ability to allocate capital, viz. a corporation, is limited to what to do with his own personal capital and his decision of whether to buy stock. The management of the corporation would not consult the shareholder on where to build a plant. Unless a large block of voting stock is owned so as to influence the board, a shareholder’s ability to influence the operation of the company is only one step above that of an employee. Usually, the only time a shareholder’s voice can be heard is at the annual shareholders’ meeting (and that is not certain even then).

        • “The management of the corporation would not consult the shareholder on where to build a plant. Unless a large block of voting stock is owned so as to influence the board, a shareholder’s ability to influence the operation of the company is only one step above that of an employee. Usually, the only time a shareholder’s voice can be heard is at the annual shareholders’ meeting (and that is not certain even then).”

          This is true. That said, when shareholders invest in a company, they hire the management team as their agents. These agents are aligned with shareholders because if the share price of the company increases, both shareholdes and management benefit. Most decisions management makes are aligned with creating value for the corporation.

          For the most part, unions have incentives that are the opposite of shareholders’. They bargain for higher wages, which is directly in their interest. However, higher wage create higher costs and therefore, lower earnings for shareholders. Since a company’s value is frequently based on a multiple of earnings, unions impose a cost on corporations that literally destroys shareholder value. Additionally, unions provide additional risks to a corporation that also can destroy value. Striking is one clear example. In the Boeing case, Virgin Airlines almost cancelled a multi-billion dollar order because a union strike delayed the company’s delivery of aircraft. In essence, the union almost destroyed billions of dollars of shareholder value. The strike alone cost Boeing $1 billion.

          Any rational shareholder would want management to have the flexibility to make decisions in that shareholder’s interests. Providing unions with veto power over management’s captial allocation decisions is a competitive liability to US corporations that should be opposed with vigilance. If someone tried to prevent you from moving, you wouldn’t stand for it (I hope) ;-)). Why should a different standard apply to shareholders and/or corporations?

          The Boeing example is a classic case of excessive union overreach.

  2. pino says:

    Would it be fair if your landscaper could block you from purchasing a house in another state?

    Spot on. Me likes.

    This is the scenario that folks refer to as socialism lately. Clearly the classic definition is one where the government owns the means of production, but it has morphed into that type of economy we see in Europe; this soft government “control of the means of production”.

    Imagine a government prohibiting a farmer from moving. Buying more land or switching from hogs to milk.

    • My biggest point of contention is providing unions with the ability to have a veto on where a company can deploy my shareholder capital. When I invest in a company, I have no expectation that a union will have veto power over what otherwise would be a sound business decision. The moment they secure such an unprecedented power, I would likely sell my stock and invest it elsewhere.

      • pino says:

        I have no expectation that a union will have veto power over what otherwise would be a sound business decision. The moment they secure such an unprecedented power, I would likely sell my stock and invest it elsewhere.

        I’m not sure how long the deal lasts, but as part of Obama’s bankruptcy proceedings of GM, the union was given the ability to place an individual on the Board of Directors.

        Fascinating.

      • nickgb says:

        Well, when you invest in a company you also have no expectation that it will venture into a new business area, or engage in a stupid marketing campaign, or any number of possible outcomes. If a union acquires veto power over the corporation’s business decisions, you can vote with your shares and walk away.

        Pino: Do you have a source for that? I couldn’t find anything with a quick google, though this story sure makes it sound like they don’t: http://www.mlive.com/auto/index.ssf/2011/05/bob_king_uaw_should_have_seats.html

        • Nick,

          Sometimes you invest in companies precisely because they venture into a new business area. In fact, you are basically hiring the management team to act as an agent for your interests. If they make a stupid decision, it was a risk you willingly took. Plus, for the most part, their interests are aligned with yours. If the stock price rises, you both do well.

          However, for the most part, the union’s interests are the exact opposite. They want higher wages for low skilled labor, which decreases profits and thereby lowers the company’s market cap.

          That said, you are absolutely correct in your assessment that if a union acquires veto rights, I would sell my shares.

        • nickgb says:

          Sorry, I was unclear on my point. What I meant was that there’s always unforeseen circumstances that can arise and you have options to mitigate losses. And honestly, as a shareholder you have just about as much control over the hiring of a management team as you would over a union veto. Very very very very very few people own enough shares in a company to actually effect any change in management, so your only option is to sell your shares and move on.

          And yes, a union’s interests are not necessarily aligned with shareholders (though I don’t think they’re necessarily against them always). But there’s all sorts of other limitations on corporations that aren’t designed to increase shareholder value. OSHA is a limitation that is designed to protect workers at the expense of corporate profits, but we accept it because we think worker’s have certain rights that a corporation can’t make them bargain away. That’s where unionized labor falls too. So to complain that a union isn’t maximizing shareholder value is missing the point of why we have unions.

        • pino says:

          Do you have a source for that?

          The United Auto Workers’ newly minted representative to the GM board, Stephen J. Girsky, is math major, former Wall Street analyst, Democratic campaign donor and special adviser to both the “old” General Motors management and the UAW.

          But Girsky’s most recent accomplishment may be his most attractive to the UAW, which through its voluntary employee beneficiary association, or heath trust, will own a 17.5% stake in the new GM.

          Just google UAW and Stephen Girsky. Until you do that, it’s hard to tease out.

        • nickgb says:

          Pino: Well, that’s VEBA’s trustees, not UAW (though I think UAW gets veto or something), but it’s not the same as a UAW seat. In the story I linked, UAW wants a seat but doesn’t have one.

        • pino says:

          Well, that’s VEBA’s trustees, not UAW (though I think UAW gets veto or something), but it’s not the same as a UAW seat. In the story I linked, UAW wants a seat but doesn’t have one.

          That’s the “teasing out” that I mentioned. The UAW owns VEBA and VEBA has a seat. So, it’s the strange world where UAW tells VEBA who to appoint.

          The seat that the UAW now wants is an ADDITIONAL seat that is explicitly the union’s.

  3. pino says:

    OSHA is a limitation that is designed to protect workers at the expense of corporate profits, but we accept it because we think worker’s have certain rights that a corporation can’t make them bargain away.

    Except OSHA hasn’t done any more good than the companies were doing before OSHA came into existence.

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