Hostess: A Victim of Union Greed or the Nanny State?

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All week I had planned on writing an article about sending jobs overseas since both presidential candidates were accusing the other of doing that as if it is a bad thing.  That topic made me think writing one on protectionists in general (stay tuned, this one is coming). Then this whole hostess mess happened.Unions

My mind went about ten different ways on this story throughout the day.  First I was going to talk about how a union collapsed a corporation by demanding money and benefits that just weren’t there.  Then I thought maybe I’d talk about the entitlement society we live in and how people expect things to be handed to them.  Then I thought maybe I’d write about how people don’t understand that a job isn’t a gift and that employees are actually selling their labor to their employers, it is not a just a really nice guy cutting you a check to show up everyday. Then I got a text message from a good friend and college roommate…

He totally opened my eyes.  He told me that the Hostess employees didn’t care if they lost their jobs.  It makes total sense and I’ll explain.  First, let’s take a look at the situation. Hostess has been struggling lately. I’m sure the demand for their products has changed in recent years.  It seems like people are moving away from the cakes and going toward healthier options, including wheat bread instead of the traditional white wonderbread. They filed for bankruptcy back in 2004.  They reorganized, got funding from several sources, the unions made some concessions and they came out of the 5 year bankruptcy as a private company in 2009.

Things didn’t get much better for the company and they filed again for bankruptcy in January 2012.  Their filing said, “is not competitive, primarily due to legacy pension and medical benefit obligations and restrictive work rules.” Basically, they cannot afford their unions’ demands.  The union and employees knew this, but the bakers’ union refused to accept a 17% cut in contributions to employee health insurance (Why should anyone pay for their own insurance?), an 8% pay cut, with 3% raises over the next 3 years and a 1% increase in year 4.  In exchange the company would give a 25% equity stake to the workers and put 2 union guys on an 8 member board.

What does this have to do with the nanny state? Well their choice was either to work 40 hours/week and  make 92% of their salary for a year with guaranteed raises over the next 4 years or make 60% of their salary and work 0 hours/week thanks to unemployment checks.  Time is money.  Sure, no one wants to make 60% of their salary, but it probably is enough to get by, even if you have to make some lifestyle changes. The point is that what is sold to us as a “safetly net” is actually and incentive to do nothing.  Without unemployment checks, unions wouldn’t be able to make insane demands on companies that don’t have the money to meet those demands.

Unions love to say that the big wigs will still get their money, that this somehow has to do with greedy executives.  Well those greedy executives directly employed 18,500 people. I don’t know the actual number, but I’ll bet if you took the total number of jobs the 18,500 now former Hostess employees employed, it would be somewhere around 0.  The executives aren’t always the good guys, and yes, they are motivated by greed just like everyone else, but they have a ton of pressure, a ton of responsibility, and create a ton of jobs and they are compensated for it.

I used the following sources for this article; this, this, and this.

God Bless Freedom, Liberty, and Personal Property,

Slappy Jones II

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Steve
Guest

Collect 60% for 99 weeks…then get on disability. And don’t forget, people can collect disability indefinitely. This country’s unfunded liabilities continue to mount to an unsustainable level. It’s only a matter of time before the inevitable austerity measures are implemented and the US becomes Greece. This is no longer a rescue mission for our elected officials… only a managed decline.

slappyjones2
Guest

I totally agree. We need a total culture change that I don’t see happening. Greece is on the way it is just a matter of when.

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