All Commentary
Saturday, August 1, 1998

Who Wins in Strikes?

Union Officials Have Different Interests Than the Rank and File

There are at least five groups of people who are affected by labor union strikes—employers, their employees, union officials, and the customers and suppliers of the strike targets. Union officials would have us believe that striking workers are the biggest beneficiaries of such conflicts and that those benefits come at the expense of employers and the investors they represent. They almost never mention the gains they get for themselves, and they usually ignore the effects on customers and suppliers.

Under American labor law all strikes involve the legal use of private coercion, and many involve outright violence. A picket line has one purpose—to prevent, or to try to prevent, replacement workers, customers, and suppliers from engaging in voluntary exchange with strike targets. It is a physical barrier to the target’s property, and anyone who crosses the line is in danger of harassment and physical harm. Last summer’s Teamsters strike against UPS illustrates the point. In any other context a picket line would constitute trespass. Many people wink at coercion and violence in strikes while they condemn both elsewhere, i think that is because they mistakenly believe that strikes benefit workers.

The late W.H. Hutt, a leading twentieth-century free-market labor economist, taught that any gains received by striking workers or union officials are ultimately paid for by consumers and other workers, not by employers and the investors they represent. Strikes do not benefit workers in general. Many empirical studies support Hutt’s hypothesis. Now we have empirical evidence that indicates that even striking workers gain very little, if anything, from strikes. The big winners are union officials and the institutions they rule. Those gains are appropriated at the expense of consumers, union-free workers, and, very often, striking workers.

The Employment Policy Foundation (EPF) in Washington, D.C., recently produced important data on who wins from strikes. Consider, for example, the 1997 UPS strike. EPF compared the cumulative wages that both full-time and part-time workers would have received had the Teamsters accepted the last offer made by UPS prior to the strike with the cumulative wages they will receive because of the strike in the years 1997 through 2001, the life of the new contract. In 1997 the strike made part-time workers worse off by $2,126 and the full- time workers worse off by $3,703. In 1998 the respective figures are $2,126 and $2,303; in 1999, $1,866 and $703; and in 2000, $2,402 and $963. In 2001, part-timers will be worse off by $1,018, and full-timers will be better off by $2,237.

Thus, notwithstanding that Ron Carey (president of the Teamsters at the time) proclaimed that the strike was for the good of the part-timers as well as full-timers, the strike makes part-timers worse off in every year of the contract, while the full-timers will be worse off in every year except the last. When these numbers are put together with the indisputable fact that the pension plan forced on the workers by the Teamsters is much less remunerative than the plan offered by UPS, it is clear that all UPS workers represented by the Teamsters have lost out because of the strike.

The UPS strike is not unique. From 1985 to 1996 there were 91 major strikes (involving more than 5,000 workers each) in the United · States. Investigators at EPF were able to assemble data on 18 of those strikes in which wages were an important matter of dispute. Again, they compared the employers’ final pre-strike offers with post-strike settlements. First, they calculated the undiscounted cumulative dollar losses (or gains) to workers over the life of each post-strike contract. Second, they calculated the number of years required for workers to recoup their losses. That is, they calculated the number of years it would take for the present value of the last-offer income that the union turned down to be offset by the present value of the post-strike income received.

Of the 18 strikes there were only two—Conasa (1986) and Farmer Jack (1987)—in which any workers gained in dollar terms over the life of their contracts. The Farmer Jack strike was the only instance where all workers made cumulative dollar gains. In the Conasa case only some workers had cumulative gains. The cumulative losses per worker ranged from $12,637 in the 1996 McDonnell Douglas strike to $704 in the 1985 Western Union strike. The average cumulative loss per worker was $3,945.

At a 10 percent discount rate striking workers in two-thirds of the strikes (12 of the 18) would never be able to recoup their losses if they kept working for the struck employer at the post-strike contract terms. At a 5 percent discount rate striking workers in 10 of the strikes would never be able to recoup their losses.

If most striking workers do not benefit from strikes, who does? As Hutt always taught, union officials have interests that are significantly different from the rank and file. They care mostly about their own promotion and tenure in union hierarchies and their prominence in local, state, and federal political arenas. The survival and growth of their unions are means to those ends. They have only to create the appearance of sufficient gains for their members to keep them from rebelling. Above that, the welfare of workers matters little to union officials.

For example, consider the actions of Teamsters president Ron Carey during the 1997 UPS strike. He was barely re-elected over James F. Hoffa in 1996. In 1997 the government overseer of the 1996 Teamsters election, Barbara Quindel, raised questions about alleged illegal deals in which the Teamsters donated money to Democrats in the 1996 presidential and congressional campaigns in exchange for the Democrats’ encouraging their supporters to donate to Carey’s campaign. Carey knew of those allegations and the investigation, and the possibility that his election would be voided, before he called the strike on August 4, 1997. He needed a national strike to divert attention from his growing legal problems. He also needed it to solidify the political support of John Sweeney, president of the AFL-CIO, as well as the Teamster rank and file in the event his election was voided. Sweeney has encouraged all AFL-CIO unions to be more confrontational, believing this strategy will reverse the unions’ declining share of workers. An apparent victory over UPS would please Sweeney as well as the members.

On August 22, 1997, Quindel announced that the 1996 Teamsters election had been voided and that a new election must be held. From Carey’s point of view the strike was well conceived. He was subsequently disqualified from running in the new election and is now on a leave of absence from the presidency while he fights the allegations against him. The election has been delayed until later this year. It is now alleged that the AFL-CIO was itself complicit.

Union officials routinely claim that the strike-threat system makes unionized workers much better off than nonunion workers. On the basis of the recent EPF data it appears that a more apt distinction would be between workers that are union-impaired and those that are union-free.

  • Charles Baird is a professor of economics emeritus at California State University at East Bay.

    He specializes in the law and economics of labor relations, a subject on which he has published several articles in refereed journals and numerous shorter pieces with FEE.