Thursday, August 19, 2010

Unions vs Business: The Mott's Plant Strike

I'm surprised, yet somewhat relieved that I haven't read much about this Mott's strike story.  Steven Greenhouse at The NY Times actually did a pretty good job presenting both sides of the case without bias, so I think I can cut and paste the arguments here for you with just a little of my own commentary...

First, the beef: 
"After nearly 90 days of picketing in the broiling sun outside the sprawling Mott’s apple juice plant here in upstate New York, Michelle Muoio recognizes that the lengthy strike is about far more than whether the 305 hourly workers at the plant get a fatter or slimmer paycheck. 

The union movement and many outsiders view the strike as a high-stakes confrontation between a company that wants to cut its labor costs, even as it is earning record profits, and workers who are determined to resist demands for wage and benefit givebacks. 

“It’s disgusting, honestly, that they want to take things away from the people who made them profitable,” said Ms. Muoio (pronounced MOY-oh), a $19-an-hour machine operator who has worked at the plant 15 years."

So, the workers are angry that Mott's is asking them to make concessions, especially considering that Motts is reporting strong profits.  The Company responds:
"The company that owns Mott’s, the beverage conglomerate Dr Pepper Snapple Group, counters that the Mott’s workers are overpaid compared with other production workers in the Rochester area, where blue-collar unemployment is high after years of layoffs at employers like Xerox and Kodak.
Chris Barnes, a company spokesman, said Dr Pepper Snapple was seeking a $1.50-an-hour wage cut, a pension freeze and other concessions to bring the plant’s costs in line with “local and industry standards.”"

So are they overpaid or not?  That seems to be a key issue, to me.  We'll get to that in a minute.  We even get the crux of the back and forth simplified for us:
"Rebecca Givan, a professor of industrial relations at Cornell, said the strike has taken on broader symbolism. “The union wants to tap into the public backlash against perceived corporate greed,” she said. “The company wants to emphasize the depressed local labor market.”"

Then we hear from the union head:

“Companies have asked for concessions throughout the history of the labor movement because they’ve faced hard times and needed help to survive,” said Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union, which represents the Mott’s workers. “Dr Pepper Snapple is different. They don’t even show the respect to lie to us. They just came in and said, ‘We have no financial need for this, but we just want it anyway because we figure we can get away with it.’ ” 

Negotiations have not been held since May, and Dr Pepper Snapple says it has no intention of resuming them. The company has continued to operate the plant using replacement workers and says that production of apple juice and apple sauce is growing each day. Union officials say production is one-third of what it was before the walkout."

Ok - so production is down - that's a business decision Mott's has to deal with.  As for "financial need,"  ugggh - Mott's is in business to make money.  So, the relevant question remains - are their workers fairly compensated?

"Justifying the proposed cuts, management says the Mott’s workers average $21 an hour, compared with the $14 average hourly wage for production, transportation and material moving workers in the Rochester area. Union officials say that 70 percent of the plant’s workers earn $19 or less an hour and that many are highly experienced and deserve well more than $14 an hour."

Well, I don't think readers will be surprised to know where I stand on this.  It seems to me that Mott's employees are likely compensated quite well for their jobs, and that it's a simple matter of economics.  Already paid well (or "overpaid") + ample supply of available replacement labor + replaceable without serious consequences to the company =  perhaps workers should rethink their entitlements.  (Oh - by the way - in case anyone wants to flame me about how hard these guys work and how badly they need the work and how they're not getting rich doing this - yeah - no kidding - and Motts apparently thinks that there are plenty of other would-be-workers in the Rochester area who would be happy to do the job also, and who need the work just as bad).

Motts is fighting its own battle in the court of public opinion:

"Dr Pepper Snapple, based in Plano, Tex., has sought to win public support by running full-page ads in Rochester’s main newspaper. One recent ad said, “Mott’s pays more. Would you walk away from a manufacturing job that paid you as much as 50 percent more than you could make elsewhere? That’s what union workers did at Mott’s.” (The company said that it had offered not to cut wages if the workers ratified its offer by April 15.)"

Makes sense to me.  Then, the workers respond:
"The workers, meanwhile, are incensed that the company is demanding givebacks when it posted record profits last year and increased its dividend by 67 percent in May. 

“Corporate America is making tons of money — this company is a good example of that,” said Mike LeBerth, president of the union local representing the strikers. “So why do they want to drive down our wages and hurt our community? This whole economy is driven by consumer spending, so how are we supposed to keep the economy going when they take away money from the people who are doing the spending?”"

I think that's a pretty silly, entitled argument.  If you're an essential employee, you can make a claim to your boss that you deserve more money.  The person running the business understands who is essential and needs to be paid more when they demand it, and who is replaceable.  If you're not a standout employee, well, you might be a replaceable commodity - but we'll get to that in a minute also.  The company responds to this line of attack as well:
"Dr Pepper Snapple has vigorously defended its stance. “The union contends that a profitable company shouldn’t seek concessions from its workers,” the company said in a statement. “This argument ignores the fact that as a public company, Dr Pepper Snapple Group has a fiduciary responsibility to operate in the best interests of all its constituents, recognizing that a profitable business attracts investment, generates jobs and builds communities.”"

Well, maybe a little overboard with the "generates jobs and builds communities" stuff, but they're right - the company's job is to make money. That's not to say that I'm in favor of sweatshops, treating workers horribly, and using and abusing them before discarding them with the trash - but I think it's already been established above that this is not the case.  We get one more comment from a young union member:

"Tim Budd, a 24-year employee who belongs to the union’s bargaining team, said he was shocked by one thing the plant manager said during negotiations. 

“He said we’re a commodity like soybeans and oil, and the price of commodities go up and down,” Mr. Budd recalled. “He said there are thousands of people in this area out of jobs, and they could hire any one of them for $14 an hour. It made me sick to have someone sit across the table and say I’m not worth the money I make.”"

Ah hah - but this is precisely the point, Mr. Budd - when you joined the union you BECAME that commodity.  That's what COLLECTIVE bargaining means - you join the union, and they presumably vouch that your skills meet some sort of standard - you've commoditized yourself.  Side note:  I have no desire to turn this post into a debate about the merits of labor unions - I'm guessing that if one wants to work at Motts, he has no choice but to join the union.

Anyway, kudos to the NYT article's author - Steven Greenhouse - for his unbiased, level presentation of both sides of the story.



Blue Moon said...

This sounds like a perfectly fair fight. Mott's has hired replacement workers, but production has gone down 1/3; the union is exercising its right to withhold labor, but its workers aren't being paid.

To use a sports metaphor, seems to me this is a hard hitting but clean football game with both sides giving and taking big hits. I imagine though that at some point, the union will cave, and Mott's, as a token gesture, will ask for a $1.00 to $1.25 haircut to allow the union to save a little face.

EconomicDisconnect said...

Wow KD, you are on fire today!

All I can say is that I saw a railroad crew the last two days replace the ties on maybe 100 yards of track. I used to do this work with my dad when i was younger and stupid. It was an enormous effort for a 6 man crew to do that work in about 3-4 days. I saw automated machines do the whole job in 1 hour this week and they only needed a few guys to fuel the machines and drive them. When robots can do most anything, I am going to try and keep my job no matter what, even if I have to take less to do it!

J Johnson said...

Nice post Kid. I like your take. There is definitely a public perception that making money is evil. Coming from a company that has over $1B in cash, but hasn't given merit increases corporate wide for two years, they are playing the other side which is "try and find something better." With companies not hiring and/or trimming over the last two years, this was a smart move on their part (while I don't like it, it focuses my attention on making contributions and standing out, which will pay off either down the road or at my current employer)

Anyway, for Mott's, making money is a good thing, what they are chartered to do...clearly the growth in revenue is great, but working on the bottom line is their right, and a smart move in the current labor market conditions. Sounds like a job at $2 less is better than not getting paid, or getting paid $5 less (at a $14/hr job). An employee might not like it, but taking the haircut is better unemployment or another employer.

It has become clear to me that employers base pay rates on market conditions and contributions, not just contributions (this has been my experience at least, I am sure there are exceptions). Whether it is manual labor or (in this case) a white collar worker.

I guess the other consideration is public perception and exercise of choice. The public might perceive the Mott's actions as greedy and choose not to consume Mott's apple juice (as some might do at Wal-mart for example). As long as there isn't spit in the apple juice, I will be looking for it on the shelf:)

Eric said...

It's not just Union members who are being commoditized. Many people today are taking pay cuts "to match the market" only because they fear a pink slip instead. Those who haven't probably were never in fear of a job loss, or were quickly back to work after their former company let them go or went under.

This unfortunately is mostly their fault as to not have developed a skill set that is highly desirable or irreplaceable. And I'll leave who's to blame for that for someone else to argue about.

Anonymous said...

Sure it makes sense for the company, from an economic standpoint. After all, they are in the business of making money. It's still a d-bag move though... what would Tommy Callahan say?

Anonymous said...

Kid, I almost always agree with you (on HFT, gardening, Barry Ritholtz) -- but not this time.

Isn't Dr Pepper/Snapple the same company that has been LBO-ed several times since the mid-1980s?

Snapple was owned by Quaker Oats, sold to an LBO-firm called Triarc for peanuts, and then shortly thereafter flipped for a big profit.

"So what?" you say.

My point is: don't LBO/PE-deals rely almost entirely on swapping equity for debt (leveraging up), and the deductability of interest expense (which comes at the expense of revenue to the federal Treasury) in order to be profitable?

So, its no surprise that levered companies (like Dr. P/Snapple?) seek to reduce their labor cost, because as every homeowner knows, a slight uptick in the value of my leveraged equity investment means a big payday for homeowners & PE-investors (which, ironically enough, often include pension funds), like in HCA:

But there's something wrong with all this. Why should the excess gains from labor productivity be shifted to the owners of capital when the deals themselves almost entirely depend upon taking advantage of the Treasury's tax code (interest-expense deductability) in the manner that Mike Milken preached in the '80s?

ps: (I sold junkbonds in the '80s & now clerk at a HFT firm. (The volume we trade is unbelievable.))

Love your blog but I'm with the strikers.


But What do I Know? said...

I have to go with the strikers here too, KD. The company is essentially saying they want to cut wages because they can, not because they need to (the median wage in the Rochester area is irrelevant). And for what? So the PE guys can produce a better cash flow number and flip the company for a couple more bucks which they can use to buy more ivory back-scratchers? This is the kind of capitalism that Marx was talking about.

As far as the workers being pure commodities, you and I need those "commodities" to have children, buy houses, and fight in wars.

Kid Dynamite said...

dedalus, BWDIK: you seem to be missing a key point though: these workers are overpaid... that's all I can really say!

and dedlaus: i think that this: "excess gains from labor productivity" is something you just made up. This debate has nothing to do with excess gains from labor productivity - it's about cutting excess labor costs.

if you have a problem with the tax code, take it up with the tax code!

back to BWDIK - DPS is a public company. Priv. eq has nothing to do with this debate.

and Dedalus - I'm not sure these guys have been LBOd multiple times in the past - Snapple was, but it's just one piece. Another big piece came from a spinoff from Cadbury Schweppes. But that doesn't matter to me - it's a public company now. I could see your point if it were just LBOd and the LBO buyers were raping and pillaging the company like Gordon Gekko - but that's not what's happening.

Kid Dynamite said...

BWDIK - why did you say that the median wage in the Rochester area for comparable jobs was irrelevant? please explain.

also, to your last line - sure we need these "commodities." The point, as evidenced by the fact that the Mott's plant did not wither and die when this group of workers decided that they wouldn't work anymore, is that there are plenty more workers waiting to fill their shoes.

I think this debate can be entirely different if Mott's wanted to cut wages from low or average levels, but again, that's not the case. These workers are paid more than they should be for their skill set. full stop.

Anonymous said...

Hey Kid,

How come I never hear you make the save arguments looking at the management side? With all that unemployed high powered talent currently on the sideline, surely we could find very competent people who would be willing to run the company for considerably less. "These workers are overpaid... that's all I can really say!"
Maybe you could even give it a shot for a fraction of the salary.

Kid Dynamite said...

you guys really want to change the subject that badly? the subject is overpaid unionized commoditized workers. That comment is a major red herring, but I'll address it anyway.

i'm quite sure there are many many executives all over America who are overpaid - but that argument is harder to prove, as executive roles have many more subjective outputs. Do you really want to get into a debate about how executive roles are much more "Skilled/specialized" than manufacturing line labor roles?

so anyway, Anon, if you show me the evidence that the Mott's executives are overpaid, we can talk about it. I won't defend overpaid execs either

Blue Moon said...

A couple of points:

-- very few of us are "indispensable" - skills or no skills. I'm an attorney with loads of trial experience, prior business experience, yada yada yada. If I went into my boss' office and told him I was indispensable, he would open his drawer filled to the brim with resumes and say "I can pay someone else half as much as you for the next 3 years at which time they will be 70% as good at your job as you are." The only place I am indispensable is at home with my wife and infant daughter... Indispensable is the ability to perform surgery, or being able to speak english, arabic and farsi like a native. It's not another degree or seminar...

-- Management at these companies is not indispensable either. Nor are the executives @ the TBTF banks. But that does not mean that we are supposed to treat people who fill juice boxes for a living as indispensable. I have no doubt given his intelligence that Kid could run a company better than most, but he is not (I don't think) part of the crony capitalist crew.

-- The workers are making a huge mistake if they think this strike is somehow sending a message, or making things better for others. The time to go on a strike like this is when times are good, not when times are bad and you live in the rust belt. Not too many people are going to be sympathetic to blue collar workers with a higher hourly wage than a second year school teacher. You are not going to shake the foundations of our broken system of bonuses and golden parachutes by striking...

Kid Dynamite said...

right, Blue Moon. and don't get me wrong - i'm absolutely positively not saying that workers are nothing more than a cost number. However, SOME workers are, and those kinds of workers that are a commoditized service where cost is a big factor are probably very likely to look like the workers striking in the Mott's plant, in my opinion.

I will open a business at some point - let's pretend it's a bar. I am well aware of the value of good help - I want a bartender and a manager who i can trust, do their jobs well, and can essentially run the business for me. If they CAN, then they will be compensated for their skills. If they cannot, then they will be a commodity that is easily replaceable.

i love BlueMoon's line "I can pay someone else half as much as you for the next 3 years at which time they will be 70% as good at your job as you are." - precisely - your boss has to make a business decision - that's his prerogative. You're not indispensable, but you're not easily replaceable either...

Transor Z said...

Mechanical application of microeconomic theory tends to get tempered a bit by political realities when violence starts breaking out between striking union workers and scabs. Any resemblance between economic theory and human reality is often purely coincidental. Pitting union members against the un/underemployed in depressed post-industrial areas is playing with fire and Snapple knows it. It's not a new game.

[cue Pete Seeger's "Which Side Are You On?"]

But What do I Know? said...

@KD--When I say it's irrelevant, what I mean is to look at it from the perspective of the worker. So here he is, he's been doing a good job, the business is making money--and now they want him to take a pay cut. It doesn't make any difference to him that they could hire someone else for his job at some cheaper wage--he hasn't screwed up "and" the company is doing well, so why are they asking him now to take a pay cut?

I can't imagine a small-business person treating their employees this way. Sure, if the business is hurting it's a different story, but they're not. Sometimes life is about more than profit-maximization.

But What do I Know? said...

To further clarify--if someone who has been working at the plant for 15 years is making $19 per hour, they're not exactly getting rich (it is in NY state after all). Take home is probably about $30K per year--that's a marginal existence. If you save $500 in your 401K that's leaving you with $2000 per month. Lodging is $1000 per month for something OK, a car is $500 per month and you might want to eat as well. Now they want you to take a pay cut!

I'm just saying that it doesn't seem like the workers are all that overpaid to me.

Kid Dynamite said...

bdwik - yes, of course i understand what you're saying in these last two comments, but it's ignoring the reality of the situation. I agree that they're not getting rich. so what? what does that have to do with it? They're getting a lot richer than other people doing the same or similar jobs - that's what's important, in my opinion.

i guess I'd just reiterate the same thing Mott's said in their advertisement:

“Mott’s pays more. Would you walk away from a manufacturing job that paid you as much as 50 percent more than you could make elsewhere? That’s what union workers did at Mott’s.”

the health of the company is a red herring designed to enhance class warfare. It's largely irrelevant. Perhaps DPS (doctor pepper snapple) is making money BECAUSE of their cost cutting efforts...

The company's JOB is to make money, and they are already paying their workers significantly more than other comparable jobs.

The fact that the workers are ignorant of this fact, or feel entitled to some more money because the company is making money is precisely the problem.

Jon said...


If this werent people and their wages, but rather raw materials say, the apples being used by motts would you still be against going for the cheaper but equal quality replacement? The company that supplies apples has always been loyal, and efficient, you have a long historty with them but they're now charging slightly more than their competitor.

I'm certain all of us would agree that we would push the company to lower their prices since it's "overpriced." How then should one think about the people at our supplier?

The other problem with this discussion is this: It's conditioned on the idea that the copmany being profitable changes how efficiently it should spend it's money. Why is that the case?

Why should it be the case that only companies that are losing money should look to cut costs. It seems to me that one of the major causes of recessions and failing companies is that during profitable times they overspend or become so inefficient that they don't even have an opportunity to adjust once things start going down hill. By the time a downturn occurs, its already probably too late.

I don't think anyone is saying that the workers are getting rich throuhg their jobs, they're certainly not. But there are way too many businesses that failed because they werent willing to be efficient on the way up.

Transor Z said...

Wow, a lot of ivory tower horseshit flying here. Sometimes you go with the higher price supplier because he extends you credit, is more reliable, will make you a priority. And you know what? Staying with the higher price supplier for sound reasons other than price is called a "business decision." Employee profit-sharing? Business decision. Shareholders be damned.

This is definitely about class warfare and could also be the cost-cutting M.O. of an ownership group looking to flip. Treating people like commodities to show how "tough-minded" and "business-savvy" you are is just white-color-macho candy-ass posturing. Employees have a dual nature (in fact and law) as labor commodity, yes, but also as human being with all of the attendant messiness and legal/moral obligations that go with that.

Fortunately, most of the CEOs and CFOs I know (small- mid-cap types) are actually very decent and remember where they came from. They just wouldn't do this.

Anonymous said...

docben Let's be honest, if there were no unions workers would be making about a buck a day. One of the real problems is the level of real wages has been stagnant for the last decade or more. The middle class has missed out on the gains of the growth in the economy. Henry Ford was way ahead of his time, and this one apparently,by paying his workers more than the average wage so they could afford to buy his product.

But What do I Know? said...

@ Jon: That's just it--they are people, not raw materials. I understand that textbook capitalism says they're the same, but do we really want as a society to live that way?

Kid Dynamite said...

TZ wrote: "Fortunately, most of the CEOs and CFOs I know (small- mid-cap types) are actually very decent and remember where they came from. They just wouldn't do this."

really? they'd deliberately overpay their workers who are in manual labor (relatively unskilled, replaceable) jobs by 35-50%? seems unlikely... shareholders should be quite upset with them.

i don't know where you got that "tough minded" and "business savvy" stuff - no one said that in this thread. This really isn't a radical hardcore capitalistic thing. It's not a psycho-Rand-ian markets philosophy. And I resent your characterization of anything in this thread as "Ivory tower horseshit" - I can't find one ivory tower horseshit comment in this entire thread.

There is a point where the pro-worker arguments make sense - and that's when we get to the level where workers are being forced to work for almost nothing because of a horrible labor market with ample labor supply at drastically reduced prices - that's NOT what's happening at Mott's!!!

I remain saddened by the entitled attitudes portrayed by the striking union employees here, and sympathized with by commenters in this thread. DPS isn't making money because these unionized manufacturing laborer are suddenly doing such a tremendous job - why do they feel entitled to the profits?

People siding with the strikers want to make it about the human factor - ok sure - how about all the poor unemployed people in Rochester who would LOVE to have these jobs? Think about them... (It's actually not unlike the housing market - for every house the government subsidizes and keeps the price from falling on, they are doing so at the expense of one more person on the sidelines diligently saving and waiting to buy a house he can afford.)

I repeat Mott's newspaper ad again:

“Mott’s pays more. Would you walk away from a manufacturing job that paid you as much as 50 percent more than you could make elsewhere? That’s what union workers did at Mott’s.”

no one has come up with a good reply to that yet.

Transor Z said...

Would you walk away from a manufacturing Big Law job that paid you as much as 50 percent more than you could make elsewhere?

Hell's yeah. Every now and then people actually do things on principle.

Kid Dynamite said...

TZ - ok yes - I'm a big fan of principle. So after you walk away, on principle, what do you expect to prove? What argument are you trying to illustrate? That your boss can replace you for significantly less?

obviously, Big Law is not a perfect example, as Blue Moon's comment earlier illustrated - you may not actually be replaceable. If you're not - if you're a superstar standout employee, then you have every right to demand a higher price for your work.

again, I don't think that's the case with these Mott's workers - and I'm not trying to say anything bad about the workers - just that it's not highly skilled specialized labor. By walking away they aren't showing any sort of principles, just ignorance of the reality of the situation.

Jon said...


But that's my point. Raw materials dont just come out of the ground or off trees themselves. There are people whose jobs who because there are buyers for whatever the company produces. Sure cutting costs by trying to get better pricing may not seem like your directly impacting a human being, but it does.

Look at newspapers and magazines. How many have gone out of business in the last decade and a half. Customers and advertisers have found an alternative in the internet. Why is there not the same popultist outrage there from all the companies or people who decided they wouldnt advertise on or buy newspapers anymore. You're costing people jobs / wages just the same. Wheres the moral obligation here? We should all continue to buy buggy whips because why put people out of work.

A printing business Im close with went from extremely profitable to most likely having to close down and unemploy hundreds of workers.

TZ: Of course if one business performs better offers better service you're willing to pay a higher price. No one was making that argument.

When you talk about un-differentiated labor how is it NOT a commodity. Why should a company continue to pay someone 22 dollars an hour for the same production as someone at 14? I'm not sure anyone has ever presented an actual argument. to KD's point if its the human element, then why not hire 1.5x the number of people for the same amount of money.

I'm not even sure what the whole the CEO / CFO remember where they came from comment means. There are plenty of non labor people that are grossly overpaid, and could be replaced by cheaper equivalent counterparts. I'd actively pursue doing the same for them too.

Transor Z said...

“Mott’s pays more. Would you walk away from a manufacturing job that paid you as much as 50% more[... 48% more... 47% more... 43% more... 39% more...] than you could make elsewhere? That’s what union workers did at Mott’s.”

Like the old joke: "Donner, party of ten... party of nine... party of eight..."

You can analyze labor (i.e., people, employees) as a commodity. Knock yourselves out. But it's really, really dumb to actually treat people as such in practical reality.

KD, I can flip your point right back at you: it is sad that management does not comprehend, does not want to comprehend that there is a human element involved. They will reap what they sow.

oddlot said...

wow great thread here. so, it comes down to living standards right? Looks like we've got to consume less. this problem (in addition to others, such as underwater mortgages and insolvent banks) would be resolved by a 30% break in the value of the currency. we hate to screw the savers. they seem like good people. but, the consumption represented by their savings (in current dollars) can not be transferred into the future. haircuts are inevitable. and inflation now looks less disruptive than mass renegotiation. management counted on a stable currency from govt, just as the workers counted on a stable job from the firm.

Kid Dynamite said...

transor - you can twist it around all you like, but you'll be skirting the issue.

Hey - if the Mott's plant withers and dies next year because all the striking laborers turned out to be irreplaceable, management (and I) will be proven wrong. Management WILL reap what they sow - it's a business decision.

the emotional plea arguments are a red herring designed to avoid logic and rational thought. But if you want the human element, again, think of all the unemployed people in Rochester who would love to work at a job like this and don't feel entitled to be paid at a massive premium to their skillset/value added.

Blue Moon said...

"...again, think of all the unemployed people in Rochester who would love to work at a job like this and don't feel entitled to be paid at a massive premium to their skillset/value added."

Or think of the replacement workers that have already taken their place. They are essentially in the same boat as new home buyers are now -- finding themselves in a position to take advantage of value.

No one on here is taking glee in the fact that Mott's is essentially offering haircuts. I certainly do not like the way we as a society have decided that it is lower prices or bust. But isolated incidents like the Mott's strike are not the way to change that.

Reminds me of the NPR story from 3-4 years ago about textile workers in NC being laid off because of outsourcing to China... they were being interviewed in a Walmart parking lot full of goods made in China, and that's where the textile workers bought their clothes. They made the same choices we all made - that it was better to buy cheap Chinese than more expensive American.

TZ - I walked away from a Big Law job because it was boring, the partners were a-holes, and litigation attorneys who don't know how to try a case before juries are a dime a dozen. Again, I have great experience now, better than if I had stayed, but I am still not indispensable... Who just HAS to have a lawyer? - the government, personal injury plaintiffs, and criminal defendants. If you know anything about the current state of Big Law, then you know that law grads have been discovering much to their dismay that they only thing indispensable to a law practice is paying clients, not snot nosed 4th year associates who only know how to bill 2200 hours a year who went to a "Top 14" school and know the correct fork with which to eat salad.

As for Mott's, they will reap what they sow when the economy turns around (hey look at me, I'm an optimist!) AND IF it is remembered that they treated their employees "poorly." Otherwise, they will just keep accumulating cash for now to use for expansion later (or more cynically, give out to executives and shareholders). I am not anti-union. I just think it is a shame that the union hasn't quite figured out that they do not any leverage in a local job market with high unemployment and low wages. How long do you think the $14 an hour lady can hold out? She ain't getting paid, she ain't getting unemployment because she chose to strike. Guess who is getting paid? -- Mott's! Soccer moms are still buying applesauce.

The system has to change -- like oddlot alluded to, we have to adjust our expectations and be realistic given the fact that taxes need to head north, and spending, both government and personal, needs to head south. If we are really fed up with the whole notion of too big to fail, then we are going to have to accept failures. We are trapped in a vicious cycle where the economy only grows when we buy gadgets we don't need, but we get caught in credit bubbles because we raid home equity lines and credit cards to buy things we do not need. TV and our neighbors tell us that we deserve a new car, a bigger house, an iPad... All things that I, Blue Moon, can afford right now, but what about tomorrow? Next year? The single mom of 3 working at Red Lobster who needs people to keep on eating clam chowder and biscuits? If we don't stop, the game is going to end. And it won't end well.

Rant over...

Kid Dynamite said...

one point that I don't think anyone has made explicitly yet in this thread is that it might just be a crappy business decision by DPS.

In other words, what is the total amount of money that they're talking about? let's take their 305 employees x 2000 man hours per year, x $1.50 per hour. That comes to about $900k. Then, double it, for other cut benefits like pension freeze, etc, and call it $2mm.

DPS is a company with a market cap of almost $9 BILLION. So, perhaps it's a bad BUSINESS decision on their part, as the bad will, angry employees, hurt morale, potential production downtime, and potential future consumer pushback may well nullify their savings. but again - that's a business decision, it's not about any "right" that anyone has to continue to be overpaid.

Transor Z said...

@KD: I agree with your 8:31 am comment completely. That's all I've been trying to get across. My only quibble is that I would change "bad" to "moronic." I paper-napkined ~$850k per annum yesterday @ 1800 hours, exclusive of fringe.

Why not just insist on a pay freeze and take a tough line on pension/medical? My "emotional argument" is not an appeal to emotions but an argument that failing to take human emotions into account is a huge mistake. Insisting on a $1.50/hr cut against soaring profits registers with most people as a major fuck you.

Any standard practice/theory that fails to account for the completely predictable human reaction is "of very limited practical utility," i.e. bullshit.

Unknown said...

I am a bit late to this interesting discussion. I am Dutch and our labor laws are completely different from the American ones. I guess that creates a different perspective in the way I view this conflict.

Two parties signed a contract in which they agree to exchange a certain amount of things (labor) for a certain amount of other things (money), one of the parties becomes unhappy about the exchange rate and wants to renegotiate the contract. The other party doesn't want to renegotiate the contract. That would be the end of the story in The Netherlands. Where I live employers are only allowed to push through pay cuts if the existence of the company is in jeopardy.

I completely agree with the employees in this case because from my point of view it is very strange that someone can unilaterally change the terms of a contract. In my opinion the law that permits the employer to do this should be changed until that has happened I guess the employees have no choice but to accept the paycut.

Kid Dynamite said...

siram3: someone made a similar argument to me offline, basically saying that accepting a job at a wage implies that the wage will be consistent and/or rising.

my reply was: for how long?

i don't think this is a case of one side trying to back out of a contract.

there may be a contract between the company and the union in this Mott's case (there probably is, right?) - but the contract is not indefinite, and I'd be reasonably confident that it's up for renegotiation - which is probably why they're in precisely this situation.

said differently, if Mott's had contracted this union to provide labor through 2015 at $19/hour or whatever the rate is, and is now trying to bail on that obligation, then I'd agree with you completely. But what if the contract is through 2010, and it's time to negotiate a new contract? I think the latter scenario is what's happening...

in summary, I guess you're assuming that the employer is changing the terms of a contract, while I don't think that's what's happening at all. i think it's time to negotiate a new contract.

Unknown said...

KD, thanks for your answer. I guess the fact that I am completely unfamiliar with the Labor Laws in the US and my Dutch perspective is hindering my judgement on this one.

I completely agree with you that the contract between the union and the employer has an expiration date and the company has every right to renegotiate the contract upon expiration. That isn't any different from what happens in my country. But, and here is where my point of view clouds things I guess, in The Netherlands you as an employee also have a contract with your employer in which your salary is specified. The majority of all employees have a contract for an indefinite amount of time (myself included). So the situation described in your blogpost would be impossible in The Netherlands.

I don't want to hijack to conversation but the situation of employees being clearly overpaid described in NYT article couldn't have happened where I live. Employers and employees signed a treaty in 1983 in which they agreed to always keep the bigger picture (meaning general employment and international competitiveness of the Dutch ecnonomy) in the back of their mind when negotiating.

See this google translate page about the this treaty if you are interested. I think it would be a good idea for the US to copy this idea. It would mean unions would be taken more seriously and probably could do some good for the general employment level in the US.

Kid Dynamite said...

Siram -
right - i guess there are a lot of countries like yours where it's basically very hard to fire someone. I think Japan and Germany are probably similar. I don't want to hijack my own thread with thoughts on that system, but it's not how we are currently set up in America.

Anonymous said...

Treating workers this way IS a bad business decision. What is the message? Do good work, generate profits, and we'll cut your pay. Economic downturn? Layoffs. Management gets the company in trouble? Half of them get canned & you get a pay cut, too. That's a highly corrosive message to send to society, especially after AIG's counter-parties didn't get any "haircut".

People might accept a pay cut in lean times, and still preserve good will toward the company. But pay cuts in profitable times make people feel insulted and bitter. The replacement workers won't trust Mott's either. And yes, feelings do matter to the bottom line. Quality and productivity will suffer if people hate their jobs and are antagonistic to mgmt.

Anonymous said...

By the way, watch the show "Undercover Boss" for a look into the jobs done by "unskilled" labor. The CEOs of Hooters and GSI Commerce were both fired on their first day from being a busboy and package packer in their own companies when their IDs were secret because their work was far inferior to their unskilled but experienced coworkers. Workers with 15 yrs experience know when to stop the line due to contamination, how to get it going again, which vendors supply quality apples, etc. Labor just isn't a commodity - no one is indispensable, but there is a LOT of friction and inefficiency in changing labor resources.

asphaltjesus said...


If you are going to bring Economics into the subject, then there is no such thing as "overpaid." There is a buyer and a seller and a price negotiation. Should an agreement be struck, the price is merely an artifact of the negotiations between the buyer and seller.

When market participants (businesses) attempt to maximize their selling price for their goods in any given market, is there anything explicitly wrong with this activity?

I would argue that in the market for labor, these workers are attempting to maximize the price for their service. No one is paid too much.

They get a higher price, then good for them. That's how markets are supposed to work.

Finally, you are cheerfully indifferent to the social/political consequences of condoning class warfare from you N.H. Doomstead. Make your best effort to deny it will only make you look more callous.

Kid Dynamite said...

AJ - i think your comment is making my point exactly.

there is somewhere between little and no doubt that the company can replace these workers for less. do you disagree?

Thus, the workers' argument, on economic grounds, holds zero water. They are being paid a premium to market prices for their labor - i don't think it's up for debate. They can be replaced for less - I don't think that's up for debate. That still may be a bad business decision for Motts, but that's another issue.

so, to answer your question : no, of course there's nothing wrong with the workers trying to maximize their rate - i have no problem with that. I have a problem with the fact that they are complaining when they are given the reality of the situation, which is that the labor can and will be done for less by others.