The Washington Post reported on July 5th that FedEx and UPS are “engaged in one of the fiercest lobbying battles in recent memory, with millions of dollars spent on advertising, Web sites, grass-roots organizing and other tactics.” And what are they fighting over? Dan Eggan explains:

An obscure, 230-word provision that would require FedEx Express to comply with the same labor laws as UPS, making it easier for the International Brotherhood of Teamsters and other unions to organize.

Fair enough. But why would FedEx care if federal law changed to make it easier for big labor to unionize their workforce? Eggan never really says. He does describe FedEx chairman Fred Smith as “voluble anti-union”, but at a reported $1.5 million a month that is a lot to spend out of pique. So what is the real reason FedEx is fighting unionization that The Washington Post fails to report? Unions are comapny killers. The Heritage Foundation’s James Sherk reviews the economic literature:

Studies typically find that unionized companies earn profits between 10 percent and 15 percent lower than those of comparable non-union firms. Unlike the findings with respect to wage effects, the research shows unambiguously that unions directly cause lower profits. Profits drop at companies whose unions win certification elections but remain at normal levels for non-union firms. One recent study found that shareholder returns fall by 10 percent over two years at companies where unions win certification.

And what happens when unions sap the profits out of previously competitive companies? Sherk again:

Economic research demonstrates overwhelmingly that unionized firms invest less in both physical capital and intangible R&D than non-union firms do. One study found that unions directly reduce capital investment by 6 percent and indirectly reduce capital investment through lower profits by another 7 percent. This same study also found that unions reduce R&D activity by 15 percent to 20 percent. Other studies find that unions reduce R&D spending by even larger amounts.

Research shows that unions directly cause firms to reduce their investments. In fact, investment drops sharply after unions organize a company. One study found that unionizing reduces capital investment by 30 percent–the same effect as a 33 percentage point increase in the corporate tax rate.

No wonder Smith is so “voluble” about unions.