Chickens and Potatoes
In ancient times, folks conducted transactions via the barter system. If a vegetable farmer wanted a couple of chickens for soup, he found a chicken farmer and traded something he had--a bushel of potatoes--for the chickens. This generally worked but was cumbersome. Going shopping with bushels of potatoes could lead to back strain.
Hence man invented a "medium of exchange"-- money. The chicken farmer would establish a price for his chickens. The vegetable farmer sold his potatoes at market for a price and could then buy the chickens with easily-carried money. (Some money was not so easily carried, but it was still better than potato bushels.)
The money represented value: chickens, potatoes, birdhouses, whatever. It was a medium of exchange with no significant intrinsic value. In addition to produce, it came to represent skilled labor. People would build something and be paid for their efforts. Companies were formed to produce merchandise which would be sold at market. The tradesmen and laborers who manufactured the goods were paid commensurate with their contribution to the value of the product.
Enter the profit system. Manufacturing facilities had overhead: building, tools, raw materials, etc. Also, administrative personnel who didn't actually build things were needed to manage finances and marketing. Thus, and this is a key point, the workers had to be paid less than the true value of their work in order to provide for this overhead. The difference was profit which went to pay for the means to manufacture. The compensation for the workers was determined by the value of his or her contribution to that product, less a profit margin. A limiting factor was the price placed on the company's product to make it competitive in the marketplace compared to competitors.
Union collective bargaining is an anachronism. At the dawn of the industrial revolution, unions were needed to counteract abuses by greedy robber-barons. Today, that is no longer the case in this enlightened society. The union practice of continually negotiating for higher pay for the same work ignores the real world of industry.
To increase wages without a corresponding increase in the value of the worker's contribution is economically unrealistic. It leads inevitably to a loss of jobs to automation and plain old belt-tightening. As a result, we have permanently lost jobs to foreign competitors who pay lower wages. The relationship should be obvious. Due to a great extent to union militancy, we have priced ourselves out of many manufacturing venues. (How many U.S. manufacturers of consumer electronic equipment are there?)
A gross distortion of the labor market exists in the area of government employment. In industry, the bargaining process with the unions is often constrained by the economic realities of the marketplace. When the Big Three automakers had the field essentially to themselves, the UAW was able to negotiate extremely generous wages and benefits for their members. When foreign competition became a significant factor, things got sticky. To their credit, the UAW recognized the problem to some extent and moderated their demands and even gave back some compensation. Not all unions did the same. (I remember a strike at a local packing plant--I think it was Patrick Cudahy--that went on for a very long time. Finally the company closed the plant and left. I recall a striker being interviewed and exulting, "We won!" But the jobs were all gone.)
Government has no constraints of profit necessity or marketplace competition. Consequently, the tendency is to acquiesce to union demands, reasonable and unreasonable. We see consequences of that today in our state government and its huge deficit. (Labor costs are not the only factor in the deficit, but they are a major one.) Collective bargaining involving government is an anachronistic misnomer. There was no real bargaining involved. At least until the state went broke.
Governor Scott Walker's proposal to terminate union collective bargaining, with some pragmatic exceptions, is simply a recognition of reality. Even though wages are technically still bargainable, severe constraints are being proposed such that little actual bargaining would be possible. Predictably, there is a huge outcry of gored oxen and the Gov. is being portrayed as some kind of heartless ogre.
Unions in general have become obsolete, constituting a self-perpetuating drain on workers' income through union dues to pay for their substantial administrative expenses. In the present highly competitive foreign-dominated marketplace, they are more the problem than the solution. Compensation should be determined by the real value of a worker's contribution to his employer's business, not his seniority or the strength of his union. Public employee unions are particularly unconstructive and unrealistic. In this instance, Gov. Walker is right on the mark.
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180 Comments
bamaphd - Feb 15, 2011 6:11 PM
They should be included don't you agree?
irked - Feb 15, 2011 7:45 PM
are ill-informed on this . I will answer but I would like to see what you think first .
Please give us your PDLS opinion on why some are not touched ?Great blog Al yours
is getting better and better . I could never have written it so well .
reformed trucker - Feb 15, 2011 8:37 PM
I don't know what police or firemen get paid, but whatever it is, it wouldn't be enough to get me to do their job.
Carl Hicks - Feb 15, 2011 8:46 PM
Al your saying...."Today, that is no longer the case in this enlightened society. "...shows you are not a member of todays work force.It is mighty brutal out there for anyone not in a secure and established job.
I was always anti union and my union friends are now having the last laugh since they are much better off when it comes to benefits and security.
irked - Feb 15, 2011 10:54 PM
Carl . Wow first stab at it and Trucker takes home the prize . Just goes to show you
what happens when people are thinkers . lol..
aneuhauser - Feb 16, 2011 1:29 AM
Carl: Yes, there are good and bad workers. Unfortunately, union rules often protect the bad apples, which hurts the good guys.
Most employers today realize that ticked off workers are a liability and so make at least some attempt to treat them well and keep them happy. There are exceptions, but most of those don't survive. Also, the NLRB and OSHA are now a factor in industry that did not exist years ago.
Your comment about your union friends being better off illustrates my point. They are better off at the expense of non-union and white collar workers. Remember, someone has to pay for those benefits since they do not typically result in greater productivity. I think this is patently unfair.
irked: Thanks for the nice words. I value your commentary.
bamaphd - Feb 16, 2011 6:17 AM
What does it take to Recall the Gov. A petition of 500,000? I know 1/5 of that number are ready to sign today.
jhayett - Feb 16, 2011 8:01 AM
bama...since you seem to act like only you have all the answers, why don't you tell us all what Walker should do to stop our state from going deeper into the red?
Fighting Jims Lies - Feb 16, 2011 8:19 AM
This is completely false. Profits are the gains a business makes after ALL expenses are taken into account. Profits are NOT the difference between total expenses and worker's wages.
Since your key point (note that you've claimed that this is a key point) is false, you should probably rethink your entire blog.
Fighting Jims Lies - Feb 16, 2011 8:43 AM
Here too, you are wrong. Global corporations abuse humans in poor countries. Do you not understand that why the clothing industry has all but evaporated in this country? There are people in the world making less than $1/day. I'd really like you to explain why you would consider a company that pays less than $1/day not a "greedy robber-baron".
Since you are wrong on this point, you need rethink your entire blog.
jhayett - Feb 16, 2011 9:14 AM
Fighting Jims Lies - Feb 16, 2011 10:55 AM
bamaphd - Feb 16, 2011 10:58 AM
http://quickfacts.census.gov/qfd/states/55000.html
The state has had basically Zero population growth and the population is ageing.
The problem with what Walker is doing is he is about to chase away the best and brightest from the state. The people who have the best skills and pay the most taxes from all levels will leave the state. They have the mobility to do that, the rest of Wisconsin does not have that level of mobility because they are tied to a certain type of industry, specific to the state. And who will fill those openings when these best and brightest move away? No one. because the atmosphere in Wisconsin is now poisoned with this action of his.
What Walker needs to do is to create DEMAND both inside and outside the state.
How to do this? How about a ten year tax holiday for anyone moving to the state from another jurisdiction on their property taxes, and the same for a business if they start a business during those ten years?
How about recruiting Foreign Students to fill Wisconsin University classrooms? They spend huge amounts of money in their communities, and if you treat them right, they may even stay in Wisconsin to start businesses when they graduate.
Cutting costs is the easiest most non-inventive thing you can do that harms people and institutions.
Focusing on growing an economy is more difficult and requires imagination and new thinking.
Walker has opted for the easy, because the public service is easy to take pot-shots at. The pain will come a few years down the road when services you need will not be there.
sirlaughsalittle - Feb 16, 2011 3:33 PM
"Milwaukee Archbishop Jerome E. Listecki on Wednesday described Gov. Scott
Walker's efforts to limit the rights of public employee unions as "union busting,"
and in a statement he said there is a "moral obligation each of us has to respect
the legitimate rights of workers.”
Listecki, who was installed as archbishop on Jan. 4, 2010, said in a letter to the
Legislature's Joint Finance Committee that, "this much needed call for
cooperation and communication between workers and management comes as
opposition to Gov. Walker’s union busting budget continues to grow."
Don't mess with the Pope!
He's pretty tight with Superman.
http://www.jsonline.com/blogs/news/116337719.html
irked - Feb 16, 2011 4:17 PM
were one of those people you would be happy to work for that much money . Thanks
to you the companies have no reason to ship their products so they will leave and
those people will make less . Then people like you complain that the Governor is
taking a small percentage away from union workers ? Yet you want them to take all
away from those dollar day people .. Get out of the basement and see how the poor
people in the world live !!
Fighting Jims Lies - Feb 16, 2011 6:25 PM
irked - Feb 16, 2011 8:17 PM
you .Just ask .
yert49 - Feb 16, 2011 9:01 PM
Bama, FJL, Sirhehehaha, are going to separate themselves from the rest of us with wonderful dissertations on economic theory. The basic concept of VALUE never enters their realm of very limited thinking. Apparently the idea of producing a 5o cent t-shirt with ten dollar an hour employee does nothing for dollar cost averaging. It's not a zero-sum game. The pursuit of profit is morally right. Even the poorest of the poor can participate by working, purchasing, and eventually profiting. Maybe not to the extent that these 3 economic illiterates would like. But when you are coming from nothing.....
referee33 - Feb 17, 2011 7:08 AM
bamaphd - Feb 17, 2011 7:28 AM
"Apparently the idea of producing a 5o cent t-shirt with ten dollar an hour employee does nothing for dollar cost averaging."
Where did you get that from? I said nothing of the kind. Please show where I said anything like that.