Wednesday, December 24, 2008

Unions Prevail Over Taxpayers

The Journal Times reports today that several people were protesting outside of City Hall yesterday. The protesters say the city's heating and air conditioning contractor is not paying the prevailing wage. "Josh Garner, a union member, said the nonunion Kenosha company Southport Heating and Cooling pays 50% percent less than prevailing local wages mandated by the state."

I have no way of knowing whether the city's contract is lawful or not, but I think it ought to be. If the city can get the job done, employ willing workers, and save taxpayers 50% on labor costs, they should be allowed to do so.

It seems that "prevailing wage law" is designed to protect overpaid union labor while sticking it to the taxpayer.


Urban Pioneer said...

Now wouldn't it be great if they saved enough money to drive away all of snow from DT with a front end loader!. And it would be cheaper to do that if we used competitive wages for the Snow removal. I have to ask those who were so upset with moving Sand to the square if they are upset about all of the snow being pushed hither and yon??

smallgovsam said...

“To widen the market and to narrow the competition is always the interest of the dealers ... The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted, till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.” - Adam Smith, On the Wealth of Nations

Unions are labor cartels. They collude (vulgarly called “collective bargaining”) to restrict the supply of labor. This causes the unionized labor supply curve to shift to the left but the nonunion to shift to the right. This causes higher wages for unionized workers but lower ones for nonunionized workers. Union members benefit at the expense of consumers, nonunion workers, the unemployed, taxpayers, and owners of corporations (shareholders). That is the true exploitation.

Also, union officials can force compulsory union dues from employees --members and nonmembers alike -- as a condition for keeping their own jobs. This should be called extortion.

Whether with the auto bailout or the city of Racine’s heating and air conditioning contractors, unions are labor monopolists that deserve no legal protections nor government patronage but our eternal scorn and enmity.

Anonymous said...

The wage market concept is a pseudo-scientific ideological concept.

Wage markets are the modern 'peddling in flesh'.

Pope Benedict said this of the concept the other day:

"They have reduced and reduce the human being to an unworthy slavery at the service of one ideology or an inhumane and pseudo-scientific economy," he said. "All of us know that there is not just one political model, an ideal that has to be absolutely fulfilled, and that political philosophy develops in time and in its expressions, according as it is polished by human intelligence and the lessons taken from political and economic experience."

Certain political-economic systems, the Pontiff continued "attributing to themselves or claiming pagan or religious origins, have afflicted humanity for too long, trying to make it uniform with demagogy and violence."

E.B. Nicholson said...

Sam, and really all of you guys, the union movement is the reason why the United States had a strong middle class between the 1935 and 1981 (but it was weakened by the Taft-Hartley Act), and the anti-union paradigm is why the power of the middle class is going down today.
When Reagan came into power in 1981, he said that he believed in the "free market" (in quotes because there is no such thing). So, as a result, he started to break up unions, most famously the Professional Air Traffic Controllers Union (PATCO).
Some of the things you take for granted, such as the 40-hour work week, child labor laws, health insurance, a pension, safety protections, livable wages, and the right to bargain collectively, were brought to you by unions.
These "trickle down" and “anti-union” paradigms have failed us and we should get rid of them. Unions are good and give good results. Please respond to this because I am almost certain that most of the people who read this blog will disagree with me. Thank you

E.B. Nicholson

Denis Navratil said...

EBN, thanks for your comments. I think you attribute too much to the union movement but that is not my main point. What would happen if everyone in the US was in a union? The unemployees union would soon be the largest I suspect. Really, what would happen? Better health insurance, higher wages, a thirty hour work week, a larger pension for everyone? Where would the money come from? Taking it from the capitalists and you will drive them all away. Then what?

E.B. Nicholson said...

Denis, by your own logic, "Taking it from the capitalists and you will drive them all away," there must have been absolutely no capitalists from the 1930's until 1980's because we had between 90% and 70% income tax on multimillionaires during that time. But, during that time, the middle class was as strong as ever.

If everybody belonged to a union, you are correct, it would be chaos because the unions would have nothing to bargain collectively against and it would just be dueling unions. Unions bring democracy into the workplace and give workers the right to challenge the employers that they would not have the right to do if they were not in a union. Ultimately, unionization is a good thing for the employees.

I can spin that argument and point it right back at you. What would happen if nobody was in a union? We would go back to feudal times. The few would have control over the many. There would be no minimum wage, horrible working conditions, no pension, no employer payed health care, and no job security (if you questioned the employer, you were fired). That is why I am for unions.

E.B. Nicholson said...

P.S. There are very few Communists and Socialists in the United States. I am a capitalist.

smallgovsam said...

Eric! So glad you could join the conversation.

To outline how unions decrease wages and cause higher prices, imagine this hypothetical scenario: You own a business. After going over the books, you find that you can pay your three workers $10 an hour. However, these workers form a union. The workers demand a raise to $15 dollars an hour. You could either A. fire one worker B. pass the costs onto the consumer by raising prices. In scenario A, the nonunion labor supply is increase, thus lowering the price of nonunion labor (lowering his wage in the future). In scenario B, you won’t sell as much of the good (remember the law of demand), thus lowering your income. And who knows, maybe you have to close your doors. Now everyone is out of a job -- unless you get a Washington Bailout. Both scenario A and B are currently happening in Detroit as seen by higher costs for American cars and high unemployment in Detroit.

It is interesting you said “unions would have nothing to bargain collectively against…” Against what? Other workers not in a union, that’s what. They decrease the wages of workers not in a union, as explained above.

The truth is that unions are what economists call cartels. Cartels are entities (businesses or employees) that collude (vulgarly called collective bargaining) to raise the price of their products (in the union‘s case, labor) Its like Ford, GM, and Chrysler getting together in a smoky backroom to collectively raise the prices of cars. Both actions harm the consumer by causing him to pay more for his goods and services.

Now, as a rich business owner, could you hire more people if your taxes were lower (20%) or higher (90%)? Isn’t employing more workers good? Should we have higher taxes or lower taxes?

What’s the criteria for a “strong” middle class? Life expectancy? Gross Income? Wages divided by income spent on food? Access to medical care? Or, as I suspect, merely a 100% subjective analysis? Please use data, Eric. We ALL know what Lou Dobbs THINKS but having the facts to back it up is quite another matter entirely.

Only 9% of Americans are members of unions. Why haven’t we seen a decrease in the standard of living in Americans from 1945, when union membership peaked? Surely if unions are responsible for all the economic progress we have seen in America’s history, why aren’t we all working in dangerous factories or coal mines? The truth is that unions are NOT responsible for the “40-hour work week, child labor laws, health insurance, a pension, safety protections, livable wages.” The free market is. The labor market is just like any other market. It has a supply and demand side. Since surgeons are demanded more than Boston Store sales associates, and surgeons are scarcer, they get paid more. And competition forces purchasers of labor (businesses) to offer employees better and better benefits and wages. Because of this scarcity, people who get their education or are successful venture capitalists or investors have good job security, excellent benefits, high salaries, and pensions.

And your “capitalism is feudalism” is ridiculous. Any historian would tell you that feudalism is a POLITICAL system based on virtual slavery (serfdom) and a set of GOVERNMENTAL obligations by lords, vassals and fiefs.

Get back to me soon, Eric! Viva la Walmart!

E.B. Nicholson said...

First off Sam, I did not say that "Capitalism equals feudalism" I like capitalism, as I said in my post script. I said that if there were no unions, then we would go back to feudal times because employers are ultimately concerned with the bottom line and would not pay their employees enough to live on (heck, they don't do that now).

Your claim that one of the options of unionization is to "pass the costs onto the consumer by raising prices" This is true but the costs are insignificant to the consumer. An analysis of the Wal-Mart Annual Report 2005 showed that they could pay all of their employees $1 more per hour if they increased the prices of everything by 1/2 a cent. So instead of $2.00 tube socks, they would cost $2.01 but the workers would get $2 an hour more.

The reason union membership has declined is because of this exact anti-union sentiment. To answer your question " if unions are responsible for all the economic progress we have seen in America’s history, why aren’t we all working in dangerous factories or coal mines?" The reason is because the employers don't have the cahones to strike down those essential things.

When you said "It is interesting you said 'unions would have nothing to bargain collectively against…' Against what? Other workers not in a union, that’s what," you took me out of context. I was responding to Denis' question "what would happen if everyone in the US was in a union?" and the answer I gave was the truth.

To have a strong middle class, there must be a living wage, health care for everybody, good retirement and pension plans, Social Security, etc. Basically a strong social safety net is what defines a strong middle class.

All in all, Sam and Denis (since you are the only two who responded), workplaces are not democracies--in the United States they are run more like kingdoms and unions make the kingdoms change into democracies. Thank you.

E.B. Nicholson

smallgovsam said...

Eric, did you even read my rebuttal? The wage rate is set by SUPPLY and DEMAND. It is not set by the employer. This Marxian way of thinking was discredited years ago by economists. Since surgeons are demanded more than Boston Store sales associates, and surgeons are scarcer, they get paid more. And competition forces purchasers of labor (businesses) to offer employees better and better benefits and wages. Because of this scarcity, people who get their education or are successful venture capitalists or investors have good job security, excellent benefits, high salaries, and pensions. Labor is just like every other product. It’s price is set by the demand of the buyers (employers) and the supplies of the sellers (employees).

Only 9% of Americans are in a union. Why aren’t 91% of us tilling our lord’s soil? The average wage in America is far above the minimum wage not because the employer’s don’t have the “conones” but because its out of their control.

The mistake you are making with the “only ½ cent increases” is regarding something economists call opportunity cost. Yes you can raise prices by 1 cent. But that means the consumer can’t buy as much. Yes, one cent on tube socks may not seem like much but it adds up over time. Remember that that one cent spent on tube socks is one cent that can’t be spent on healthcare or healthy food. Let’s say you tipped everybody you saw one shiny penny. Yes, that would make other people richer, but leave you poorer. The same principle applies to Wal-Mart employees. They would get richer but the consumer would get poorer.

By any standard, the middle class in America is as strong as ever. According the Bureau of Labor Statistics, wages have only increased. Access to medical care has only increases as time passes. Americans spend less of their incomes on food. And it isn’t a safety net that creates a strong middle class. Its capitalism. Look at China and India. The middle class is exploding not because of the welfare state but because of free trade, deregulation, and privatization.

As for the decline in union membership, the employer’s need to keep costs down has something to do with it. Factory jobs are either moving to the South and West, where unions are not as strong as they are in the Midwest or East, moving overseas to lift the millions of indigent Asians, Africans and Latin Americans out of poverty, or simply being replaced by automated machines.

For your last point, workplaces are indeed private kingdoms. And they should be. Its called private property and it’s a right that all people have. Would it be right if I demanded that we must vote on how you spend your own money? Unions coerce employers into paying them higher wages. Unions are not the good guys.

Anonymous said...

EB, my wife and I started a business 15 years ago. We didn't make a whole lot of money then and we aren't exactly getting rich now. We have had numerous employees over the years. Are you suggesting that workplace decisions should be democratic? So some 16 year old that we hire for seasonal help should have the same say as I do in running my business? This is absurd. What would prevent 3 employees voting to sell the business and share the proceeds with themselves. I guess they would win on a 3 to 2 vote and my wife and I, after toiling 15years to build the business, would be SOL. Is this your idea of fairness EB? Denis Navratil.

E.B. Nicholson said...

Sam, was "The wage rate is set by SUPPLY and DEMAND" true in the Gilded Age when deregulation and privatization were rampant? What would happen if we got rid of the minimum wage? Would the corporations pay people less? Would we have another Gilded Age?

I submit to you that yes we would. We need regulation because as we saw in the Gilded Age, unfettered capitalism is self destructive. Regulation helps save Capitalism from itself. Remember, I am also a Capitalist. I like money but I think that others should have some too.

I don't think that people should have to work 80 hours a week just to get by. That is why I think the minimum wage should be increased to a living wage like it was in the late-196s.

Privatization of the commons is just a fig-leaf for greed. There are some things that are just too important for private business to have control over.

As for the wages as Supply and demand, that is true, but what if we got rid of the minimum wage and all the regulations and privatized everything, what would happen? As I said in the first paragraph, it would become another Gilded Age or worse.

With the penny thing, if you bought 100 items, it would only be a dollar more than what it would normally be. IT IS A BLEEPING PENNY!!! Plus, it would be better knowing that that dollar extra is being used to give every employee at Wal-Mart 2 dollars extra.

I meant to say that unionization makes workplaces more democratic, not 100% democratic, but more.

We need to go back to classical economics, that is:

you give more money to the middle class by raising the minimum wage, because they spend almost 100% od what they earn compared to if you give tax breaks to the multimillionaires, they save almost 100% of it. The middle class spends the extra money they earn on things. That causes an increase in consumer demand. That, in turn, creates jobs and it is a self sustaining system. This demand-side economics worked for 200+ years before Reagan. Voodoo, or supply-side, econonics has been a horendous disaster for the middle class and for America.

If you disagree with the idea that a person working 40 hours a week should not make enough to live on, I feel sorry for you.

E.B. Nicholson

smallgovsam said...

Eric, I have no idea what universe you are living in but economic historians point to the Gilded Age as time when government patronage was at its highest ever. The tariff protected Northern industries. Railroads were granted government sponsored monopolies. Government intervention in the economy inevitably led to favoritism, bribery, kickbacks, inefficiency, waste, and corruption. White supremacy once again reigned in the South. Chinese immigrants were discriminated against (with a little help from labor unions).

But that’s not to say that the Gilded Age was all bad. “Robber barons” established colleges, hospitals, museums, academies, schools, opera houses, public libraries, symphony orchestras, and charities. We transferred from an agrarian to an industrial economy. And, most importantly per capita income exploded to its highest level at that time.

As for your minimum wage argument, it makes absolutely no sense. How about we make the minimum wage $1,000.00 an hour! Then everybody will be able to afford yachts and the economy would be awesome! … Do you see what’s wrong with that? If the minimum wage was that high, most people would be unemployed. It works the same way with the minimum wage. It causes unemployment to be higher. Economists call it a price floor. Look at Europe. You will find consistently high unemployment because of “living wage” laws.

Furthermore, if we paid people a “living wage” not only would we have higher unemployment but where is this money going to come from? The costs would get passed on to the consumer or the business would make less money. That isn’t classical economics.

I agree with you. Some things are too important to be left to the greedy private sector. I have an idea. Let’s nationalize the phone industry. Its vital for communication right? Guess what? They already had that. AT&T was the only legal phone company in the United States. All the phones were black, rates were high and service was terrible. Today we have a multitude of phone companies competing for our business. You can get phones with cameras in them, different styles, custom rates at relatively low prices. If you think nationalizing industries leads to economic growth, I suggest you travel back in time to the Soviet Union. Monopolies, especially in the government sector, are very harmful for consumers.

Here’s how side-supply economics works: We allow the rich to keep more of their money. They save most of it in the bank. As people save more, more credit is available. With increased credit as the stimulator, investment increases. With increased investment comes greater efficiency in the production of goods and the delivery of services. This increased productions causes a lower price level in an economy and decreases unemployment. Isn’t that a good thing?

Eric, I don’t think anyone should have to work 80 hours a week. But we live in the real world. Sometimes we have to sacrifice our lofty ideologies for what actually works. I feel sorry for you. Thinking with your emotions is a terrible way to do a cost-benefit analysis.

Do a better job of addressing my points next time, m’kay buddy? ;)

Urban Pioneer said...

Welcome to the conversation EBN, I look forward to many debates. So prepare to be flogged, (Gently :^). Sam great job of making the arguments so far.
2 items in EB's postings caught my attention.
The first was Minimum wage. Who actually makes minimum wage? Almost no one actually makes it. Most of those that do are High schooler, or low skilled first time employees, and 6 months after they are hired are usually not making Minimum wage any more. I think if the Minimum wage were eliminated tomorrow, more people would have jobs, not less, those people would then have an opportunity to get on the first rung of the ladder. (BTW you may recall the Dem's raised the Min Wage earlier this year and the unemployed numbers increased).
If I hire someone to work for me why can't the hiree and I agree on a fair price per hour or per job. I have no shackles, nor prison walls to force the employee to work for me, if I am unfair or the employee is worth more the "free market" will determine the value of the employee. In areas with high unemployment wages would be lower and in areas of low unemployment they would be driven up. Why do the unemployed continue to stay in Racine, when Madison and Appleton have very low unemployment numbers? I would favor an elimination of the minimum wage.
Item 2: EB cited Wal-mart's 2005 report. The purpose of the report was not to determine how much more to pay Wal-mart employees, (BTW they pay rather well, and introduce alot of otherwise unemployable people to the working ranks). The purpose of the report was to inform the OWNERS of the business, the stock-holders, how well their investment and faith in Wal-mart was preforming. (Many Wal-mart employees are stock holders too!).
The purpose of a business is NOT to create jobs for the lower class, the middle class or the upper class. A business is created for the purpose of creating Wealth and a return on investment to the business OWNERS.
Now of course it makes sense to award your staff a competitive to keep the other Corp across town from "buying" your employees. Things like streamlining, automation and of course making a product or service people want to buy. But to give a business the human emotion of compassion is poppycock. Business exist to make a profit. Jobs are a side-effect. Every employee who preforms his/her job the best for the betterment of that company is a "product/ business" in and of themself. If your are a great employee or manager the "Business" will reward you, if the business doesn't; You the employee can market yourself to the competition, and be paid accordingly.
Now I am not saying business are only cold-harded b*st*rds, but if they do a fundraiser for Breast is to promote the business name and brand. Helping the cause is a side effect. If it doesn't help the business bottom line, the business will discontinue the cause or find another instead. Remember when Virginia Slims sponsored a Golf or tennis tournament. It wasn't about promoting a healthy lifestyle it was to sell cigarettes.
I could go on, but I thought those 2 points were worth expressing. Again EB U can share a lot, and learn a lot. so welcome.

E.B. Nicholson said...

Sam, your "[the minimum wage] causes unemployment to be higher" is simply not true. If you look at the history of the minimum wage, the country has raised the minimum wage 27 times. According to the Bureau of Labor Statistics, 15 of those times, unemployment went down and the other 8 times, unemployment went up. So raising the minimum wage is twice as likely to lower the unemployment rather than it is to raise unemployment.

When I said that things are too important for private industry, I was refering to Social Security, the military, voting, etc.

In the Gilded Ages the monopolists basically owned the government, also known as the literal definition of FASCISM (the mixing of the state and private entities)!!! Today, we are headed down the same path. Companies contribute to the politicial campaign and the politicians vote in the interest of that company, whether it be Exxon-Mobil, Lockheed-Martin, or Haliburton, which ultimatly works against the consumer if the company is getting government kickbacks.

"I don’t think anyone should have to work 80 hours a week. But we live in the real world. Sometimes we have to sacrifice our lofty ideologies for what actually works." LOFTY IDEOLOGIES? WHAT REALLY WORKS? WHAT THE F***??? THIS ACTUALLY HAPPENS IN AMERICA, SUPPOSEDLY THE RICHEST NATION IN THE WORLD! There is a problem with that picture! While CEO's make millions of dollars in wages and in compensation for firing hundreds of people. Is that right? Anybody who is able and willing to work a full 40 hour work week should earn enough to live.

F.Y.I. There is no such thing as a truely free market.

Also F.Y.I. You need emotion to be rational.

E.B. Nicholson

smallgovsam said...

For your first point, you are confusing correlation and cause. Just because a happens and then b happens, doesn’t necessarily mean that a caused b. In an economy, there are trillions of confounding variables that cause the employment rate to shift. How exactly does a price of labor increase cause an increase in demand of that labor? Explain that to me please. Because if you could, you would be disproving the law of demand. I’m sure economists all over the world would love to hear this fact they have overlooked all these years.

I disagree with your definition of fascism. Fascism is a “political philosophy, movement, or regime that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition” according to Merriam-Webster’s. When private and state entities merge, its called nationalization, a tenant of socialism. As most aspects of Nazi Germany and Mussolini’s Italy were controlled by the state via nationalization, rationing, government patronage, etc., I would label fascism is a form of socialism.

For your other point about companies controlling the government, I agree with you. There should be no favoritism in government. But that’s not an argument AGAINST capitalism, its an argument FOR capitalism and LESS government. We need to get the government OUT of the business’s way, not help them get their competitor’s out of the way. If the federal government was as small as it was in George Washington’s time, you think we would have as many lobbyists? Big government causes companies to try influence that government. Let the individual decide his actions, not the bureaucrat. Laissez-faire, bro!

And of course everybody working 40 hours SHOULD earn enough to live on. But how do we decide if a job is worth doing? What if I work really hard digging holes in the ground? The fairest way to determine who gets what is to rank them on how much they do for other individuals, or what economists call demand. Since a CEO is demanded more than a janitor and many people can do a janitor’s job, the CEO gets paid more. And there is nothing wrong with that. Although your appeal that it “wasn’t right” was heart wrenching.

You mentioned “cost of living.” Isn’t living free? How much is the “cost of living” in American dollars? Is it different for different people or do we all have the same “cost of living?” Is it the cost of food? Housing? A car? What quality of food/house/car? What if I blow all my money at the craps table? Does it include the cost of mistakes? I have had plenty of people buy clothes from me that they probably couldn’t afford. Do new clothes factor in the “cost of living?” In short, how are you, a 17-year-old living in Racine, Wisconsin, going to figure out the “cost of living” for each person in America and adjust their wages accordingly? Economists call this central planning and, because humans are fallible and don’t have all the information, it fails.

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