Moreover, the ability of unions to raise the wages of some workers does not mean that universal unionism could raise the wages of all workers. On the contrary, and this is a fundamental source of misunderstanding, the gains that strong unions win for their members are primarily at the expense of other workers.
The key to understanding the situation is the most elementary principle of economics: the law of demand — the higher the price of anything, the less of it people will be willing to buy. Make labor of any kind more expensive and the number of jobs of that kind will be fewer.
Milton and Rose Friedman, Free to Choose, 1980.
August 29, 2017
QotD: The power of unions
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August 24, 2017
Words & Numbers: Child Labor Was Wiped Out by Markets, Not Government
Published on 23 Aug 2017
In 1938 the US government passed the Fair Labor Standards Act mandating a forty hour work week, establishing a minimum wage, and prohibiting child labor. Because of legislation like this, government is often credited for making the American work environment safer and more fair. Yet, as Antony Davies and James Harrigan demonstrate with historical data, market forces were already making things easier on the American worker long before the FLSA.
Learn More:
https://fee.org/articles/child_labor_was_wiped_out_by_markets_not_government
https://youtu.be/0zq-2cKENOchttps://fee.org/articles/child_labor_was_wiped_out_by_markets_not_government
Data:
http://www2.census.gov/prod2/statcomp/documents/CT1970p1-05.pdf
See page 170 for average weekly work hours.
See page 134 for child labor rates.
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June 11, 2017
Nostalgia for a lost England
David Warren got all weepy about bygone times in England:
I lived in England — London, to be more frank, but with much wandering about — through the middle ’seventies and for a shorter spell in the early ’eighties. By the late ’nineties I visited a place that had been in many ways transformed, and clearly for the worse, by the Thatcher Revolution. Tinsel wealth had spread everywhere, trickling down into every crevice. Tony Blair surfed the glitter, and people with the most discouraging lower-class accents were wearing loud, expensive, off-the-rack garments, and carrying laptops and briefcases. No hats. It was a land in which one could no longer find beans-egg-sausage-and-toast for thirty-five new pence, nor enter the museums for free.
I missed that old Labour England, with the coalfield strikes, and the economy in free fall; with everything so broken, and all the empty houses in which one could squat; the quiet of post-industrial inanition, and the working classes all kept in their place by the unions. I loved the physical decay, the leisurely way people went about their charmingly miserable lives. Cricket still played in cricket whites; the plaster coming off the walls in pubs. It was all so poetical. And yes, Mrs Thatcher had ruined all that. For a blissful moment I was thinking, Corbyn could bring it back.
Actually, he would bring something more like Venezuela, but like the youff of England, one can still dream.
I visited England as an adult in mid-Winter 1979, the “Winter of Discontent“, and it was a fantastically appropriate epithet for a chilly, damp, and miserable time-and-place. When we landed at Heathrow, there was some kind of disruption with both the bus service and the underground (“subway” to us North Americans), so getting into London required taking a cab. The cabbie “kindly” took us around a bunch of touristy sites (and probably ran up the meter a fair bit) before dropping us off at King’s Cross station. When we bought our tickets for the train north to Darlington, we were warned that the catering staff were not working that day (no idea whether there was a formal strike or just a wildcat walkout), so there were no meals available on the train. The restaurant at the station was closed — that might just have been the time we were there, as British restaurant opening and closing hours were quite restricted at the best of times.
On the train, we were at least able to get a cup of tea and a stale bun. The journey took quite some time — once again, that might have been normal, but what was supposed to be a ~3 hour journey probably took closer to 5 hours (maintenance, signalling issues, strike-related delays, and for all I know the “wrong kind of snow” were all possible contributors). By then, we’d missed our connecting train to Middlesbrough, but they ran fairly frequently so we weren’t held up too long. We finally reached my Grandmother’s house, only to discover that we might be hit by blackouts as the power station workers were threatening to go off the job. It was a dismal and yet appropriate welcome back to the place I’d left as a child in 1967 … it was tough to recognize the places I thought I remembered, as childhood memories tend to emphasize the (fleeting) warmth and sunshine and ignore the much more traditional wet and windy British weather.
I left Toronto wearing normal winter clothing, which was well adapted to our Canadian winters, but not at all appropriate to the bitter, wet cold of Northeast England at the best of times and this was the worst winter since 1963. My teeth started to chatter as we left the terminal at Heathrow and didn’t stop chattering until the door closed on the aircraft for our return two weeks later (in the middle of a huge winter snowstorm that had us on one of the few aircraft that arrived or departed that day).
My brief two weeks’ experience of England’s Winter of Discontent didn’t build up any particularly rich sense of nostalgia, let me tell you…
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January 22, 2017
QotD: Conflict of interest
I am not sure that this is a suitable subject for a blog post, probably more a project for an aspiring PhD student, but with all the discussion of conflicts of interest in the Trump cabinet, it strikes me that the most glaring conflict in the public sector is ignored: The CoI between state and local politicians elected with the support of public sector unions who then participate in compensation negotiations for the members of those unions. Here the temptation of the politicians to buy the support of the unions with public money is overwhelming. The impact of this is potentially trillions when public pension liabilities are included.
This is such an obvious conflict that I have looked to see if there are laws preventing this, but my initial research shows nothing.
It would be interesting to see if there is a statistical relationship between union support and subsequent pay rises. I would expect this relationship to be especially strong with deferred compensation (such as pensions) since this is very difficult for voters to monitor and can be easily gamed with unrealistic assumptions about, for example, investment returns.
Roger Barris, quoted by Tyler Cowen, “Understudied conflicts of interest in American government”, Marginal Revolution, 2017-01-11.
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December 18, 2016
Deportations – Strikes – Evacuations I OUT OF THE TRENCHES
Published on 17 Dec 2016
Chair of Wisdom Time!
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December 14, 2016
QotD: Fill-in-the-blank OECD fun
When writing about the Organization for Economic Cooperation and Development, an international bureaucracy based in Paris, my life would be simpler if I created some sort of automatic fill-in-the-blanks system.
Something like this.
The OECD, subsidized by $____ million from American taxpayers, has just produced a new _________ that advocates more power for governments over the _________ sector of the economy.
But this may not be sufficiently descriptive.
So maybe I should create a multiple choice exercise. Sort of like when students take tests and get asked to circle the most appropriate answer.
The bureaucrats at the Paris-based OECD, working in cooperation with union bosses/class-warfare advocates/other tax-free international bureaucrats/politicians, have released a new report/study/paper urging more power/control/authority for governments in order to increase regulation/taxes/spending/redistribution/intervention.
You may think I’m trying to be funny, but this is totally serious.
How else would you describe a bureaucracy that consorts and cooperates with leftist groups like Occupy Wall Street and the AFL-CIO and routinely published propaganda in favor of Obama’s agenda on issues such as global warming, government-run healthcare, so-called stimulus, and class-warfare taxation.
And never forget that American taxpayers finance the biggest chunk of this bureaucracy’s budget.
Adding insult to injury, the bureaucrats at the OECD get tax-free salaries, which makes their relentless support for higher taxes on the rest of us even more obnoxious.
Dan Mitchell, “More Statist Propaganda from the Taxpayer-Funded OECD”, International Liberty, 2015-04-12.
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November 14, 2016
QotD: The relationship between unions and occupational licensing
… this is also known as “licensure”. And the rate in the 50s, at that peak of union power, was around 5% of workers needed such a licence to go to work. And union membership was, at that peak, 35% and is now around 10% or a little above, and licensure has gone from 5% to 30%.
For my point to work we have to consider unionisation and licensure as being the same thing. And they’re obviously not exactly the same thing. But they are sorta, kinda, the same thing. For all the claims that the requirement for a licence is in order to protect consumers (a theory for which the technical economic term is “codswallop”) it’s really a way to protect the wages of the ingroup against competition. As, of course, is being in a union a method of protecting those economic interests of the ingroup.
Actually, licensure is most akin to the medieval and early modern guilds system, out of which the union movement itself grew. So it’s really not surprising at all that they share certain attributes. That aim and desire of protecting the incomes of members of the group against the economic interests of everyone else.
So, my argument is that we’ve not in fact had a fall in the power of organised labour over these recent decades. We’ve just seen a change in the form of it, from unionisation to licensure. The point being that this is absolutely and definitely true in part and may or may not be true entirely. I tend towards the entirely end of that spectrum and I’d be absolutely fascinated to see if there’s been any academic comparisons made of the strengths of the two systems in protecting workers’ wages and conditions. I’d even be willing to believe that licensure works better than unionisation, given that the first is a conspiracy against the consumer, something easier to carry off than the unions’ conspiracy against the employer.
Tim Worstall, “More Union Power Won’t Raise Wages Or Reduce Inequality”, Forbes, 2015-03-07.
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October 29, 2016
Is there a bright side to the sale of Constellation Brands for Ontario wine drinkers?
Michael Pinkus gets an uncharacteristic rush of optimism over the sale of Constellation Brands:
[W]hile it’s nice to see Canada’s Inniskillin and Jackson-Triggs back in Canadian hands what does all this say about the selling of wine in Canada? When the world’s largest holder of wine companies/brands decides to throw in the towel here and sell off their Canadian division, yet still holds the remainder of the wineries and brands they acquired with their 2006 purchase of Vincor to me speaks volumes. Now I’m just speculating here, as I do in many of my commentaries, but could it be that Constellation sees the writing on the wall: that making money in Canada (in general) and in Ontario specifically, will not be as easy as it once was under the Liberal’s new proposed “sharing the retail space plan”. Let’s face it, the real selling feature of Vincor’s Canadian holdings were those Ontario money makers: those off-site stores that were a license to print money in the province … and now if the world’s largest can’t figure it out how in the world are the rest of Ontario’s wineries supposed to do it? Are we about to embark down another rabbit hole of when it comes to the sale of booze in this province?
[…] Just last week, I was asked for my thoughts and I immediately went to the pessimistic side of things: “does not bode well for the selling of wine here in Ontario”; but then after some careful thought I decided there still might be room for optimism, especially if you look at the purchaser. At one point in the process it was rumoured that Peller was in the mix of buyers to take over the Constellation Canadian holdings, but in the end it was the Teachers’ Pension Plan that took it for $1.03 billion. Many on social media lamented that if the teachers do for booze what they did for Toronto sports teams we’re all in big trouble. But I thought of a better angle: Nobody is better at lobbying and twisting the arm of the provincial government to get what they want than the Teachers’ Union … and once they learn how difficult selling wine is, and the antiquated laws we have surrounding it, here in Ontario, they’ll set their sights on making changes, and while the fairly ineffectual Wine Council of Ontario seems to be a mouse nipping at the heels of the governmental elephant, the Teachers’ Union and their Pension Plan will seem like a pack of wolves and hyenas working together to wrestle the elephant to the ground. So while Peller (had they succeeded in their purchase efforts) would have become the largest Canadian winery by far, they would not have been any more effective at invoking change to the system; on the other hand, the Teachers’ Union could play a large and important role at getting laws passed that will loosen up our repressive and antiquated system up; because who is in more need of a drink at the end of the day than a teacher, and it should be easier for them to get it and sell it..
June 30, 2016
Do Unions Raise Wages?
Published on 7 Apr 2015
Do unions raise wages for workers as a whole? If not, can unions raise the wages of some workers? The answer is, well, it depends. Unions have the ability to restrict the supply of labor to a job, which can increase wages for some workers. However, unions can also lower wages. For example, work stoppages and strikes supported by unions can slow down economic growth, lowering real wages. To illustrate this, we take a look at what happened to Great Britain’s economy during the 1970’s union strikes.
It’s important to note that unions are not just about wages — they can be helpful in protecting workers from arbitrary abuses and maintaining positive workplace relationships.
Finally, we ask — are there differences between professional associations and unions? How are they similar? Watch to learn more about how unions affect the economy.
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April 23, 2016
The Marginal Product of Labor
Published on 7 Apr 2015
In this video on the marginal product of labor, we discuss some commons questions such as: How are wages determined? Why do most Americans earn so much by global standards? What exactly is meant by ‘human capital’? Do labor unions help workers, and if so, by how much? How does discrimination affect labor markets? How is the demand for labor different than the demand for a good? We’ll discuss how to derive the demand for labor based on the marginal product of labor, and use real-world examples — such as the demand for janitors in a fast food restaurant — to illustrate this calculation. We’ll also cover an individual’s labor supply curve vs. market supply of labor.
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March 30, 2016
QotD: The spendthrift governor, Nelson Rockefeller
In 15 years as governor of New York, Nelson A. Rockefeller, popularly known as “Rocky,” was as careful with the public’s money as he was with his own — which is to say, he spent lavishly, impulsively, and often indiscriminately. New Yorkers have been paying the bill ever since. As portrayed in Richard Norton Smith’s new biography, Rockefeller believed that there was no problem (least of all a lack of cash) too big to yield to a big-money solution. “As much as I loved Nelson,” Smith quotes the financier Frank Zarb, “his meter didn’t start until you reached a billion dollars.”
Rocky’s meter began to spin soon after he became governor of New York in 1959, and it accelerated as time went on. To be sure, every level of American government was expanding during the 1960s and 1970s. But Rockefeller made an outlier of the Empire State. He quadrupled the state budget and quintupled state debt, including off-the-books public-authority borrowing. He created the nation’s most lavish Medicaid program, designed to draw down maximum federal aid to the state while saddling New York City and county governments with half the non-federally reimbursed cost. He pushed through a collective bargaining law that would bequeath to New Yorkers the nation’s highest level of public-sector unionization. Though New York had been a cradle of open-handed liberalism, its state and local taxes, relative to personal income, were slightly below the national average when Rockefeller took office, according to Census data. By 1974, the combined burden had nearly doubled to a level well above the 50-state norm — where it has remained ever since.
Smith demonstrates that Rockefeller’s profligacy was at least as much a matter of personal disposition as political preference. There’s no small irony in this: Rocky’s grandfather, John D. Rockefeller, Sr., built his Standard Oil mega-fortune on penny-pinching attention to detail. As one story goes, even as a wealthy man, “Senior” was delighted to discover he could eke out a slightly larger profit by encouraging his employees to use one less drop of solder on each tin can of Standard Oil kerosene.
E.J. McMahon, “Hiya, Big Spender! For good or ill, Nelson Rockefeller’s legacy lives on”, City Journal, 2014-12-04.
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March 8, 2016
QotD: The Civil Works Administration, the Works Progress Administration and the Wagner Act
Roosevelt created the Civil Works Administration in November 1933 and ended it in March 1934, though the unfinished projects were transferred to the Federal Emergency Relief Administration. Roosevelt had assured Congress in his State of the Union message that any new such program would be abolished within a year. “The federal government,” said the President, “must and shall quit this business of relief. I am not willing that the vitality of our people be further stopped by the giving of cash, of market baskets, of a few bits of weekly work cutting grass, raking leaves, or picking up papers in the public parks.”
But in 1935 the Works Progress Administration came along. It is known today as the very government program that gave rise to the new term, “boondoggle,” because it “produced” a lot more than the 77,000 bridges and 116,000 buildings to which its advocates loved to point as evidence of its efficacy. The stupefying roster of wasteful spending generated by these jobs programs represented a diversion of valuable resources to politically motivated and economically counterproductive purposes.
The American economy was soon relieved of the burden of some of the New Deal’s excesses when the Supreme Court outlawed the NRA in 1935 and the AAA in 1936, earning Roosevelt’s eternal wrath and derision. Recognizing much of what Roosevelt did as unconstitutional, the “nine old men” of the Court also threw out other, more minor acts and programs which hindered recovery.
Freed from the worst of the New Deal, the economy showed some signs of life. Unemployment dropped to 18 percent in 1935, 14 percent in 1936, and even lower in 1937. But by 1938, it was back up to 20 percent as the economy slumped again. The stock market crashed nearly 50 percent between August 1937 and March 1938. The “economic stimulus” of Franklin Roosevelt’s New Deal had achieved a real “first”: a depression within a depression!
The stage was set for the 1937–38 collapse with the passage of the National Labor Relations Act in 1935 — better known as the Wagner Act and organized labor’s “Magna Carta.” To quote Hans Sennholz again:
This law revolutionized American labor relations. It took labor disputes out of the courts of law and brought them under a newly created Federal agency, the National Labor Relations Board, which became prosecutor, judge, and jury, all in one. Labor union sympathizers on the Board further perverted this law, which already afforded legal immunities and privileges to labor unions. The U.S. thereby abandoned a great achievement of Western civilization, equality under the law.
Armed with these sweeping new powers, labor unions went on a militant organizing frenzy. Threats, boycotts, strikes, seizures of plants, and widespread violence pushed productivity down sharply and unemployment up dramatically. Membership in the nation’s labor unions soared; by 1941 there were two and a half times as many Americans in unions as in 1935.
From the White House on the heels of the Wagner Act came a thunderous barrage of insults against business. Businessmen, Roosevelt fumed, were obstacles on the road to recovery. New strictures on the stock market were imposed. A tax on corporate retained earnings, called the “undistributed profits tax,” was levied. “These soak-the-rich efforts,” writes economist Robert Higgs, “left little doubt that the president and his administration intended to push through Congress everything they could to extract wealth from the high-income earners responsible for making the bulk of the nation’s decisions about private investment.”
Higgs draws a close connection between the level of private investment and the course of the American economy in the 1930s. The relentless assaults of the Roosevelt administration — in both word and deed — against business, property, and free enterprise guaranteed that the capital needed to jumpstart the economy was either taxed away or forced into hiding. When Roosevelt took America to war in 1941, he eased up on his anti-business agenda, but a great deal of the nation’s capital was diverted into the war effort instead of into plant expansion or consumer goods. Not until both Roosevelt and the war were gone did investors feel confident enough to “set in motion the postwar investment boom that powered the economy’s return to sustained prosperity.”
Lawrence W. Reed, “The Great Depression was a Calamity of Unfettered Capitalism”, The Freeman, 2014-11-28.
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June 3, 2015
The great Los Angeles minimum wage experiment
I missed this post a few weeks back from Kevin Drum at Mother Jones, pointing out that we won’t really know the full impact of the Los Angeles experiment with significantly higher minimum wages:
So my near neighbor of Los Angeles is poised to raise the minimum wage to $15. How should we think of that?
Personally, I’m thrilled. Not because I think it’s a slam-dunk good idea, but because along with Seattle and San Francisco it will give us a great set of natural experiments to figure out what happens when you raise the minimum wage a lot. We can argue all we want; we can extrapolate from other countries; and we can create complex Greek-letter models to predict the effects — but we can’t know until someone actually does it.
So what do I think will happen? Several things:
In the tradeable sector, such as clothing piece work and agriculture, the results are very likely to be devastating. Luckily, LA doesn’t have much agriculture left, but it does have a lot of apparel manufacture. That could evaporate completely (worst case) or perhaps migrate just across the borders into Ventura, San Bernardino, and other nearby counties. Heavier manufacturing will likely be unaffected since most workers already make more than $15.
In the food sector, people still need to eat, and they need to eat in Los Angeles. So there will probably be little damage there from outside competition. However, the higher minimum wage will almost certainly increase the incentive for fast food places to try to automate further and cut back on jobs. How many jobs this will affect is entirely speculative at this point.
Other service industries, including everything from nail salons to education to health care will probably not be affected much. They pretty much have to stay in place in order to serve their local clientele, so they’ll just raise wages and pass the higher prices on to customers.
Likewise, retail, real estate, the arts, and professional services probably won’t be affected too much. Retail has no place to go (though they might be able to automate some jobs away) while the others mostly pay more than $15 already. The hotel industry, by contrast, could easily become less competitive for convention business and end up shedding jobs.
While I’m certainly in favour of people being able to afford to live on their base income, I’m afraid that this experiment is going to hurt a lot of already at-risk poor people who will have few other options if their jobs go away. I’m especially amused that LA-area union reps are now reported to be pushing to exempt the businesses where their members work (so that unions will have an effective monopoly on low-wage jobs because non-unionized companies would have to pay a higher wage). That, after putting all their organizational muscle behind getting the minimum wage raised in the first place. That’s a high grade of cynicism.
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March 19, 2015
Thirty years on, what was the impact of the Miners’ strike in Britain?
Frank Furedi points out six ways that Britain’s political scene has changed as a result of the year-long miners’ strike:
To defeat the National Union of Miners, UK prime minister Margaret Thatcher and her Conservative government had to use almost every available resource, including the mass mobilisation of the police. The Miners’ Strike became the defining event of British politics in the 1980s. And in retrospect, it’s clear that it was the last class-focused dispute of its kind.
Over the past three decades, the political climate, culture and institutions that served as the background for the Miners’ Strike have fundamentally altered. Here are six things that changed enormously in the wake of that industrial conflict.
1) The defeat of the Miners’ Strike signalled the end of the era of militant trade unions
[…]
2) The demise of the British labour movement was paralleled by the decline of the left
The Labour Party has survived the post-1985 tumult, yes, but only by reinventing itself as the party of the middle-class, public-sector professional. Thanks to the vagaries of the electoral system, Labour can still have MPs in many of its traditional working-class seats. The decline of labourism also coincided with the implosion of the Stalinist communist movement and the collapse of the Soviet Union.
[…]
3) Paradoxically, the demise of the left has not benefited the right
Thatcherism, which was very much the dominant force during the Miners’ Strike, has lost its authority. Today’s so-called Conservatives regard Thatcher as an embarrassment and self-consciously distance themselves from her legacy. So defensive is the right today that it continually protests that it is no longer a ‘toxic brand’.
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February 4, 2015
CP Rail offering engineer training to office staff
Laura Spring linked to this interesting bit of news that CP Rail is “encouraging” non-unionized employees to take training on how to operate locomotives:
A Canadian railway company is training its managers and office workers to drive locomotives and load trains, a move one labour lawyer says could be an attempt to prepare for a possible work stoppage.
Documents show CP Rail has encouraged office employees to step away from their desks and cubicles and sign up for training both on the trains and in the rail yards.
The use of office workers driving trains could be a major safety concern, said Wayne Benedict, a former railroader who now works as a labour lawyer in Calgary.
“You’ve got them climbing onto a train that’s a mile and a half long, with a hundred and some cars, weighing 16,000 tonnes, with dangerous goods, going through our cities,” he said. “And they are not professional, running trades employees. They are running human resource professionals, or other managers and supervisors.”
CBC News has obtained an internal CP Rail document dated Feb. 19, 2014, encouraging non-union employees to sign up for training as a locomotive engineer or conductor. It calls the training “a requirement at Canadian Pacific. It is also the single best way for a management employee to learn what the business is truly about. It is a fundamental cornerstone to the development of our railway culture.”
The document also suggests, “no matter what your role is at CP, this experience will make you better at what you do.”
The program is targeted mainly towards mechanical and engineering workers, but open to any non-union employees.
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