Just vote NO! The math.

We've all heard it. Most of us have probably said it at one time or another. The logic being that if we "hold out" a better offer is sure to be coming, sooner or later. It's the later bit that gives me pause. Here is a little example, using arbitary number (please feel free to tweek as you see fit) to illustrate the cost of "Just voting No". This example assumes a relatively low inflation rate of 4% (This will increase in the future as the cost of the rampant Fed money printing is felt, but for now we will assume things remain stable)

Example: Management offers labor a 20% pay increase. Union negotiators refuse it , believing that more is possible. They succeed , eventually, after three years, in brokering a 30% pay raise for a five year contract. Not bad eh?
Actually it stinks.
Here is the math. We look at it over the eight year period when negotiations commenced and management's first offer was rejected until the end of the negotiated five year contract:
Money lost on paper = 20% X 3 years = 60% (The time you got ZERO pay increase)
Time value of money lost @ 4% p.a. compounded annually = 12.5%
Total money lost = 60 +12.5 = 72.5%

Money gained = 30% (new deal) - 20% (original offer) = 10% X 5 (years duration of contract) = 50%

Net result = 50 - 72.5 = -22.5%

So for a union negotiator to hold out for three years to gain an extra 10% in salary actually costs you 22.5% of your annual salary. The longer the time between the originally rejected offer and the actual settlement, the bigger this number becomes. So for us right now, given our conditions, this 22.5%  is as LOW as it can be.

This is sobering, but the political ramifications are even worse. ALPA leaders know this increasing loss to be the case and so to skew the numbers favoring a larger raise/signing bonus/equity stake etc must be achieved. So ALPA's position actually must move further away from an acceptable deal to management, rather than get closer. As ALPA's intial position was rejected, a more expensive position will of course, be rejected by management too. Management is put in a position where the option to run 2 separate airlines, under current contracts, becomes more and more inviting, more and more logical, more and more fiscally responsible. And this is what will happen. This is what is happening. I fully expect to retire in five years under the current contract having seen no raise or improvement of benefits of any kind because of this position that your union has taken. A position YOU are supporting. Your handlers have turned it into a USAir situation, and will continue to blindly accuse the company of being the problem.

This is what "Just voting No!" costs. So the next time you hear it, think. Even better, direct them to this blog and have them check the math.