April 15, 1998
Who Wins In Strikes?
by
Charles W. Baird
There are at least five groups of people who are affected by labor union strikes - employers, their employees, union officials, and the customers and suppliers of the strike targets. Union officials would have us believe that striking workers are the biggest beneficiaries of such conflicts and that those benefits come at the expense of employers and the investors they represent. They almost never mention the gains they get for themselves, and they usually ignore the effects on customers and suppliers.
Under American labor law all strikes involve the legal use of private coercion, and many of them involve outright violence. A picket line has one purpose - to prevent, or to try to prevent, replacement workers, customers and suppliers from engaging in voluntary exchange with strike targets. It is a physical barrier to the property of the strike target, and anyone who crosses the line is in danger of physical harm and harassment. Last summer's Teamsters strike against UPS illustrates the point. In any other context a picket line would constitute trespass. Many people wink at coercion and violence in strikes while they condemn both elsewhere. I think that is because they mistakenly believe that strikes benefit workers.
The late W. H. Hutt, a leading 20th century free-market labor economist, taught that any gains received by striking workers or union officials are ultimately borne by consumers and other workers, not by employers and the investors they represent. Strikes do not benefit workers in general. There have been many empirical studies that support his hypothesis. Now we have empirical evidence that indicates that even striking workers gain very little, if anything, from strikes. The big winners are union officials and the institutions they rule. Those gains are appropriated at the expense of consumers, union-free workers, and, very often, striking workers.
The Employment Policy Foundation (EPF) in Washington DC recently produced very important data on who wins from strikes. Consider, for example, the 1997 UPS strike. EPF compared the cumulative wages that both full- and part-time workers would have received if the Teamsters had accepted the last offer made by UPS prior to the strike with the cumulative wages they will receive because of the strike in the years 1997 through 2001, the life of the new contract. In 1997 the strike made part-time workers worse off by $2126 and the full-time workers worse off by $3703. In 1998 the respective figures are $2126 and $2303; in 1999, $1866 and $703; and in 2000, $2402 and $963. In 2001, the last year of the contract, part-timers will be worse off by $1018, and full-timers will be better off by $2237. Notwithstanding that Ron Carey, the then-president of the Teamsters, proclaimed during the strike that it was on behalf of part-timers as well as full-timers, the strike makes the part-timers worse off in every year of the contract, and the full timers will be worse off in every year except the last. When these numbers are put together with the indisputable fact that the pension plan forced on the workers by the Teamsters is clearly much less remunerative than the pension planned offered by UPS, it is clear that all UPS workers represented by the Teamsters have lost out because of the strike.
The UPS strike is not unique. From 1985 to 1996 there were 91 major strikes (involving more than 5,000 workers) in the U.S. Investigators at EPF were able to assemble data on 18 of those strikes in which wages were an important matter of dispute. Again, they compared the employers' final pre-strike offers with post-strike settlements. First, they calculated the undiscounted cumulative dollar losses (or gains) to workers over the life of each post-strike contract. Second, they calculated the number of years it would take workers to recoup their losses. That is, they calculated the number of years it would take for the present value of the last-offer income that the union turned down to be offset by the present value of the post-strike income received. Their results are summarized in the nearby table.
Note that of the eighteen strikes there were only two - Conasa (1986) and Farmer Jack (1987) - in which any workers gained in dollar terms over the life of their contracts. The Farmer Jack strike was the only instance of all workers having cumulative dollar gains. In the Conasa case only some workers had cumulative gains. At a 10 percent discount rate all striking workers in twelve (two-thirds) of the strikes would never be able to recoup their losses if they kept working for the struck employer at the post-strike contract terms. At a 5 percent discount rate all striking workers in ten strikes would never be able to recoup their losses.
The Fate of Striking Workers
Company and year of strike Cumulative gains and losses during contract Time to recoup losses: discounted at 10% (years) Time to recoup losses: discounted at 5% (years)
Hotel Association (1985) $-8,750 never never
Pan American (1985) $-2,476 never never
Transporters Association (1985) $-1,560 never never
Western Union (1985) $-704 2.6 2.3
Conasa (1986)1 Conasa (1986)1 1/never (2) 1/never
Farmer Jack (1987)3 $1,785 / $1,080 1 1
General Dynamics (1988) $-6,372 never never
Boeing (1989) $-1,475 never never
Timken (1989) $-1,771 never never
Food Employers (1990)4 $-1,669 21.4 / 8.5 8.5 / 6
Hawaii Hotels (1990) $-2,596 5 4
Kroger (1992) $-3,608 never never
Food employers (1994)5 $-4,078 / $-4,384 never never
Trucking Management (1994) $-2,189 never 24
Boeing (1995) $-5,011 never never
League of Volunteer Hospital (1996) $-6,570 never never
McDonnell Douglas (1996) $-12,637 never 33.5
Realty Advisory Board (1996) $-1,346 5.8 4.4
Source: Employment Policy Foundation, Fact & Fallacy, March 1998, pp. 2-3
1. noncontainer workers and container workers respectively
2. journeymen and meatcutters respectively
3. full- and part-time workers respectively
4. noncontainer workers and container workers respectively
5. journeymen and meatcutters respectively
In the Conasa strike the meatcutters would never be able to recoup their losses at either discount rate, but the journeymen could in one year. In the McDonnell Douglas (1996) strike no striking workers could ever recoup their losses at a 10 percent discount rate, and it would take 33.5 years for them to do so at a 5 percent rate.
If most striking workers do not benefit from strikes who does? As Hutt always taught, union officials have interests that are significantly different from the rank-and-file. They care mostly about their own promotion and tenure in union hierarchies and their prominence in local, state and federal political arenas. The survival and growth of their unions is a means to those ends. They have only to create the appearance of sufficient gains for their members to keep them from rebelling. Above that, the welfare of workers matters little to union officials.
For example, consider the actions of Teamsters president Ron Carey during the 1997 UPS strike. He barely defeated James P. Hoffa for the presidency in 1991, and he was scheduled to stand for reelection against the same opponent in 1997. Before the strike questions had been raised by government overseers of the Teamsters election process regarding alleged illicit campaign donations to Carey's campaign in exchange for Teamster donations to Democrats in the congressional and presidential elections of 1996. Carey needed a national strike before the scheduled 1997 election to divert attention from his growing legal problems, to solidify the political support of John Sweeney, the president of the AFL-CIO, and to create the illusion that he was capable of securing significant gains for the Teamster rank-and-file. In the 1996 elections Sweeney used over $35 million of forced dues from his members to defeat Republican candidates notwithstanding that around 40 percent of his members voted Republican. Carey and Sweeney couldn't care less about the losses imposed on UPS workers by the strike or about the political preferences of their dues payers. What matters to them is their own political agenda. As it turned out, the government overseers of Teamster elections disqualified Carey from standing for reelection on the basis of the alleged illicit campaign financing practices. Carey is now on a leave of absence from the Teamsters presidency while he defends himself against the allegations. Richard Trumka, the secretary-treasurer of the AFL-CIO, is also under investigation concerning the same allegations. The Teamsters election has been delayed until late in 1998.
Union officials routinely claim that the strike-threat system makes "unionized workers" much better off than "nonunion workers." On the basis of the recent EPF data it appears that a more apt distinction would be between workers that are "union-impaired" and those that are "union-free."