I caught James Hoffman by phone this week as he was midair on a business trip to Georgia.
He’s a fourth-generation Hoffman, the current owner of an award-winning Wisconsin-based, family-owned road construction company in Black River Falls that also does business in Minnesota. His great-grandfather founded the company exactly 100 years ago and built the first major paved road in Wisconsin’s Jackson County.
So I figured Hoffman the businessman would be happy about Wisconsin’s recently passed “right to work” law, which grants a worker the “freedom” not to pay union dues in a union shop.
It’s sold as a better way to attract businesses to the state, thereby creating jobs. Never mind that by federal law, unions still must negotiate for that worker who isn’t paying dues and also represent them if they file a grievance or are unjustly shown the door.
Let’s be blunt here. The legislation should be called the “right to bust unions” law, which is what its supporters really hope will happen. But let’s skip the semantic play on words for now.
Back to Hoffman. Happy is hardly the word.
“This (law) is wrong,” he tells me over the drone of the airplane engines. “Over time, as has been seen in other states, there’s a spiraling downward of wages and loss of high-paying, middle-level jobs. By workers opting out of paying dues, it also erodes the union’s ability to administer contracts and provide highly skilled, trained workers.”
Now this guy sounds more like a union business agent than a profit-seeking capitalist. But union’s not a dirty word in Hoffman’s household or workplace. His company grew by 50 percent last year, adding 200 employees and winning contracts in the two states in large part because of his productive and well-trained, mostly union workforce, not in spite of it.
Now he fears that Wisconsin, and by extension his company, will suffer more economic harm in terms of job growth, depressed wages and perhaps a less skilled or trained labor force by going to a right-to-work option.
8 OF 10 WORST STATES
He may have a point.
The nonpartisan Economic Policy Institute, or EPI, conducted a study in 2011 on manufacturing job growth in Oklahoma after it passed its right-to-work law in 2001. The study found that manufacturing job growth actually has fallen each year since the law was passed after steady growth the previous 10 years. The total number of manufacturing jobs in the state fell by about a third in the 10 years after the law was enacted.
“This does not mean that right-to-work in itself caused a decline in the state’s manufacturing employment,” the study said. “Rather, it suggests that right-to-work had no positive impact on the manufacturing sector and, in the face of broader forces undermining the sector, right-to-work was simply impotent.”
Another institute analysis found that the average full-time, year-round worker in right-to-work states actually makes about $1,500 less annually than a similar worker in a state that wasn’t right-to-work.
In a recent blog post before the bill was passed, Ross Eisenberry, the institute’s vice president, noted that seven of the 10 states with the worst unemployment rates are right-to-work states.
He also cited a study by the Organization for Economic Cooperation and Development that ranked all 50 states in terms of quality-of-life indicators. They include jobs, education, housing and heath. Eight of the 10 worst states, Eisenberry noted, were right-to-work states. Eight of the best were states that were not right-to-work.
Coincidence? I don’t think so.
COSTCO VS. SAM’S CLUB
In his testimony before a Wisconsin Senate committee last month, Hoffman maintained that he has enjoyed a healthy relationship for years with labor and engineering unions in both states that provide him with a skilled labor force, both long-term and at a moment’s notice.
He maintained that right-to-work legislation would lead to dissension in the workplace, defund the unions, making it more difficult for them to pay for training and would ultimately increase company costs.
Now, how could a law that could lead to lower or more minimum-wage salaries cost a company more money?
A 2006 Harvard Business Review article made that argument by comparing the big-box non-union retailer, Sam’s Club, which is owned by Walmart, and Costco.
It found that:
— Costco employees earn about 40 percent more than those at Sam’s Club.
— 82 percent of Costco employees have health-insurance coverage, compared with less than half at Walmart.
— 91 percent of Costco’s employees are covered by retirement plans, with the company contributing an annual average $1,330 per employee, while 64 percent of employees at Sam’s Club are covered, with the company contributing an annual average $747 per employee.
Undoubtedly Costco spends far more money than Sam’s Club or Walmart on worker wages and compensation. But it makes up for it in worker productivity and retention.
It found that employee turnover at Costco is 17 percent overall and 6 percent after one year’s employment. In contrast, turnover at Walmart is 44 percent a year, close to the industry average
It crunched some numbers and concluded that “the total annual cost to Costco of employee churn is $244 million, whereas the total annual cost to Sam’s Club is $612 million.”
“In return for its generous wages and benefits, Costco gets one of the most loyal and productive workforces in all of retailing, and, probably not coincidentally, the lowest shrinkage (employee theft) figures in the industry,” the magazine noted. “As a result, Costco generated $21,805 in U.S. operating profit per hourly employee, compared with $11,615 at Sam’s Club.”
MORE HIRING HERE
Hoffman did not want to discuss the politics behind right-to-work legislation. He’s foremost a conscientious businessman who is mostly driven by his simple company motto: “Our company is about our people.”
About 45 percent of Hoffman’s contracts are from Wisconsin’s Department of Transportation. Roughly 15 percent is from Minnesota’s DOT. He reads the business tea leaves and sees a glaring disparity between the border states.
Wisconsin, his home state, is facing an estimated $2.2 billion budget deficit over the next two years. Minnesota, in turn, has $2 billion budget surplus and lawmakers are itching to spend some of it on road and bridge repair.
That’s one reason Hoffman is expanding an office in Lakeville and hiring more workers here. In Wisconsin, however, he has canceled plans to invest in more equipment or hire more workers because of the uncertainty surrounding the new right-to-work law.
“There will be no savings in right to work that the state will see,” Hoffman said during his testimony. “Good-paying construction jobs will be replaced with minimum-wage jobs. Talk of repealing prevailing wage statutes will lead to a steady decline of skilled, trained workers who earn a living wage.”
His views fell on deaf ears, because this law is driven more by union bashing and busting rhetoric and politics than by economic common sense.
Good luck, Wisconsin workers, union and nonunion alike.
Ruben Rosario can be reached at 651-228-5454 or email at rrosario@pioneerpress.com. Follow him at twitter.com/nycrican.
