Guest Contributor
Joe Armendariz
Joe Armendariz is Executive Director of the Santa Barbara Industrial Association and the Santa Barbara County Taxpayers Association.

Consumers of the World, UNITE!
Memo to the United Food and Commercial Workers: You can't have Labor without Capital!
[Joe Armendariz] 10/15/03

Big Labor never seems to understand this fundamental, economic truism. Admittedly, I am no fan of labor unions. What was, perhaps, a once necessary by-product of the early 20th Century, has become an irrelevant, anachronistic, old-economy-relic, writ large.

The grocery store employee "lock-out", more aptly referred to as "walk-out", is indicative of Big Labor's inability to understand the significance of market-forces and its role in determining prices, including wages. And while we are on the subject of wages, health benefits, which are simply non-taxable wages, are inextricably linked to the prices charged for the groceries sitting on store shelves. Higher wages and better benefits for the stores employees means higher prices to the consumer.

The employees will tell you, as you sheepishly walk across their wispy picket line, the strike is about "solidarity" and the need to stand up to the greedy store owners. In fact, the opposite is true. The strike is about the corruption of Big Labor and its refusal to accept the stubborn fact that their role in society is no longer necessary. The wall to wall news coverage of this anti-capitalistic, political exercise, will hopefully prove to be nothing more than Big Labor's last gasp at relevancy and the long anticipated swansong by this tired, anti-consumer institution.

And consumers should make no mistake about it, by walking-out on employers and inconveniencing customers, the employees have fired a shot across the bow of every hard-working family in California struggling to put food on their table. Simply put, if UFCW gets its way, the price for groceries sold at the stores employing their members will go up. It is Econ 101 and there is no way around it.

The good news for millions of consumers, and subsequent bad news for the 70,000 exploited union members, is non-union stores will quickly gain a larger market share at the expense of unionized stores and as a result, the 70,000 members of the United Food and Commercial Workers union, who spent their time standing around grocery store parking lots, carrying their postcards on a stick instead of serving the customers who pay their wages, will eventually get laid off.

Now, none of this is really the fault of the stores employees. Joining the union is something over which they have no choice in the matter. However, I do say shame on those unionized employees who are too quick to grab the microphone from news crews and regurgitate Big Labor's workers-of-the-world-unite, anti-capitalism, rhetoric. But, for the most part, these union dupes are the exception, not the rule.

Where this all becomes utterly ludicrous is in the negotiation process itself. The United Food and Commercial Workers union is arguing for the wrong thing. And because they are inherently an anachronism, the type of benefits they are fighting over are as well. In the first place, let's be clear; the union is being totally unreasonable. There isn't an employer, particularly in California, who hasn't been forced to revisit their company's defined-benefit, group-health-insurance contract, in order to try and save money.

Group insurance premiums, since 1998, have been going up at an average annual rate of between 18-24% and even higher in certain cases.

But, even if that weren't the case, an employer-based system that spends health care dollars on a set of defined benefits is as much of a relic as the labor movement itself. What UFCW should be fighting for, instead, is an alternatively-funded (self-funding), defined-contribution plan that follows the employee and allows them to leverage the contribution and secure the type of coverage uniquely suited to their particular situation and from a much bigger menu of choices. The options should be expanded to include pre-paid managed care plans (IPA's), an in-network-only, preferred provider option (INPPO), exclusive provider option plans (EPO), a point of service plan (POS), and perhaps most important of all, a high deductible plan that makes the employee eligible for a tax-advantaged medical savings account (MSA).

If such a model were already in place (which would require the relaxation of a blizzard of crushing regulations), there would be no need to argue over the employers demands, regarding an employee helping to cover increasing insurance costs. Because each employee would already be empowered with their own self-shopping mechanism with which to help navigate the always evolving insurance market.

With that type of alternative funded, ultra-choice, defined contribution model in place, employees can simply re-shop for their health coverage within the existing plan(s) and make whatever changes they deem appropriate to lower their individual costs. It is also worth mentioning, that the overwhelming percentage of employers, who do provide group health insurance, contribute nothing to the cost for an employees family. And with the escalating costs in workers compensation, liability insurance, and taxes, companies in California, who are providing health insurance, are perfectly justified in looking for ways to cut labor costs. Why should the grocery stores be any different?

To reiterate, this walk-out is about the intellectual and political corruption of an increasingly militant Labor Movement, and its refusal to accept the stubborn fact that their role in society is no longer required. The employees who are forced to join unions will ultimately suffer at the hands of a brutally efficient marketplace where the price of food is set not by greedy-white-males sitting in smoke filled rooms, but by the laws of supply and demand. The same goes for wages. In 2003, the consumer is king and the Labor boss has no clothes.

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