Wall Street Journal Compares Union vs NonUnion

                                Unions Can Be a Good Thing – or Not

On this long holiday weekend, we take a look at the issue it commemorates: labor.

In 1894, Congress passed a law making the first Monday in September “Labor Day.” According to the Department of Labor, which didn’t come into existence until 1913, Labor Day is meant to pay tribute to the “creator of so much of the nation’s strength, freedom and leadership — the American worker.”

With that in mind, let’s examine the role of labor unions from an investment perspective. At first blush, most folks would say unions aren’t good for investing. Expensive contract demands cut into profits and tough workplace rules reduce productivity.

Things are seldom so simple, however. Among industrialized countries, most would be surprised to learn that strike-loving France has one of the lowest union membership rates — 7.7% of the work force in 2008, according to the Organization for Economic Cooperation and Development. The U.S., widely considered light on unions, has a higher rate at 11.9%.

Here are four reasons labor unions can be good for investing — and one why they aren’t.

1 Heavily unionized countries are outperforming everyone else. This is true in the industrialized world, for the most part. The union-heavy countries, according to the OECD, are Sweden, Norway, Finland, Denmark and Iceland. The Nordics have union membership rates of more than 50%. Sweden and Finland are nearly 70%.

And how are these countries doing? Sweden expects growth of nearly 5% this year, and its central bank is tightening monetary policy to tamp down inflation concerns. Norway is growing and its unemployment rate is below 4%. Its central bank is raising rates, too. The story is similar in Finland and Denmark.

Iceland is a completely different story, which shows that union-membership rates are hardly a perfect indicator. Its economy collapsed during the financial crisis as most of its banking system failed.

Union membership in most of these countries is somewhat different than in the U.S. Unions have more say in corporate direction, including board representation, and labor-management relations are more cooperative than confrontational. A minimum five weeks paid vacation doesn’t hurt.

2 The German economic miracle. West Germany’s postwar growth, especially in the 1950s, was phenomenal. The unemployment rate went from 10% to about 1%. Industrial production per capita tripled by 1958.

This rapid growth slowed and eventually choked a bit on the 1990 reunification with East Germany. But in the second quarter of this year, Germany recorded its best rate of growth since reunification — about 9% on a seasonally adjusted annualized rate.

West Germany’s postwar economic miracle coincided with the implementation of “co-determination,” a policy that gave workers substantial board representation and enabled trade unions to work with managers to craft corporate policy.

Labor reforms earlier this decade gave management greater flexibility. And many analysts cite those reforms as helping fuel the current turnaround. Germany’s unionization rate is 19.1%, according to the OECD.

3 UPS vs. FedEx. UPS is heavily unionized. FedEx is not. Which has done better in the stock market over the past 12 months? UPS stock is up 20%; FedEx shares are up 15%.

Over five years, FedEx’s stock is slightly ahead. But it shows that in a straight-up comparison, the unionized company isn’t an automatic loser. UPS has a sometimes-fractious relationship with union members, but that hasn’t stopped the company from doing well in the marketplace.

4 Southwest Airlines. Southwest is heavily unionized. It’s also the most successful airline company in the country, from a profit perspective. It has the largest market capitalization in the sector. It has labor peace — top management frequently seeks out union input when making big decisions. And it seems to make money even when its peers, also mostly unionized, don’t.

5 Detroit — the one reason unions may not be so good from an investment perspective. The unions that once helped build a solid middle class in large parts of Michigan and Ohio played a leading role, along with management, in the demise of Detroit as the car capital of the world.

Job banks where members got full pay to do no work. Overly rigid work rules. Overgenerous benefits. Hostile relations between workers and management. Just about everything to make a cash cow wither away.

One has to reckon with the bankruptcy and government rescue of General Motors and Chrysler and the white-knuckle fight for survival at Ford Motor.

But even GM is making a comeback of sorts. It has filed for an initial public offering, hoping to raise as much as $20 billion. The United Auto Workers union, which owns a chunk of GM through a benefits trust fund, has had to make concessions as part of GM’s bankruptcy and government rescue. Contract negotiations get under way next year and the UAW has already pledged not to strike during the talks.

Dave Kansas at dave.kansas@wsj.com

Union dues…a bad investment?

        I saw a film strip a while back that Walmart uses to fight union organizing. It showed a happy Walmart worker saying, “The Union would just take money out of my check.” Perhaps Walmart workers are not the brightest people in the world, or maybe Walmart just portrays them that way, but a simple mathematical computation would show them that union dues are not a bad investment. 
Union         If a Walmart worker makes $10 an hour and pays no union dues, than he makes $400 a week or $1600 a month. But let’s say he organizes and joins a Union and gets a $1 an hour raise. Now he makes $11 an hour, $440 a week or $1760 a month. His dues are 2 times his hourly rate or $22. So his net gain by joining the union is $160 minus $22 or $138 a month. 
        That’s a profit of $138 on an investment of $22.
        I’d take that any month. 

       Where else can you get that kind of a return?
       Only at the Union.

Modern Day Slavery

     Today we live with  modern day slavery. The employers of today think it’s OK to use cheap labor from across the border. They love to blast the current administration about their policies on immigration, but it’s the business bunch that love the cheap labor illegal immigrants provide. In the old days local farmers had to settle for the teenager down the street, (gives him or her experience), or they would have to function under the law to hire legal immigrants to do the agricultural work that needed to be done.
     It’s funny to listen to Faux news and others go on about how opposed to illegal immigration they are, and how it’s the Democrats that want those people as future constituents. Those same mouths then turn around and hire those same illegals. After all, the illegals can’t complain about their wages. The employer doesn’t have to pay for all the associated costs such as Social Security, and Medicare. They don’t have to deduct payroll taxes, and they don’t have to pay any unemployment tax. These employers also do not have to worry about injured workers, or complying with OSHA since they just fire the “slave” if he,or she, gets hurt. What will they do, complain to someone?
    The only real solution to the illegal immigration problem is to go after the slave owning employers. There must be fines levied at the “illegal employer” for hiring people living in our country illegally. Only then will there be a reduction in the number of people crossing the border.
     Our problem today is not with illegal immigration, it is with employers that hire and use illegal immigrants as slaves. Get rid of the illegal employers and the problem goes away.