5 ms·

Wouldn't it be easier if the company could choose to pay more during the good years (bonuses / raises) and cut more during the lean years (no bonuses / layoffs)

Wouldn't it be easier if the company could choose to pay more during the good years (bonuses / raises) and cut more during the lean years (no bonuses / layoffs)? Then the employees could choose to leave the company if they determined the broader market conditions were such that they could get more money at a different employer! This union thing seems really inefficient.

vertex-four 7y ago
The actual result there is that companies never "choose" to pay more.
- rtkwe 7y ago
  Yep, they'll largely only do so when forced by market conditions. Unfortunately there's a lot of other effects that will insulate them from small to medium wage differences: moving is tough, expensive, and affects the whole family not just the worker, in a reasonable commute radius there's often only a handful of potential employers for plant workers, and manufacturing by design has relatively little reliance on individual employees and their skills, tasks are rote and repetitive, and to top it all off getting healthcare outside of an employer in the US is insanely expensive. All of this adds up to a huge barrier to employee power to push for higher wages.
  - AnthonyMouse 7y ago
    Those are exactly the things that push wages up, because new or growing companies have to set salaries that overcome them in order to attract a workforce. Then workers at existing companies can go to those companies, get a job offer under those terms and bring it to their existing employer and credibly threaten to leave if they don't get a raise. The existing employer would have to match it anyway in order to replace them (because the replacement employee would have those same costs), so it allows the employee to negotiate a raise -- or take the better paying job at the other company, which had to do better than after-cost breakeven to attract them to begin with.
    - rtkwe 7y ago
      In a vacuum perhaps but that depends on the credibility of them actually leaving and for there to be new jobs coming into a sector. Manufacturing in particular isn't great because any new company is already going to be looking for lower wages just to compete against imported products manufactured overseas. A small difference in wages won't attract people from far away to move to a new location because of all the thing I originally stated and ultimately while there are some good benefits to manufacturing in the US it's hard to beat Mexico or China because the costs are so much lower there for labor. On top of that because it's a relatively low skill field the potential hiring pool is very large so there's little need to pull in veteran higher wage (and higher healthcare cost) employees from other companies.
      - AnthonyMouse 7y ago
        But now you're talking about a completely different issue -- competition from foreign labor pushing wages down. But that's also the same reason why the unions can't really get more money from them. They can't pay US workers more when competitors are able to (and do) pay foreign workers less. You're also now looking at the company's perspective rather than the employee's. The fact that there are other industries is a benefit to the employee -- if you can go to college and get paid twice as much as a software engineer then some people will take that option (benefiting them), which reduces the labor supply in the original industry (benefiting the remaining people).
mfer 7y ago
Historically, companies - specifically their leadership - has tried to get the most they can out of people for the lowest cost. It has often gotten into ways that would be considered abusive today. Are people just a thing in a financial transaction where each side tries to get the most out of the other at the least cost? If someone thinks that then it's kind of a sad view on humanity.
- seibelj 7y ago
  Companies must optimize the cost of all inputs. No matter how much unions want to be paid, the market sets the price for cars, and if labor demands an absurd amount of money that prices GM's cars above the market price, the cars won't sell. This isn't "abuse", it's a free market system.
  - mfer 7y ago
    Are companies all optimizing for cost? Isn't there a temptation to optimize for executive compensation? What it manufacturing was sent to the place in the world with the lowest overall expense. The extra money made could be put into bonuses and raises for execs. This is an honest temptation. It's not just about the company health. It prioritizes some employees over other employees. It's more than optimizing expenses.
    - seibelj 7y ago
      Every company takes inputs (labor and physical goods) and produces outputs (products and services). GM is not the only producer of cars, this is a very competitive industry. If they sell a car for $25,000 they can't simply raise the price without consequence - there are competitors' cars for sale. So how will they cover the extra expense demanded by labor? It sounds like you believe executives are paid too much, so the extra money to pay labor should come out of executive compensation. However, the vast majority of executive compensation is in the form of equity, and labor's demand for more cash will punish the stock price. Plus there really isn't that many executives and you can't squeeze them enough to cover the extra spend on labor.
rtkwe 7y ago
Easier for the companies maybe but not the employees. Companies are almost always in a better position relative to employees when it comes to negotiation: they have more information, deeper pockets, and on an individual negotiation level have little need for a specific employee (especially in manufacturing jobs where the skill level is low). The employee on the other hand often has few options and if they do push for better wages can just be canned losing their healthcare and possibly pension (in the few places those still exist) because in manufacturing (and to be honest many other jobs) individuals are by design replaceable and largely interchangeable. In some areas there's only 1 or 2 employers for that type of job and moving for a better opportunity requires uprooting the lives of the rest of the family (children go to new schools and spouses have to find new jobs as well) with a lot of uncertainty about the new job. To counteract this and get the employees a fairer share of the value they add to a company unions exist so that the power imbalance gets evened out between workers and management.
benj111 7y ago
I don't know why you're getting down votes. Not so much bonuses, but a certain amount of unpaid time off is common in the contracts of European car workers. I still don't think you could/should get rid of the unions though.
pytester 7y ago
Conflict is inherently inefficient. That doesn't mean surrender to the opposing party is the best option.

vertex-four 7y ago

The actual result there is that companies never "choose" to pay more.

rtkwe 7y ago
Yep, they'll largely only do so when forced by market conditions. Unfortunately there's a lot of other effects that will insulate them from small to medium wage differences: moving is tough, expensive, and affects the whole family not just the worker, in a reasonable commute radius there's often only a handful of potential employers for plant workers, and manufacturing by design has relatively little reliance on individual employees and their skills, tasks are rote and repetitive, and to top it all off getting healthcare outside of an employer in the US is insanely expensive. All of this adds up to a huge barrier to employee power to push for higher wages.
- AnthonyMouse 7y ago
  Those are exactly the things that push wages up, because new or growing companies have to set salaries that overcome them in order to attract a workforce. Then workers at existing companies can go to those companies, get a job offer under those terms and bring it to their existing employer and credibly threaten to leave if they don't get a raise. The existing employer would have to match it anyway in order to replace them (because the replacement employee would have those same costs), so it allows the employee to negotiate a raise -- or take the better paying job at the other company, which had to do better than after-cost breakeven to attract them to begin with.
  - rtkwe 7y ago
    In a vacuum perhaps but that depends on the credibility of them actually leaving and for there to be new jobs coming into a sector. Manufacturing in particular isn't great because any new company is already going to be looking for lower wages just to compete against imported products manufactured overseas. A small difference in wages won't attract people from far away to move to a new location because of all the thing I originally stated and ultimately while there are some good benefits to manufacturing in the US it's hard to beat Mexico or China because the costs are so much lower there for labor. On top of that because it's a relatively low skill field the potential hiring pool is very large so there's little need to pull in veteran higher wage (and higher healthcare cost) employees from other companies.
    - AnthonyMouse 7y ago
      But now you're talking about a completely different issue -- competition from foreign labor pushing wages down. But that's also the same reason why the unions can't really get more money from them. They can't pay US workers more when competitors are able to (and do) pay foreign workers less. You're also now looking at the company's perspective rather than the employee's. The fact that there are other industries is a benefit to the employee -- if you can go to college and get paid twice as much as a software engineer then some people will take that option (benefiting them), which reduces the labor supply in the original industry (benefiting the remaining people).

mfer 7y ago

Historically, companies - specifically their leadership - has tried to get the most they can out of people for the lowest cost. It has often gotten into ways that would be considered abusive today. Are people just a thing in a financial transaction where each side tries to get the most out of the other at the least cost? If someone thinks that then it's kind of a sad view on humanity.

seibelj 7y ago
Companies must optimize the cost of all inputs. No matter how much unions want to be paid, the market sets the price for cars, and if labor demands an absurd amount of money that prices GM's cars above the market price, the cars won't sell. This isn't "abuse", it's a free market system.
- mfer 7y ago
  Are companies all optimizing for cost? Isn't there a temptation to optimize for executive compensation? What it manufacturing was sent to the place in the world with the lowest overall expense. The extra money made could be put into bonuses and raises for execs. This is an honest temptation. It's not just about the company health. It prioritizes some employees over other employees. It's more than optimizing expenses.
  - seibelj 7y ago
    Every company takes inputs (labor and physical goods) and produces outputs (products and services). GM is not the only producer of cars, this is a very competitive industry. If they sell a car for $25,000 they can't simply raise the price without consequence - there are competitors' cars for sale. So how will they cover the extra expense demanded by labor? It sounds like you believe executives are paid too much, so the extra money to pay labor should come out of executive compensation. However, the vast majority of executive compensation is in the form of equity, and labor's demand for more cash will punish the stock price. Plus there really isn't that many executives and you can't squeeze them enough to cover the extra spend on labor.

rtkwe 7y ago

Easier for the companies maybe but not the employees. Companies are almost always in a better position relative to employees when it comes to negotiation: they have more information, deeper pockets, and on an individual negotiation level have little need for a specific employee (especially in manufacturing jobs where the skill level is low). The employee on the other hand often has few options and if they do push for better wages can just be canned losing their healthcare and possibly pension (in the few places those still exist) because in manufacturing (and to be honest many other jobs) individuals are by design replaceable and largely interchangeable. In some areas there's only 1 or 2 employers for that type of job and moving for a better opportunity requires uprooting the lives of the rest of the family (children go to new schools and spouses have to find new jobs as well) with a lot of uncertainty about the new job. To counteract this and get the employees a fairer share of the value they add to a company unions exist so that the power imbalance gets evened out between workers and management.

benj111 7y ago

I don't know why you're getting down votes. Not so much bonuses, but a certain amount of unpaid time off is common in the contracts of European car workers. I still don't think you could/should get rid of the unions though.

pytester 7y ago

Conflict is inherently inefficient. That doesn't mean surrender to the opposing party is the best option.