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Critical Site Selection Factor #9: Low Union Profile - Unions Still a “No-Go” Factor for Many

Unions Still a “No-Go” Factor for Many

Q4 2014
This series examines the top-10 site selection factors as decided by the respondents to AD's Q1 Corporate Executive Survey. Labor costs, skills, and highway access are top of mind; construction and occupancy costs are key; and availability of ICT infrastructure is getting closer scrutiny. Find out what else your company should consider when making its next location/expansion decision…

Having a low union profile ranked as slightly more important in Area Development’s latest Corporate Survey, up one position to #9. But in a similarly incremental sense, U.S. unions overall actually may have gained some ground over the last year.

If they had their druthers, most companies would prefer to locate and operate without unions because labor contracts typically add significant fixed costs and because their work rules deny important flexibility and efficiency in operations that increasingly must compete on a global basis. Unions also tend to stand in the way of building a cohesive company culture. “The perception of unions can be debated all day long,” notes Eric Stavriotis, senior vice president at CBRE, “but the reality is that a lot of management folks have been burned by them and they want to avoid them.” The bottom line is that some percentage of companies will only consider right-to-work states. Kathy Mussio, managing partner at Atlas Insight

Kathy Mussio, managing partner at Atlas Insight, notes that union presence “can be a first-screen go/no-go to some companies, regardless of whether a state that is not right-to-work can demonstrate that it has very low private unionization rates.” She adds, “The bottom line is that some percentage of companies will only consider right-to-work states.”

Correlation Between Growth and Low Union Influence
Thus the addition of Indiana and Michigan to the ranks of right-to-work states over the last two years has given corporate site selectors more hope that they can avoid unions even in the traditional industrial Midwest, which has been a bastion for labor organizations for decades. It more readily puts these states into consideration, not only because of the lack of concern about union hamstringing per se, but also because there has been a strong correlation between economic vigor and lack of unionization. The perception of unions can be debated all day long...but the reality is that a lot of management folks have been burned by them and they want to avoid them. Eric Stavriotis, senior vice president at CBRE

In important measures — including net domestic migration, nonfarm payroll employment, personal income, and gross state product — the 23 right-to-work states (as of study date), on average, vastly outperformed not only the average of all states, but especially the average of 27 non–right-to-work states over the decade that ended in 2013, the American Legislative Exchange Council found. There’s a similar correlation between the strongest growth states and low union influence: The nine states having union membership rates below 5 percent in 2013 were topped, in order, by North Carolina, Arkansas, Mississippi, South Carolina, and Utah, according to the Bureau of Labor Statistics.

Foreign Companies Union Avoidance
Foreign companies establishing U.S. locations tend to be especially interested in avoiding unions, says Dick Sheehy, director of Advanced Planning and Site Selection for CH2M Hill. “Most American companies understand the union issue and make decisions accordingly, but we have to educate some international clients on what it means to have unions,” he says. “A lot of them haven’t been unionized and probably never will be.” Most American companies understand the union issue and make decisions accordingly, but we have to educate some international clients on what it means to have unions...A lot of them haven’t been unionized and probably never will be. Dick Sheehy, director of Advanced Planning and Site Selection for CH2M Hill

Still, the pendulum that has swung so decisively against unions over the last few decades may be slowing or even beginning to shift the other way. For one thing, says John Morris, leader of Industrial Services for the Americas for Cushman & Wakefield, for company decision-makers, “the conversation around union avoidance is less significant now than it was a couple of years ago.” Meanwhile, the bellwether United Auto Workers union is demonstrating new determination on issues including organizing southern auto plants and rolling back two-tier wages. And overall U.S. unionization in 2013 held at 11.3 percent, the same rate as in 2012, according to the Bureau of Labor Statistics.
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