Who Is at Fault for the Decline of the Big Three?

Mickey Kaus indicts "Wagner Act unionism" for the fall of the auto industry.

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By Michael Barone, Thomas Jefferson Street blog

Mickey Kaus, pretty much alone among the commentators I've been reading, indicts "Wagner Act unionism" for the decline and fall of the U.S. auto industry. The problem, he argues, is not just the high level of benefits that the United Auto Workers has secured for its members but the work rules—some 5,000 pages of them—it has imposed on the automakers. As Kaus points out, unionism as established by the Wagner Act is inherently adversarial. The union once certified as bargaining agent has a duty not only to negotiate wages and fringe benefits but also to negotiate work rules and to represent workers in constant disputes about work procedures.

The plight of the Detroit Three auto companies raises the question of why people ever thought this was a good idea. The answer, I think, is that unionism was seen as the necessary antidote to Taylorism. That's not a familiar term today, but it was when the Wagner Act was passed in 1935. Frederick Winslow Taylor was a Philadelphia businessman who pioneered time and motion studies. As Robert Kanigal sets out in The One Best Way, his biography of Taylor, he believed that there was "one best way" to do every job. Industrial workers, he believed, should be required to do their job in this one best way, over and over again. He believed workers should be treated like dumb animals and should be allowed no initiative whatever, lest they perform with less than perfect efficiency.

Taylor's work was regarded as gospel by many industrial managers in the 1910s, 1920s, and 1930s, a time when many factory workers were recent immigrants, often with a less than perfect command of English. Auto assembly lines were organized on Taylorite principles to squeeze the last bit of efficiency out of low-skill workers. And squeeze some more. If you ask UAW defenders why they have so many work rules, they will tell you horror stories of the "speedup" dating back to the 1930s. Workers who were required to do some operation 20 times an hour were told to do it 30 times an hour, and so forth. Wagnerism was a response to Taylorism.

Workers hated these jobs. But in the 1930s, with unemployment ranging over 10 percent, they were happy to have them: At least they got a paycheck and there were thousands of others who would be happy to take their jobs if they told their bosses to shove it. Flash forward to 1970, when the UAW was negotiating its contract with General Motors, a story told by William Serrin in The Company and the Union. Taylorism was still the reigning philosophy of management, and workers really hated their jobs. I remember hearing a UAW political operative tell me, with horror in his voice, that a colleague who deviated from UAW discipline "was sent back to the line." So the big UAW demand that year was "30 and out"—assembly line workers could retire after 30 years on the job. This in turn led the union to demand generous retiree benefits. A worker who retired at 51 wouldn't be eligible for Medicare for 14 years, and therefore the UAW negotiated incredibly generous medical benefits—elective dental work with no copayment is one that sticks in my mind.

The UAW also created a constituency within itself of retirees who have voting rights in union elections just as actual workers do, and there are now something like three times as many GM retirees as GM employees as voting members of the UAW. Retiree benefits account for the lion's share of the difference between GM's labor costs and the labor costs of foreign automakers in the United States.

General Motors in 1970 thought it could afford this. Didn't it "control" half the U.S. auto market? Couldn't it generate any level of demand it wanted through advertising? That's what as learned a sage as John Kenneth Galbraith had argued in his bestselling The New Industrial State, published in 1967. GM in 1970 didn't fear competition; its greatest fear was that the Justice Department would bring an antitrust case to break it up.

But of course it turned out that GM and Ford and Chrysler were in 1970 just on the verge of getting serious competition from foreign automakers. And in particular from Japanese automakers who managed their plants not according to Taylorism but by giving their workers more autonomy and more responsibility—by treating them like sentient human beings and not like dumb animals as Frederick Taylor taught. The Detroit Three by all accounts I have seen were slow to learn from this—and were even slower to apply the lessons the Japanese taught—because of Wagnerism. Japanese management required cooperation between managers and workers. Wagnerism insisted that all interaction between managers and workers be conducted on an adversarial basis. The 5,000 pages of work rules mean that GM can't manage the way Toyota does.

The UAW rejected Sen. Bob Corker's plan to impose something like Chapter 11 bankruptcy conditions on a government loan to GM, and it's not clear whether the Bush administration will impose similar conditions in its handout of TARP money to GM. Clearly the Democrats are poised to hand out money to GM (and perhaps Chrysler and, if necessary, Ford) after January 20 without requiring any significant changes in the union contracts. Yes, the UAW made important concessions to GM in its September 2007 contract, notably by agreeing to take over retiree health benefits, but obviously not big enough concessions to prevent the company from being now on the verge of bankruptcy. Clearly GM is not going to be able to come up with the $30 billion it promised to give the UAW to take over the retiree health benefits (unless the government ponies up the money), and without that it seems unlikely that the level of retiree health benefits can be maintained (the UAW might decide that it's not oppressive to require copays for elective dental work). But can General Motors ever make money if it continues to be subjected to Wagnerism? Taylorism is pretty much dead in our society; no automaker free to make a choice chooses it as a way to manage its workforce. But its antidote, Wagnerism, remains. "Look at General Motors," Mickey Kaus writes, "and tell me that strong unions are good for the economy." But the Democratic Party is determined to shell out money to maintain Wagnerism in the U.S. auto companies and is committed to promoting Wagnerism by passing the card check bill, which will abolish secret-ballot unionization elections. They want to impose adversarial labor-management relations in large swathes of the private-sector economy that are, currently, in healthier condition than the Detroit Three. Does that sound like a good idea?

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