The unions are on both sides of the table now so the rules of economics matter

How To Go Extinct

Posted 08/18/2010 06:42 PM ET

Labor: The members of a United Auto Workers local decide they'd rather shut their Indiana GM plant than take a pay cut to keep their jobs. It's their choice, but it's also about as intelligent as a dodo.

Commentators including Rush Limbaugh have noted with amusement that even the UAW leadership was unable to persuade 631 Indianapolis union members to accept a pay cut so their plant could stay in business.

After all, UAW now owns General Motors, so it was comical seeing them worry about costs just like any other owner. The bottom line was that the plant would shut unless GM could sell it to JD Norman Industries with reduced salaries. Starting pay would fall from $29.90 to $15.50 an hour under the deal the UAW negotiated.

No one likes to see a wage cut, but still, amazingly, the workers said no. Years of UAW indoctrination that auto makers were bottomless pits of money and only "greedy" managers kept workers from earning more prompted the gear-turners to say no. They even chased UAW men out of their union hall.

As satisfying as it is to see the UAW endure the wrath of its rank and file, the workers will soon find themselves on the unemployment lines as a result of their refusal to adapt to reality in bad times.

The Indianapolis Star reports that the workers are "wagering that even if the plant closes, they can transfer to GM locations in other states and keep the UAW base wage of $29 per hour."

They may be deluding themselves. Profits matter and companies have no choice but to compete on global terms to survive. Working in a declining industry with few other skills means jobs are scarce,maybe even impossible, to find.

Companies are obliged to hire productive people who give them the best value for their money. In the case of the Indiana workers' wages, they're priced at roughly twice the going rate.

Bloated worker costs prompt companies to move to other states, if not countries, to keep costs down. And no business wants to hire workers who have a record of militant inflexibility.

In effect, workers have chosen a $390 weekly unemployment check — about $20,000 a year — over a $30,000 pay package with benefits and prospects of better pay as the economy improves.

Meanwhile, the losses will mount. Indianapolis will lose $1.8 million in property taxes and $550,000 in payroll taxes as the plant shuts down, according to the Star. Nonunion workers at the plant will lose jobs, and so will small businesses in the area.

Should a financially troubled state like Indiana now support those who willingly walk away from decent jobs? Workers are free to do as they choose, of course. But they aren't exempt from reality.