trade unions

Have you been following the Chattanooga story?

In a nutshell here it is:

Volkswagen has a big production plant there. VW was given the usual trade distorting incentives by Tennessee to set up shop locally. Up until now the VW plant has been non-union, but now a union drive looks like succeeding. VW’s management has been remarkably hands off about the vote to unionize, saying it can work with unions in the US just like it does back home in Germany. In fact VW says it would be happy to import the German style work council management process it uses successfully back home if the vote is pro-union.

So far so good. Management looks like it can manage with a union. The workers want to unionize. All is well.

Umm.

Enter the Republican party.

Local Republicans are up in arms. They are threatening to force VW to repay those incentives if it allows the union in. They are hysterical. Then Senator Corker waded in and announced that VW would not build a new line of vehicles at the plant were the plant to unionize. This is despite the fact that VW has made no such statement and has said that its production scheduling is entirely independent of the union vote. Corker then told the press that VW management was unable to speak the truth because of union pressure. Presumably he is privy to management decisions that the management isn’t privy to.

The entire episode is escalating rapidly. It is revealing the extent of anti-worker sentiment that drives the Republican party, and will presumably echo in any local elections later this year.

The real problem is that the Chattanooga vote could ripple across other Southern auto plants, and could see the end of a big advantage Southern states have had when trying to induce manufacturing to set up shop there.  The low cost of the South’s workforce was based, at least in part, on its lack of a union presence. That coupled with all those tax giveaways and other incentives has produced a dramatic shift in the geographic spread of some industries, with auto-making being a leading sample. Indeed, much of the South’s recent economic rise has been based on that potent combination: cheap unskilled labor, and massive tax handouts to corporations. A shift in the workforce towards unionization and higher wages would threaten to undo the allure of the region to manufacturing forcing it to abandon its ‘race to the bottom’ style of economic policy making and to compete, instead, with the northern states who focus more on a policy based on higher skilled workers and social infrastructure investment.

Why is this a problem?

The shift would require higher taxes. And we all know how those Southern Republicans react to the thought of higher taxes.

Hence the hysteria. Hence the feeling amongst local Republicans of an existential threat that must be fought off at all costs. Even if it means punishing VW, who, so far, have been entirely neutral about the union vote.

I suppose the local Republicans have it right: unionization is, indeed, a threat to their low wage economic policy. But their hysteria is still extraordinary, and threatening VW is astonishing. For a party that likes to be corporate friendly and advocates zero intrusion by the government into the workings of business, to abandon both with such zeal is a measure of its attachment to keeping worker wages low. It tells us that Republicans see low wages as the only way to generate jobs.

That’s nineteenth century thinking. I thought only New Classical economists believed that stuff.