Unions only help if the underlying economic situation is that the employer is able to charge a great deal more for the amount of product generated per worker-hour than the worker is getting — there is headroom for the worker’s wage to expand into while the manufacturer still makes a net profit. (If the manufacturer doesn’t make a net profit the business collapses and nobody gets paid.)
During the age that manufacturing nostalgisists remember nostalgically, this was true. For most of that period (roughly 1870-1970), the capital goods required to manufacture in a way price-competitive with the U.S. were so expensive that almost nobody outside the U.S. could afford them, and in the few places that could they were mainly preoccupied with supplying their domestic markets rather than the U.S. World War II prolonged this period by hammering those “few places” rather badly.
In that environment, U.S. firms could profit-take hugely, benefited by being scarce suppliers not just to the U.S. but (later on) to the whole world. And unions could pry loose enough of that margin to make manufacturing jobs comfortably middle-class.
All that ended in the early 1970s. A good marker for the change is the ability of the Japanese to make cheap cars for export and sell them for the U.S.
In the new world, the profit margins on manufactured goods narrowed dramatically. The manufacturing firms could no longer effectively ignore overseas competition in the U.S. domestic market. U.S. consumers no longer had to to pay the large price premiums required to sustain domestic manufacturing wages at pre-1970 levels, and they jumped right on that option.
In this environment, unions don’t help because they have almost no negotiating room. If they bid up workers’ wages, the jobs will evaporate or move overseas – not because corporations are being “greedy” but because they can no longer charge the prices that would allow such high wages to be sustained. Too much foreign labor and capital is ready to pounce on the first hint of price-taking.
Eric S. Raymond, “Why labor unions have lost their moxie”, Armed and Dangerous, 2014-11-29.
December 19, 2014
QotD: The twin rise and fall of unions and manufacturing
December 18, 2014
A mandatory registry that might actually do some good
At Reason, Ed Krayewski suggests that a Police Offenders Registry might be an excellent start to reduce some of the worst interactions between the police and the public they are supposed to serve:
This week, the Department of Justice announced new guidelines against racial profiling. The changes don’t actually change all that much. As regular incidents of police brutality get more and more mainstream media attention, it’s time for a bold move from the White House.
There’s a moral obligation to keep bad cops off the streets. A job with a police department is not a right and shouldn’t be treated like one. Police unions that push for permissive rules that end up protecting bad cops pose a serious public safety threat. Nevertheless, dismantling them where they’ve taken root is a difficult prospect even in the long-term. There are other ways to keep bad cops off the streets. The federal government, and state governments, ought to create and encourage the use of a police offender registry list. Such a list would register individuals who while employed as law enforcement officers were found unfit for duty or faced serious disciplinary issues they may have resigned to avoid. Just as any other component of comprehensive police reform, this won’t eliminate excessive police violence, but it’s a start.
When actually identified, a surprising (or not) number of officers involved in controversial, high-profile use of force incidents have previously disciplinary history. Officer Daniel Pantaleo, the New York City cop who put Eric Garner in a fatal chokehold, had been previously accused, at least twice, of racially-motivated misconduct, including strip searching a man in the middle of the street and allegedly hitting his testicles. The police union in New York City is among the strongest in the country. When a rookie cop shot Akai Gurley in apparent panic last month, he didn’t think twice to reportedly contact his union rep first. A man lay dying in a stairwell for no other reason that he startled a rookie, and the fact that the officer called his union representative before calling for assistance isn’t shocking enough to lead to the officer’s termination. Even if it were, it would still be impossible to terminate the officer immediately. While all this is happening, the state of New York is on the verge of placing even more of the disciplinary regime that applies to cops under the purview of the police unions.
October 15, 2014
The pay gap issue, again
There’s been a lot of moaning on about inequality recently — some are even predicting it will be the big issue in next year’s Canadian federal election — but the eye-popping figures being tossed around (CEOs being paid hundreds of times the average wage) are very much a case of statistical cherry-picking:
Before retiring to their districts for the fall, the House Democratic Caucus rallied behind the CEO/Employee Pay Fairness Act, which would prevent a public company from deducting executive compensation over $1 million unless it also gives rank-and-file employees raises that keep pace with the cost of living and labor productivity.
Meanwhile, the AFL-CIO and its aligned think tanks have made hay of the huge difference between the pay of CEOs and employees. One of the most widely cited measures of the “gap” comes from the AFL-CIO’s Executive Paywatch website.
- The nation’s largest federation of unions laments that “corporate CEOs have been taking a greater share of the economic pie” while wages have stagnated for the rest of us.
- As proof, it points to a 331-to-1 gap in compensation between America’s chief executives and the pay of the average worker.
That’s a sizable number. But don’t grab the pitchforks just yet, says Mark J. Perry, economic professor at the University of Michigan-Flint and resident scholar at the American Enterprise Institute, and Michael Saltsman, research director at the Employment Policies Institute.
The AFL-CIO calculated a pay gap based on a very small sample — 350 CEOs from the S&P 500. According to the Bureau of Labor Statistics, there were 248,760 chief executives in the U.S. in 2013.
- The BLS reports that the average annual salary for these chief executives is $178,400, which we can compare to the $35,239-per-year salary the AFL-CIO uses for the average American worker.
- That shrinks the executive pay gap from 331-to-1 down to a far less newsworthy number of roughly five-to-one.
August 3, 2014
NLRB decision would “stick a fork in the franchise model”
In Forbes, Tim Worstall explains why the recent decision by the US government’s National Labour Relations Board could destroy the franchising business model widely used by fast food chains:
The National Labor Relations Board (NLRB) made a very strange decision last week to rule that McDonald’s the corporation, was a joint employer of the staff in the franchised restaurants. It was, of course, at the urging of those labour activists who would like to union organise in the sector. Dealing with one national company is obviously going to be easier than dealing with thousands of independent business owners. There’s a number of problems with this decision ranging from the way that it overturns what has long thought to be settled law, to it obviating already signed contracts but perhaps the greatest problem is that it calls into question the entire validity of the franchise system.
[…]
The franchisor though gets paid a percentage of pure sales: what the labour costs at the franchises is is no skin off their nose at all. So they’ll not control it. The only major input that the franchisee can control in order to determine profitability would now become, at best, a join venture and we’ve different incentives for each side of the bargain. That’s just not going to work well. I don’t think that Pudzer is being alarmist in stating that this ruling would stick a fork into the franchise model as a whole. You simply can’t have such a system where the franchisees don’t control any of their inputs.
Of course, it’s still open to someone to argue that the franchise system shouldn’t actually exist, that it would be a good thing if everyone were either a truly independent organisation or part of a large and centrally managed group. But if that is the argument that’s being made, or will be made, then it’s a large enough change that it really needs to happen through political means, not administrative law. That means that if Congress wants to change the rules in this manner then that’s up to Congress. But it really shouldn’t be done by the decision of an administrative agency.
July 14, 2014
When unions took over the public sector
Dmitri Melhorn says the union movement is missing an opportunity to be more relevant in the private sector, because public sector unions don’t help poorer workers (because public sector union members are middle class professionals, not working class):
Progressive hostility to [Harris v. Quinn], however, is shortsighted. Harris and decisions like it have the potential to revitalize progressive politics by restoring the relevance and political potency that labor held in the early-to-mid-20th century. The great labor leaders of that era — AFL-CIO President George Meany, President Franklin D. Roosevelt, and the like — agreed with the majority in Harris: it was both impractical and inadvisable to afford public employees compulsory collective bargaining rights.
Roosevelt said that collective bargaining and public workers’ right to strike would be “unthinkable and intolerable.” Meany said it would be “impossible.” In the view of these leaders, civil service laws from the Progressive Era of the 1890s to 1920s had made government jobs good and safe. Labor and progressives, therefore, needed to focus on blue-collar workers’ need to fight collectively for basic safety, dignity and living wages. Through this focus, the United States saw historic gains in the well-being of workers and the country’s middle class.
That labor heyday lasted through the 1950s, but starting in the late 1960s labor lost ground. Public-sector unions grew rapidly, but private-sector unions shrank. By 2012, public-sector workers had union membership rates more than five times higher than rates among private-sector workers.
Essentially, the public-sector unions sucked up all the oxygen. Talented labor organizers opted to work with government workers: their members were relatively prosperous and well connected, so they were easy and lucrative to organize. As explained in Jake Rosenfeld’s book What Unions No Longer Do from earlier this year, this shift to public-sector unions meant that unions no longer fought primarily for the working poor. Instead, much of their muscle was devoted to improving the status of middle-class professionals.
July 5, 2014
So how would they react to a strong pro-liberty Supreme Court decision?
Shikha Dalmia says that the relatively mild pro-liberty decisions from the US Supreme Court in this session have driven progressives wild. It’s hard to justify going to DEFCON-5 over Hobby Lobby or Harris … isn’t it?
This week, the United States Supreme Court handed down two rulings that are a victory for the liberties of religion, speech, and association enshrined in the First Amendment. That ought to be cause for a double celebration on July 4. But instead, the rulings, issued on the narrowest possible grounds, constitute a victory so modest — and have elicited a response from the left so hysterical — that anyone serious about liberty can’t help but be a little depressed right now.
The case that has attracted disproportionate attention is informally known as Hobby Lobby, and it challenged ObamaCare’s contraceptive mandate. This mandate requires all for-profit companies to provide all 20 forms of birth control approved by the FDA, including pills and “abortifacients,” even though they violate the Christian (Assembly of God, to be precise) convictions of the owners of Hobby Lobby, an arts and crafts chain in Texas, who were willing to cover “only” 16.
[…]
None of this, however, prevented the left from throwing a collective hissy-fit. Social media erupted into tiresome taunts of fascism. Ann Friedman called the ruling a “blow to reproductive rights” that made her want to issue “an outraged scream, sort of a combination groan-wail…while beating my fists against the desk on either side of my laptop.” (Hey Ann, be careful: A new laptop will cost you several years’ of contraceptive pills. Generic versions sell at Costco for $25 a month.)
Such moral huffing and puffing was also on display in response to the Supreme Court’s ruling in Harris vs. Quinn. That case involved the right of family members of disabled loved ones to offer care without having their state aid garnished by public unions. Harris, a mom who was providing home care to her 25-year-old disabled son, had sued the state of Illinois for forcing her to pay dues to a government union.
But what in the name of Jimmy Hoffa does looking after her son have to do with the union?
Apparently, because she receives state subsidies for caring for her son, Illinois, along with a dozen other states, considers her a “home health care worker.” This means she must submit to the exclusive representation of a government union in collective bargaining negotiations — even though she supports neither the union nor its goals.
June 13, 2014
Ontario embraces scandal, mismanagement and deficits
Well, that happened. As Elizabeth said to me when I got up this morning, at least it means we see the back of Tim Hudak. Aside from that, not a lot of encouraging news from the polls. We have set our acceptable political standards to a much lower notch, and we clearly don’t think it’s a bad thing to spend hundreds of millions of dollars on party purposes. Noted.
Premier Kathleen Wynne didn’t win the election so much as Horwath and Hudak lost it. Horwath was cut off at the knees by her own party (and organized labour), while Hudak tried on a set of fiscal conservative policies for size … and they didn’t fit at all. Things must have been more desperate inside the Liberal war room earlier in the campaign, if they felt they had to get the Ontario Provincial Police and the media unions to both declare for Wynn (if any two organizations should stay out of politics, they’d be the ones). And yet, once the votes were counted, they clearly didn’t need to force those two organizations out of their traditional neutral stances after all.
And, to top off the sudden acceptance of a much lower standard of political conduct by the provincial government, we get to watch (and suffer financially) as the province introduces a mandatory pension scheme on the false basis that Ontarians aren’t saving enough of their own money for retirement. That’s going to be fun. I wonder what the job market is like in Alberta…
Paul Wells offers his take on the election:
Kathleen Wynne’s victory is historic, it is almost all hers, and its meaning is a little opaque, because there is a tension between her platform and her record that will be resolved only by her actions, now that she has the length of a majority mandate to show Ontarians what kind of premier she wants to be.
Historic: She is Ontario’s first elected woman premier. Almost all hers: People who make a living proclaiming their knowledge of strategy said she was crazy to put herself at the centre of her party’s messaging and communication to the extent she did. She voiced her own attack ads. To voters upset about the mess McGuinty left behind, she offered her person as sufficient guarantee that the past would stay past. It’s what Paul Martin attempted in 2002-2006, but Wynne offered none of Martin’s creepy intramural fratricide and never benefited from the fast-burning personal popularity that seemed, at first, to be Martin’s greatest asset until he ran out of it. The funny thing about a cult of personality is, sometimes it works better if you don’t have quite as much personality. Rule One in Bill Davis’s Ontario is, don’t get on people’s nerves.
But there are a lot of Conservatives in Ontario who have forgotten the province was ever Bill Davis’s. There are a lot of people who accreted around Mike Harris in 1990 like barnacles — the Little Shits, Frank magazine used to call them — and they’ve never really grown up. They were at Trinity College or Upper Canada College or Hillfield Strathallan or some other dreary Anglo-Saxon dumping ground in the early ’80s when Ronald Reagan came on TV and fired the air traffic controllers, and they’ve spent the rest of their lives looking for an excuse to play Ayn Rand Home Edition. It even worked in 1995, when Mike Harris came back from his 1990 drubbing and years of the worst recession, combined with the worst government, Ontario had seen in ages. Harris’s “Common Sense Revolution” worked because by 1995, thanks to Bob Rae, common sense seemed revolutionary.
[…]
But back to Wynne. She ran on activist government, and celebrated victory by congratulating those who want to “build up Ontario.” But Ontario can’t afford the Ontario it’s got. Wynne’s own platform quietly acknowledges this. Hard public-sector wage freezes and a new program-review exercise won’t feel much like building up. If she abandons them for more spending, she simply postpones harder choices. She has proven herself a redoubtable politician; now she had better be a very good premier, because she’s put herself in a fix to get the mandate she just won.
But that’s a high-class problem, one she would not trade for the simpler life Hudak can now look forward to. (A word on the NDP’s Andrea Horwath: she is in trouble with some New Democrats for forcing this election and losing the bargaining power she had in a minority-government legislature. But the balance of power is not a comfortable place to be after a while, and Horwath was well into the zone where, every time she propped Wynne up, voters would wonder why. The NDP should cut her some slack.)
June 11, 2014
LA court delivers a major blow against tenure for teachers in California
The Los Angeles Times on yesterday’s decision:
Teachers union officials denounced a ruling Tuesday by a Los Angeles County Superior Court judge deeming job protections for teachers in California as unconstitutional as a misguided attack on teachers and students.
The ruling represents a major loss for the unions and a groundbreaking win by attorneys who argued that state laws governing teacher layoffs, tenure and dismissals harm students by making them more likely to suffer from grossly ineffective instruction.
If the preliminary ruling becomes final and is upheld, the effect will be sweeping across California and possibly the nation.
Judge Rolf M. Treu ruled, in effect, that it was too easy for teachers to gain strong job protections and too difficult to dismiss those who performed poorly in the classroom. If the ruling stands, California will have to craft new rules for hiring and firing teachers.
[…]
The Silicon Valley-based group Students Matter brought the lawsuit on behalf of nine students, contending that five laws hindered the removal of ineffective teachers.
The result, attorneys for the plaintiffs said, is a workforce with thousands of “grossly ineffective” teachers, disproportionately hurting low-income and minority students. As a result, the suit argued, the laws violated California’s constitution, which provides for equal educational opportunity.
The laws were defended by the state of California and the two largest teacher unions — the California Teachers Assn. and the California Federation of Teachers. Their attorneys countered that it is not the laws but poor management that is to blame for districts’ failing to root out incompetent instructors.
May 24, 2014
First US military union approved, strike imminent
What The Onion does for civilian news, Duffel Blog does for military news. Here’s their coverage of the US military following European practice and allowing the first military union to be formed:
In a historic move, the Department of the Army has recognized the right of service members to unionize.
“Historically, collective bargaining has improved American working conditions and made us the envy of the world economically. We’re pleased to announce that our soldiers can now have that right. In defending democracy, our service members should reserve the right to practice it,” declared Secretary of the Army John McHugh.
McHugh went on to say that the founding of a union had been under way for sometime and required lengthy negotiations with top civilian and military leaders, before an acceptable framework emerged. The first union, the Junior Enlisted Service Members (JESM), almost immediately threatened a strike.
PFC Harry Milton of the 323rd Military Intelligence Battalion is the founder of JESM. The 19 year-old soldier invited Duffel Blog into his new office in the reserve center, just outside Ft. Meade, MD, where JESM is headquartered.
April 5, 2014
Chris Kluwe’s suggestions for more constructive NFLPA texts-to-players
When they’re not on the playing field or otherwise engaged in preparing for the games, NFL and other high-profile sports players lead normal-ish lives. Most of them manage to blend in to the local community, but some achieve notoriety for their off-the-field antics. Chris Kluwe is still a member of the NFLPA (the union for NFL players), so he gets their occasional communications to the membership like this text message:
Dear NFLPA: When you send me a text pushing an app by LinkedIn, it really makes me question your leadership/decision making abilities.
— Chris Kluwe (@ChrisWarcraft) April 4, 2014
Mindful of the opportunity to help out some of those players whose off-the-field activities might get them into trouble, he has a few suggestions:
Wouldn't a better use of that phone database be sending a text like: "Here are five of the highest independently rated financial advisors!"?
— Chris Kluwe (@ChrisWarcraft) April 4, 2014
Or perhaps, "Thinking of hitting your wife/a random bar patron? We'd advise against it!" #nflpatips
— Chris Kluwe (@ChrisWarcraft) April 4, 2014
"Hey! Investing in purple drank and Bentley's? Probably not going to end well!" #nflpatips
— Chris Kluwe (@ChrisWarcraft) April 4, 2014
"Feel like blowing a .28 on that BAC driving home? You're not an owner! Get a taxi!" #nflpatips
— Chris Kluwe (@ChrisWarcraft) April 4, 2014
"You get drug tested once a year. Stop smoking in March!" #nflpatips
— Chris Kluwe (@ChrisWarcraft) April 4, 2014
"Gun safety isn't just making sure you have a spotter on bicep curls. Know your applicable state laws!" #nflpatips
— Chris Kluwe (@ChrisWarcraft) April 4, 2014
November 13, 2013
QotD: Trade unions
If they are timid in some respects, the Trade Unions are aggressive in negotiation and cannot be otherwise. To keep in business a union has to do something. Each year there must be a fresh demand, without which the union will lose membership. Members expect to see some return for their subscriptions and union officials are not paid to be inactive. Lacking a grievance, they will have to invent one. Realizing this, the directors must make a show of reluctance, postponing the inevitable concession until it looks like a victory for the employees. If the union is quiescent it will lose membership, most probably to another union. Its officials, honorary or paid, can always gain consequence on the other hand, from their decision to do battle. Any Trade Union has, therefore, a built-in aggressiveness, without which it can hardly survive. Nothing can be more damaging to the union official than the rumour that he is friendly with the management. This can only be the result of blackest treachery, it is assumed, and the official has to stage a conflict in order to secure his own re-election. Aggressive toward management, the unions are almost as aggressive toward each other, competing for membership and staging frontier disputes over the exact territory which belongs to each. Nor is this unrest the fault of individuals. It is a characteristic of union organization and one for which there is no obvious remedy.
C. Northcote Parkinson, “The Feet of Clay”, Left Luggage, 1967.
October 16, 2013
Cultural organizations and unions
Richard Epstein looks at two recent disputes between unionized employees and cultural organizations:
This past week featured two stories about major orchestras dealing with their adamant unions. The first incident occurred on Wednesday, October 2 at Carnegie Hall in New York City. A fancy opening night gala, featuring the violinist Joshua Bell and the young jazz performer Esperanza Spalding, was called off due to a surprise strike by Local One of the International Alliance of Theatrical Stage Employees.
The second dispute, still unresolved, involves the protracted labor impasse at the Minnesota Orchestra. On October 1, true to his promise, star music director Osmo Vänskä resigned because of the inability of the orchestra and its musicians’ union to hammer out a new contract in time to prepare for concerts scheduled at Carnegie Hall on November 2 and 3. The issues in these two labor disputes could scarcely be more different. But each of them, in its own way, illustrates the long-term toll that American labor law takes on the cultural lifeblood of our nation.
The incident at Carnegie Hall raised more than a few eyebrows when it was revealed that the strike was organized by the five full-time Carnegie Hall stagehands who were members of Local One. Their annual compensation in wages and overtime averaged a cool $419,000 per year, making them — one properties manager, two carpenters, and two electricians — five of the seven highest paid workers at Carnegie Hall after Carnegie CEO Clive Gillenson. Other union members in unspecified numbers were called in to help from time to time, presumably at rates on par with those Carnegie Hall paid to its full time workers.
As befits the sorry state of labor relations in the United States, the dispute was not about the status of these five workers. Rather, it focused on the new jobs that would open upon the completion of a new education wing in 2015. Mr. Gillenson was not exactly breathing fire when, well-coached in the pitfalls of labor law, he eschewed any anti-union sentiment and announced that he expected union workers to take the stagehand slots in that new facility. It was just that he insisted on dealing with unions that lacked the clout and the wages of the hardy men from Local One.
[…]
The bargaining dynamics could not have been more different in the Minnesota dispute. It is no secret that unionized musicians command a short-run monopoly premium for their members. The orchestra knows that it can earn back some fraction of that wage premium by securing the most talented musicians. But by the same token, any generous deal opens the orchestra up to financial ruin if its endowment shrinks or if its key donors cut back their support in hard times. But usually the large gains for older musicians carry the day.
Unions in all industries — think of the debacle at General Motors — do not do well in negotiating givebacks to management. Yet, ironically, the higher the premium that unions are able to extract during good times, the larger the give-backs are needed to bring the employer’s fiscal position into balance during bad times.
Just that dynamic was in play with the Minnesota Orchestra. The high wages before 2009 led to one round of union concessions. But in 2011, the budget was still out of balance, and management came back with a request for further cuts of about 32 percent. It later softened its demands to insist on wage cuts that would reach 25 percent after three years. Those cuts would be offset by a one time $20,000 bonus, which would, of course, not be part of the wage base in future years.
The union proposals were for pay cuts in the range of six to eight percent. This would have left an annual deficit in the order of $6 million. In the end, no deal could be reached, which precipitated Vänskä’s departure and the subsequent huge hit to prestige of the orchestra’s hard-earned international reputation.
September 24, 2013
The horrors of Greek Austerity strike!
Those poor Greek civil servants … this is so hard on them:
In a sign of just how hard the austere financial climate is hitting, it has been reported that the Greek government has been forced to put an end to one of its civil servants’ most treasured privileges. We speak, of course, of the Hellenic Sir Humphreys’ entitlement to an extra six days a year paid holiday if they are compelled to work with that frightful engine of misery, the computer.
Reuters reports that the long-standing regulation, in which all Greek government workers compelled to use a computer for more than 5 hours a day get an extra day’s leave every two months, was axed in an official announcement on Friday.
September 17, 2013
A brief history of fifty years of American economic thought
Tyler Cowen wraps up the rise and fall of “right” and “left” economics in the US since the 1960s:
Throughout the 1970s and most of the 1980s, the so-called “right wing” was right about virtually everything on the economic front. Most of all communism, but also inflation, taxes, (most of) deregulation, labor unions, and much more, noting that a big chunk of the right wing blew it on race and some other social issues. The Friedmanite wing of the right nailed it on floating exchange rates.
Arguably the “rightness of the right” peaks around 1989, with the collapse of communism. After that, the right wing starts to lose its way.
Up through that time, market-oriented economists have more interesting research, more innovative journals, and much else to their credit, culminating in the persona and career of Milton Friedman.
I’ve never heard tales of Paul Samuelson’s MIT colleagues mocking him for his pronouncements on Soviet economic growth. I suspect they didn’t.
Starting in the early 1990s, the left wing is better equipped, more scholarly, and also more fun to read. (What exactly turned them around?) In the 1990s, the Quarterly Journal of Economics is suddenly more interesting and ultimately more influential than the Journal of Political Economy, even though the latter retained a higher academic ranking. The right loses track of what its issues ought to be. There is no real heir to the legacy of Milton Friedman.
