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Blame Unions for the Hostess Bankruptcy



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Stock up on Twinkies while you can. As everyone now knows, Hostess Brands, Inc. has gone bankrupt, thanks to striking workers who just struck themselves out of a job. Small wonder that union membership hit (another) new low in 2012.

Hostess — the maker of Twinkies, Ding-Dongs, and Wonder Bread — had struggled financially for years. It lost over $300 million in 2011. The firm proposed reducing its benefits to stay competitive. Unsurprisingly Hostess’s unions balked. But after examining the firms’ books, the Teamsters reluctantly accepted the cuts.

But Hostess’s other union — the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union — would not. The union went on strike. Hostess warned them that the strike would quickly bankrupt the company. The Teamsters warned the Bakers the company wasn’t bluffing, but the union chose to keep striking.

Hostess announced it had no choice but to file for bankruptcy. More than 18,000 employees will lose their jobs.

This is the problem with labor unions. They make companies less nimble, less competitive. A unionized firm takes longer to respond to changing market conditions. It has to negotiate any changes with the union, and unions are not always reasonable. So unionized companies invest less, make less, and create fewer jobs than non-union firms. Over time they wither away.

This is why union membership hit a record low in 2012. Between January and October union membership fell by 0.5 percentage points to 11.2 percent of workers. Just 6.6 percent of private-sector workers belong to unions — fewer than one in 15 employees. A smaller proportion of workers belong to unions today than when FDR signed the National Labor Relations Act.

It’s not hard to see why. Who wants their company to wind up like Hostess? Or General Motors? Or U.S. Steel? Or American Airlines? The list goes on and on. Polls show that just 10 percent of non-union workers want to organize.

The union movement has responded by trying to make it more difficult to refuse their services. The misnamed “Employee Free Choice Act” would have replaced secret-ballot organizing elections with publicly signed cards — exposing workers to pressure and harassment. President Obama’s NLRB has rushed union votes, giving workers as few as 18 days before voting.

These changes would only make union organizing easier. They would not make unionizing a better deal for workers. The union movement won’t recover until it gets a new business model — one that actually helps companies and workers compete in the marketplace. Few workers want to make their company as dead as a Ding-Dong.

— James Sherk is senior policy analyst in labor economics at the Heritage Foundation.



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