Is no job better than a poor job?

November 16, 2012 5:50 AM

Help me understand the reasoning behind continuing the Hostess strike when it has resulted in the company going out of business.

I understand the purpose and need for organized labor and collective bargaining. I understand the reasoning behind the strike, which would have significantly cut workers' pay and benefits. But what's the reasoning for continuing the strike, knowing the company would go out of business and kill 18,000 jobs - especially in this economy? Is it that no job is better than settling for Hostess' treatment of their employees?

It just seems counter-intuitive to me that a union would rather drive a company into the ground than find some way to keep its workers employed. Help me see the light!

posted by Ms. Toad to society & culture (23 answers total)

The short answer is that the company is/was doomed independent of labour action.

If you're sure (or even just betting) that the company's doomed, there's little incentive to take a pay cut to try and save the company. Moreover, if your members agree to concessions at Hostess, some other company will say "Well, your members agreed to X at Hostess, so they should agree to X here, too." (The other company might be the successor to Hostess or perhaps somewhere else entirely.) In other words, you want to try to preserve your future bargaining position as much as possible.
posted by hoyland at 5:55 AM on November 16, 2012 [8 favorites]

It just seems counter-intuitive to me that a union would rather drive a company into the ground than find some way to keep its workers employed. Help me see the light!

Well, first, you need to recognize that you've bought into the company spin that it's this strike that has driven the company into the ground, when, in fact, it's been decades-long mis-management that did the deed.
posted by Thorzdad at 5:57 AM on November 16, 2012 [46 favorites]

Collective bargaining works because an 18,000-strong company that was not already on its third death knell would have absolutely no interest in having this happen and would be open to some negotiation. In this cade, the union has basically been framed. This is why it is in some ways an extraordinary story. No one closes a company out of spite. But convenient scapegoat is convenient.
posted by griphus at 6:04 AM on November 16, 2012 [11 favorites]

The answer to the question posed as the title of your Ask, "is no job better than a poor job?", is: "often, when considering the far larger scope of the world outside of the simple binary of no job/poor job". From simple situations where having a poor job makes finding a better one much harder, to social dynamics revolving around domestic stay-at-home issues, to macro economic policies about ensuring the working class has enough money to support itself, as well as the previously mentioned issues of leverage.

In other words, not only can choosing a poor job over no job be a bad choice for an individual, it can also be a bad choice for a group, or a society, due to the opportunity cost (alternatives you must give up) of taking the poor job.
posted by seanmpuckett at 6:05 AM on November 16, 2012 [15 favorites]

Managers told St. Louis mayor Francis Slay about the impending stl plant closure months ago, independent of any striking. cite

This article says their bankruptcy filing from January states that they were planning on closing at least nine bakeries.

Threats only have leverage if there's a chance (or there's at least believed to be a chance) that the threatening party will not carry the threat out if you do want they want.
posted by neda at 6:07 AM on November 16, 2012 [5 favorites]

It just seems counter-intuitive to me that a union would rather drive a company into the ground than find some way to keep its workers employed. Help me see the light!

Accepting unsustainable pay and benefits cuts is a bad thing for these reasons:

1. Past a certain degree of pay and benefits cuts, you're going to have to go into debt and take huge financial risks just to keep working. This is especially true if it follows on years of wage freezes and benefit cuts already. The cuts that Hostess proposed were massive. Sometimes it's better just to accept that you're going to go on unemployment than to die by slow cuts, especially if the company is probably going to go under anyway. Also, you get more unemployment if you're laid off when you're making $2000/month than when you're making $1500, so you might as well take the hit at the best time.

1.5. This is especially true when the company won't negotiate because then it's a straight up defeat. Some concessions on either side are what's needed. A company that won't negotiate is trying to break the union.

1.75. This is especially also true when a company deals with several unions and tries to split them - giving a better deal to the Teamsters, etc. (And I have seen this done.) Then you know you're dealing with management that doesn't want to work with the workers, just wants to exploit them as much as possible.

2. It seems intellectually strange to a lot of Americans, but many union people have at least some real commitment to solidarity and some analysis of labor rights. It's really dangerous to have a history of broken strikes and vast worker concessions, because it means that other companies point to those as precedent. And that means lower wages and less job security for everyone down the road.

3. In general, bosses don't want to break the union for legit reasons; they want to break the union to increase their profit margins and provide more flexibility for the future in terms of firing people and cutting benefits. Also, they want to increase their stock price. (I happen to have some person experience of being in a union that was broken when there was more than enough money to avoid cuts.) You can't just say "well in this case I will accept lousy wages to keep the company doors open" and not have that turned against you down the road.
posted by Frowner at 6:08 AM on November 16, 2012 [45 favorites]

Clearly you are not going to get a definitive answer here, just different theories. If you read the thread on the blue about it I think its reasonably informative from all perspectives. I tend to disagree with hoyland's theory because I don't think the ovens will be turned back on. I'm more in the Thorzdad camp. I.e. the bakeries were underinvested in during the 90's so their production costs were too high. Renegotiating the labor contracts was an attempt to replace that missing capital with cheaper labor, but the unions tried to call managements bluff - they must have thought the bakeries were worth more as an ongoing entity with the old labor contracts than in liquidation and management was bluffing. Management apparently was not bluffing.

Bear in mind when assigning blame that current management is at least two generations away from the crowd that made the bad investment decisions 20+ years ago.
posted by JPD at 6:08 AM on November 16, 2012 [5 favorites]

Well, you could apply the same reasoning to almost any strike: "Why are you threatening the livelihood of the very business that employs you?".

But, to pick aspects that are more specific to this case:

* Four executives of Hostess were awarded large pay increases after it was clear the company was in bankruptcy. The union may reason that cuts in the executive pay arena, especially after such lacklustre management, would be more appropriate than cutting workers pay.

* Some might argue that would be better for the company to fail and the workers to receive compensation and unemployment. As it stands, the workers currently have the choice of soldiering on at reduced pay with reduced benefits or quitting.

* There's no indication or promise that pay will be restored or compensated if the company survives, thus condeming workers to a future at reduced pay.

* Reducing the pay for workers for any reason drives down wages for all workers within the sector.

(Yowza, 4 comments while I was composing mine.)
posted by outlier at 6:11 AM on November 16, 2012 [4 favorites]

The company had already filed Chapter 11—again, for the second time in this decade—back in January. Hostess had one billion dollars in debt.

Here is a summary of the management offer to labor in September:

The proposed new labor deal consists of an immediate 8% wage cut and work rules more favorable to the company. Employer contributions for health insurance would decrease 17%. Hostess contributions to multi-employer pension plans would cease until 2015, at which point the current required level of funding would plummet from $100 million to $25 million. According to Rayburn, the proposal has been endorsed by Hostess's key secured lenders, which are led by hedge funds Silver Point Capital and Monarch Alternative Capital.

What's notable is it's not really management versus unions: it's a couple of hedge funds, who dumped a lot of money into the company, versus the workers at the company.
posted by RJ Reynolds at 6:11 AM on November 16, 2012 [12 favorites]

If the union's position that any job is better than no job, then that puts all the power in the hands of the company. The company could offer a choice of a completely crappy contract or nothing and the union would have to take the crappy contract.

Unions offer the company a choice: give us an acceptable contract, or you don't get any workers.
posted by BrashTech at 6:12 AM on November 16, 2012 [4 favorites]

it's a couple of hedge funds, who dumped a lot of money into the company, versus the workers at the company.

this is actually a really good point. The nature of bankruptcy has changed as hedge funds become bigger players. If banks were the controlling debt holders you might have seen a less aggressive strategy on the part of management.
posted by JPD at 6:14 AM on November 16, 2012 [5 favorites]

You can't just say "well in this case I will accept lousy wages to keep the company doors open" and not have that turned against you down the road.

This is a big point. When you talk to people who are freelancers in, for instance, design, there's a big, important rule that even though you're in competition with the other designers, that there's a generally agreed-upon floor to the fees you charge. When you charge below the market rate, you don't just lower the value of your own labor, but everyone else's as well. So taking shitty pay won't just be turned against you, but it will be turned against the workers of the entire industry. No worker wins in a race to the bottom.
posted by griphus at 6:27 AM on November 16, 2012 [11 favorites]

First of all, you need to understand that unions don't always act in the best interests of their employees. They act in the best interests of the union. Agreeing to a crappy package would make the Teamsters Union seem weak and then other companies would take advantage of them.

Second of all (and perhaps more importantly), the company was badly mismanaged, but executives were well-compensated. To conceal their mismanagement (and presumably to get more capital from investors to stay afloat) they were going to force the workers to take a haircut. This would have been extremely unfair. Psychological studies have shown that humans value fairness over profit - if somebody is taking advantage of them, the average person would rather make a decision that hurts both parties rather than a mutually profitable decision which benefits the exploitative person more. I refer to this sometimes as "the retribution principle."
posted by wolfdreams01 at 6:56 AM on November 16, 2012 [7 favorites]

Four executives of Hostess were awarded large pay increases after it was clear the company was in bankruptcy. The union may reason that cuts in the executive pay arena, especially after such lacklustre management, would be more appropriate than cutting workers pay.

This is one that stood out to me given that one of those increases was the CEO's salary going up to $2.55 million from around $750,000. (Another link if the WSJ one doesn't work.)

If that's the general tenor of the company's attitude it doesn't surprise me that the union isn't interested in taking pay cuts to fund that sort of stuff.
posted by XMLicious at 6:58 AM on November 16, 2012 [5 favorites]

This is one that stood out to me given that one of those increases was the CEO's salary going up to $2.55 million from around $750,000. (Another link if the WSJ one doesn't work.)

That sounds to me like looting - as if they knew that the company was going down in flames and wanted to draw as much compensation as possible while it was still open.

This whole thing just makes me so angry about the relentless propaganda against unions, which after all just want their members to make anywhere from a modest living (my union, which benefits service staff most, raising their base wages from the typical $8-9/hour in the private sector to $12/hour, while the rest of us covered by union contracts make slightly less than in the private sector but have much better benefits and security) to a perhaps-slightly-surprising-but-still-middle-class (famous auto workers' unions in the good old days)....while these clowns at the top and in finance capital are constantly angling for millions. Everyone trashes on the immigrant dude at the cash register who wants to make $25,000 per year rather than $18,000 as if he's some kind of greedy market-distorter but you're some kind of radical commie if you complain about the vast salaries that executives allocate to themselves.
posted by Frowner at 7:15 AM on November 16, 2012 [26 favorites]

the board members that approved those pay packages have something like 100x that amount of capital at risk.

The lawyers will make more the than that just creating the plan of liquidiation.

The optics of are bad, and the economics of it are bad, but it really really didn't matter in the context of the whole situation.
posted by JPD at 7:22 AM on November 16, 2012 [1 favorite]

The AP reporting on this (which NPR picked up) isn't really explaining the whole story either.
posted by supercoollady at 7:40 AM on November 16, 2012 [1 favorite]

The fresh packaged bread category is becoming an oligopoly. In 2000 there were eight national or super-regional bakery companies. Now there are four (including Hostess) with the top two approaching 50% market share.

2000: Sara Lee, Weston, Best Foods, Earthgrains, Interstate Bakeries (Hostess), Pepperidge Farm, Flowers Foods, Grupo Bimbo

2005: Sara Lee, Weston, Interstate Bakeries (Hostess), Pepperidge Farm, Flowers Food, Grupo Bimbo

2010: Grupo Bimbo, Flowers Foods, Hostess and Pepperidge Farms

Pepperidge Farm is the smallest of the group and probably more focused on Goldfish crackers and snacks overall. It's owned by Campbell Soup.

Bimbo became the industry behemoth after it acquired Sara Lee's bread business last year. The next biggest player is Flowers, which started out in the South. It has an independent distributor model that has helped its growth.

Neither Bimbo or Flowers could buy Hostess outright because of anti-trust issues. Bimbo already had to sell a number of bakeries (notably in California) after the Sara Lee deal. And neither company wanted to bring on the labor issues. And, perhaps most importantly, both companies think there is already too much bakery capacity in the US. In my opinion, Bimbo and Flowers had no reason to act until Hostess was effectively dead. A number of bakeries will be shuttered permanently, a few will be acquired by Flowers and a smaller number acquired by Bimbo.
posted by mullacc at 7:48 AM on November 16, 2012 [3 favorites]

The workers may end up as creditors in the bankruptcy suit as well.
posted by empath at 7:48 AM on November 16, 2012

They already are. Part of the pension obligation was converted in unsecured debt in the last bankruptcy.
posted by JPD at 7:59 AM on November 16, 2012

First of all, you need to understand that unions don't always act in the best interests of their employees. They act in the best interests of the union. Agreeing to a crappy package would make the Teamsters Union seem weak and then other companies would take advantage of them.

Small clarification, the Teamsters are Hostess' largest union, and they've already reached an agreement.
posted by inigo2 at 8:37 AM on November 16, 2012 [1 favorite]

...which underlines point 1.75 above, This is especially also true when a company deals with several unions and tries to split them - giving a better deal to the Teamsters, etc. (And I have seen this done.) .

Definitely a lot of the commentary I've seen on this is of the simplistic lousy job vs. no job binary choice, when actually it is much better modeled by the Prisoners' Dilemma. If you confess (cave), how do you know your partner (boss) isn't just going to sell you out? I think the calculus here is that the unions aren't going to be left taking a haircut, they're going to call management's bluff and force them to liquidate so that in effect nobody wins. It may well be that there is no mutually agreeable win-win outcome here, so pretending that there is merely buys into the management narrative.
posted by dhartung at 10:04 AM on November 16, 2012 [4 favorites]

BrashTech writes "Unions offer the company a choice: give us an acceptable contract, or you don't get any workers."

Which is really the only power organized labour has. The bullshit abuses you hear about happening in Amazon's et. al. warehouses for example just wouldn't happen if unions in the US were stronger and more importantly people desperate for jobs wouldn't scab.

wolfdreams01 writes "First of all, you need to understand that unions don't always act in the best interests of their employees. They act in the best interests of the union."

For the most part the best interests of the Union are in the best interests of the workers. It's hard to see that when it's your job getting sacrificed in the name of solidarity however. The power to shut a business down and the willingness to do it is the power unions have. Without it you end up taking freeze after freeze and cut after cut until you are making shit wages in horrible conditions.
posted by Mitheral at 7:37 PM on November 16, 2012