Blasted Union Twinkie Killers!

November 30, 2012 07:42


If people lose their jobs because they committed economic hara-kiri, should they still be entitled to receive taxpayer-funded unemployment?

 

By Dr. Mark W. Hendrickson

 

Drat! I’m bummed—saddened by the news that the Hostess company, home of the Twinkie and other venerable sugary snacks, is shutting down.

I’ll bet I haven’t eaten more than three or four Twinkies in the last 30 years, so the demise of Hostess doesn’t adversely impact my lifestyle. It’s just that, for baby boomers like me, the Twinkie has historic significance in popular culture. Being a kid in the ‘50s meant watching “The Mickey Mouse Club” and “The Lone Ranger” and snacking on Twinkies and Tootsie Rolls. Twinkies were as American as baseball. Now the company that makes them is facing liquidation. Why?

Because the bakery union wouldn’t agree to the concessions needed to keep their employer afloat. Look, I don’t wish lower wages on anybody, and having personally worked with great people in two unions (UAW and NEA), I have a natural sympathy for working men and women, but I can’t respect a union that would kill off the Twinkie and their own jobs due to a false sense of pride.

Hostess lost $341 million last year. The money for the compensation that the bakery union wanted simply wasn’t there. Even the Teamsters union, whom nobody would ever accuse of wimping out during contract talks, looked at Hostess’ books and acknowledged that the only way to keep the operation afloat would have been for workers to accept lower compensation.

The bakery union, however, would have none of it. They couldn’t have been so stupid as to misunderstand the simple arithmetic of Hostess’ financial predicament, so one can only conclude that they went berserk with ideological madness: “better to destroy the company than to make concessions to management” seems to have been their cold-hearted calculus. The bakery union lost sight of an important truth understood by Samuel Gompers, the founder of the American Federal of Labor, over a century ago: what workers need is a company that operates at a profit.

The pending liquidation of Hostess raises some interesting questions: If people lose their jobs because they committed economic hara-kiri, should they still be entitled to receive taxpayer-funded unemployment? Should the Teamsters union members, whose jobs are also being lost because of the bakery union’s decision, be allowed to file civil suit against the bakery union for compensatory damages for the losses they will suffer from the latter’s reckless actions? Can the rank and file of the bakery union sue their union leaders for professional malpractice? (The malpractice is worse in the union’s case, because most doctors convicted of malpractice don’t intentionally try to harm patients, whereas the Hostess bakery union could see that their action would have a lethal effect, and they went ahead with it anyway.)

It is possible that Hostess has been living on borrowed time. Tastes have been gradually shifting to healthier foods and Hostess’ complex financial structure (372 collective-bargaining agreements, 80 health and benefit plans, and 40 pension plans, according to The Wall Street Journal) might have guaranteed its eventual demise anyhow. Still, for the union to kill off the source of their own members’ income is ghastly. Can there be any silver linings in such a monstrous act? Perhaps.

Maybe union members will start demanding leadership that helps companies survive instead of killing them off. Maybe more union workers will come to understand which is the better choice for them: working zero hours per week at x-dollars per hour or 40 hours per week at x-y dollars per hour. Maybe the Twinkie brand will be sold to another firm so that this iconic snack doesn’t go the way of the dodo. Maybe Americans will see that a corporate bankruptcy—even a corporate liquidation—doesn’t mean that the company’s product has to disappear, that its assets can still be put to productive use, and that at least some of its employees can continue to do the same kind of work under a different business plan based on an economically rational and sustainable cost structure.

Maybe, just maybe, it will dawn on Americans that the same stubborn and ultimately destructive denial of reality that brought down Hostess and possibly killed the innocent Twinkie is the same willful madness that we see in Washington, where ALF-CIO boss Richard Trumka flatly opposes government spending cuts and Senate Majority Leader Harry Reid refuses even to consider Social Security reform. Like the bakery union at Hostess, these powerful national figures seem ideologically incapable of recognizing the simple fact of life that they want more than the country can afford. Call it folly or madness or whatever, but if we don’t wake up and change our ways, there will be far more economic destruction than just the loss of the venerable Hostess brand.

Can the Twinkie and other famous Hostess brands be saved? I hope so, and I’ll offer my own two cents’ on one possible way of doing so. First, though, I’d like to address two of the criticisms of my previous article—namely, that I confined my comments to the Bakery union and the allegation that I “hate” unions.

Yes, it’s true that I did not write a comprehensive diagnosis of the chain of events that brought Hostess to the brink of liquidation. My focus was simply on what, to me, is the astounding and sad decision by the Bakery union to deep-six their own jobs.

That is not to say that the bakers are solely responsible for Hostess’ demise. The Teamsters surely share in the blame for the massive inefficiencies that their work rules and featherbedding imposed on Hostess.

As for management’s alleged culpability, I don’t know enough of the particulars to judge. I’m sure they made some mistakes. Who doesn’t? I wonder, though, whether any management team would be brilliant enough to make Hostess profitable, given the union-imposed inefficiencies and the challenge of funding and administering Hostess’ several hundred collective-bargaining agreements and health and benefit plans.

Furthermore, I question the arithmetical skills of those who claim that management bonuses comprised half the problem. Let’s say for the sake of argument that Hostess’ managers gave themselves $60 million in bonuses. (One figure I read was $6 million, but I can’t verify that, so I opted for a larger figure.) Even if those $60 million bonuses were cancelled or retrieved, that wouldn’t come close to eliminating the company’s annual red ink of $341 million. In comparison, the compensation packages for 18,500 current employees, plus who knows how many retirees, must be somewhere around $1 billion per year. I’m not asserting that the bonuses were justified, but for anyone to say that management bonuses constitute “half” of the company’s financial problems doesn’t add up.

Now, in response to the charge that I hate unions, that’s just absurd and unfounded. First, I don’t hate anyone. (Actually, I think the pro-union people who sent vile emails to me might be projecting their own hatred onto me.) In essence, I am neither pro-union nor anti-union. I believe that a person should be able to exercise the right of free association and join a union, and also should be free to not join a union as a condition of holding a job if the person doesn’t want to join.

I have been on the workingman’s side at least since working as a janitor at Chrysler over four decades ago. I think unions sometimes make poor decisions (the Bakery union’s being the most recent example) and that is why I have urged unions to adapt so that they can thrive in the 21st century. I have even argued that there should be more unions—a goal to be accomplished by removing the current monopoly status that unions have. That way, additional unions could form, resulting in competition between unions that would yield better service to rank-and-file workers, just as competition between businesses leads to better service to consumers.

Okay, here is what I propose with regard to Hostess:

Instead of selling off the Twinkie and other famous brands to outside interests, let the owners either give them or sell them at a discount to the Bakery Union. Other unions have lined up financing to buy the factories where they worked. Then, the union members could pay themselves whatever they think they deserve—no more of the toxic “management is the enemy” atmosphere. They could charge whatever price they want for the Twinkies they would make. They could bake as many or as few as they wanted and do so in the way of their choosing. They could hire whomever they wanted to manage the business and set their compensation—no more unjustified bonuses to resent. The Bakery Union could hire whomever they wanted—Teamsters or non-Teamsters—to drive their products to market.

Such a change in ownership could be a very effective learning experience, not just for the Bakery Union and the Teamsters, but for other unions and the American public, too.

Long live the Twinkie!

 

Dr. Mark W. Hendrickson is an adjunct faculty member, economist, and fellow for economic and social policy with The Center for Vision & Values at Grove City College.

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