Saturday, February 23, 2013
Labor: Who says intransigence doesn't pay? After driving Hostess out of business by refusing to negotiate, union bakers have been rewarded by the White House with Trade Adjustment Assistance. It's all the foreigners' fault.
Politics: Who says intransigence doesn't pay? After driving Hostess out of business by refusing to negotiate, the White House has decided to reward the union bakers with Trade Adjustment Assistence, blaming foreigners. What a sweet deal.
Last November, Hostess Brands went into liquidation, throwing 18,500 employees out of their jobs. The baking giant had been through two restructurings, but the company remained unprofitable.
All the same, most workers at the bread and pastry maker, famous for its Twinkies and Ho Hos snack cakes, were willing to tighten their belts until good times returned.
They included hard-line unions, such as the Teamsters, not known for making concessions.
But there was one exception: the AFL-CIO-affiliated Bakery, Confectionery, Tobacco Workers & Grain Millers International (BCTGM).
It refused to deal, taking the entire company, including fellow workers, down with it.
Turns out the union knew exactly what it was doing.
This week, the Labor Department decided to shower Hostess workers with Trade Adjustment Assistance, a multibillion-dollar pork barrel program that was beefed up as a bone to Democrats, who were blocking passage of three free-trade treaties in Congress in 2012.
TAA is a lavish program doled out by the Labor Department for laid-off workers who've lost their jobs due to "global trade."
It provides worker retraining due to the supposed evils of free trade — plus moving expenses, baby-sitting expenses and as much as two years of unemployment pay. If a worker ends up making less than his union salary afterward, Uncle Sam spots the worker for 50% of the supposed lost wages in a "free" subsidy.
What's more, "virtually anybody can qualify," said TAA certifying officer Elliott Kushner in an interview with the Wall Street Journal.
Kushner was the one who signed off on shoveling the pork to Hostess.
Two problems come with this scenario.
One, there is no evidence foreign baked goods — cited in his report — are flooding into the U.S., putting bakery workers out of business.
Imports of baked goods have been basically flat since 2010, according to the Bureau of Labor Statistics.
The Labor Department, meanwhile, notes that baking as a profession should see 2% growth until 2020 — not big growth, but not negative, either.
As for the industry itself, the American Bakers Association reports that its key concerns aren't imported goods, but soaring energy costs, high grain costs due to a drought (and, no doubt, the Obama administration's inflexible ethanol mandate that has made food grain scarcer) and the threat of environmental regulations that force bakeries, regardless of size, to buy $500,000 catalytic oxidizers.
In Hostess' case, labor costs were almost certainly a factor. The Labor Department says the average wage for bakers nationally is $11 an hour.
The unionized Hostess bakers were pulling in as much as twice that amount, which, together with pensions, was what made the company uncompetitive.
Imports weren't the problem.
But it's so much easier to blame foreigners, even if no significant foreign goods can be found.
This shows how something like the TAA can turn into a perverse incentive, encouraging all workers to make no concessions in tough times, even if it means saving their company.
The BCTGM union's intransigence was directly responsible for the liquidation of Hostess Brands.
Yet the same union is being rewarded with premium unemployment packages that encourage its members to go on the dole — and to blame foreigners for it.
Undoubtedly, more examples of this perverse incentive will take down more companies, an unintended consequence of a boondoggle that sounds good on paper.
It's not good. It's a reward for those who refuse to negotiate, and a sop to the manipulative unions that are most adept at gaming the system.
This doesn't create value. It's corruption.