Did unions cause the collapse of the Detroit auto industry?

What role do unions have in economic growth and job creation?

Can unions help increase economic and business competitiveness?

How do unions really help their workers?

MYTH: Unionization Caused The Detroit Auto Industry Collapse

Fox's Tantaros: The UAW “Essentially Bankrupted” Detroit Auto Industry. On the February 18 edition of Fox News' America's Newsroom, co-host Bill Hemmer and fellow Fox News host Andrea Tantaros used an unsuccessful unionization vote at a Volkswagen plant in Chattanooga, Tennessee to attack the United Automobile Workers (UAW), with Tantaros stating that the union “essentially bankrupted a lot of companies in Detroit.” [Fox News, America's Newsroom, 2/18/14]

Fox's Morris: UAW Failed Because “We Know What Happened In Detroit.” On the February 16 edition of Fox News' Fox & Friends Sunday, co-host Clayton Morris invited Sean Moss, a Volkswagen employee who did not support unionization at the Volkswagen Chattanooga, Tennessee facility, to discuss his choice to vote against joining the United Automobile Workers (UAW). Moss expressed concerns that the UAW would ignore the wishes of employees and noted that the UAW is “tied to Detroit, whether or not it's a hundred percent accurate” to which Morris responded “we know what happened in Detroit.” [Fox News, Fox & Friends Sunday, 2/16/14]

Fox's Roberts: “Chattanooga Could Become The Next Detroit.” On the February 12 edition of Fox News' Special Report, correspondent John Roberts discussed the opposition to United Automobile Workers (UAW) attempts to unionize workers at the Volkswagen plant in Chattanooga, Tennessee, noting that opponents have warned “that Chattanooga could become the next Detroit.” [Fox News, Special Report, 2/12/14, via Media Matters]

FACT: Unions Didn't Cause Detroit Auto Industry's Struggles

Economic Policy Institute: Detroit Auto Industry's Struggles “Stemmed From Decades Of Mismanagement,” UAW Influence “Almost Irrelevant.” Ross Eisenbrey of the Economic Policy Institue (EPI) criticized media's willingness to accept what he called the “false history” that the United Automobile Workers (UAW) union undermined Detroit's auto industry by demanding unsustainably high wages and benefits for union workers. According to Eisenbrey, the “auto industry's problem stemmed from decades of mismanagement,” rather than its UAW contracts (emphasis added):

The biggest element of mismanagement was designing and selling poor products. Anyone who lived in Michigan in the 1970s remembers when Detroit began building truly terrible cars, like the Chevy Vega, the AMC Gremlin, the Chrysler Imperial, and the Ford Pinto; it was the beginning of what became a slow-moving train wreck.

[...]

Autoworker wages didn't make the Big Three uncompetitive by driving prices up; poor value drove prices down. As prices and quality fell together, consumers fled. The UAW's contracts were almost irrelevant. One way to show this is to compare the pricing of the competitors' vehicles with the size of the labor cost differential bargained by the UAW. Labor costs make up only 10 percent of the cost of a typical automobile. Before the auto rescue, the Big Three paid $55 an hour in compensation per auto worker while the Japanese paid only $46 an hour. (Company lobbyists and publicists inflated the total Big Three labor cost to $71 by attributing the unfunded pension and health benefit costs for decades of retired workers to the much smaller currently employed workforce; the legacy costs for Japanese transplants were only $3 an hour.) But even if, for the sake of argument, we accept the unfairly inflated $71 figure, the difference in the cost of a vehicle attributable to the UAW (the UAW premium) would be 30 percent of the average 10 percent labor cost, or 3 percent of total cost.

In 2008, according to Edmunds, GM sold its average large car for $21,518. Assuming GM sold its cars at cost, the UAW premium would have been only $645 (3 percent of $21,518). Did the UAW premium raise the selling price so high as to make GM cars uncompetitive with Toyotas? Not exactly. Toyota sold its comparably equipped average large car for $31,753--$10,000 more than GM. It wasn't price that made GM cars uncompetitive, it was the quality of the product and the customers' perception of quality. [The Economic Policy Institute, Working Economics Blog, 5/24/12]

Joint Center For Regulatory Studies: The “Only Way” Automakers Could Have Stopped Decades Of Decline Was To Address Problems With Vehicle Quality And Value. According to a May 2006 report from the American Enterprise Institute and Brookings Institution's Joint Center For Regulatory Studies, the “only way” that the U.S. auto industry would have been able to stop its declining market share was “to improve the basic attributes of their vehicles as rapidly as foreign competitors have been able to improve the basic attributes of theirs” (emphasis added):

We have found that the U.S. automakers' loss in market share during the past decade can be explained almost entirely by the difference in the basic attributes that measure the quality and value of their vehicles. Recent efforts by U.S. firms to offset this disadvantage by offering much larger incentives than foreign automakers offer have not met with much success. In contrast to the numerous hypotheses that have been proffered to explain the industry's problems, our findings lead to the conclusion that the only way for the U.S. industry to stop its decline is to improve the basic attributes of their vehicles as rapidly as foreign competitors have been able to improve the basic attributes of theirs. The failure of U.S. automobile firms to address this fundamental deficiency suggests that these organizations may be saddled with constraints that researchers and industry analysts have yet to identify. [The Brookings Institution, May 2006]

MYTH: Unions Hurt Economic Growth And Job Creation

Fox's Bolling: “More Jobs” Means Keeping Unions Out Of Auto Plants. On the February 19 edition of Fox News' The Five, co-host Eric Bolling repeated a claim made by Republican Senator Bob Corker that rebuffing attempts by the United Automobile Workers (UAW) union to organize in Tennessee would equate to “more jobs” in that state's automotive industry. Bolling also claimed that unionization would lead to outsourcing of jobs. [Fox News, The Five, 2/19/14, via Media Matters]

Fox Business' Varney: Unions Are A Drag On The Economy. On the February 13 edition of Fox & Friends, Fox Business' Stuart Varney was brought on to discuss the UAW's attempts to unionize workers in the Chattanooga, Tennessee Volkswagen plant. After guest co-host Peter Johnson Jr. asked him what unionization would mean for the ability of companies to compete, Varney suggested that it could hurt the economy:

PETER JOHNSON, JR.: What does this sound in terms of the economy, in terms of right to work, in terms of our ability in this country to manufacture in a way that's not too expensive?

VARNEY: Oh, it's a very big issue.

JOHNSON: Yeah. Tell us about that.

VARNEY: A very, very big issue. Foreign carmakers have, I think, 11 plants in more than a dozen states in America. They're nonunion, very successful automobile producers. Now, if the union comes into Volkswagen, do they now have union rules, work rules? Which really hurts the ability of a carmaker to move quickly with a new product. What about wage levels? What about benefits? Do those always go up because of unionization? [Fox News,Fox & Friends, 2/13/14, via Media Matters]

FACT: Unions Deliver Positive Benefits For The Broader Economy

Center For American Progress: “Unions Are Good For The American Economy.” According to a Center for American Progress fact sheet titled “Unions Are Good for the American Economy,” unions have been shown to raise economic demand by increasing workers' wages and buying power. The fact sheet also noted that the benefits of unionization spread beyond members, causing non-union employers to match union wages (emphasis added):

What is sustainable is an economy where workers are adequately rewarded and have the income they need to purchase goods. This is where unions come in.

Unions paved the way to the middle class for millions of American workers and pioneered benefits such as paid health care and pensions along the way. Even today, union workers earn significantly more on average than their non-union counterparts, and union employers are more likely to provide benefits. And non-union workers--particularly in highly unionized industries--receive financial benefits from employers who increase wages to match what unions would win in order to avoid unionization.

Unfortunately, declining unionization rates mean that workers are less likely to receive good wages and be rewarded for their increases in productivity. The Employee Free Choice Act, which is likely to be one of the most important issues debated by the 111th Congress, holds the promise of boosting unionization rates and improving millions of Americans' economic standing and workplace conditions. [Center For American Progress, 2/18/09]

Economic Policy Institute: Unionization Improves Economic Stability. According to economist Paula B. Voos of the Economic Policy Institute, unionization has been tied to the stability of the middle class, which is necessary to maintain a healthy consumer-based economy:

Economic recovery and future economic stability depend on a middle class once again having sufficient purchasing power to sustain the economy; we must not rebuild another bubble economy. Greater unionization can contribute to that goal because wages and benefits for ordinary workers will rise and income inequality in the economy as a whole will be reduced. In short, unions help foster the broad middle class that is essential to our nation's economic strength. [Economic Policy Institute, 3/10/09]

MYTH: Unions Reduce Business Competitiveness

Fox's Hasselbeck: Unions Are “Driving Companies Like GM And Chrysler” To Mexico. On the February 18 edition of Fox News' Fox & Friends, co-host, Elisabeth Hasselbeck accused labor unions of “driving companies like GM and Chrysler” to relocate jobs and facilities to Mexico by raising worker's wages. Hasselbeck and her co-hosts Steve Doocy and Peter Johnson Jr. then engaged in a discussion about how unions and their alleged effect on business competitiveness could spark more companies to relocate outside the U.S. She then ended the segment by claiming that auto companies could then exploit “first world productivity and quality, and third world wages.” [Fox News, Fox & Friends, 2/18/14]

FACT: Unions Increase Productivity, Do Not Reduce Business Competitiveness

Economic Policy Institute: “Unions Increase Productivity Through A Variety Of Channels.” In a report on the benefits of unions in restoring and strengthening the middle class, economist Paula B. Voos of the Economic Policy Institute explained how unionization can increase individual firms' productivity by encouraging investment and increasing the supply of highly-skilled labor:

Unions increase productivity through a variety of channels. They reduce turnover and, hence, firm-specific skills are retained. One benefit is that turnover costs are lowered for employers. Moreover, the lower turnover makes it economically rational for employers to provide more training to union-represented employees, increasing employee skills and productivity further. In addition, since unions increase compensation, firms are incentivized to invest in new technology (which tends to be labor -saving), increasing productivity. Unionized employers also tend to shift to higher value-added goods and services in their product mix. And in sectors in which there are union-supported apprenticeship programs, employers can take advantage of this source of highly-skilled labor. [Economic Policy Institute, 3/10/09]

Economic Policy Institute: Unions Do Not Harm International Competitiveness. According to economist Josh Bivens of the Economic Policy Institute, when unionization rates in a country rise, international competitiveness is not negatively affected:

The claim is often made that unions are a potential drag on a country's international competitiveness. Although there is no single, generally accepted measure of competitiveness with which to test such claims, many analysts use a country's trade balance as a proxy for competitiveness. The figure below, which includes the United States and several of its rich industrial peers, examines the relationship between union coverage rates (the share of a nation's workers covered by a union contract) and the current account balance (an indicator that captures the amount by which a country's exports exceed its imports).

The comparison in the chart shows that there is no clear correlation between unionization and international competitiveness. In fact, if anything, the chart suggests there might be a positive relationship between union coverage rates and a nation's current account balance--in other words, countries with higher union coverage rates also seem to have higher current account balances. Note that the United States has the lowest union coverage rate in the sample yet also has the biggest current account deficit. There is, in short, nothing about highly unionized economies that suggests they can't be internationally competitive. [Economic Policy Institute, 2/25/09]

MYTH: Unions Do Not Help Workers

Fox Guests: Union “Parasites” Are “Not Doing Anything” For Workers. On the September 14 edition of Fox News' Cashin' In, host Eric Bolling introduced a panel to discuss an attempt by the AFL-CIO to register traditionally non-union employees in the fast food industry. Fox regular Jonathan Hoenig referred to unions like the AFL-CIO as “parasites” before guest Wayne Rogers claimed that unions “are not doing anything” for workers or members. [Fox News, Cashin' In, 9/14/13, via Media Matters]

FACT: Unions Vital For Reduced Inequality, Prosperous Middle Class

EPI: “Declining Bargaining Power Of Unions” A “Major Factor” Driving Inequality, Wage Stagnation. In an August 2012 issue brief, economist Lawrence Mishel of the Economic Policy Institute argued that the “declining bargaining power of unions” since the 1970s was a “major factor” contributing to growing inequality and stagnating wages. Mishel further noted key benefits of unionization for union members, primarily increased wages and increased likelihood of having employer-provided health insurance:

· The union wage premium--the percentage-higher wage earned by those covered by a collective bargain­ing contract--is 13.6 percent over­all (17.3 percent for men and 9.1 percent for women).

· Unionized workers are 28.2 percent more likely to be covered by employer-provided health insurance and 53.9 percent more likely to have employer-provided pensions.

[Economic Policy Institute, 8/29/12]

CAP: “Unions Strengthen The Middle Class By Advocating For Workers.” According to a September 2012 issue brief from the Center for American Progress, "[u]nions strengthen the middle class by advocating for workers." The column argued that states with higher rates of union participation tend to have a “stronger middle class” and noted that if unionization rates were 10 percentage points higher, similar to levels in the 1980s, it would result in an increase in “average annual income for middle-class households--unionized or not--by $1,501 a year.” [Center for American Progress Action Fund, 9/21/12]

For more on recent conservative media attempts to discredit unionization, click here.