By James Sherk
The Heritage Foundation
Enjoy Twinkies while you still can. Hostess Brands just went bankrupt. This morning the company announced that it will suspend operations and lay off more than 18,000 employees. The Bakery International Union put them out of business.
Hostess has struggled financially for years. The company tried to stay competitive by cutting costs, but these cuts enraged its unions. The Teamsters ultimately accepted concessions; the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union would not.
Despite warnings from management—and the Teamsters—the Bakery union went on strike and refused to return to work. Hostess lacked the funds to carry on, and the company will now liquidate.
This has become the story of the labor movement. Companies like Hostess need to be nimble, but unions make it difficult to respond to a changing marketplace. This makes unionized firmsless competitive. So unionized firms invest less, create fewer jobs, and earn less than comparable non-union firms.
While unions try to avoid bankrupting their firms, the companies grow more slowly—and shrink more rapidly—than their non-union competitors. Over time, they eventually go under. What happened to Hostess has happened across the entire economy.
This is one reason why union membership keeps falling: Unions cannot recruit enough new members to replace the ones they keep losing. In 2012, union membership hit another record low, falling 0.5 points to 11.2 percent. In the private sector, just 6.6 percent of workers belong to a union.
Unions now want to boost their membership by making it difficult for workers to tell them “no.” President Obama’s National Labor Relations Board (NLRB) is obliging. The NLRB just changed its rules to enable unions to cherry-pick who votes in union elections. At one New York department store, unions recently formed a unit representing only women’s shoe associates on the second and fifth floors. None of the 300 other employees in the store got to vote.
However, a strike or union-induced bankruptcy hurts all the workers at a company. Just ask everyone at Hostess who lost their jobs in the Bakers union strike. The NLRB’s new rules effectively disenfranchise employees who do not want to risk unionizing. Now their choice does not count.
If employees feel that they need a union for protection, they have a right to organize. Management gets the union it deserves. But if a company treats its workers well, the NLRB should not foist unions on them anyway. Losing Twinkies is bad enough.
If capitalism is fair, then unionism must be. If men have a right to capitalize their ideas and the resources of their country, then that implies the right of men to capitalize their labor.
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BCTGM members are well aware that as the company was preparing to file for bankruptcy earlier this year, the then CEO of Hostess was awarded a 300 percent raise (from approximately $750,000 to $2,550,000) and at least nine other top executives of the company received massive pay raises. One such executive received a pay increase from $500,000 to $900,000 and another received one taking his salary from $375,000 to $656,256.