Dean Barber

The Wave Will Spread

In Uncategorized on December 16, 2012 at 9:42 am

In the decision to invest capital at some place and at some time, the human factor, the human resources needed, will almost always plays a key role regardless of the industry. As you might imagine, this is incredibly important in the site selection process, to which I advise companies.

Despite the trend toward needing fewer people to do appointed tasks, particularly in manufacturing, we cannot all be replaced by robots. Somebody has got to design the robots. Somebody has got to keep the robots running. Somebody has got to lubricate the system and make the machine of business run.

In the drive to remain competitive and to free themselves from the encumbrances of labor unions, US manufacturers have been shifting resources to right-to-work states, where they believe the machine can run better. In right to work states,  it is illegal to require that employees join a union or pay union dues to get or keep a job.

And while employees can still form unions, engage in collective bargaining and go on strike in right to work states, the power and the purse strings of unions are most certainly deflated. In those states, most of them in the South and the West, union membership stood at 6.48 percent in 2011, according to the U.S. Bureau of Labor Statistics. In states without right-to-work laws, 10.8 percent of the workforce belonged to unions.

A Tectonic Shift

The shocker came when Michigan, the cradle of the US labor movement, this past week became the 24th state to adopt right-to-work laws. One poll showed that Michigan voters favored the right-to-work bills by 51 percent to 41 percent. (Even 40 percent of union households supported the law as did 63 percent of young voters.)

The question is whether what happened in Michigan — the home state of the UAW and the Big 3 automakers — could be a harbinger of things to come. In other words, if Michigan of all places can become a right to work state, why not Ohio, Pennsylvania, Wisconsin or Illinois?  I suspect that we just might be witnessing the movement of huge tectonic plates in the labor history of our country.

You may want to mark the date — Dec. 11, 2012. It was the day that Michigan Gov. Rick Snyder signed the right-to-work bill into law. It may not go down in history as the day the unions died. That would be an overstatement as more established unions will remain intact. But Dec. 11 may nonetheless become an historic date when the floodgates were opened for what may come to follow. We shall see.

But keep in mind that this has been a long time in coming, even if the bill signing came as an unexpected surprise. About 17 percent of Michigan workers belong to unions, according to the U.S. Department of Labor. In the early 1960s, about 40 percent did.

If 40 percent of union households in Michigan favored right to work status, then you have to wonder if there are not at least some undercurrents within the rank and file as to whether unions have deviated from their original purpose. If given the choice, some union members may not have chosen to join the union, because they may not like what they see — a stifling of labor competition to the detriment of their employer.

Yes, Lower Wages

Union proponents contend, and there is some evidence to suggest that they are correct, that right-to-work states have lower wages on average than pro-union states. A study by Hofstra’s Lonnie Stevans in 2007 found that right-to-work laws help boosts the number of businesses in a state — but the gains mostly went to owners, while average wages went down. Another study by Thomas J. Holmes in 1998 found that companies in heavily unionized states often relocated just across state borders to right-to-work states.

As I related in my blog last week, O Ye of Little Faith, I have had more than a few companies tell me during the site selection process that they wanted to restrict their search to only right-to-work states. No doubt, economic developers in Michigan and Indiana, which earlier broke the mold in the industrial Midwest by becoming a right-to-work state in February, believe they are now on a better competitive standing to win industrial projects. And so they probably are if for no other reason than perception of a more pro-business environment.

As I suggested, I am not in the habit of arguing with clients. If it is right to work they want, it is right to work they will get.

No Coincidence Indeed

It’s no coincidence that a wave of German, Japanese and Korean automotive manufacturers have built assembly plants in the Southeast, all right to work states where the UAW holds little sway. And while I do not put a lot of stock in the various magazine rankings of states in terms of their business climate, I do take note of CNBC’s annual list of the best states for business, in which nine of the top 10 states are right-to-work states. That’s something that I file away in the back of my mind.

Likewise, I file away that Indiana and now Michigan are right to work states, where client companies may suggest that they will now consider for future investment. While there are a slew of factors to be considered in the site selection process, workforce is usually always high on the list. Allaying fears and doubts of management regarding workforce is a big part of that process.

In short, I am suggesting that some fears and doubts have been diminished in Indiana and Michigan, once bastions of organized labor, as was the intent with the change of status. The critics are probably right in that it may do nothing to boost wages in those states. I will grant them that.

But if right-to-work status serves as a better incubator for capital investment, a concept that even some union members would apparently agree, then the historic changes we have witnessed in these two states will spread. I don’t think this can be contained. The wave will spread.

Our Hearts Have Been Broken

This is a business blog, so I am going to ask your forbearance here when I delve into something that I am not equipped to fully fathom or explain.

But I can tell you that by Saturday morning, I had my fill of television news coverage about the senseless killing of 20 children and six adults at an elementary school in Newtown, Conn. I just couldn’t watch it anymore as it saddened me so.

There about 310 million Americans and about 285 million guns floating around in our society, and I’m starting to believe that the only people who should have guns are the police and me. (Actually, I don’t believe that but I am trying to make a point here. Just bear with me.)

This latest mass murder comes just days after a young man went on a killing spree in Oregon shopping mall that resulted in three dead, including the shooter. As a gun owner and having grown up in a hunting tradition, I have always been skeptical and resistant to gun control, but I’m starting to believe that some things need fixing.

Experts believe about 40 percent of guns sold in this country are done so without any background check. That is not good, and I would hope that the NRA might even agree, although I doubt that they would.  (It should be noted that the three weapons recovered at the crime scene in Newton were all legally purchased by the shooter’s deceased mother.)

Now I will fully acknowledge that it’s not all about guns. On the same day of the massacre in Newton, Conn., a man in China stabbed 22 children at an elementary school.  Ultimately, this is about the mentally disturbed that walk among us. How can we better identify and provide treatment for the mentally ill, particularly that smaller subgroup of angry depressives, and how do we prevent them from getting weapons?

Couple mental illness with an access to weapons, and you have is a lethal combination. So treating mental illness, not criminalizing people who have mental illness (98 percent of whom will not be violent), I think is somehow key to all of this. The gun violence that we sustain in this country, with 87 fatalities a day, is a national disgrace.

Will this be a historic watershed moment for policy makers? Perhaps no substantive changes in guns laws will result, but rather a substantial tightening of security with the placement of armed police officers in virtually every schoolhouse in America. I would not doubt that.

A clearly emotional President Obama faced television cameras on Friday afternoon. “Our hearts have been broken,” he said, trying to wipe back tears. And so they have.

We are better than this. Lord knows, we have to be better than this. Give us wisdom and give us strength.

Dean Barber is the principal of Barber Business Advisors, LLC., a site selection and economic development consulting firm based in Plano, Texas. He can be reached at 972-767-9518 or at dbarber@barberadvisors.com Please visit our website at www.barberadvisors.com

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  1. Dean is right about some clients making the right to work issue a no-go decision criteria. i also feel that while a union operation is not necessarily bad for business and in many cases has been brought upon the organization due to poor management. I have managed union and non-union operations and what typically makes a union operation less competitive is the inflexibility in the work rules. When work rules are flexible and allow the workers to move freely between tasks as the volume of work requires it, the operation can be successful and flourish. When work rules are unnecessarily restrictive, the productivity of the operation suffers and makes its leaders look for solutions that might include eliminating the operation entirely and moving. That move might be to a right to work state or offshore. In either case, good workers lose jobs.

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