Unions Allow Companies to Squeeze Huge Profits
By More Job Cuts and Exploiting Their Workforce

Despite heavy losses in sales, many companies are reaping huge profits by cashing in on an old formula to slash their labor costs: shrink their work force, hold back on hiring new people and making their employees work harder and longer for less.

Unions have not fought back against the wholesale layoffs and the production speedup, regarding it as futile to challenge employers during a weak economy. Many have yielded to the employer argument that concessions are needed to make their companies more competitive in the global market. Some companies have threatened to move to China or India if unions resist reducing wages and benefits.

The difference in this recession is that companies wrung more savings out of their work force, said Neal Soss, chief economist for Credit Suisse in New York. In fact, while wages have remained largely stagnant, profits have staged a robust recovery, jumping 40 percent between late 2008 and the first quarter of 2010.

“Whole industries are operating at new levels of profitability,” said David J. Kostin, chief U.S. equity strategist at Goldman Sachs. “In the downturn, companies managed to maintain higher profit margins than ever before.”

As an example, let’s consider the case of Harley-Davidson, the giant motorcycle company. For the past three years, and including 2010, it has suffered a serious drop in sales. Yet Harley’s profits keep rising. In fact, Harley reported a $71 million profit in the second quarter, more than triple what it earned a year ago.

The company’s seven-year contract with the International Association of Machinists and Aerospace Workers allows it to slash nearly half of the 2,000 non-managerial jobs at its plants. The I.A.M. also agreed to a new category of workers who will receive 30 percent less in wages than top-tiered workers.

Profits not Invested in New Equipment or Hiring

If companies were to invest in new equipment or expanding their work force, they would stimulate the economy and make a dent in the current jobless rate. But at least for now, they prefer their relatively risk-free profitability, operating with a reduced labor supply.

The benefits of profiteering are going mostly to shareholders, instead of the broader economy, as management conserves cash rather than expanding production.. The more than 14 million unemployed reap few jobs from the increase in profits by corporations.

If corporations are making huge profits, it’s their employees who are making that possible, by their hard work and low wages. Why shouldn’t those workers be given a healthy slice of those profits? When will AFL-CIO unions confront employers about treating their workers fairly? The nation’s union dues payers are hungry for leadership.—Harry Kelber

LaborTalk (87) will be posted here on August 3, 2010 and on our two web sites, https://www.laboreducator.org/ and www.laborsvoiceforchange.org.