The Electric Commentary

Tuesday, September 07, 2004

Labor Day...What a Cruel Joke

Being that yesterday was Labor Day, and I had to work, I got a thorn in my side and decided to weigh in on it.

I understand that organized labor often drives up product costs and often makes unreasonable and impractical demands, but unions also fight for the middle and lower class' share of America's bounty.

Why should anyone support a union when they drive up the costs in whatever industry they operate in? Because they help to guarantee a bigger share of the pie. Jared Bernstein, an economist with the Economic Policy Institute in Washington, D.C., estimates that 80 percent of the growth in corporate income went to worker compensation in most economic recoveries after World War II, while 20 percent went to corporate profits. In the current expansion, that ratio is almost exactly reversed.

Supporting a union does not mean that you are a communist. It does mean you want your fair share.

The fact is that the only forces strong enough to balance the power of large corporations are government and organized labor. Without these two entities, those who are the least advantaged are ground up and cast aside. With them, it is possible to create an educated, healthy populace where those who start at the bottom can eventually become part of the "ownership society."

Unions often shoot themselves in the foot by making ridiculous demands and being utterly inflexible, but they are an important part of realizing democracy in America.

From the Star Tribune:

Economic inequality in the United States now stands at its highest level since World War II, a trend that caused a task force of the American Political Science Association to observe recently: "Disparities of income, wealth and access to opportunity are growing more sharply in the United States than in many other nations. Progress toward realizing American ideals of democracy may have stalled, and in some arenas reversed."

15 Comments:

  • i agree that supporting a union does not make you a communist, but what the hell does wanting a "fair share" mean? that sounds a lot like wealth redistribution, which is rather socialist/communist.

    the supply of labor for a particular job determines a wage rate. if your group of x workers are the only people out there who can do a particular job, then you should be able to more or less set your price. but when your group of x workers makes up a small percentage of all possible workers capable of performing the job, what right does group x have to make demands?

    unions make a huge fuss over scabs, but in our country isn't it your right to work for any wage you see fit? if person A wants to be paid n dollars to do a job, how can he/she get mad at person B who is willing take n-1 dollars to do it? who is A to tell B that they can or cannot work, or what their "fair share" is?

    isn't it the owners right to pay what he wants? regardless of whether this wage price puts him out of business or into Fortune 500, isn't it his/her right? doesn't he just want his "fair share" for having the ability and ideas to start said company, getting all the start-up money, etc.? let's face it. starting a company is a much bigger risk than working at one. why then shouldn't their "fair share" be a huge chunk of the profits?

    it's funny how the rights of workers have somehow become much more important than the rights of owners. capatalism is based on the idea that those with ability will have more success than those without. now im definitely not saying owners have all the ability and workers have none. it's most likely spread among the two groups. but the growing gap between rich in poor in the US seems more a result of the decreased work ethic/low priority on education/want something for nothing attitude that is spreading through our nation, things that weren't present in the 1940's.

    By Blogger ethan, at 12:24 PM  

  • "i agree that supporting a union does not make you a communist, but what the hell does wanting a "fair share" mean? that sounds a lot like wealth redistribution, which is rather socialist/communist."

    It's wealth distribution, not redistribution and has nothing to do with government policy.

    "the supply of labor for a particular job determines a wage rate."

    Supply amongst a variety of other things like taxes, material costs, real estate costs, shareholder dividends, competition, just about anything that figures into the operating cost of a business.

    "when your group of x workers makes up a small percentage of all possible workers capable of performing the job, what right does group x have to make demands?"

    Why wouldn't they have "the right?" If they are smart enough to organize a collective bargaining group then they must have "ability" and therefore "will have more success than those without;" which could be compared to "the owners right to pay what he wants."

    "unions make a huge fuss over scabs, but in our country isn't it your right to work for any wage you see fit? if person A wants to be paid n dollars to do a job, how can he/she get mad at person B who is willing take n-1 dollars to do it? who is A to tell B that they can or cannot work, or what their "fair share" is?"

    Couldn't agree more, hence the "often shoot themselves in the foot" comment.

    "it's funny how the rights of workers have somehow become much more important than the rights of owners."

    Even if that were true, why is it funny? Organized labor has been trampled by our government so many times throughout our history that it's hard to count.

    "now im definitely not saying owners have all the ability and workers have none. it's most likely spread among the two groups."

    So how about spreading some of the good life between the two groups?

    "but the growing gap between rich in poor in the US seems more a result of the decreased work ethic/low priority on education/want something for nothing attitude that is spreading through our nation, things that weren't present in the 1940's."

    This is purely speculation. I could speculate that it's because of no employer loyalty/rising cost of education/decline of labor unions/concentration of owenership/industrialization/globalization, but I won't.

    By Blogger RyanSimatic, at 11:34 PM  

  • "It's wealth distribution, not redistribution and has nothing to do with government policy."

    the owner and workers got their money when the product/service was sold (wealth distribution). now a union demands that owner give them some of his earned money (and without doing any more/better work, or increasing productivity, etc.). the profit already was distributed. now the union is demanding that it be redistributed.

    also, while democracy is hardly an economic model, it seems that since communism and socialism have many more economic implications, an economic action (such as wealth redistribution) could reasonably be termed as communistic/socialistic.

    on a side, good commentary here. the issue at hand is unfortunately being largely ignored in the political realm. this topic goes hand-in-hand with outsourcing, a seemingly inevitable economic practice (that was all but pushed into motion by unskilled laborer demands in the u.s.) that neither bush nor kerry want to touch with a 10 foot pole.

    By Blogger ethan, at 8:20 AM  

  • This is one of my favorite topics, and I have a (very) lenghty post in the works, and have for some time. Just a few quick points though.

    If you want to bring the "rich/poor" disparity back to the level of 25 years ago, there is a simple way to do it in a short period of time:

    End immigration. You see, if you remove from the equation every immigrant (illegal and legal) that has emmigrated here over the last 10 years, the "growing disparity between rich and poor" vanishes. Our open door immigration policy adds poor people to the US, and that fact distorts that oft-cited statistic.

    I happen to favor an open immigration policy and I am grateful that we provide an opportunity for people from crappy countries, so I'm also OK with the growing disparity between rich and poor. And while real wages have been steady for a while (also leading to the staistical disparity) true consumer purchasing power (in my humble opinion a better measure of economicgrowth anyway) has been increasing quickly. Just ask yourself if you would rather be "poor" ("American poor" not "Ethiopian poor") in any other decade. ow do the same for middle class.

    As for Labor, I'll post more on that later, but I will say that the best way to become strongly anti-union is to take a labor law class. Basically, all labor laws make no sense, and conflict with many Constitutional rights (like the 1st amendment, for instance as management is not allowed to hire/fire based on "anti-union animus" whatever that means).

    I agree with Milton Friedman on this. People should be allowed to organize, but management should be allwoed to fire them for it. If someone wants to start a business with unionized employees, they should be free to, but the employees should not be allowed to force it on an owner.

    By Blogger PaulNoonan, at 8:38 AM  

  • "Why wouldn't they have "the right?" If they are smart enough to organize a collective bargaining group then they must have "ability" and therefore "will have more success than those without;" which could be compared to "the owners right to pay what he wants.""

    >> this really just drives home ethan's point. sure, the workers have the right to organize and collectively bargain... but under the current system, the employers don't. it's a clear case of one group of people being granted a set of rights that another group doesn't have.

    By Blogger ahren, at 3:46 PM  

  • A corporation is a group of people that is legally recognized as a person. Sounds like a collective of owners to me.

    By Blogger RyanSimatic, at 4:30 PM  

  • No one forces a worker to do business with a corporation. Indeed, they are free to work for a corp, a partnership, a sole proprietorship, or become an owner themselves.

    On the other hand, for the owner that sees his business unionized, he has no choice but to deal with those workers, or close up shop. That's it.

    Corpoarations have an advantage over workers because the owners of that corporation create opportunity.
    Workers have an advantage over owners because, through government power, they have them staring down the barrel of a gun.

    By Blogger PaulNoonan, at 4:49 PM  

  • "No one forces a worker to do business with a corporation."

    Any business owner with half a brain is incorporated. Even a sole owner can incorporate himself and then take on more investors and owners at any time. The way our laws are structured every business should be a corp.

    "On the other hand, for the owner that sees his business unionized, he has no choice but to deal with those workers, or close up shop. That's it."

    Or he could reject the union contract.

    "Corpoarations have an advantage over workers because the owners of that corporation create opportunity.
    Workers have an advantage over owners because, through government power, they have them staring down the barrel of a gun."

    Corporations have an advantage over workers because, through government power, they are responsible only for delivering profits to shareholders and nothing more. They have no responsibility to the workers, the community, or the environment.

    By Blogger RyanSimatic, at 5:02 PM  

  • "Any business owner with half a brain is incorporated. Even a sole owner can incorporate himself and then take on more investors and owners at any time. The way our laws are structured every business should be a corp."

    You miss the forest for the trees (and incidentally, an LLC is more attractive these days for most small businesses). Not only are there other forms of businesses, but also competing corporations. If a machinist isn't getting paid enough by Ford, he should go work for Chevy.

    If corporations were truly like unions, consumers would have to negotiate the prices (and quality, and color, and size, and shape, and function, and accesories) of products with the corporation. Then, after a long period of inaction the consumer may attempt to purchase a "replacement product." But be careful consumer! IF you happen to commit an "unfair purchasing practice" while purchasing the replacement product, no matter how minor, you will be forced by the government to purchase "back products" from the adversarial coporation against your will! And even if you eventually bargain to an impasse and are permitted to impose your "last best offer" whatever that means, you are subject to the same penalty, compulsary purchases! It may take you years to get your product. All the while, more competitive consumers are buying cool stuff from free market corporations.

    "Or he could reject the union contract."

    All sorts of crappy fake regs on a companies ability to do this. You must bargain in "good faith" whatever that is (Note: the union has not such requirements, at least they haven't for the last 45 years or so) If you replace workers you stand to get nailed with back pay, and you can't even communicate your views to the workers in most cases. THis includes threatening to close a plant. Ironically, you can only threaten this if you then actually do it!

    "Corporations have an advantage over workers because, through government power, they are responsible only for delivering profits to shareholders and nothing more. They have no responsibility to the workers, the community, or the environment"

    Thank heavens. Otherwise we'd never get anything done.

    Your bread is not delivered to you through the bakers concern for your situation, but through his own self interest.

    By Blogger PaulNoonan, at 8:33 PM  

  • "And while real wages have been steady for a while (also leading to the staistical disparity) true consumer purchasing power (in my humble opinion a better measure of economicgrowth anyway) has been increasing quickly. Just ask yourself if you would rather be "poor" ("American poor" not "Ethiopian poor") in any other decade. ow do the same for middle class."

    I think that this increased purchasing power is not neccesarily a good thing since it mainly has to do with people borrowing up to their ears, making the majority of the American populace beholden to the banking industry. Since the trend is moving toward carrying more debt as a percentage of income as opposed to less debt, it doesn't require much of a leap to see the next generation(s) of Americans starting off behind.

    And of course the government is working to make that situation apply to our public obligations as well. Visions of the Matrix come to mind with dollars being sucked out of beaten down people - and babies - as opposed to energy. Of course the people will smile as their debt brings the illusion of prosperity, but I don't know if a reasonable person could absolutely conclude that this is better than previous generations.

    -- Rashid

    By Anonymous Anonymous, at 12:23 PM  

  • This comment has been removed by a blog administrator.

    By Blogger PaulNoonan, at 1:05 PM  

  • This comment has been removed by a blog administrator.

    By Blogger PaulNoonan, at 1:05 PM  

  • Sorry about the duplicate comments. Let's try this one more time:

    It's not just the widespread use of easy debt - clearly a bad thing - that allows for more consumer purchasing. It is also technological advancement, and variety of good and services.

    The sheer number of products created allows consumers to purchase what they need at cheaper prices. In a way, dynamic production acts as a subsidy for essential goods. For instance, let's assume that there is a product called "basic bread." In 1990, it is the only bread available, so it's cost is directly related to the supply of basic bread and the demand for it. Basically everyone likes bread and thinks it's healthy (let's ignore Atkins for the sake of this argument), so the consumer base is large, and because basic bread is the only game in town, they charge a pretty penny and make a lot of money. Unfortunately, a few poor people are priced out of being able to buy bread, and instead must survive on a federally subsidized menu of government cheese. So, we have an essential denied to poor folks and a government subsidy to them to consume an inferior product. This model is extreme, but fairly representative of what takes place in non-dynamic economic sectors. Tone it down a tad, and it starts to look a lot like the American steel industry, especially in public sector areas where buying American is required by law. Often they require either more funding than is necessary (a government subsidy) or an inferior product (American steal that cut corners, or some lesser metal).

    Now let's say that some enterprising young person incorporates "Luxury Breads," and starts selling high end bread for 2 bucks more than "Basic Bread" per loaf. The hoity-toity folks start shelling out for the Luxury bread, and the enterprising young fellow starts to rake in the cash.

    Unfortunately for Basic Bread, their monopoly is now under fire. They have all of this extra bread, but their customers are leaving. Fortunately, they have a bunch of customers that they haven't targeted - Poor People! And since they've been using their protected status to overcharge anyway, they can afford to cut prices.

    So at this point in our story, consumer purchasing power has increased solely because of a dynamic economic alteration. But it gets better.

    Basic Bread will not simply let those old customer go. They have the facilities already in place, and will undoubtedly encounter some excess capacity at factories with Luxury Bread now in the fold. Basic Bread starts making Basic Bread Plus! And they only charge 1 buck more than Basic Bread Original. This draws in some Luxury consumers, but also some of the more well off Basic Bread consumers. Basic Bread can now lower the price on Basic Bread original even more.

    OK that's enough. The point is that consumer purchasing power is not just a product of easy credit. It is more a function of innovation and economic diversity. Giant HDTVs have made regular TVs affordable even to the poorest people. Most people own multiple televisions regardless of economic situation. This was not true 15 years ago. Most people have Internet access something that basically did not exist 15 years ago. Almost everyone has food (hunger as a problem in the US is almost non-existent, except among the mentally ill), shelter (see hunger), and clothing. High-end clothing and mass produced low-end clothing has made clothing in the aggregate dirt-cheap. Almost every major metro area in the country contains a Ragstock or something like it where serviceable (although generally unstylish) clothing may be purchased for 1 dollar or less. This did not used to be true.

    That is what I mean by consumer spending power. Even though real wages have remained steady for several years, because there is more to buy in general, it is easier to buy that which you want, and easier still to buy that which you need.

    By Blogger PaulNoonan, at 1:11 PM  

  • Right, you're saying that economies of scale are driving overall prices down which drives up the value of the real wage even though the actual number that represents it is stagnant. Also that the pure physics of the market (assuming no government intervention) will cause vendors to carve out niches in the market for "underserved" consumers and through that cause the general players to expand and cut prices in order to salvage as much of their cash cow as possible.

    This is the beauty of the capitalist system - a system that (ideally) works on physics as opposed to ideals or emotions yet seems to always address both given enough time. I apologize for mischaracterizing your initial statement, though I think that my point still stands.

    The majority of consumers in this country spend to their perceived financial boundaries. Credit creates the illusion that those boundaries are further out than they really are. The same market forces that you talked about earlier have resulted in creative financing of all shapes and sizes that have sucked this country into an enormous hole of debt: 2 Trillion last time I heard. Caveat emptor I know, but this illusion is causing major damage in the middle and lower class. Sure they got themselves into it, but I'm not making excuses for them - just questioning whether they are really much better off due to this flip side of increased purchasing power.

    By Anonymous Anonymous, at 3:23 PM  

  • "Almost every major metro area in the country contains a Ragstock or something like it where serviceable (although generally unstylish) clothing may be purchased"

    And this shows our readers that Mr. Noonan is, of course, at the height of fashion.

    By Blogger RyanSimatic, at 11:05 AM  

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