Union ‘greed’ helps close 16 Goodwill stores, 10 donation centers in Toronto

Goodwill is a non-profit organization that helps the impoverished in the city of Toronto. Everything from second-hand shoes to used jackets, the impecunious can get some pretty cheap stuff – let’s not forget that it’s a paradise for hipsters.

This week, many were shocked to find the closure of 16 stores, 10 donation centers and two offices in southern Ontario. Keiko Nakamura, CEO of Goodwill Industries of Toronto, Eastern, Central and Northern Ontario, who is being paid $220,000 per year, blamed the closure on a low cash-flow, expensive rent and union rules.

It was even reported that staffers wouldn’t be receiving their paycheck on Friday. This report was proven false after it was announced employees would be getting their paychecks.

What about Nakamura? Will she step down? Here is what she told reporters Monday:

“I recognize this has all happened very suddenly. I am examining all possible situations — I’m trying to exhaust them,” Nakamura said. “I have a duty as the CEO for this organization to ensure I do the diligence in the best interest of this organization.”

Everyone is in upheaval. Everyone is calling for the head of Nakamura, which is a partially correct demand. Her ineptness and lavish expenses have no room in a non-profit organization designed to aid the poor. Does a charity need to spend $53,000 on parties and manicures? Nope.

Why is its primary competitor, Value Village, flourishing? It’s simple: better management, effective marketing and competitive prices.

But there is one group that is at fault, too, and perhaps even more so: the unions.

Although the unions are blaming corporate greed and mismanagement for the shutting down of Goodwill, it’s actually the so-called greed of unions that led to the inevitable demise of Goodwill.

Labor unrest and minimal flexibility in staffing levels were part of the reasons why Goodwill in the Greater Toronto Area had been suffering after all of these years. For instance, in 2012, Goodwill wanted to bring in a “winter strategy” to slash costs, which would see employees’ working hours be cut during the slow season. The unions didn’t like this, and instead urged the company to keep full-time employees and fire part-time workers.

After quite a commotion and legal trouble, Goodwill had to abandon this strategy altogether, which would’ve helped the company stay afloat and maybe stay open longer.

In addition to this, unions are demanding high wages (between $17 and $27 per hour) and exorbitant benefits. These are two things that are difficult to attain in today’s economy.

Let’s take a gander at the retail marketplace:

Goodwill is in an extremely competitive marketplace right. It sells a lot of the same stuff that you could find at Dollarama, Value Village, Wal-Mart and at other stores. There’s not a whole lot of variety, and prices kept creeping up. At least the merchandise at some of the aforementioned stores were new.

In most cases, these stores have minimum wage employees (in Ontario it’s $11 per hour) so Goodwill is already at a disadvantage. Putting clothes on hangers or ringing a cash register begs the question: is this labor really worth between $17 and $27 per hour? Let the marketplace decide that question, but the answer is likely no. Unions just decided to use coercion as opposed to sound economic practices.

As any economics major can tell you, labor is the No. 1 cost for businesses. Goodwill, already facing very low margins and expensive rents in a competitive marketplace, probably couldn’t afford this type of labor cost, which is why its cash flow kept decreasing over the years. It had no other choice but to cave into the demands of unions.

Workers were probably jubilant over these union heads talking about higher wages and medical benefits. They likely began to celebrate during speeches and immediately fell for the idea that unions will save them and help them achieve a higher standard of living. It was a Faustian tragedy.

Unfortunately, they didn’t take the time to realize that these wages are too big for a group like the 80-year-old Goodwill, and eventually they’ll have to close up shop. Today, they’re out of work.

Nakamura’s salary is what the market will bear. Whether or not it’s justified is something up to the company’s leadership. The organization probably bet that the $220,000 would help turn the company around. It was the wrong bet, something you see in every corporation, large or small.

Everyone is chastizing Nakamura for that level of “greed” and accusing her of making such a vast sum of money off the backs of the city’s most vulnerable. But the question remains: aren’t union workers just as greedy as their vilified CEO? Yes.

Yet, for whatever reason, this eludes the talking heads in Canada’s mainstream media.

AM

Photo by Mike Mozart via Flickr.

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