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Tuesday, August 21, 2007

Union Power at its Worst

I just read a news report that Indiana ranks #2 in foreclosure inventory rate. The article makes mention that since Indiana is heavy in manufacturing, and manufacturing jobs have been hit hard the last 5 years, this has added to home losses. I think that’s obvious but it’s not just about that.

Union power in the manufacturing industry in Indiana, especially in the automotive manufacturing sector, is extreme and is beyond what I think even the most liberal economists would say is a ‘good’ kind of union power. Over the last number of decades, UAW and other major unions have pushed up the wages and retirement benefits of workers so high that it was only a matter of time before the sector imploded – and started killing jobs.

Delphi Automotive is a great example of this. In the last 2 years, they have tried to take steps to cut their labor costs from the ridiculous rates of $30 some-odd dollars an hour for an assembly line worker.

For a more concrete example, Bloomberg cites:
"...for example, the $25 hourly rate, plus benefits, paid to union workers who trim grass around its buildings. Delphi's union contract... bars hiring an outside lawn-cutting service. "

I work at a nice desk job and I don’t make near what low/mid skilled union auto labor employees do.

So, the foreclosure rates can be explained more by the fact that these low educated workers were paid a huge premium, and they took that premium to buy big houses, often with no money down and often at a variable interest rate. So, when their employers imploded they were left with this huge house, ballooning interest rates, large monthly payments, and no steady income (anymore).

1 comment:

Anonymous said...

You are a fraud. I can't believe that someone can go through their entire economics education and spew this horseshit. You know very well that none of this would hold up under any kind of econometric scrutiny, and yet you still advance it because its the only way to reconcile the image of millions of American getting kicked out of their homes with your pathetic worldview.