The New Deal is widely credited with saving American capitalism from its worst excesses by empowering labor unions, providing badly needed social insurance and granting vast regulatory powers to the federal government. Yet today, the system that protected American workers from the vagaries of the market is under pressure as never before.
The manufacturing sector has shed three million jobs since 2001 while the trade deficit has ballooned. Corporate pension plans are riskier than ever for workers and to make matters worse, they are underfunded to the tune of half a trillion dollars. Today just eight percent of private-sector workers are union members, and they are seeing their contracts torn up by federal bankruptcy courts.
However, the crisis facing American workers is the reverse of the situation that inspired the New Deal. If 70 years ago a welfare state was needed to save capitalism, today it is capitalism that must save the welfare state - from itself. Why? Increasingly, it is precisely the government's attempts to "protect" workers that are the root of their problems.
Consider overtime rules, which oblige companies to pay employees time and a half for work beyond 40 hours a week. Democrats have vigorously defended these laws from Republican efforts to reform them even though they are probably the single most important reason why millions of working parents are underemployed, stuck in jobs with part-time hours.
How can a law that allows salaried doctors and investment bankers to work 70-hour weeks while cashiers are forced to work under 40 hours be "progressive" under any meaningful definition of the term?
Liberals, of course, just think overtime pay is a human right, and don't have many coherent thoughts after that. As Sen. Ted Kennedy, D-Mass., put it: "I believe that anyone who works 40 hours a week, 52 weeks a year should not live in poverty in the richest country in the world." Go ahead and blame greedy corporations for deliberately avoiding overtime, but the bottom line is that Democrats have no plan to give Americans the working hours that they deserve until they're willing to repeal overtime laws.
But I have a bigger fish to fry: labor unions. Liberals are shocked that companies like Wal-Mart refuse to recognize organized labor, which is strange, given that practically no private-sector workers belong to unions anymore. What liberals don't understand is that unions have increasingly become a death sentence to the companies that recognize them, and are themselves responsible for much of the shift of manufacturing jobs overseas.
Take Delphi Corp., the auto-parts giant that recently filed one of the largest bankruptcies in history even as its Chinese assets see booming profitability.
Like the airline companies that went under this year, Delphi is the victim of its union contract, which guarantees its unskilled workers a wages/benefits package totaling $65 per hour, more than 20 times the labor cost of Delphi's Chinese operations. Under their contract with the United Auto Workers, Delphi cannot close unprofitable factories, and it is forced to pay idle workers almost their entire paycheck and benefits.
Gentle reader, $65 per hour - and for unskilled workers whose next best option is probably McDonald's. Sadly, however, the game is up for Delphi's employees, who will soon face drastic downsizing at home while the company continues to expand its overseas operations.
Employees at General Motors can't expect much better. Also at the mercy of the UAW, GM faces a $1,500 cost disadvantage relative to its Japanese competitors on every car it sells thanks to employee benefits alone, and it may soon follow Delphi to become the largest bankruptcy case in automotive history.
The United Auto Workers union will have only itself to blame when the cars their children are driving are assembled in Japan from auto parts manufactured in China.
All this may come as something of a surprise. At the very least, don't unions have an incentive to keep their employers out of bankruptcy? You'd think so, but once again, a mountain of blame goes to the very regulations that are meant to protect workers.
The government's Pension Benefit Guaranty Corporation exists to insure the pension plans of bankrupt companies so that retirees don't lose their benefits when their former employer goes under. This gives unions every incentive to demand ever more lavish pension promises from ailing companies that cannot afford immediate pay hikes, knowing full well that they can simply dump the burden onto the American taxpayer when their employer collapses.
In this way, labor unions extort companies to the point of insolvency while their unskilled members float to retirement beneath golden parachutes that even most corporate executives can't count on.
With cost pressures like these, it's no wonder that America's manufacturing sector has fled to countries where the labor market is truly free. What awaits the autoworkers that get left behind as their jobs move to China? In too many cases, it's a part-time job at Wal-Mart - and a Democratic Party that has too many ideas about what workers "deserve" and too few ideas about how to deliver it to them.
Nate Goralnik '06 is greedy and hates workers. That's why he writes this stuff. He's evil.
