Updated: May 3, 2013 12:15PM
In honor of this Labor Day holiday, here is a little fable. And like all fables, it comes with a moral at the end.
Once upon a time, in a beautiful city by a lake, there was a company that was in the business of building outboard engines for boats. It had prospered in this town for 70 years. The factory employed 850 workers, and the world headquarters building employed an equal number of people.
The workers, who lived and shopped in the town, enjoyed its parks and recreation, its schools and libraries, its stores and its services ranging from garden supplies to gas stations. With their paychecks, they supported these local businesses -- and everything ran smoothly. In fact, their company payroll injected $175 million into the local economy.
The Chamber of Commerce estimated that a total of 5,900 jobs were dependent on this boat-engine company in the nearby region, since more than 250 companies in the area were suppliers to this business.
Then suddenly, there was an economic slowdown. The workers still had their jobs, but not much overtime, since people weren't buying boats, and thus weren't buying the motors.
Jobs: Company vs. union
The company tightened its belt, hoping to keep the plant open. Salaried workers took wage cuts and furloughs. Some factory workers and salaried workers were laid off.
Then the company explained to the remaining factory workers that there would have to be some changes -- or they would be forced to move production to a plant in another state -- Oklahoma -- where costs were lower, and workers seemed eager to have those jobs, even at lower wages.
The company made a seven-year proposal, which included a three-year wage freeze and a plan that anyone who had been laid off and then rejoined the company would be hired back at the 30 percent lower wage being offered to new hires. The company said its plan was its best offer and not negotiable.
The workers had a union. The union leaders were insulted by the plan and vowed to fight. "Whatever comes our way, we will take it on," said one union leader.
Community leaders urged the workers to accept the deal, knowing that local prosperity was riding on the company's survival there.
There was a vote. The company provided a summary of the contract and clarification of the issues. But following the instructions of their union leaders, workers voted down the company offer, confident that a better deal would be forthcoming.
Then came the surprise. The company said it had no further offer. Did the workers want to vote again? No, said the union leaders. We can't have a vote unless the company makes a different and better offer. The company's response: That was our final and best offer! Company executives unveiled plans to close down the plant over the next three years.
The workers were shocked. There was a flurry of activity, including an abortive attempt at a late-night re-vote. One of the top union officials resigned.
The company met with union members. And then a second vote was scheduled -- on the very same proposal -- for the Thursday and Friday before Labor Day weekend. Late Friday night, the results, though not the voting tabulation, were released. The original contract deal was approved.
The company issued a statement saying it would now transfer some of the Oklahoma jobs to its home plant in Wisconsin as a result of the vote. There was just too much capacity for demand.
You see this story is more than a fable. It's a real-life example of the pressures that are hitting businesses and workers at all levels of our economy. This is a true story that played out in the last month at Mercury Marine, a division of Brunswick Corp. that is headquartered in Fond du Lac, Wis.
"We accept the union's ratification of our contract proposal," said Mark Schwabero, president of Mercury Marine. "As we've stated throughout this important process, comprehensive changes to wages, benefits and operational flexibility are necessary for Mercury to effectively compete in a smaller and fundamentally changed marketplace."
The moral of this story?
Ask Archimedes, who demanded a lever and a place to stand in order to move the world: Leverage only works if you have a strong place to stand.
This Labor Day, with unemployment nearing 10 percent, the moral of this fable applies to you -- or someone very close to you. And that's The Savage Truth.
Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.