A Labor Day Fable for Tough Times

09/08/2009 11:19 am EST

Focus: MARKETS

Terry Savage

Author, The Savage Truth on Money

Before we let Labor Day fade into memory, here is a little fable appropriate for the occasion. And like all fables, it comes with a moral at the end.

Once upon a time, in a beautiful city by a lake, there was a company that was in the business of building outboard engines for boats. It had prospered in this town for many years. The factory employed 850 workers, and the world headquarters building employed an equal number of people.

The workers, who live and shop in the town, enjoyed its parks and recreation, its schools and libraries, its stores and its services ranging from garden supplies to gas stations. With their paychecks, they supported these local businesses—and everything ran smoothly. In fact, their company’s payroll injected $175 million into the local economy.

Then, suddenly, there was an economic slowdown. The workers still had their jobs, but not much overtime since people weren’t buying boats, and thus weren’t buying the outboard motors. The company tightened its belt, hoping to keep the plant open. Salaried workers took wage cuts and furloughs. Some factory workers were laid off.

Then the company’s management explained to the remaining factory workers that there would have to be some changes or they would be forced to move production to a plant in another state—Oklahoma—where costs were lower and workers were eager to have those jobs, even at lower wages.  

The company proposed a seven-year wage freeze and a plan that anyone who had been laid off and then rejoined the company would be hired back at the 30% lower wage being offered to new hires. The company said this was a “take-it-or-leave-it deal.” 

The workers had a union. Its leaders were outraged. “Whatever comes our way, we will take it on," said one union leader. They urged their members to turn down the new deal.

And so, the workers voted down the company’s offer, confident that a better deal would be forthcoming.

Then came the surprise. The company said it had no further offer: “That was our final and best offer!”  Company executives unveiled plans to close down the plant over the next three years.

The workers were shocked. They turned on their leaders, demanding an answer. Two of the top union officials resigned.

And then a second vote was scheduled—on the very same proposal—for the Thursday and Friday before Labor Day weekend. 

Late Friday night, the results, though not the voting tabulation, were released. The original contract deal was approved. The workers decided they’d rather have jobs at lower pay than no jobs at all. 

The company issued a statement, saying it would now transfer some of the Oklahoma jobs to its home plant in Wisconsin as a result of the vote. There was just too much capacity for demand.
 
You see, this story is more than a fable. It’s a real life example of the pressures that are hitting businesses and workers at all levels of our economy. This is a true story that played out this past month at Mercury Marine, headquartered in Fond du Lac, Wisconsin.

“We accept the union’s ratification of our contract proposal,” said Mark Schwabero, president of Mercury Marine. “As we’ve stated throughout this important process, comprehensive changes to wages, benefits, and operational flexibility are necessary for Mercury to effectively compete in a smaller and fundamentally changed marketplace.”

And the moral of this story: In real life, leverage works only if you’re in a position of strength. Ask Archimedes, who demanded a lever and a place to stand in order to move the world. Or ask Confucius, who advised the sinking man to stay out of quicksand.

Or ask the union leaders who should have figured out when and where to take their stand.

What do you think? Please have your say and join the conversation.

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