Are labor unions capitalistic enterprises?

To answer that question, we need to define capitalism: “An economic system in which the means of production and distribution are privately or corporately owned and development occurs through the accumulation and reinvestment of profits gained in a free market” (wordnik.com).

A labor union is a corporation made legal by the federal government in the 1930s in the Wagner Act. Workers have the right to organize and form a union.

An article in Forbes Magazine by Adam Ozimek entitled “The Difference Between Unions and Corporations” argues a union is not a corporation because a worker does not have the choice to opt out.

Here is Ozimek’s argument: “With unions, critics—myself included—allege that the exclusivity agreement is unduly coercive to some of the initial parties. With corporations, there is no parallel criticism.”

I would argue that Ozimek’s statement is incorrect. Many workers have to sign “do not compete” agreements in order to be hired. That means they are banned from working for a business competitor for a stated number of years. There’s little difference between the exclusivity of belonging to a union and no-compete clauses.

Unions are capitalistic enterprises where workers compete with corporations in the market for a share of profits through their labor. Their strength lies in their numbers. Union boards are elected by stakeholders (just like corporations)—the workers—to increase their profits (income) through their refusal to work without gaining an equitable share of the profits. Historically corporations hate unions as a result.

By changing our perception of unions being capitalistic enterprises, let’s examine the United Auto Workers Union strike against Ford, Chrysler, and General Motors.

Unions do not own the means of production and distribution—the factories, machinery, and the vehicles that transport the manufactured products, but they do own the skills and labor to produce the goods and services that the company offers for sale.

In order to get what they consider is their “fair share” of the profits of the automakers, unions have to resort to strikes to get the attention and respect of the automakers. The U.A.W. has chosen to selectively strike. Most of the workers remain on the job so the $825 million strike fund will not be depleted too quickly. This makes it more difficult for the automakers to know how to deal with the strike. Where will they place the non-striking workers is put into the hands of the union rather than with the auto corporations. The U.A.W. has to be creative and innovative to be successful, just like a corporation.

As with all bargaining, the U.A.W. made demands that are unrealistically high as a starting point: 40% wage increases over four years, increases in retirement benefits for both retired and future retirees, new workers being put on the same pay scale as veteran workers, and better health insurance coverage.

The Big Three automakers counteroffered with a 20% pay raise. The U.A.W. rejected the offer but dropped its wage demands to 36%.

The automakers are put at a major disadvantage since it is commonly known they have made billions in profits in the past few years. When the Ford C.E.O. warned the automaker may go bankrupt, the argument rings hollow in the light of the public knowledge that she earns $29 million/year. The Union is only asking for wage increases in proportion to the rises in pay of the C.E.O.s. and job protections for workers in the EV conversion.

The auto industry is in a state of flux and corporations are spending billions of dollars to retool for electrical vehicles. These changes are risky, though, because EVs require charging stations, and that infrastructure is costly.

Meanwhile, the Big Three are looking over their shoulders at Elon Musk and Tesla whose workers do not belong to a union. Musk pays his workers at a lower wage scale as a result.

As with all corporations, capitalism involves risk. Batteries may not become the alternative to the internal combustion engine. One transportation consultant recently told me he thinks hydrogen gas will be a more sensible and a less expensive alternative to batteries. The concern about the explosiveness of hydrogen has been solved, according to him. Mining lithium, a major component of EV batteries, is also highly polluting.

Both the U.A.W. and the Big Three are competing for the largest share of the profits they can obtain. The battle is pure capitalism at its best and worst. All we can do as residents of the U.S. is to sit back and watch, eating popcorn, as the competition continues.