Ding-Dong, the Twinkie is Dead: Were Labor Unions to Blame for Hostess' Downfall?

By Amy Wagner on November 25, 2012
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By now, I’m sure you have heard about the demise of Hostess, and with it that of the infamous Twinkie. But there is far more to this story than the impending lack of America’s favorite cream-filled sponge cake. More specifically, this turn of events involves Hostess going before a bankruptcy judge, asking for permission to go out of business and lay off 18,500 workers. At the root of Hostess’ bankruptcy motion involves a long-fought battle between union workers and top executives. It should be noted that this is not merely the story of one company shutting its doors; it symbolizes an argument between two drastically different groups, involving issues of compensation for top executives, workers’ rights, and income equality in general.

On one hand, there’s the workers. 

Hostess has been making unreasonable demands. They have not only cut wages and benefits for about one-third of workers, but they have also given top executives large pay raises. Union president Frank Hurt says that “our members were aware that while the company was descending into bankruptcy and demanding deep concessions, the top ten executives of the company were rewarding themselves with lavish compensation increases, with the then CEO receiving a 300 percent increase.” Also, Hostess has been mismanaged for some time, in addition to being loaded down with debt from private equity firms, yet they choose to place the blame on union members. Moreover, if union members had not made wage and concessions after their first bankruptcy, this company would have shut its doors a long time ago. Since this bankruptcy, senior management and top executives have failed to turn the company around and make it profitable. Any smart company would invest more money into marketing, new technology, and other potential paths to success following a bankruptcy, but Hostess did not do this.

Photo from Flickr.com by Jenn Durfey

And the other, the business. 

It is far better to have a job with reduced benefits and wages than to have no job at all, which is something that the striking Hostess workers should have learned by now. By going on strike and demanding more than the company could give, they drove Hostess out of business, and now more than 18,000 people are out of work. It is more than obvious that pro-union politics are bad for business. As Ted Nugent wrote in an article for the Washington Times about Hostess’ demise, “businesses are not social welfare experiments whose primary responsibility is to provide jobs and meet the demands of ever-shrinking labor unions…[but] there is good news. In the private sector, labor unions are quickly becoming extinct. Only about 7 percent of private-sector employees belong to labor unions.” This is indeed a good sign, as labor unions often cause large companies to fail. In fact, it is often because of labor unions and their fantastical demands that companies leave the United States, and that union-heavy states often have weaker economies than ones with less unionized workers. It is abundantly clear that if we want to create – and maintain – jobs in America, we need to realize that reducing union presence is the first priority. We don’t need the America of the 1950s, with one-third of citizens belonging to labor unions. We need workers who are willing to embrace pro-business ideals, and who will be willing to have their wages and benefits cut if that’s what is needed to keep the company afloat. If Hostess union workers had come to this realization and backed down, the company would be in business,  and 18,000 people wouldn’t be out of work.

But which is right?

As Paul Krugman writes in his recent article for the New York Times, “in 1955 roughly a third of American workers were union members…America in the 1950s made the rich pay their fair share; it gave workers the power to bargain for decent wages and benefits; yet contrary to right-wing propaganda then and now, it prospered.” Clearly, a country where workers are given the right to voice their demands in the form of unions and in which the wealthy are held accountable can not only do merely alright; it can succeed. Although increased income equality and more presence workers’ voices are obviously not a priority or in the best interest for everyone, both will benefit the majority. Just because the minority has the money and power does not mean they should have the right to continually run companies into the ground while pinning the blame on labor unions, as they only seek to further their own interests.

In the end, union members “decided that they were not going to agree to another round of outrageous wage and benefit cuts and give up their pension only to see yet another management team fail and Wall Street vulture capitalists and ‘restructuring specialists’ walk away with untold millions of dollars.” Union members did not accept this behavior from corporate elite, and Americans should not either. Enough is enough.

What do you think about the controversy surrounding Hostess’ bankruptcy? Sound off below!

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Amy is a third-year student at the University of Denver majoring in Communication Studies, with concentrations in organizational and intercultural communication, as well as minoring in business and international studies. She is a Colorado native, avid reader, coffee drinker, lover of all things active, and now, thanks to Uloop, a writer.

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