February 24, 2003
From the desk of Jane Galt:Yes, but. . .
Regarding the post below, a friend points out that the construction industry also has multiple powerful unions -- how come they don't all declare bankruptcy? That question has a couple of answers, starting with the fact that they do go bankrupt a lot.
But while the structure is superficially the same, in practice it's very different. Other than equipment operators, most unions actually face competition. Ironworkers and Carpenters compete for work with Dockbuilders, Electrical Workers compete with Electricians, and there are too many labor unions to count. While union workers certainly get above-market wages, they aren't claiming as much value as the monopoly unions in the airline industry.
Moreover, construction unions take place in regional collective bargaining. All the contractors face exactly the same labor cost (plus or minus the efficiency of their operation). They are thus able to easily raise their prices to cover their labor costs, unlike the major airlines that face competition from companies with much lower costs than they have.
So why can't we get the joys of collective bargaining in the airline industry? Several reasons. First, doing so would raise prices, restricting flight to the carriage trade. And second, the unions don't want collective bargaining. Collective bargaining reduces everyone's wages to those affordable by the least profitable operator; it's only good for labor in industries with a very high degree of labor mobility, such as construction, where workers change companies with each project and utilization varies day to day.
Posted by Jane Galt at February 24, 2003 10:47 PM | TrackBack | Technorati inbound linksI like unions just fine, the same way I like corporations. What I don't like are monopolies, anti-competitive practices, and stilted laws which give unfair advantages. What I like is competition. Products, services, and employees shouldn't be an on/off you get "the one and only" or you get nothing deal. You should be able to decide from among several options. Don't like the quality, prices, or service from Microsoft or GM, buy from Apple, RedHat, Ford, or Toyota. Don't like the deal one union is offering, go with another. Competition keeps business honest and efficient. I say the more the merrier, all the way around, unions and all.
Robin - The problem is an airline is not able to eaisly switch from one union to another. A pilot from one airline cannot simply start flying for another the next day. Even if both airlines fly the same type plane, the planes are equiped differently. The pilot would need a lot of training on the new equipment before the FAA would allow him or her to fly for the new company. The same applies, to a lesser extent, to the other unions serving the airline industry. This makes it only natural that each airline is served by a unique set of unions. As Jane described, each union is in competion with each other, but the pilots' union is not in competition with another pilots' union. Thus, the airline is at the mercy of 5 or 6 unions, each yielding monopoly power.
Where I come from typically there is one craft union per trade on a given job, with elaborate negotiations about which trade does what. For instance, welding a pipe to a tank nozzle might be boilermaker work, but the rest of the pipe belongs to the steamfitters. On a big diesel generator, some pipe might belong to steamfitters, some to millwrights, some to instrument fitters, and so on. Failing to honor the boundaries can be hazardous to your health, especially in NY.
That isn't much competition.
I know people in construction locally. I don't know about the rest of the country in general, but here in sunny Central Florida many contractors stay afloat by...not completing the job. Yes, at some point (pegged by some at 80% completion) it becomes more profitable for the contractor to just walk away from a job and proceed on to the next job. If the prime contractor goes as far as to file suit, frequently the contractor will dissolve his business and immediately start another. I've got a friend who's a CFO of a local company, and he spends 80% of his time in court, holding feet to the fire.
This could be one way in which an industry can avoid bankruptcy. Imagine if an airline charged you to take you to from New York to Los Angeles but decided they only needed to take you as far as Phoenix (the 80% point is about halfway between Phoenix and Santa Fe).
Sheesh Jane, if there was ever a post to refer too and ask of my site, this would have been it, but nary a mention....
David Walser -
I don't understand this:
"The problem is an airline is not able to eaisly switch from one union to another."
Why does the airline need to switch? Can't the airline deal with more than one union (say 3 different pilot unions)? Then the pilots can belong to whichever one they want. I must be missing something as I don't know enough about unions.
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