News of the Tautological

Daily Best of the Web   —   Posted on February 21, 2014

The following is an excerpt from OpinionJournal.com’s “Best of the Web” written by the editor, James Taranto.

Melting-Snowman-3News of the Tautological 
“Temperatures Should Melt Snow”–headline, Times Union (Albany, N.Y.), Feb. 20

Out on a Limb 
“Joe Biden: Obamacare Enrollment May Miss Mark”–headline, Politico.com, Feb. 19

Count to Nein
It was a stunning loss for the United Auto Workers when employees of Volkswagen’s only American factory, in Chattanooga, Tenn., rejected the union by a 712-626 vote this past weekend. It was particularly unexpected because VW management was officially neutral and was generally understood to be supportive.

Reuters reported last Friday, while the vote was going on, that President Obama weighed in at a private meeting: “Obama said everyone was in favor of the UAW representing Volkswagen except for local politicians who ‘are more concerned about German shareholders than American workers,’ according to a Democratic aide who attended the meeting with Democratic lawmakers in the House of Representatives.”

Also in opposition, as it turned out, were a majority of the workers at the plant. Our colleague Jason Riley speculates that Obama, who in 2012 managed barely 39% of the vote in Tennessee, might have hurt the union with his endorsement.

At any rate, if the secondhand Obama comment is accurately reported, it reflects some serious misconceptions, as well as an unwitting but telling acknowledgment.

One misconception is the vaguely xenophobic claim that VW is owned by “German shareholders.” In fact, although Volkswagen AG is a German company, it is publicly traded on multiple stock exchanges. Its shareholders include American workers, either directly or through mutual funds and retirement accounts. Owning VW stock does not make you German (which may come as a relief).

Obama’s unwitting acknowledgment is that unionization is bad for companies, a corollary of its being bad for shareholders. But that leads to another misconception. If unionization is bad for companies, it does not follow that it is good for workers. The relationship between employers and employees is not fundamentally an adversarial one.

To be sure, there is a basic clash of interests in any negotiation over wages, or for that matter between the prospective buyer and seller of anything, including labor. The seller’s (or employee’s) interest is to maximize the price, the buyer’s (or employer’s) to minimize it. At the same time, both parties are better off reaching an agreement that allows the desired transaction to be completed.

A union can increase workers’ bargaining power and thereby yield higher wages (or more favorable working conditions), but if that comes at the expense of the company’s long-term viability, the victory is Pyrrhic. The Chattanooga workers’ “nein” vote could have been informed by the experience of Detroit auto workers, on whose behalf the UAW extracted generous pay and benefits, which ultimately bankrupted General Motors and Chrysler.

UAW allies have accused Republican politicians, including Sen. Bob Corker and Gov. Bill Haslam, of “interference” for arguing that unionization of the VW plant would have been bad for the state’s business climate. But now, Reuters reports, German unionists are making precisely that claim about the failure to unionize:

“I can imagine fairly well that another VW factory in the United States, provided that one more should still be set up there, does not necessarily have to be assigned to the south again,” said Bernd Osterloh, head of VW’s works council.

“If co-determination isn’t guaranteed in the first place, we as workers will hardly be able to vote in favor” of potentially building another plant in the U.S. south, Osterloh, who is also on VW’s supervisory board, said.

The 20-member panel–evenly split between labor and management–has to approve any decision on closing plants or building new ones.

As Slate’s Matt Yglesias notes:

German firms, by law, have boards of directors that represent both workers and shareholders. The price-to-book ratio of publicly traded Germany companies is systematically lower than in the United States for this reason. In America, in the long run the shareholders get there [sic] way. In Germany, the workforce is able to override shareholder perogatives [sic] at key times.

What’s more, two of the shareholder representatives on VW’s board are left-wing politicians from the German state of Lower Saxony, which owns some 20% of VW shares; and Germany’s federal labor minister is a member of both the Social Democratic Party and IG Metall. “A fired-up IG Metall plus a fired-up Social Democratic Party do currently have the objective leverage to force policy decisions on Volkswagen,” Yglesias writes.

It’s in IG Metall’s interest to maximize VW’s overseas labor costs so as to minimize competitive pressure on domestic labor. And it’s in the interest of German politicians, especially on the left, to cater to IG Metall. VW shareholders, it appears, are represented at least in part by men who don’t necessarily have their interests at heart. At least the same isn’t true of VW workers in Tennessee.

For more “Best of the Web” click here and look for the “Best of the Web Today” link in the middle column below “Today’s Columnists.”