Special interest handouts are not a pretty sight. Perhaps that is why lawmakers buried their latest one inside the bill reauthorizing the Federal Aviation Administration. Unfortunately putting handouts out of sight does not make them any better for the economy.
At issue is the fierce competition between FedEx and the United Parcel Service (UPS) in the package delivery business. While UPS must collectively bargain with the Teamsters, FedEx remains union free.
FedEx has avoided the costs of collective bargaining primarily by keeping its employees satisfied without union representation. Fortune magazine routinely recognizes the company as one of the best 100 companies to work for. When the recession forced FedEx to cut costs it started with executive salaries before cutting hourly pay – including a 20 percent reduction in CEO Fred Smith’s pay.
Federal law has also helped FedEx stay nonunion. The Railway Labor Act (RLA) – the law regulating unions in the airline and railway industries – covers FedEx because the company began as an airline and ships most of its packages by air. UPS – a trucking company – falls under the National Labor Relations Act, which covers unions in the rest of the private sector.
Under the Railway Labor Act (unlike the NLRA) every worker in the company votes on organizing in one national ballot. At a company where most workers like their jobs such a vote presents Teamsters organizers with a daunting task. They would have an easier time selectively organizing key transportation hubs. Then they could use the leverage of shutting down the national company to promise workers at those hubs excessive concessions. Under the RLA they cannot do that. So as long as FedEx workers like their jobs and FedEx remains under the RLA the company will likely remain nonunion.
That gives FedEx a competitive advantage. The 1997 Teamsters strike paralyzed UPS, and UPS recently had to pay $6.1 billion to withdraw its employees from the Teamster’s poorly managed pension plan. UPS wants the Teamsters to start similarly burdening FedEx.
The Teamsters and UPS are jointly lobbying Congress to transfer jurisdiction over FedEx to the NLRA to make unionizing FedEx employees easier. The Teamsters want more dues-paying members to shore up their shaky finances. UPS wants the Teamsters to raise their competitor’s costs. Lost in the middle of the lobbying blitz is the health of the economy.
Saddling FedEx with union work rules and collective bargaining would raise their costs, forcing them to raise prices. Americans will have to pay more to ship parcels, leaving less money to spend elsewhere. And if the Teamsters did strike against FedEx hubs it could paralyze package delivery for millions of small businesses – the two week UPS strike in 1997 cost the economy billions of dollars. Making businesses less competitive is bad policy in normal economic times, much less in a severe recession.
However, Organized Labor is no ordinary interest group. Labor unions spent hundreds of millions of dollars electing President Obama and the current Congressional majority and they want payback. They have been getting it. Consider that Congress and the administration have already:
Unionization opportunities already exist at FedEx, but not the ones that the Teamsters like. So it is small wonder that Congress is happy to re-write the labor code at the Teamster’s behest. The House of Representatives has passed a version of the FAA reauthorization that transfers FedEx drivers to the NRLA, but the Senate passed version does not. A conference committee is hammering out the final version of the bill and will soon decide whether or not to include this handout for the Teamsters.”
Let it not be said that Obama ignores his friends.
UPDATE: An earlier version of this post did not acknowledge that the Senate has passed its FAA reauthorization bill.