Politicians have been slow to wake up to the reality that small tweaks to the growth of future spending aren’t going to solve our debt problem and another round of government stimulus spending isn’t going to reignite private-sector hiring. Big changes need to be made to put our fiscal house in order and give businesses the certainty they need in order to expand and invest in the American economy again.
Employees also need to come to terms with these new realities. Super-sized benefit packages and union officials unwilling to make any changes to their contracts all but sunk America’s great auto companies. Other industries are also vulnerable. Employees should consider the difficult, competitive environment confronting most businesses today and the long-term consequences of what high employment costs will do to a business — and ultimately to workers.
Unfortunately, this lesson has yet to be learned by the 45,000 Verizon workers who chose to strike this past weekend. In a move that many companies have made recently, Verizon asked employees to start contributing to their health-care premiums, reduce available sick leave, change the company pension system, and make it easier to fire workers — all changes that would bring them in line with common business practices.
Unions have protested that Verizon is a profitable company, making such changes unnecessary. And certainly, it’s easy for the media to cast the employers as the villains. After all, Verizon’s a big, very successful company with some highly paid executives.
But it’s not that simple. As with many corporations, most of Verizon’s profits come from one line of business (wireless), while its union workers come from other lines of business (home and business land-lines) that are in decline.
If this sector of workers is allowed to become an anchor on the company, its currently profitable sectors of the company will become less competitive, because finite resources will have to be shifted to cover legacy costs for less productive workers. In the telecom industry — as in pretty much all other industries — there are competitors hungry for market-share who will exploit the advantage of having comparatively lower labor costs. Companies that shoulder disproportionate benefits have less flexibility and capital, and will pay a price in the long-run.
Unions and workers are understandably reluctant to give up perks they’ve enjoyed for years. Yet the long-term health of the company — and indeed the American economy — rests on remaining competitive. Striking workers should consider how long companies will continue to operate less productive, more costly endeavors. If they succeed in defending their salaries and full benefits, how long will those jobs last?
Fortunately, government workers across the country are slowly acknowledging that the promises that political leaders made for their pensions and health benefits create an unjustifiable burden on taxpayers. Far more needs to be done, but some states have managed to trim back promised benefits — something that might have seemed unthinkable just a few years back. Private-sector unions will ultimately have to follow suit and recognize that business-as-usual just isn’t a realistic option.
— Carrie Lukas is the managing director at the Independent Women’s Forum.