Union-Busting Is Market Manipulation and Wage Theft
The “information asymmetries” in such a negotiation are immense — they’re actually more like process asymmetries. Companies spend millions of dollars on human resource experts, consultants, labor lawyers, etc., and they know both the conditions of the market and the ins and outs of the labor laws in intimate detail. While working people with rarified skills are often members of trade associations or guilds, read trade journals and have a pretty good sense of what the market will bear, many low- and semi-skilled workers don’t know their rights under the labor laws, don’t know how to assert them and (rightfully) fear reprisals when they do. They often have little knowledge of the financial health — or illness, as the case may be — of the company to which they’re applying for a job, how profitable it is, how much similar workers in other regions or firms earn, etc.
For the majority of Americans who lack scarce talents or a high level of education, negotiating a price for one’s time with a firm on an individual basis is anything but a free market transaction. That’s where collective bargaining comes in — when workers bargain as a group, they do so on a level playing field with employers, and the resulting wages (and benefits) are as high as the market can bear, but no higher.
Unions, like corporations, have a great deal of information about the market. They know how a firm is doing, how profitable it is and where it is relative to the larger industry in which it operates. They know what deals workers at other plants have negotiated. They have attorneys who are just as familiar with the American labor laws as their counterparts in management.
And while an individual has very little leverage in negotiations — again, most companies can do with one less worker — collectively, an entire work force has the ability to shut down or at least slow down a company’s operations if management chooses not to negotiate in good faith (as is often the case).
It’s not difficult to quantify the difference between what most hourly employees take home and what the free market would dictate. Economists Lawrence Mishel and Matthew Walters estimate the “union wage premium” — the amount of additional pay a unionized worker receives compared with a similar worker who isn’t a member of a union — at around 20 percent (that’s in keeping with other studies, using different methodologies, which put the premium in a range between 15 and 25 percent). If one includes benefits — health care, paid vacations, etc. — union members make almost 30 percent more than their nonunion counterparts.
Another way of looking at it is this: Millions of American families are scraping by on below-market wages, and if that weren’t the case, there wouldn’t be such a large group of American families among the “working poor.” In economic theory, it’s a given that a producer can’t sell his or her wares below the cost of production. The equivalent to the cost of producing a gizmo, when we’re talking about the sale of someone’s working hours, is the cost of providing basic necessities — nutritious food, safe housing and decent medical care. These are out of reach for the almost three million American families who work full-time and live beneath the poverty level. According to the Working Poor Families Project, half of the working poor have no health insurance.
So, I’m turning the free market argument around and using it against the union-busters. What do you think?
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chundini:
February 25th, 2011 at 4:16 pm
Even if scott walker wins for the Koch brothers in destroying the unions and we have to step back over a hundred years of justice stuggles, They (the elites) will pay dearly for that. The teachers will keep on teaching with more subtleties. Fostering truth never before broached. They will not be outspoken to be targeted as subversive. While their prebscribe essays assignments that will filter out the most brightess with a thirst for knowledge. Many of the elites’ children will go to private schools to avoid contamination. These private schools are seldom a den of creativity but of doctrination to appease and justify the high fees in accordance with what they think their high paying customers want. These Elites are prodatory amongst themselves unless a common goal is targetted through their concensus. Why do the Rothchilds inter-marry? It is not a big incestuous fetish. It is in the keeping Monney and and power unto itself. Once the lower classes (middle, poor and poorest) have been usurped and render compliant to their designs. They will historically follow the path to infight amongst themselves as we have seen Bear Stearns and Lehman Brothers. From a text book classical case study one would think, Although it is an ideal position to be in, or will this bring me closer to an anti-trust situation. I lay pleasantly awake a few nights pondering if Obama is a trully bought man or simply our new Gaius Marius
ReneeMax:
February 26th, 2011 at 5:55 am
What’s going to happen is: there will be a mass exodus of the educated middle to upper middle class. Already there are hundreds-of-thousands of educated American expatriates living and working abroad. My niece, who recently obtained a master’s degree in public health, specializing in not-for-profit health care, from the NYU in Manhattan, NY, is now working for an NGO in India. In two years, she will be transferred to the NGO’s main headquarters in Switzerland, where she intends to live out her life. Many young Americans are returning to their grandparents’ (or great grandparents’) homeland like Scotland to attend a four-year undergraduate university program. By the time these young Americans finish their university educations abroad, they will have already formed very close bonds with friends and potential mates. These young Americans, studying abroad — because a university education is no longer affordable or viable here in the U.S. — will make a new home abroad as permanent American expatriates. Most of our grandparents (and great grandparents) would never comtemplate immigration to the U.S. today. The U.S. has evolved into a most repressive and oppressive regime, espousing virulent forms of religious, social, and political extremism. In reality, the Republican party is not much different than the extremist parties in the Middle East like Hamas and Hizb’allah.
Hector Chavana Jr:
February 26th, 2011 at 2:40 pm
I like original arguments, and critique only to strengthen these arguments. The idea that coercion is used in the negotiation of labor is very insightful. Brilliant. Coercion is economic philosophy, but the practical theory is found in contract law. Of course, I have always known of the disadvantage of having rent on your back when you need a job, but I had never thought to consider it through the prism of contract law, or economic philosophy as you seem to do here. From the little that I know about contract law, this could be called “duress” in certain circumstances. The worker has to eat and keep shelter over his head, resulting in a great amount of duress should he not accept the offer to work. A contract signed under duress is often voidable. This duress argument might not apply if there are other market alternatives to the choice of employment. However, in the grand scheme of things, this duress argument might provide a greater theoretical framework for socializing all basic needs, rather than as an argument as to the efficacy of labor unions. So the worker is under duress from his need to eat? How does a labor union remove the existing duress?
As far as the asymmetrical information argument…I guess I have a couple of thoughts. On the one hand, I don’t know that workers are really that uninformed about their own product (labor). I understand that jornaleros (day laboreres) here in Houston, mostly charge $80 per day, sometimes $50 under specfic circumstances. It is true that many workers of all stripes are unaware of their rights, but I think most understand what price their labor will fetch. Perhaps if you detailed out the asymmetrical information argument and applied it specifically to worker’s rights (as opposed to only the price for labor) I might be more agreeable.
On the otherhand, the mortgage market collapse nakedly showed what an asymetry of information could do to collapse markets. A pool of overly informed suppliers of mortgages sold to a dismally uninformed pool of buyers (borrowers). The borrower’s lack of familiarity with product features led to the collapse of the market. The analogy is not exact, but perhaps still useful. In the mortgage market, the buyers were uninformed. In the labor market, the seller (of labor is uniformed). Perhaps providing some examples in which uniformed sellers have collapsed market might bolster your argument.
I reiterate that your take on duress in the sale of labor, viewed through the prism of economic philosophy, is one that I won’t soon forget.