Kevin Meyer

Myopic Views of Efficiency

Once again we have someone, this time ostensibly a professor of economics, looking at a concept from an unfortunately narrow perspective.  From a letter in The Washington Post last Monday:

The Jan. 5 editorial "Terms of Trade; Why the U.S. Lost Manufacturing Jobs, and How It Can Replace Them," was on the mark. The bailout of U.S. automakers will not save their industry in the long run.


True.  Let's go on.

Manufacturing by the Big Three represents the remnants of an industry that has been relocating to other places for 30 years. The subsidy would only slow this trend, which is likely to follow the pattern set by other manufacturing industries. At the turn of the 20th century, the heart of American textile manufacturing was in New England. Throughout the century, it relocated to the South to take advantage of non-union labor, and it eventually migrated offshore to find even cheaper labor.


True from a historical perspective, but I'm sure the more enlightened among you are starting to perceive the problem.

As foreign carmakers in the South erode the market share of the Big Three, burdened by high labor costs and low-efficiency cars, the pull of relocation will become stronger.

The solution is moving substantial parts of the industry to the
South or to low-cost foreign sites, where U.S. subsidiaries are already
producing cars more efficiently.


Boom.  Yes union labor costs are considerably higher than non-union, although not as great as some will say.  And definitely not enough to change the competitive balance.  Are most foreign cars made in cheap labor countries?  No.  Japan isn't exactly cheap.

The real competitive problem, the real driver of differences in efficiencies, is the difference in work rules that constrain change, agility, and flexibility.  If the unions really wanted to survive, perhaps even hold on to their lavish pay and benefits, they would simply eliminate their ridiculously narrow job functions.  Not try to skew a democratic process via promoting the idea of non-secret ballots as "fair choice."  Become a brain instead of just a pair of hands.  I realize that this was originally brought about due to a management that also treated the employees as just hands, but it's time for a change, on both sides.

Efficiency is created by using brains to improve the process, not by just focusing on the cost of the pair of hands.

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