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Affluent Investor | June 25, 2017

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Twinkie’s Preservatives: Private Capital and Non-Union Workers

Photo: Matt Rourke / The Associated Press

Photo: Matt Rourke / The Associated Press

Twinkies – along with my personal favorite, Hostess CupCakes – make their return to store shelves today. Call it the new Twinkie-nomics.

What’s the key economics/business lesson to be taken away from the resurrection of these tasty snacks from the old Hostess that went in liquidation last year? The long death of labor unions – and the demise of heavily unionized firms and industries – continues. And that’s good news for consumers and, in the long run, for workers.

The percent of private-sector wage and salary workers that are labor union members fell from 6.9 percent in 2011 to 6.6 percent in 2012. Overall labor union membership (private and public sectors) fell from 11.8 percent to 11.3 percent.

According to Unionstats.com, private sector labor union membership has declined from 24.2 percent in 1973 to 6.6 percent in 2012. According to a New York Times story, the overall labor union membership rate of 11.3 percent last year was the lowest since 1916.

In effect, labor unions have fallen to inconsequential status in the private sector, while just holding their own in the public sector (falling from 37.0 percent in 2011 to 35.9 percent in 2012, with the range since the late seventies being 35.7 percent to 38.7 percent).

The old Hostess was heavily unionized, which resulted in arcane, costly, noncompetitive operations. The new Hostess Brands, LLC, owned by two private equity firms, Metropoulos & Co. and Apollo Global Management, is focused on innovation, improved efficiency and expanded distribution, with a much-leaner, and non-unionized, workforce, as noted by a July 9 report in The Wall Street Journal. The new Hostess has chance, while the previous Hostess struggled, falling into bankruptcy twice and finally being liquidated in the face of labor union unwillingness to bend to economic realities.

While pro-labor union rhetoric often sounds nice, like “protecting workers’ rights,” it must be understood that the primary purpose of labor unions is to maximize pay and benefits for its members, while minimizing their members’ work and productivity. In the distant past, when some workers could count on lifetime employment in industries facing little competition or artificially insulated from competition, this held appeal to many workers.

But that’s certainly not the twenty-first century economy. Indeed, far from it, and most workers generally get it. Individuals looking to get ahead realize that they need to work hard, and improve their skills and productivity. Therefore, they want little to do with the labor unions that work against those needs. That’s real-world Twinkie-nomics.

Raymond J. Keating is chief economist for a national small business organization; a weekly columnist with Long Island Business News; a former Newsday weekly columnist; and an adjunct professor in the MBA program at the Townsend School of Business at Dowling College.

Author of numerous books, his latest business and policy books are “Chuck” vs. the Business World: Business Tips on TV and Unleashing Small Business Through IP: Protecting Intellectual Property, Driving Entrepreneurship. Keating also is a novelist, penning a series of Pastor Stephen Grant thrillers.

His articles have appeared in a wide range of additional periodicals, including The New York Times, The Wall Street Journal, The Washington Post, New York Post, Los Angeles Daily News, The Boston Globe, National Review, The Washington Times, Investor’s Business Daily, New York Daily News, Detroit Free Press, Chicago Tribune, Providence Journal Bulletin, and Cincinnati Enquirer.

 

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