How Unions Hurt Workers: The 2019 GM Strike

It's a fact that the number of union strikes have been increasing the last couple of years – especially among hourly workers like hotel, hospital workers and convenience store employees. We've also seen work stoppages involving teachers and various manufacturing workers. The United Automobile Workers (UAW) strike against GM is one example of how unions hurt workers. Because of General Motors participation in the 2008 federal bailout plan, there are some unique - and fascinating twists. What happened during the Recession is key to understanding what is going on now.

However long the UAW strike against GM lasts, it's a good reminder for employers that strikes still take place in the public and private sectors, and their negative impacts are felt inside and outside the business. The GM strike is an opportunity to educate your managers and supervisors on the importance of staying union free and the ramifications of a strike on employees and the communities of operation, as well as the company.

Employees Hurt the Most by a Strike

The reality is that a strike hurts the workers the most. They don't hurt the union. In fact, union leaders see a strike as a chance to get some nationwide publicity as an organization helping the "little guys" take on the big bad abusive employer. Strikes don't hurt permanently hurt the company because a large company like GM has a contingency plan and is prepared to keep operating without the striking workers by taking steps like temporarily shutting down some plants and consolidating operations.

It's the workers that are hurt, encouraged by the unions and some politicians to subject themselves to loss of income and job stability. Instead of encouraged, it should read that workers are "used" by the unions and political parties to push their agenda. Unions thrive on making employers look bad, and politicians that believe America's big businesses take advantage of employees use the strikes as proof. The general line is that, "If employees are willing to suffer a loss of income, benefit and job stability, the workplace policies must be abusive."

The negotiations for a new 4-year collective bargaining agreement started July 16, 2019, and two months later the strike began after negotiations reached an impasse. On September 16, 2019, more than 48,000 union members at 55 plants in the Midwest and South GM factories went on strike.

Bailing Out the Union?

One of the most glaring twists to this story is the fact General Motors would likely be out of business if not for the $49.5 billion taxpayer bailout during the recession. The company was in serious financial trouble before the recession, but it didn't declare bankruptcy until 2009. After the company paid back the bailout money it agreed to pay, taxpayers ended up covering $10.6 billion (or $11.2 billion by some estimates).

The union did make concessions during the recession, but there were twists to their seeming generosity. One is that it was either make concessions or be unemployed and lose their pensions. The other is that many people believed that weak GM management had negotiated too generous collective bargaining agreements with the UAW. Union workers were overpaid and had too generous benefits, and that contributed to GM's financial problems and being unable to survive a recession without government assistance.

What Is the Union Doing Now?

The union storyline today is that union members bore a "significant portion of the pain" required to restore GM's financial health. A New York Times headline read, "G.M. Workers Say They Sacrificed, and Now They Want Their Due." This is the foundation of the strike today. Union members have bought into the union stance that they suffered to help GM in 2009, and now GM is taking advantage of them.

The opposing viewpoint is that unions did make concessions, but the uncompetitive wages were largely responsible for GM's financial instability. The UAW was given preferential treatment during the bankruptcy proceedings. Usually a bankruptcy leads to wages being dropped to a competitive level, but in this case union wages were not cut.

GM was in trouble before the recession because of the exorbitant compensation paid to union employees and competition. Now the union says this about the current strike, "We are standing up for fair wages. We are standing up for affordable quality healthcare." They continue, "We are standing up for our share of the profits. We are standing up for job security for our members." So, what exactly does all of this mean in the real world?

Losing Money...

In 2007 and 2008, GM lost $70 billion. At the time, the labor costs were approximately 45 percent higher than the labor costs of competitors. The level of compensation was untenable and likely would have eventually driven GM into bankruptcy even without the recession. Was the union standing up for the little guy by helping the company go broke?

For example, production workers were paid 95 percent of their salaries when temporarily laid off. Union workers back then made approximately $31 per hour plus bonuses and had full benefits that included a lifelong pension. One of the concessions made before the recession was that permanent people hired after 2007 could start at $17 per hour and work eight years to reach $29 per hour. Another concession is that union workers have 401(K) retirement plans instead of pensions.

The union agreed to forgo cost of living wage increases and a four-year wage freeze. Workers also had to start paying a 3 percent health care cost-sharing amount. All workers get a nice health care package, with the only difference being the temporary workers don't have vision and dental benefits. GM's temporary workers earn approximately $15 an hour. Since 2010, GM has paid out $80,500 each to permanent hourly workers as bonuses.

Union Complaints

The union's complaints cover a range of items. One is that they don't like GM's planned change to use more temporary workers which currently account for 7 percent of the workforce. The union wants a cap on the number of temporary workers. Minimum pay for temp workers is at $15. They don't like the fact there are two very different pay levels in the workforce so want the pay leveled out between the pre- and post-2007 workers hired. They want entry-level workers to reach $30
an hour within 3-4 years. Top production wages are at $33 per hour.

Unions don't like the fact GM plans to close four plants, will build the Chevy Blazer in Mexico, and already laid off 2,800 employees with plans for more layoffs. The unions don't like GM's request for union members to contribute 15 percent of health insurance costs. All of these company changes the union doesn't like are used to justify the strike.

Here is the reality. GM is facing intense competition from foreign vehicle manufacturers. Earnings are falling. The company cannot afford to pay everyone on an equal basis and needs to cut, not increase, labor costs in order to stay competitive. GM needs to increase the number of lower-cost temporary workers so there is more scheduling flexibility.

The union points to a 2018 GM profit of $12 billion, but revenues were only 1 percent higher compared to 2017, an indication of coming financial problems. However, GM announced a restructuring last November and needs the profits to pay for the restructuring and protect itself against a future economic downturn and the competition causing further revenue declines.

Fighting for the Past

Here is what GM offered during the contract negotiations. The company said it planned on investing $7 billion in eight plants in the U.S. GM said it would adding 5,400 jobs and an $8,000 signing bonus after contract signing. The company offered a new profit sharing formula that increases the amount permanent workers would get, and workers are already averaging $10,000 each on an annual basis.

However, the new offer did not include temporary workers in the profit sharing. GM also said it would build batteries and electric pickups in Detroit-Hamtramck and manufacture battery cells in Lordstown, two of the plants targeted for closure. There are two cities where GM plants were closed.

This strike has many elements reflecting a clash of the past with the present. Unions want to continue to do business the old way. They want companies to hire mostly full-time permanent workers, guarantee schedules, not plan plant closures as a strategy for company survival and increase the total compensation package, including profit sharing. One striking worker said the union told us, "We're fighting for, honestly, a thing of the past, where health care is provided by the employer." GM wants to do what it takes to secure a strong company future so that people have good employment for decades. As GM earns profits, the unions believe compensation and benefits should increase, even if those profits are used to build or modernize facilities and equipment and establish a contingency fund to carry the company through the next recessions.

What's Next for the GM Strike?

The union wants GM to agree to a permanent path for temporary workers to reach permanent status. This defeats the whole purpose of hiring temporary workers, a trend occurring across industries. Unions are never satisfied. GM offered to retain all healthcare benefits and add new coverage for allergy testing, autism, and therapy care. As mentioned, GM workers currently pay 3 percent of costs, and GM has offered to come down from the 15 percent requested. However, 3 percent is significantly less than what most employed people play. Currently, the national average for employee cost-sharing of health benefits is 28 percent.

GM offered two percent raises in alternating years and 2 percent lump sum payments, also in alternating years. The union says it is not enough. GM offered to keep or retain the 5,400 jobs with half of them new ones. The union doesn't think this is good enough because, of course, they want to increase their membership.

Who Suffers Most During a Strike?

You may think a company suffers as much as or more than workers during a strike. That is the message unions give workers. If union members didn't believe that, there would be no reason to go on strike. The whole purpose of a strike is to hurt the business so the employer caves in to union demands. Of course, strikes are a powerful example in which unions hurt workers.

However, consider the fact it's the employees walking picket signs in all kinds of weather. It's not the employer. As the strike starts its second week, it's the employees who will have to live on $250 per week strike pay after the eighth day of the strike. It's the workers who toss-and-turn at night while wondering how they will support their families pay their bills.

During the first week of the strike, GM chose to shift the cost of healthcare payments for striking employees to the union, in order to help make up for likely stalled vehicle production and to demonstrate the costs the company carries (over $900 million each year) to provide excellent benefits to its workers. The unions will have to pay the money for health insurance out of their strike fund, including for COBRA payments for hourly employees. The strike fund does not cover vision, dental, and hearing, so all workers are penalized again for striking.

Unions Using GM Employees for a Long-Term Strategy

Unions are also using the GM workers for a larger strategy. If the unions can get concessions from GM, the plan is to do the same during talks with other auto companies like Ford. Politicians are also using the workers. Not long ago, AFL-CIO President Richard Trumka sent a public warning that Democrats shouldn't take the support of union workers for granted because they aren't doing enough in terms of influencing labor laws to favor employees and are supporting the Green New Deal which will cost unions members their jobs. It's not surprising people like Presidential candidates Elizabeth Warren and Joe Biden are publicly aligning themselves with the striking employees. They need union votes to win an election.

Unions always have an agenda that begins with protecting its own organization. A strike is where unions hurt workers the most. Strikes lead to worker financial hardship and cause harm in community relations with their employer. There are ripple effects too.

For example, 4,500 Unifor union employees have been laid off in Canada due to the U.S. strike, GM suppliers are already feeling the loss of business and facing layoffs, and communities are experiencing negative economic impacts. When union members strike, they cause harm to many more people than themselves. The unions don't talk about these kinds of issues because it would damage their efforts.

Stay Union Free

Unions use words like "sacrifice" and "taken advantage of" to appeal to people's emotions. They don't talk about local businesses hurt by the strikes. They don't make mortgage payments for their members. Additionally, they don't offer to increase strike pay to put food on people's tables. Ultimately, they don't recognize or address the ways unions hurt workers.

All of this is a good reminder that keeping a business union free remains an important strategy for long-term business sustainability. Educate your leaders and employees on unions by taking advantage of communication tools like video, web and eLearning, engage your employees and be transparent about changes needed to remain competitive. It's the path to becoming an employer of choice with a workforce that has no need for unions.