Saturday, November 17, 2012

Unions Destroy Hostess Brands

Eighty five year old Hostess Brands, maker of Wonder Bread, Twinkies, Ding Dongs and Snow Balls, among many other bakery products, will close its factories and lay off 18,500 workers thanks to numerous unions demanding higher compensation, benefits, pensions and crazy work rules.  This is another case of unions both destroying jobs and in this case an iconic company. 

Of course, the unions are blaming "Vulture Capitalists" that twice came to the rescue with investment money in an attempt to save Hostess from bankruptcy.   But finally, since unions would not relent related to unreasonable demands, Hostess just decided to call in quits and liquidate.   So now, it is feasible that these brands will be sold to bakeries in China, or other countries to take advantage of this brand identity.   Though manufacturing will not likely come back to the United States, unless it happens in Right to Work states with no unions. 

While Public Employee Union membership has skyrocketed, unions in industry today only represent 7% of workers because unreasonable union demands have pushed many manufacturing jobs overseas.   The reality is, for better or worse, that work is only worth so much as determined by the market place.   Hostess could not charge $10 for a package of Twinkies because the consumer will not pay it.   So in the end, union demands for higher compensation, benefits, pensions and work rules that drive up the cost of doing business, are irrelevant.   Consumers voted NO to higher union demands and so now Hostess will soon be gone. 

Socialists in unions and government just do not understand market realities.   Price in determined in the market place, not a smoke filled room full of union bosses, based on the price a buyer is willing to pay a seller.   The price for all goods and services are determined in this way.   The reason this Blogger does not oppose private sector unions, though they too are job killers, is that this process is self regulating.   If a private sector union demands too much in compensation, benefits, pensions and crazy work rules and company management is dumb enough to agree, then the company will just go out of business, sadly destroying the jobs the union purports to represent.  This has happened time and again. 

The same is not true for Public Sector Unions because government cannot go out of business.   And, Public Sector employees hold a monopoly on jobs.   There is little competition for public schools, unless poor and middle class parents are given School Vouchers to allow them to pull their children from failing public schools and send them to private schools.   Of course, Teacher Unions oppose School Vouchers and School Choice for this very reason.   They do not want any competition.   The same is true for police, fire and most other government services.  

Lack of competition breeds mediocrity; hence the saying "good enough for government work".   And, Public Sector Unions are able to demand higher and higher compensation, benefits, pensions etc. that are bankrupting our country because Socialist politicians, owned lock, stock and barrel by the Unions, are more than happy to comply because it is their ticket to power. 

In any case, what is happening at Hostess Brands has happened to various industries in the United States like Steel, Textiles, Furniture etc. that for the most part no longer manufacture goods in the United States.   Unions have destroyed these industries in the US because of unreasonable demands.   Even the auto industry in the Rust Belt, where auto unions predominate, is much smaller today than 20 years ago.   It is no accident that foreign car manufacturers, that do make cars in the US, are almost all in Right to Work states in the South in non-union shops.   

Unions in industry served a purpose 100 years ago when working conditions and pay were miserable.   Today,  the law governs most working conditions and total compensation and benefits should be based on what the market will bear not arbitrary demands.   Until unions start to understand the forces of Global Free Market Capitalism, we will continue to see more and more manufacturing jobs shipped overseas.   It is what it is. 

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