When will unions come around?

There must be a lot of frustrated economic developers in Milwaukee these days. Before I make my point, you need to understand that Milwaukee has had one of the most challenging economies of any urban area in the USA. From 1990 to 2005, the population has dropped from 628,088 to 578,887 – at a time when the vast majority of urban centres over 500k population are either increasing or at least maintaining population.

So along comes a tailor made economic development project. The city’s largest manufacturer wants to build another large scale plant. Hallelujah. But there’s a catch. In keeping with its normal practice, Harley-Davidson had advised its international and local unions of the need to add capacity and to do so in a way that would significantly reduce future costs and improve flexibility. This meant that new hires (not existing employees) would have lower starting wages than before (the actual wage rates proposed was not made public) and the health care plan needed to be adjusted to try and curb rising costs.

The union nixed the idea and Harley Davidson announced it would build the plant elsewhere.

Now, I am not privvy to the deal but let’s be clear – Harley Davidson is a premier employer paying top notch wages in that city. So, the cuts they were proposing were likely modest. But the union would rather the jobs go elsewhere than take the cuts. Remember, current employees were not on the table – this was about new jobs.

So, one of the poorest economic performances in the past 15 years (Milwaukee) and the union doesn’t give a crap.

I remember almost a decade ago I was over at the Moncton Club with a client and he had just left with the real estate agent. I was sitting at a table when an old guy sidled up to me and wanted to chat. He had probably drank too much but I sat and listened. He used to run a manufacturing plant in Moncton in the 1970s, he said, but one day the national union decided they wanted a ‘national wage rate’ for their unionized workers. So the plant in Moncton closed within 18 months and moved to Ontario because the previous wage differential of a couple of bucks an hour had offset the increased transportation costs. He was forced to move with the plant and had retired back to Moncton. He told me that numerous other plants in the same situation did the same thing. He was quite bitter.

But that experience (and this one) made me hearken back to my college days in the late 1980s. I had a particular interest in unions and even lead the union bargaining team in a semester long union-management negotiation that made up 50% of the grade in one of my classes. I then went on to write a major report in my MBA program on union/management relations where I hypothesized that unions could become key partners in helping industry manage the ups and downs of the business cycle. However, my experience with unions in the past 15 years of economic development has not been positive. In addition, to these examples, I remember a union guy in Miramichi (a long time ago as well) saying he would close the mill before accepting a dollar an hour pay cut.

Unions see protecting and expanding wages and benefits as central to their mandate. Fair enough. But at the expense of putting the company out of business? Or forcing it to close its facility in Moncton and move it to Kingston? Or denying a Harley-Davidson plant which will be coveted and fought over by dozens of communities in the coming months?

Union membership is crumbling in both Canada and the United States. Some have already read the eulogy for the union movement saying it has run its course. I don’t know about this. I do know that probably 700k or so people in Milwaukee are right now pretty pissed off at unions. I know that there are probably a few Michiganers that are pissed off that all the new auto plants were built in the southern US to avoid the UAW.

I just don’t understand this. The union movement should be an economic development tool. It should use its position to support economic growth in areas such as New Brunswick.