The UAW Turns Its Crippling Sights South

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Having helped to cripple the economies of Michigan, Ohio, and other northern states as well as contributing to the recent bankruptcy of Detroit, the United Auto Workers is turning its attention to more fertile grounds. It is hard for a union to grow and survive when the economy is collapsing all around it. Thus the UAW has a new southern strategy.

Non-union labor currently prevails in southern auto plants, all owned by foreign companies. The UAW wants to turn non-union factories into new union factories. Prior efforts at wooing southern workers have failed, but this time the UAW has a new message. They are dressing up unionization as "a representation model built on collaboration and cooperation," according to UAW regional director Gary Casteel.

The starting place is Chattanooga, Tennessee, site of a Volkswagen plant. The UAW is trying to persuade VW workers that a German-style unionization model will benefit them.

No matter that VW moved operations to America in part to be free of the German industrial union IG Metall, and that VW chose Tennessee because it is a right-to-work state, where workers do not have to be represented by a union as a condition of employment.

As well as Volkswagen, the UAW has efforts underway at other southern auto plants, including Mercedes-Benz in Tuscaloosa, Alabama, and Nissan in Canton, Mississippi. The UAW is being advised by the German labor union IG Metall, which has over 2.3 million members.

It is not surprising that American unions are looking for help from their European counterparts. Richard Trumka, president of the AFL-CIO soberly admitted in a speech to the AFL-CIO in Chicago on March 7th that union membership is steadily declining, to 11.3 percent of the workforce in 2012, compared to 20 percent in 1983. Even worse, only 4.2 percent of workers between the ages of 16-24 are union members, he said, so as the workforce ages the percent of union members is expected to decline.

The decline in union membership is understandable. There are few advantages to joining unions. Organized labor is no longer the guardian of safe working conditions. These are under the purview of the Employment Standards Administration and the Occupational Safety and Health Administration. The 40-hour work week has become the norm.

Plus, there are substantial costs to union membership. The dues go to salaries for union officials that are several times the take-home pay of the average union member. Most multiemployer union pension plans are underfunded, so workers pay pension contributions to support existing retirees without hope of receiving similar pensions when they retire. Most important, unions frequently price their members out of jobs, so union-dominated industries such as textiles and steel have closed their doors and left the country.

That's why Trumka said in March, "We need to create new models of worker representation. We need to be more strategic and forward-looking."

By new models, Trumka seeks to emulate Germany. Its corporations have works councils, union supervisory boards, and union members on industry boards. Unions are integrated into the decision making of the firm.

Horst Mund, an official in the German union IG Metall, told Automotive News in June, "In Germany, you don't need to organize a full facility. Everyone can be a member of IG Metall. He may be a minority in his plant, but he's still an IG Metall member. At the same time, there can be a works council in the same facility because all the workers have decided to elect one."

Germany's economy has grown more slowly than the American economy over the past few years. The collaborative union/industry system is not the only reason, but it hasn't helped.
In contrast, foreign transplants in southern states are expanding rapidly. The 2,400-worker Chattanooga Volkswagen plant is across the street from the Amazon warehouse where President Obama gave his speech on the economy July 30th. President Obama said that building up America's durable manufacturing sector was a cornerstone of the country's recovery. He declared, "I want to offer new incentives for manufacturers not to ship jobs overseas, but to bring them back here to America."

Welcome to the southern auto industry, Mr. President. And Volkswagen is not alone in creating jobs while free from the burden of union representation. The 5,000+ Nissan plant in Canton, Mississippi, added over 2,000 jobs lately as it extended the line of automobiles in production. Nissan wants to make Canton the global export base for the Murano crossover vehicle.

The Mercedes Benz plant in Tuscaloosa, Alabama, which employs 2,900 workers, recently invested over $2 billion and is planning to add 1,400 additional jobs. Mercedes brought prosperity to West Alabama.

These southern states are attractive to foreign transplants because they are right-to-work. That is their competitive advantage over the more heavily unionized North. The UAW must move to these southern states to survive since Detroit is shrinking.

Earlier this year, Fiat and Chrysler Group announced that it is expanding production of Fiats and Jeeps in China.

In 2012 union members accounted for 17 percent of Michigan's wage and salary workers, compared to 9 percent for Alabama, 4 percent for Mississippi, and 3 percent for Arkansas, North Carolina, and South Carolina. If foreign transplants in the south give in to the demands for union representation and collective bargaining, it will not be long before those businesses within their state either relocate to a more work-friendly neighbor, or the states' budgets go the way of Detroit's.

Before signing up with the UAW, southern workers should take a close look at the results of the union's handiwork. For example, Michigan saw real GDP shrink by seven tenths of one percent annually over the last ten years. This can be compared to North Carolina, which saw real GDP grow at a rate of almost 2 percent a year over the past decade. With a track record of Michigan and Detroit, it is hard to see why anyone would want to join the UAW-even in its German reincarnation.


Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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