Out of touch politicians and labor negotiations.

This Tweet is a great example of how out-of- touch our politicians can be.

To put it simply, profits go up, profits go down or sometimes disappear. The economy and business conditions change, competition changes. There are no guarantees.

When a union contract is negotiated for wage increases, benefit increases, more time off, work rules, etc. they are intended to be permanent and in some cases they compound over time. Wage increases and employer benefit contributions are good examples.

A wage increase of a dollar is not a dollar to the employer. Add to that amount Social Security and other payroll taxes, add wage based benefits, perhaps a 401k match or in a few cases pension funding.

As labor costs increase, including non-productive time paid, the risk grows. Just look at the auto industry as a prime example.

You don’t base long-term labor costs on a year or two of good profits. It would be ideal though if labor accepted a portion of compensation as profit sharing, but that risk is generally placed on shareholders.


  1. The union reps and company reps will sit down and thrash it out. The company side always comes in with a lower offer and the union reps come back talking hard and ask for the moon. Neither side wants the company to go under but they both want all they can get. The company is not always the squeaky clean side in the negotiation.


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