Saturday, December 7, 2013

Inequality- are unions the answer?

What role do unions play in addressing inequality? Relatively little, compared with public policy.

Are unions the answer to the current tide of inequality? I don't think so, either practically or ideally. One enormous fact about unions is that they are incredibly unfair. If you are in one, then great, you may strike it rich, so to speak. If you are in a good one that knows its business, you may be able to capture much of that business's profits. But if your union is ineffective, or non-existent, tough luck. Unions don't do you any good, other than their general political activities, which can be beneficial to the working class. Or not...

The conflict can be even more pointed. Government employee unions, like the local police and firefighters, use their political influence and concentrated money to capture resources that local politicians don't care that much about or regard as their own.. taxpayer dollars. The current public pension debacle is a long story of spineless politicians bought and paid for by unions that attack the public interest for private gain.

Unions also create a great deal of strife, usually for good causes, but not always. They are structured as adversarial institutions with a very narrow scope. When sufficiently successful, they can bring an entire industry to its knees, as the US car industry learned to its dismay. They have a far less complex job than their adversary does, which has to run the complete business.

Unfortunately, in the absence of unions, corporations are happy to capture all the productivity gains of their workers for 1) their management, and 2) their shareholders, leading directly to the inequality that has been culturally and economically so damaging in the US and elsewhere. The labor market is a disaster- for many reasons, it is not efficient or fair in valuing work, let alone lives.

So what is needed? The touchstones for any solution are fairness and effectiveness. One example is raising the minimum wage. This is a no-brainer that lifts all workers at or near the minimum wage level to a more livable level. The minimum wage should be set at least at the poverty level, which currently 23,000 per year, or $11.08 per hour. I would support a wage higher than that, to 1.5 times poverty level, with perpetual indexing in the future. That might actually reduce poverty in the US.

A second element would be a guaranteed minimum wage job, provided by the government, if no others are available, so that all able people can get work and serve others for a decent wage. As previously described, such work is plentiful in principle, and much of the funding would come from lowering the cost of existing safety net programs.

A third element would be universal equity in pensions and workplace benefits. The idea that youngsters contemplating their career paths can make a rational decision at a young age to evaluate prospective professions based on their ultimate pension payouts is insane. That outcomes vary so dramatically is grossly unfair. All workers should get the same treatment, which in an ideal world would involve a beefed up Social Security system, raised to 1.5 or 2 times its current level, and cancellation of the 401K non-system, which just bleeds money to Wall Street. Beyond that, whatever workers save on their own should be their own business, and get special tax treatment at only nominal levels, if at all. Mitt Romney's $100 Million gold-plated 401K is an appalling abuse and must never be allowed to happen. Similarly, health insurance needs to be removed from the workplace, completing the Obamacare trajectory, so that the employer-employee relationship is not clouded with ancillary issues and even more power asymmetries than are necessary.

A fourth element, which goes without saying, is strong Keynesian policy at the federal level. We need a couple trillion more stimulus to resolve the current recession in a timely manner, and a government that actually cared about its people would provide it. The only way a labor market works for workers is if unemployment is low. Then we can worry about inflation, for which there are plenty of other tools.

A fifth element would be to return to the union issue. With a higher minimum wage, and guaranteed work, and strong Keynesian (even MMT) policies on the federal level that keep employment high and the labor market favorable to workers, there would be less need for collective bargaining. Indeed, I would end collective bargaining for pay and benefits. Benefits would be nationalized or standardized, and pay would fall to the labor market and to individual bargaining. Workers could not be fired without cause after working for some probationary time, say a year. Basic protections like that should be standardized, not left up to individual negotiations.

Unions would still allowed, indeed they would be mandatory for all workplaces, but only to negotiate miscellaneous work conditions and manage individual employee negotiations. Every company would be met with an equal sized union composed of its workers, organized automatically, just as the shareholders are organized. And they would be empowered to have a vote on the board of the company, to bargain about most non-monetary conditions. Unions would also be the main employment agent for each worker, bargaining individually for pay, and matching the employee with external jobs and employers as part of the negotiation process.

Any industry-wide corporate grouping would be complemented by a worker group of equivalent size, insuring that worker interests are counted at the table at all levels. Both corporations and unions would be under much greater restrictions against any kind of spending on individual political campaigns and lobbying. There would be no more organizing fights, etc. Insuring the proposed separation between pay and conditions negotiation may well be unrealistic, however. There are many overlaps, such as seniority systems and time off allowances, etc. But in principle, this would be a way to reconcile the true need for unions in countering employer power with a need for a labor market that is effective, fair, and transparent.

One way to make the labor compensation market more effective is to make it transparent. Employers today benefit from the "privacy" of salary data, hiding what they pay employees. The Lilly Ledbetter case would never have happened if such secrecy were not routine, and routinely damaging. It is a huge power assymetry, benefitting employers. Yet public salary and wage data in many other fields, such as professional athletics and boardrooms, doesn't make the sky fall down. James Surowiecki had an interesting article recently on the perverse effect of public CEO pay disclosure, to whit that boards typically want to believe that they have above-average CEOs, so mandated transparency tends to increase CEO pay, not decrease it. The same mechanism is needed in the trenches. Everyone needs to know what everyone else is being paid.

Beyond that, with contemporary technology, the labor market could be much more effective, putting workers and employers into a perpetual market that evaluates talents and needs with great specificity. Each worker could have a personal profile perpetually active that all employers (and anyone else) can see. And vice versa with job positions. The matchmaking could be highly automated and continuous. It would be like having an agent working on your behalf, whether entirely technological, or aided by the worker's union.

The erosion of the middle class may be a natural consequence of laissez faire. But it is not something we have to accept. With a modicum of public management of the system, we can have one that grows the middle class and makes us a more civilized nation.


  • Plight of unions, cont...
  • Excess CEO pay, funded by you and me.
  • Our climate.. apathy running rampant.
  • Community for the godless.
  • The terrible economy, yes, it is crushing the youth.
  • Immunity for financial crimes? They need to be sent to jail, not to GO.
  • Personhood for companies? No, no, no.

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