Toyota workers in Kentucky plant made more than UAW members last year

Here's the link:

http://www.autoblog.com/2007/01/31/toyota-workers-in-us-made-more-than-uaw-members-for-first-time-l/

The problem with these sorts of discussions is that they assume the (implicit) capitalist framing that the purpose of a corporation is to maximize returns to its nominal owners (shareholders).

Corporations are a fairly recent social innovation (300 years old) and what rules they must follow are based upon man-made legislation, not laws of nature.

In fact even under the present profit maximization ideology we don't have such a pure system. Firms must adhere to safety, hiring, discrimination, and other regulations which cut into their profits. In Europe the balance is slightly different and there are more regulations concerning the well being of workers, including some dealing with outsourcing and governance.

Profit maximization is a fiction; what the argument is about is which restrictions should be added/repealed/flouted.

China has just passed legislation mandating that all large firms have unions. It was expected that these would be state-controlled company unions, but as Walmart is finding out this may not turn out to be true.

Firms don't care what regulations they have to adhere to as long as others have the same restrictions. What they are really lobbying for is special breaks that put them at a competitive advantage with their rivals. This is what is behind the sweetheart tax breaks, the subsidies for R&D and other routine business expenses and lopsided international trade agreements.

If you want firms to start to act as better global players, change their rules of incorporation. They are not "people" and should not be granted the rights of people and their charters should include conditions about their dealings with workers, customers, suppliers and the environment.

Non-profits write charters like this all the time. You want better behaving firms - change the rules.

Some times unions increase productivity by driving the acquisition of labor replacing capital. Some times unions increase productivity by driving the acquisition of harder driving managers.

Neither of which are necessarily bad but need to be considered.

The down side of unions is their tendency to become exclusive rather than inclusive.

Actually some of what motivates anti-Union (and even some pro-Union) folks is exactly the sort of "bitterness" that Obama got lambasted for mentioning -- but it also applies to the professional classes.

I know many a professional who hates unions essentially because "thanks to unions' ability to collectively bargain, people who do manual labor [even if it be highly skilled and involve much more actual labor than my work] make as much, if not more money, than me -- a highly trained professional" -- they hate unions because they feel unions become a threat to their position on the socio-economic ladder as above those who work by the sweat of their brow.

OTOH, some professionals (my family was in this category) take a "the Man won't let us be lower on the ladder than the proles, so if the proles make more money, that means we'll have to get even more as well" attitude and hence are very "pro-Union".

Of course, now they have professional unions ... so the dynamics might change a bit. But the people in my first category usually don't want to unionize, and ultimately their explanations are essentially "unions are something for the proles and we're above that on the socio-economic ladder".

What's surprising is that anyone is arguing that unions decrease productivity anymore. About 10 years ago Sandra Black, one of the earlier economists to do these studies, explained the reason succinctly: if you're not unionized, and you figure out how to to the same job with fewer people, pretty soon you and some of your colleagues are going to be out of a job.

BTW, I'm not sure about the reduced-profit argument. Clearly the share of revenues going to workers tends to increase with unionization, but if productivity and revenues go up, then the overall profitability of the firm will go up as well. You know, that whole win-win situation. Some capitalists, unfortunately, are happier with a bigger slice even of a smaller pie.

Clearly, El Viajeros subtle and nuanced analysis has put Ezra completely in his place.

And of course, one would conclude that the also productive Toyota factories in Japan are similarly non-union.

That would be wrong, but why interrupt a good 1-sentence narrative?

The problem with these sorts of discussions is that they assume the (implicit) capitalist framing that the purpose of a corporation is to maximize returns to its nominal owners (shareholders).

I dunno even know if this framing is a necessary one for even capitalists to adapt. One can be a perfectly good capitalist and view corporations as just an efficiency and necessary instrument to limit liability of shareholders so that they may be encouraged to invest (historically this is what corporations are about, hence "Ltd").

Profit is just the incentive to invest. Profit drives the engine that is a corporation just as heat loss drives a heat engine. As such, profit, at some level, represents a necessary "inefficiency". Just as an engine cannot be 100% efficient, business entities must extract profit from the "money [energy] in" in order to have incentive for giving "good/service [work] out".

By having a corporation, the drive to create internal efficiencies so that the body as a whole can produce the same work out with fewer resources so that the money in generates a profit for the corporation as a whole is how corporations provide efficiency.

But if the "pieces" of a non-profit machine were to be as efficient as those in a "for profit", obviously the non-profit would be more price efficient as they don't have to generate profits! Nu? It's simple arithmatic ...

Ezra- are you and other TAP writers unionized? Is there a bloggers guild?

Where can I catch the nearest concern-trolly?

So let's see, so far we've learned that if you're opposed to unions it's because you're either greedy, a liar, are willing to make the pie smaller so you can keep a bigger share, or you don't want blue collar workers to make as much as you. How enlightening. The idea that someone can have a reasonable and defensible position that disagrees with your own is completely foreign to you people. The only possible explanations are reprehensible character flaws.

The problem with these sorts of discussions is that they assume the (implicit) capitalist framing that the purpose of a corporation is to maximize returns to its nominal owners (shareholders).

Well, the main difference between a corporation and an LLC or LLP is the ability to sell shares on the open market. If the shares you purchase do not give you a return on your investment that is better than available alternatives, then there's no reason to own them.

This isn't just a matter of CEOs' salaries vs. union workers' salaries. It's a matter of salaries vs. shareholder payouts. It may well be that spending more money on labor/talent provides a better return on investment for the shareholders, but that's what the equation ultimately comes down to. Money spent by the company, whether on CEO salaries, transportation costs, rent, car leases, and workers' salaries is the shareholders' money. The question is whether the shareholders are getting a good return for their investment. People don't purchase company shares for fun, after all.

The only possible explanations are reprehensible character flaws.

Given that the counterarguments tend to be disingenuous, yes. The character flaws are either a hostility to workers or a ignorance that is a result of unquestioning alleigence to anti-union propaganda, and ignorance is a character flaw. I see you did not provide any arguments that you felt were better ones, did you? Why do you blithely assume that all arguments are equally worthy of our respect? They aren't. Some of them are trash and are regarded as such.

Having higher paid employees means that the employees have to be more productive in order to justify higher pay. Non-union shops that can hire workers on the cheap can have menial jobs that require little training that could be done by machine except that the machine is more expensive. When wages are higher, employers are forced to invest in equipment and job training that will make each worker more productive.

the counterarguments tend to be disingenuous

Disingenuous like the argument that we should attribute the post-WWII productivity and growth directly to unionization? (The argument that both Ezra and Kathy G made)

I'm not here to start unions good/unions bad debate, because that won't go anywhere. I understand the arguments of pro-union people, and though I might disagree with them on some crucial matters I can understand their point of view and I don't just attribute it to them being evil and/or stupid, which is all that seems to be happening here.

There is no "downside" to unions as such, anymore than there is a downside to "business." The right to form a union without interference to bargain for better terms and conditions of employment is as essential to liberty as freedom of speech. Opposition to unions in general may not be a character flaw, but it is the product of a flawed and rigid ideology.

"Opposition to unions in general may not be a character flaw, but it is the product of a flawed and rigid ideology."

Opposition to unions in general is often a case of Stockholm syndrome where people internalize the views of the overdogs.

The union movement has been crushed, a fact which makes those who complain about unions even more annoying.

What's interesting to me is how often in undemocratic countries like Mexico or China, the unions are part of the state party apparatus and almost completely undemocratic. It's a farce. But that has been changing b/c as President Bush has said, people yearn for freedom.

Unions reduce short-term profits not only through better salaries and benefits for workers but also through forcing expenditures for company infrastructure---safety design and equipment, lighting, replacement of dangerous or obsolete equipment, and the like. The long-term result is often (according to various articles in BusinessWeek) long-term benefits for the company: better fiscal health, better long-term profits, and the like.

The true reason, I suspect, is psychological: CEOs tend to love power, and unions restrict that power. So unions are (from the CEO's point of view) bad.

You might want to see how Kathy G fared with those arguments when she paraded them in front of a number of people who actually know what they're talking about.
http://crookedtimber.org/2008/05/09/unions-good-for-equity-good-for-efficiency/
Read the comments, she really doesn't come out of it well.

First, I'd like to point out that workers in failing firms usually do not successfully set up unions, so there is a lot of selection bias in the naive comparison that Kathy G is doing.

There was a study that looked at firms where the election on whether to unionize was very close, comparing the group that narrowly lost with the group that narrowly won. This gets rid of a lot of the sample bias problem, giving us a better idea of the effects of unionization.

This study(Which only looked at establishment level business), found at
http://ideas.repec.org/a/tpr/qjecon/v119y2004i4p1383-1441.html
, found that the effect of unionization on wages was not statistically significant.

Keep that in mind guys.

Where can I catch the nearest concern-trolly?

Actually Careful1,
Here:
http://www.atomdiecutting.com/die_cutting_presses.html

Is where you CAN catch such a trolley.

The internets are such a weird place.
[Actually, since it was a new pejorative for me I was going to say that I kinda liked it...
and do.]

A lot of you guys have a propensity to class warfare that amazes me. There are plenty of valid(and progressive!) reasons to oppose unions that do not involve greed and evil CEOs.

Collective bargaining is, at heart, an evil notion. If a bunch of companies "collectively bargain" to raise the price of food, that is evil. Labor is a good, just like any other, and collusion is a universal bad.

Negotiating conditions are far from ideal, but the simple fix would be to require companies to publish salaries of employees(As they do in Sweden).

As other commenters have mentioned, spending money on better working conditions can be very good for productivity. But then, wouldn't companies themselves, seeking profitability, then go ahead and improve working conditions anyway?(This is after all, why most large companies have HR departments).

There is nothing progressive about unions, most European countries have VERY low rates of unionization.

Instead of fighting for an outdated, wasteful, and unnecessary vestige of days long past, actually fight for things that will really help the Middle class and the poor.

If we instead get a sensible non-employer based healthcare system, a wage subsidy, and job-retraining programs, then can anyone explain to me what a union's purpose would be?

a cursory scan of the link provided by Tim (admittedly quick)- just to let people know doesn't seem to say what he claims it says. Just thought I would put that out there. I keep saying the problem isn't the arguments. it's narrative and denial.

Collective bargaining is, at heart, an evil notion.

And that's where you lost me...

If a group of partners can get together, call themselves a "corporation," and leverage their assets and market power to do what they couldn't do alone, then employees should do the same thing, rather than each try to negotiate individually up against a corporation.

You're never going to convince people that collective bargaining is evil. When you're calling workers getting together to leverage their power for mutural benefit "evil", then THAT'S class warfare-- warfare against workers. You're almost providing evidence for the "Stockholm Syndrome" claim made up above.

So let's see, so far we've learned that if you're opposed to unions it's because you're either greedy, a liar, are willing to make the pie smaller so you can keep a bigger share, or you don't want blue collar workers to make as much as you. How enlightening. The idea that someone can have a reasonable and defensible position that disagrees with your own is completely foreign to you people. The only possible explanations are reprehensible character flaws.

You know something, AB? You're exactly right!

Tyro,

This is an argument I would love to have with you, and I ask that you stick around for a round or two.

The relevant metric is whether you leverage your assets to change prices.

If a bunch of partners come together, call themselves a corporation, and then proceed to corner the oil market, shooting up the price of oil, that is indeed very evil.

In the same vein, when a bunch of doctors come together to artificially restrict the supply of doctors so as to increase wages, that is really evil.

When the union of lawyers in France threaten a general strike if the government allows people to get divorced without a lawyer, that is really fucking evil. (That actually happened back in December)

Collective bargaining to "shift the rules of the game", by any side, is a bad thing to do. This is true for the rich and the poor.

Admitting, information asymmetry is a big problem with workplace negotiations. At the same time, employer based health care makes it very difficult for workers to change jobs.

But unions are a poor substitute for attacking these problems directly.

ObamaFan, please stop acting so patronizing. Actually, the fact that Wal-Mart can use its purchasing power to get better deals from its suppliers, allowing them to sell drugs more cheaply, is a very good thing. The fact that I can form a food co-op to purchase goods in bulk to get a better deal, is a good thing. My ability to leverage my power to get better deals or better wages is a good thing. To claim that workers should not be allowed, as corporations are allowed, to leverage their power to get a better deal on things is, in fact, an insidious form of class warfare and resentment that workers are allowing themselves not to be divided-and-conquered by a large corporation. This is basic. Calling that evil is unacceptable. More evidence that those whiners who scream "class warfare" are jsut projecting.

Because of the natural imbalance of corporations who control lots of capital vs. an individual workers who could normally only negotiate for himself, it is prefered that workers organize themselves.

A lot of you guys have a propensity to class warfare that amazes me. There are plenty of valid(and progressive!) reasons to oppose unions that do not involve greed and evil CEOs.

Collective bargaining is, at heart, an evil notion. If a bunch of companies "collectively bargain" to raise the price of food, that is evil. Labor is a good, just like any other, and collusion is a universal bad.

Negotiating conditions are far from ideal, but the simple fix would be to require companies to publish salaries of employees(As they do in Sweden).

As other commenters have mentioned, spending money on better working conditions can be very good for productivity. But then, wouldn't companies themselves, seeking profitability, then go ahead and improve working conditions anyway?(This is after all, why most large companies have HR departments).

There is nothing progressive about unions, most European countries have VERY low rates of unionization.

Instead of fighting for an outdated, wasteful, and unnecessary vestige of days long past, actually fight for things that will really help the Middle class and the poor.

If we instead get a sensible non-employer based healthcare system, a wage subsidy, and job-retraining programs, then can anyone explain to me what a union's purpose would be?

Good lord, and you call yourself an Obama supporter?

To begin with, collective bargaining is no more evil that getting a bulk purchase discount. Indeed, collective bargaining flows from a social good - solidarity. The belief that we're all in this together, that the treatment of any one worker affects every other worker, that we should all stand together to make our lives better, is a good belief. Indeed, as Walter Reuther (and before him, Haywood and Gompers and Powderly) said, solidarity is the extension of democratic values into the world of work.

Indeed, I would argue that it is also the value that spurs the Obama campaign, and the Democratic Party more broadly. If collusion is evil, than the message of the Obama campaign that ordinary people should get together to change their political system is also evil.

On a more material level, collective bargaining brings workers together to achieve common aims, improves living standards, working conditions, and benefits, fosters self-respect and independence, and establishes a system of rights within the workplace.

Companies avoid these measures because, while increasing productivity, they tend to decrease short-term profits, even if they improve overall profits in the long run. Management, while not being any more evil or greedy than any other person out on the market, have a strong incentive in terms of their shareholders, their stock options, and their reputations, to enhance short-term profits at the hazard of long-term profitability.

In terms of European countries, you're just flat wrong. The U.S has a 12.1% density rate, the E.U has an overall rate of 26.4% (2001 data most recent available). The U.K, in 2007 (most recent available) had a 28.4% density rate, Germany is about the same at a shade under 30. The highest, Belgium, has a density rate of 55.8%! (also 2001 data). Sure, there are some outliers - France is noticeable - but the overall trend is about twice the level of density that we have.

And even in the presence of universal health care, wage subsidies, and retraining, you'd need unions to achieve: equitable treatment on the job (unless you want the DoJ to take on every grievance case in the U.S), workload and overtime issues, pay raises and promotion, retirement and pension protection, provision of child care and other services, etc. etc.

Tyro,

Your example is a bit ambiguous. If the size of Walmart's order allows for efficiencies of scale that increase profitability(For example, large shipment allows for a larger truck, decreasing transport costs per item), then indeed, this is good.

On the other hand, if Walmart can decrease prices because they tell suppliers "If you don't cut prices, we'll cut you off from our customer base and you'll lose business", then no, that is very very bad. This is a monospony, and their negative effects on the economy are well known.

Corporation's use of their market power is a much bigger problem for our economy than unions, and I would support a vastly strengthened anti-trust division to take them on.

But I'd set them after unions too, for the same reason.

Drugs are not really a good example, because producers are given an artificial monopoly on their production. That's an entirely different discussion.

Umm ... when an employee bargains as an individual with a corporation, isn't the corporation a collective? Isn't it only fair then that the employee be represented by a union?

Actually, I know some anti-union glibertarian types who actually agree with this argument. What they suggest (since they, being glibertarians, cannot abide by the term "union") is that unions be replaced by an employee owned "corporation" that provides manpower of a specific type -- e.g. instead of having the steelworkers union, there would be a corporation that provides steelworkers to companies but negotiates the terms of employment (including "if you want to hire any one of our associates, we get to represent all your steelworkers -- i.e. a closed shop).

But nu? how, except in name, is that different than a union then?

In general, my response to "Jeffersonian liberal" arguments (c.f. above where it was pointed out that the concept of a corporation as we know it today is only about 300 years old ... it was also opposed by Jefferson) is "you don't want to have collective bargaining, big government, etc.? well, let's do away with corporations! what? you think those are good for the economy? good ... unlike what you may think of moonbats like me, I agree with you 100% ... but that means ya gotta accept collective bargaining, etc."

Attewell, You raise some interesting points.

You are correct insofar as the European data. I held the examples of France, Latvia, and Lithuania in my mind without weighing by population. Thank you for pointing out my mistake.

But I'd like to say, your infusion of political and social notions into the workplace disturbs me a bit. It's not clear to me why I need to have solidarity with my fellow workers.

It seems like you are following an old social model, where people organized and defined their lives by their one job, at one company.

Increasingly, people move from job to job, and even from city to city. The old methods of social organizing are not really relevant to this newly emerging world.

The dense social networks that any progressive social movement needs to harness are, more and more, not distributed amongst a workplace, and we should change our ideas of social organization to account for that.

As for your economic productivity argument:

Companies should have a strong incentive to maximize long term profit. I personally suspect that the effect you mentioned is very rare(Because of the study I quoted earlier).

But if the effect is there, addressing it by better contract law and a couple of financial regulations would most likely do a better job then collective bargaining.

And to address your last point, that unions are necessary to run a company do to mundane administrative details, I'll remind you that most of the workforce is un-unionized. It seems they've gotten the problem of designing pay packages solved fairly well.

DAS,

I already have addressed your point about corporations previously in the thread. I would be happy to debate any response to those.

Unless of course, you prefer to reduce me to a "glibertarian" strawman...

Can I ask a seperate question: Why are people arguing with a guy who labels collective bargaining as "evil?" What kind of a reasonable conversation where you are actually conversing, not just writing passed each other, will happen with this sort of analysis? Note, for example, the difference in rhectoric- no liberal or leftist in America would ever label corporations as per se evil. They may question its form, but not the idea of a corporation. This is why I think conversations- again real ones- are impossible. The libreral/left spends much of its time arguing with what are non-starter conversations about basic concepts while the right takes its concepts as per se acceptable, and so does the left. I am not arguing an eye for an eye. I am saying don't given into the impulse to feel the need to defend what doesn't need to be put on trial.

ObamaFan717,

You talk about trusts, collusion, etc. -- but you don't quite address the idea that the very idea of a corporation means that any bargaining between an employee and an institution hiring said employee is collective bargaining (which you say is evil).

Do you propose we ban any corporate entity bigger than a mom and pop store and bust all corporate entities for collusion? I may be a moonbat, pinko but even I don't want to do that.

Otherwise, evil or not, collective bargaining is a fact of life. And if it's good enough for the employer, why isn't it good enough for the employee?

"It's an article of faith..."

Many of the most anti-union people I know used to work in a unionized environment, then went to a non-union plant (sometimes, though not always, for lower wages). These union refugees saw first-hand how politicized and wasteful their old jobs at GM, Ford, US Steel, etc. were. When they went to work for places like Toyota, Nissan, or Nucor, and the union came around to try to organize them, management literally had to prevent the formerly workers from hurting the organizers.

This is not an article of faith; it's the product of experience.

ObamaFan717,

Thanks for the civil response.

Even with moving from job to job, the fact is that you still spend 40 hours a week on the job. If nothing else, this creates a mini-society of its own: work places develop office cultures and politics, you make friends and acquaintances (and enemies and plain old jerks), and so on and so forth. The political aspect comes into it with the relationship between the worker and management - unless you're willing to quit and find a new job every time you come up against a bad boss or a bad employer, you need some way of gaining some kind of independence vis-a-vis your employer to prevent yourself from being treated like a doormat.

As for social networks, unions can be part of them - and indeed, especially in progressive localities like Los Angeles and New York, labor unions are a key part of progressive social and political networks. Moreover, if you look at the work that unions are doing to organize the unorganized or the unemployed through Working America into social and political networks, you'd see where the long term is going here. Furthermore, all you need to do to adapt is to establish a AFL-CIO or Change to Win union card that travels with you from workplace to workplace, so that you can move from one job and one local to another with ease.

As for company incentives, regulation needs all the help it can get against agency capture and the like, because they're pushing against the systemtic bias we have inherited: stock-price driven analysis, huge stock options among the CEO class, etc. Look at what happened after Enron, et al. collapsed. Regulations were established, but it didn't stop Bear Stearns and the sub-prime crisis, because the incentives to cheat are really really strong. On the other hand, a strong labor movement, like the movement that Reuther led in the late 40's, can be a strong goad to "open the books" and socialize information and decision-making.

And in regards to non-unionized workplaces, I can good and guarantee you that in non-unionized workplaces, those procedures are set up to privilege management against the workers, all the way up to the line. Look at what's happened to Walmart in regards to discimination suits, backpay violations, unpaid overtime, etc. Corporations have an incentive to squeeze if they can get away with it, so unions are a big roadblock in terms of changing incentives.

Can I ask a seperate question: Why are people arguing with a guy who labels collective bargaining as "evil?"

Because liberals maintain an earnest and childlike faith in the idea that if we just reason with people enough, they'll understand the superiority of our point of view.

I think our dispute is partly one of definition. Once it became clear that there was some confusion, I clarified my position.

It is not right to use market power to distort signifigantly effect market prices.

Corporations only do this when they collude. When they do this, government should take agressive action.

On some level, market power always will exist. But there is an entire FIELD of economics dedicated to regulating monopolies, and there is a lot more we can do on that front(its wonky stuff, I won't go into detail unless some one asks)

Collective bargaining, as I've defined, is a fact of life only in the same sense that embezzlement is a fact of life. CEOs embezzle all the tim, and we can't catch them all, why not let workers do it too?

Notice my key implicit argument here. Price manipulation is really bad, and I think that's a very obvious point.

Let me know if I'm wrong.

ObamaFan, you're missing a key point: the Corporation is a combination of capital to derive profit while limiting liability, no? In effect, mobilizing the individual market powers of the investors to form a single, much larger market power.

The labor union is effectively the same thing, applied to labor. So if one's legal and good, why isn't the other one?

I am probably going to leave this diary alone after this post because I see people are still arguing with the collective bargaining is evil poster.

I really am becoming disenchanted with this particular blog, and find better reasoning at sites like Open Left and Glen (who does some great con law work) as well as a few strong economic blogs.

Ezra, a few months ago, wrote up a diary about the resurgence of some "Bell Curve" type of analysis that questioned whether the races were of equal intelligence.

This is off topic, but along that thread one poster made a really good point that is applicable here and has begun to stick with me.

His point was this- by entertaining outlandish ideas as if they are indeed worthy of critique provides them with their legitimacy. I don't understand the need to argue with views that are not only contra (which is fine), but outlandish and absurd (which doesn't raise discourse (which means tests here for example Ezra's basic thesis).

How does this help progressive causes, and, if that's not your interest, the cause of unions and the American people?

Do you really think there are a lot of people in America who , even if they don't like unions, see them as "evil?" Do you think that's what this is about? Or, is the point to argue for the sake of argument with people who raise the most outlandish claims?

Just curious. If that's the point let me know.

Note: Vikingkingq=my usual handle. Forgot, sorry.

Vikingkingq,

I'm not ready with a response to your previous post on community organizing(Not my area of expertise), and I'm certainly sympathetic to arguments of regulatory capture. But I'm not sure why price-collusion is necessary for any of the goals you mentioned.

If you want an organization of workers who fight institutional injustice and foster solidarity and all, yet completely ignores the issue of wages, I don't see why those goals you were talking could not be achieved.

But to respond to your most recent question:

Market power is, in economics, defined as a firm's ability to change the market price. Monopolies can use their ability to cut supply in order to raise prices, and unions can use the threat of a strike to raise prices.

If a bunch of investors come together to form a corporation, then I'm not sure where the market power automatically comes from.

"Collective bargaining" is not something that corporations automatically do, it's something that is almost always against the law.

How is capital reserve not a form of market power? Since you can (for a time) sell at a loss to establish market share, and thereby change market price.

"unions can use the threat of a strike to raise prices"

Unions don't want to raise prices, per se. They want to raise wages. The more enlightened unions, such as Reuther's UAW in the 40s, pushed for wage increases without price increases as a way to gain economic justice without inflation.

"How is capital reserve not a form of market power? Since you can (for a time) sell at a loss to establish market share, and thereby change market price."

That strategy doesn't work, and history is full of failed attempts. Its a standard result in economics that "dumping" is an irrational practice(At least on a domestic level, international trade gets more complicated)

Not only that, but the practice is illegal.

And as a last point, the above is only relevant if the company has a very large market share.

To give an example, suppose that you run a medium sized and well capitalized oil company. You lower prices to $20 a barrel.

What happens? Your oil is bought up very quickly and then, likely, resold again for $130. Your effect on prices? Minimal.

"Unions don't want to raise prices, per se. They want to raise wages."

Labor is a good, they are raising prices on labor. The labor market is fucked up enough(See Stiglitz's efficiency wages) without adding Unions into the mix.

If you want to give workers more money, then give them wage subsidies after the fact. Much less distorting way of reaching the same goal.

If a bunch of investors come together to form a corporation, then I'm not sure where the market power automatically comes from. - ObamaFan717

When investors come together and form corporations, how many such corporations are purchasing a particular kind of labor? How many such workers are available to do said labor?

There is a definite imbalance, especially when labor mobility is limited, laborers have already specialized according to their comparative advantage and there are only a few businesses in town. In such a case, the corporations doing the employment are essentially an oligopsony (sp?) in terms of the labor market.

Having the employees form oligopolies (unions) kinda evens the tables, wouldn't you agree?

DAS,

The economic damage of an oligopoly decreases very very fast with respect to the number of competitors( Roughly 1/n, depending on the model). Once there are even 4 or 5 firms, there is little cause for concern. If there are more than 10, then there is literally no discernible difference from a theoretical perfect market.

There are some markets that meet that criteria, but very few. And unions are a very blunt tool to deal with it, best to use anti-trust law instead.

Roughly 1/n, depending on the model - ObamaFan717

Gah ... today's my day to learn that I'm a biophysical chemist, not an economist (at MY's place, I've just realized the way economists define efficiency ends up, in certain situations, being the exact opposite of the way physical chemists do!) ... "depending on the model" you say? But what about in real life? Or at least in simulations and/or experiments?

Economists do those, don't they? Or is our economic policy being guided purely by theories for which there is no experimental evidence? I sometimes wonder whether if our public health policy worked the same way as our economic policy, Congress would be debating whether or not government subsidized health care should pay for leechin' in the case when someone has too much black bile ...

I dunno about models, but in practice, gettin' a job is hard and there is much advantage to the employer over the employee in terms of negotiation ...

DAS,

I know, I know. But accross the models, efficiency increases really quickly with the number of competitors.(I sympathise with your frustration, I'm a math major who has to deal with interdiciplinary work a lot)

So, I have a feeling that companies are not colluding in order to keep wages down, atleast not in most industries.

But, they don't really need to. Companies have a vast informational advantage over their employees in a negotiation. They have entire departments that have access to databases that the worker does not.

Yes, Unions could fix this, but really, they arn't likely to do it very effectively. Public choice theory tends to get in the way.

Instead, there are simple rules that could level the playing field. Force, as Sweden does, the publishing of salary data(perhaps anonomysed for privacy).

But yeah, it really is a shame that our economic debate is so stunted. I occasionly repress the desire to leave all fiscal policy to the majority vote of a randomized basket of Econ departments.

Not sure about any solutions on that front there, other than shouting on blogs of course.

Obamafan, that strategy is in fact historically a powerhouse. Look to U.S Steel, Standard Oil, Swift Meats, they all got their start by under-cutting the competition, grabbing market share, and never-letting go.

As for labor being a good, I would disagree. Labor is not solely a good - it's also people, who have needs beyond the economic, who have needs beyond material - respect, self-worth, independence, etc. A good doesn't care where it goes or how it's used, but a person has a home and a family, they get tired after working too long, they need to eat, to use the bathroom, to take a break. These are all basic rights that workers had to fight for through unions to gain Believe it or not, you didn't used have the right to a lunch break, or a bathroom break, or any break at all - let alone the eight hour day.

But even granting your point, let me ask you this: if the labor market is distorted, due to the disproportionate power of the employer, don't unions act as a countervailing force, as Galbraith argued?

PS: the disparity isn't just about information. Even if workers had perfect information about the housing market, the costs of travel, relocation, retraining, etc. are generally too high, and humans generally too risk-averse to ever act as a perfect good in a perfect market.

I know, I know. But accross the models, efficiency increases really quickly with the number of competitors.(I sympathise with your frustration, I'm a math major who has to deal with interdiciplinary work a lot) - Obamafan717

Ditto me (on the math major part)! :) Thank you for clarifying, but I see you understand exactly where I'm coming from on the model issue.

Anyway, though, I'm not sure I buy those models. I know in my field (academic chemistry) and in my wife's field (law) there is a huge asymmetry in hiring: there are many more providers of labor than purchasers of labor ... and it is the asymmetry that seems to have the effect in terms of employers being able to say "you don't like this job -- I can always hire someone else" rather than the number of employers.

Perhaps the ratio of buyers to sellers is a more important statistic than the raw numbers? What do economic models have to say when there are many buyers (n > 10) but many, many more sellers than buyers?

I suspect that the market would behave as an oligopsony or at least as monopsonic competition rather than as a truly competative market.

Yes, Unions could fix this, but really, they arn't likely to do it very effectively. Public choice theory tends to get in the way. - Obamafan717

Actually, unions fix this quite well, in my experience (although, as you point out, there are other ways of fixing this -- but they'd never pass in this country: there would be "it's our free speech not to say nothin'" campaigns from corporate interests to keep laws about open wages from being passed): if the union contract is public knowledge, then you know what wages are at given levels. For instance, in my new job, I know that I am being hired at a certain level and certain step within that level -- so I know my salary. OTOH, in my current (non-union) job ... even though it's paid for from government funds, since each granting agency has different standards and my salary could, in theory, come piecemeal from different agencies, I have no idea how my salary compares to other "equivalent" workers: even though there are actually standards in place.

So, while the plural of anecdote is not data, at least in my experience, union negotiation of contracts is actually one of the more efficient ways of obtaining information symmetry.

"Obamafan, that strategy is in fact historically a powerhouse. Look to U.S Steel, Standard Oil, Swift Meats, they all got their start by under-cutting the competition, grabbing market share, and never-letting go."

That's not actually true. Those companies secured monopolies because they owned the railroads and newspapers. They then used their assets against their competitors(Both by spreading false rumors and preventing competitors from using rail transport).

The "dumping" strategy, simply does not work. If you wish, I'll refer you to some papers.

"As for labor being a good, I would disagree. Labor is not solely a good - it's also people, who have needs beyond the economic, who have needs beyond material - respect, self-worth, independence, etc."

Airline tickets are a good. But it's not just about getting people there, people want to be treated with respect, have a sense of self-worth, etc.

The market, usualy, settles this stuff in a free agent system. It doesn't always, I'll be the first to say it.

But if we have a situation where the market is failing, then we have a very deep problem on our hands. And one that we should focus on fixing directly.

"But even granting your point, let me ask you this: if the labor market is distorted, due to the disproportionate power of the employer, don't unions act as a countervailing force, as Galbraith argued?"

No, quite the opposite. Unions act as another distorting force, fucking up the system even further.

If you want to counter the disproportionate power of the employer, there are very specific ways to do so(by publishing payroll data for example).

"the disparity isn't just about information. Even if workers had perfect information about the housing market, the costs of travel, relocation, retraining, etc. are generally too high, and humans generally too risk-averse to ever act as a perfect good in a perfect market."

There are usually multiple employers for a given market in any urban area.

Otherwise, I'd vastly prefer job retraining programs and rent subsidies to unions.

ObamaFan717,

you sound like a technocrat, who doesn't trust the people or democracy. Why even have elections if people can't decide their interests?

As Chuchill said, democracy is the least bad option.

To me Obama seems like a democrat not a technocrat, so I don't see why you're a fan.

Disingenuous like the argument that we should attribute the post-WWII productivity and growth directly to unionization? (The argument that both Ezra and Kathy G made)

Well, since all the gains made by women have been due to feminism, and nothing else, surely all the economic gains made by all people all over the world have been made by unionism.

Anyway, though, I'm not sure I buy those models. I know in my field (academic chemistry) and in my wife's field (law) there is a huge asymmetry in hiring: there are many more providers of labor than purchasers of labor ... and it is the asymmetry that seems to have the effect in terms of employers being able to say "you don't like this job -- I can always hire someone else" rather than the number of employers.

Poor decisions really stink, don't they.