Winds of Change.NET: Liberty. Discovery. Humanity. Victory.

Formal Affiliations
  • Anti-Idiotarian Manifesto
  • Euston Democratic Progressive Manifesto
  • Real Democracy for Iran!
  • Support Denamrk
  • Million Voices for Darfur
  • milblogs
Syndication
 Subscribe in a reader

A Liberal Argument Against Public Sector Unions

| 64 Comments

My friend Kevin Drum has a piece coming out next week in MJ about the decline of private-sector unions. Today, he has a short blog post up about the contremps in Wisconsin and the effort by the new Gov to shut down the public sector unions and change the terms of the public employees employment (greater healthcare and pension contributions, etc.).

Kevin says:
I won't pretend to be the world's most full-throated defender of public sector unions. If I could trade ten points of union density in the private sector for ten points in the public sector, I'd take the trade in a heartbeat. But that is, obviously, not the trade on offer. Nor is what's happening in Wisconsin merely hard bargaining during tough economic times. That would be understandable. Rather, it's an effort to destroy one of the few institutions left that fights relentlessly for the economic interests of the middle class. That's why conservatives oppose unions of all kinds, both public and private, and regardless of their faults, that's why they deserve our support.
Well, it's great that he 'may not be the most full-throated supporter of public sector unions', but in fact - as a liberal - he should be their biggest opponent.

No, they don't deserve the support of true liberals.

First, and foremost, the problem with public sector unions is that have captured state and local politics in the states where they get to play.

In California, the total contributions in the last two years from State & local government employee unions plus Police & fire fighters unions and associations plus Teachers unions is over $6.2 million dollars, which is 15% more than the next biggest donor - construction unions, 73% bigger than the third biggest donor - attorneys, and over 257% bigger than the first real business lobby, telecommunications (I'm skipping Native American gaming as sui generis) - data from the great MapLight.org website.

If you can tell me that the public sector unions don't have the pink slip to many of our California politicians without cracking up ... I want some of what you're drinking.

And there's the problem. When state employees are primus enter pares among the interest groups the state has to balance among, we find the state and local governments increasingly setting policies directly for their benefit. And for decades, we did just that; they ate at the top of the trough, and the rest of the folks just ate what was left. And as long as there was lots...it was fine. There's less now.

Less because yes, we are paying lower taxes than we did in the Clinton years. Less because California shifted the tax/revenue structure around when we passed Prop 13. Less because there's a recession. less because we're gradually becoming less wealthy as we have to compete with the rest of the world.

And public sector employees are saying - well, that's your problem and trying hard to hang on to what they've managed to win in the political process.

But who gets hurt by this? The poor, that's who.

Look, you broadly have four variables that control any system: 1) how much can I spend (budget)? 2) how much do I get for it (efficiency of work per unit spending)? 3) how much do the people doing the work cost (wages)? 4) what do I expect to get out of it (output)?

In a world of fixed budgets, I can increase efficiency per worker, or lower wages and hire more workers (until the efficiency drops), or if my workers are less efficient and cost more, I can do less.

So far all efforts at managing public sector labor costs have involved doing less - we furlough and close offices on Fridays; we cut programs; we shrink the rolls of those who are helped.

We don't look for efficiency to improve outputs or cut labor costs. Why? because work rules and labor agreements - agreements signed with politicians elected with the money provided by public sector unions - keep us from doing that.

I'm kind of sympathetic to the real people who are facing cuts and who aren't going to enjoy the ever-escalating prosperity that they signed on for. But I'm not so sympathetic to the fact that almost all of our government programs have turned into jobs programs.

As a liberal, I want an activist government that can actually do things. I want the poor helped, children educated, the ill helped to become well. That cost money, and potentially imposes on my life in a variety of ways. At some level, I - and lots of others - are willing to pay the money and be imposed on - to help the children, the poor, and the ill.

When you tell us that the money is for a bigger boat for the administrator, or that the inconvenience is because work rules - for the benefit of staff - can't be changed, I'm a whole lot less willing to pay.

It's hard to go ask for more money for government - which it needs, badly (to get us out of debt, to rebuild our infrastructure, to invest in the ways that California invested in the 50's and 60's) - when the bulk of that money goes to people who make as more or more than taxpayers do. It's flowing uphill, and that's not how - as a liberal - I think it ought to work.

Are the wealthy and corporate interests playing up these issue? Of course they are. But no one can deny that they are real issues, and it's both stupid and shortsighted for the liberal commentariat to somehow try and wish them away into some kind of Koch Brothers talking point.

This is an issue we have to deal with, and now is the time. I want to push back public worker unions so that government can do more for poor people and not for the middle-income bureaucrats who are supposed to be helping them.

If there is going to be a showdown now (and the fact that the national unions are piling onto Wisconsin shows that there is), let's have one.
-

64 Comments

I think there's a much more terse argument against liberal support of public sector unions.

The argument is that it is (or certainly appears to me!) to be fundamentally at odds with modern liberal political philosophy. The point of collective bargaining is to protect yourself from the depredations of your bargaining partner. But in this case, the bargaining partner is the government. Advancing the claim that public sector workers need protection from the government seems to play to the philosophical bias of the conservatives, with the government as powerful adversary. It makes the liberal stance on government power seem awfully... convenient.

Rather, it's an effort to destroy one of the few institutions left that fights relentlessly for the economic interests of the middle class.

That would be the middle class who shell out massive property taxes to support failing schools, including paying full price for teachers who do nothing because they've been suspended. It's hard to swallow that one even if you chase it with a big swig of 100 proof True Believer.

Having the teacher's unions front and center in this fracas will prove to be a huge mistake - not that anyone making this mistake will acknowledge it to the day they die. Having Obama and the DNC and Ariana the Magic Dragon bring in their bully pulpits will be another big mistake.

But the biggest mistake will be nationalizing this issue, dragging in New Jersey, New York, Illinois, California - inviting some instructive comparisons. "What is wrong with all of these places?" the public might ask.

And public sector employees are saying - well, that's your problem and trying hard to hang on to what they've managed to win in the political process.

Before this move, the teachers unions volunteered to give up 100million in benefits but the gov wouldn't meet with them. They have continued to say they will march until he is willing to MEET with them. Not give in their demands, just meet. They have also said they are perfectly willing to give concessions, but they would like to choose how the cost of those concessions are distributed.

It's hard to know if they're request will be fair. I guess he would have to MEET WITH THEM to find out. Or he could thumb his nose at them, which is why they're thumbing back.

I think it's also interesting that he's trying to remove CBagreements for Democratic strongholds... but leaving republican strongholds (Fire & Police) completely intact.

Apart from the practical consequences of giving state power to one set of workers so that they can collect money from another set of workers, is the irony of left wing ideology becoming the politics of the well off and protected. It's an irony with a long history, however.

It's hard to know if they're request will be fair. I guess he would have to MEET WITH THEM to find out. Or he could thumb his nose at them, which is why they're thumbing back.

Or they could publish their plan. Maybe they could meet with their elected representatives. Oh, wait, they're here in Illinois. Strike that, I guess.

In any case, I'm a bit unsympathetic, since my coworkers and I don't get to decide how our raises and salaries come down, either. We're just told. I see no reason for public sector workers to be any different.

(I would, however, agree to get rid of collective bargaining for all public sector unions instead of just teachers unions. But we can't have everything. Since I'm in Illinois, I probably can't get any of what I want.)

In any case, I'm a bit unsympathetic, since my coworkers and I don't get to decide how our raises and salaries come down, either.

Unions don't get "to decide", they lobby on behalf of their interests.

You can do it too (it's actually much easier in a private company).You go to your boss, and say "I want a raise", and then you lobby him on your behalf. If it's not granted, you can find a job somewhere else, (or threaten to do so ).

That doesn't work in education, because salaries are largely standardized, and those standards are directly linked to the funding granted by the legislature. Therefore,it makes sense to bargain with the legislature, not your boss.

The other thing worth mentioning is that these sorts of strikes often have mas much on the line for resources: making sure that schools have enough equipment, supplies and technology to do the best teaching job they can.

alchemist, when you say they 'lobby' it's kind of disingenuous - the reality is that they are such a powerful lobby, and so many electeds owe their offices to them that it's more like a staff meeting than a lobbying one...

...and I actually give the Gov credit for trying to deal with the root of the problem, rather than a band-aid solution for this one time.

Marc

Let’s squash those unions, let’s neuter their political influence, let’s pay our muni drivers minimum wage for driving TAXPAYERS to the financial district. Let’s get rid of their pensions. Those greedy selfish unions; those pigs getting fat at the trough! Those worthless government workers shouldn’t earn what real taxpayers earn, let along more. Let’s get rid of those government programs, because almost all of them are just job programs for rent seeking trough feeders!

Is that what passes for liberalism these days? I don’t think so. The effort to destroy public unions is not about building activist government that can actually do things, like help the poor, educate children, or help the ill to become well. This is right wing orthodoxy aimed at destroying government, not building an activist government that can do progressive things.

Alchemist, I'm following your reasoning here, if not your exact word choices. You're the one who said that the unions want to choose (your word-- or decided, my word) how the costs of the concessions are distributed.

So, no, they don't "get" to do that, but your claim is that this is one if their demands. The demand strikes me as unreasonable.

But I will retract and revise my statement about the other public sector unions not affected here. I said earlier that I would support them taking a haircut, but that's questionable at best. At best, I would not in principle oppose it.

Back when A.L. was talking about California politics, I made the observation that communication skills are important, but only insofar as they enable coalition management (specifically, building friendly coalitions and damaging adversarial ones.) That principle applies here as well. If Walker does what you're implicitly asking for, he will mobilize a coalition against him that will have a greater chance of defeating him. Why on earth would he want to do that? Instead, he is doing the thing with a greater chance of success-- putting a wedge between elements of that larger coalition. I point out that this would not work if the various unions in play were not self-interested as well.

Now, what I would like to believe is that once Walker is done with the educators, he or a successor will go after the fire and police. I'd like to believe that, but it's possible that he is cynically, self-interestedly playing to his base and maximizing not only the short term success but also his long term re-election prospects. On the other hand, you could be cynically calling on Walker to do stupid, ineffective things because you don't want to see any meaningful reform.

Since I don't have access to the contents of either of your hearts, I can only remain in support of what I see as a short term good, and hope that it is followed by another short term good, later. I will not let the perfect be the enemy of the good.

And it turns out, we really have had this conversation before. Until I looked it up, I didn't remember that it also included exceptions for public safety responders. So my position is now what it was then: Everyone should take a haircut, but insisting that it happen all at once is a recipe for making it happen never.

When, when will I learn to preview before posting? At least the dangling anchor was toward the end....

Roland, if the unions think they are the government, we're in a worse position than most people on the right think.

Marcus, my read is that the public-safety unions were supporters, and so Walker is doing the standard 'reward-your friends' thing that I dislike in politics...

Marc

Ahhh, Roland, why doesn't your comment shock me?

So we pay them whatever they want and watch as government slowly folds in on itself because we're bankrupt...it worked so well in New York in the 1970's...

A.L.,

It's quite possible. I have no access to Walker's heart. (And I have more than enough to worry about here with Quinn and Daley.)

Still, insisting that Walker shoot himself in the foot is a little naive. It's not going to happen. Hope that someday a Democrat will come along and give the public safety responders their own deserved haircut, if nothing else.

how the costs of the concessions are distributed...

Maybe I should have chosen my wording a little more carefully.... My understanding was that the unions wanted to be able to discuss the cuts and how those cuts were structured to employee plans (ie money vs. benefits) not who was being cut.

If an employer decided to cut my pay, I would certainly hope they would come to me about it first, and least show they care enough to bridge the divide between both groups.

Marcus:

Public unions are not the government, but they are a potent political force that influences government. As Drum points out, they are one of the few institutions left that fights relentlessly for the interests of the middle class. I don't have a problem with that.

There is lots to be critical about with public unions: the whole self-interest thing can be unseemly and counter-productive to good overall policy. Whether adjustment should be made to public pensions, or overall compensation are certainly fair issues to discuss. I have no problem with such discussions.

Marc:

Noone is advocating paying unions whatever they want. Of course your comment shouldn't "shock" you: it's an accurate paraphrase of your post. And if you think that's "liberal," it ain't.

Roland if public sector unions are not the government, then an attempt to destroy public sector unions is not an attempt to destroy the government.

Climb down off your rhetorical high horse, quit throwing incendiary cocktails, and join the reasonable part of the conversation. Or don't. But don't complain when you're called on your absurd rhetoric and blatant self-contradictions.

Roland:
As Drum points out, they are one of the few institutions left that fights relentlessly for the interests of the middle class.

He doesn't point that out, he just asserts it without explanation. Unless the explanation is found in the following sentence, where he asserts that this is the REAL reason that conservatives oppose unions. The reason being, therefore, that Kevin Drum is dumber than a whole classroom full of freshman Education majors, and less subtle.

Unless the public sector unions are allowed to simply define themselves exclusively as "the middle class", maybe you can give me one example of their relentless struggle for the middle class.

Marcus:

O.K., fair enough. I see what your comment is pointed at. Let me clarify. Republicans want to starve government, so they can drown it in the bathtub, so the saying goes. Destroying the influence of unions and any other pro-government influence group is part and parcel of that.

I'm looking hard for the reasonable point in the original post, and I'm having trouble picking it out of the innuendos. But let me unstuck my button that Marc has pushed and try once more.

The liberal premise is:

I want an activist government that can actually do things. I want the poor helped, children educated, the ill helped to become well. That cost money, and potentially imposes on my life in a variety of ways. At some level, I - and lots of others - are willing to pay the money and be imposed on - to help the children, the poor, and the ill.

Agreed. That, however, is certainly not the intent of the $60 billion cuts outlined in the House bill this week (by reports, for whose seen the thing?), and its not the intent of a Republican assault on public sector unions. Public sector unions are in the cross-hairs (don't go shoot anyone now!) because they are the most powerful force for that liberal premise quoted above.

The point made in the post, that a public perception that public unions have had too much control over the process leads to a lack of public support for taxes and the liberal premise is interesting. But to think that destroying this political force will advance the liberal cause . . . . I don't buy that for a minute.

Glen: It's my sense that public sector unions generally support progressive taxation. Reich's suggestion for moving forward is to give a tax cut for everyone middle class and below, and hike the marginal tax rate for the top 5% back up to 70%. Public sector unions would support that; they work to elect people who support that kind of thing. Liberals think that would be good for the country. Having public sector unions in that fight is good for the liberal cause. I know you think liberals are befuddled, but that's another story.

Roland -

So public sector unions are fighting for a 70% tax rate, and this is their unique gift to the middle class?

I know you think liberals are befuddled ...

I think scientologists are befuddled. I think liberals should aspire to befuddlement.

This libertarian completely agrees with AL's post. It's hard to see how any principled believer in government activism could make a stand with government unions.

They stand together purely because of politics, and thus are progressives fundamentally corrupted.

Whenever I see people defend government unions, I always ask them for an affirmative defense of their social value. The only answer that makes any sense (even though I disagree with it) is a sort of aspirational argument: hey, you unorganized private-sector workers, have a look at the wonderful benefits you'll get if you unionize! High pay, permanent employment, great benefits, and infinite pensions will be yours if only you join us!

Of course, this argument ignores the fact that their employer has a captive revenue stream, while the real economy is brutally unforgiving to employers who have higher costs than their competitors. But even this captive revenue stream is ultimately sourced from the real economy, and that's what's drying up.

Roland, here's the nub of our issue; you say

As Drum points out, they are one of the few institutions left that fights relentlessly for the interests of the middle class.

No, they fight relentlessly for the rights of a certain favored group of the middle-class; they do little to actually advance the interests of the rest of the middle class, because government as a whole does almost nothing to advance the interests of the middle class as a whole - they can't afford the rent.

Marc

A.L. hits it on the head, I think.

The greatest trick the unions ever pulled was making people think they're on the side of anyone not a union member. They're really not. The unions, neither public nor private, are not synonymous with the poor or the middle class or the government. The unions don't represent the poor or the middle class or the government. The unions represent union members.

I'm middle class, and I'm pretty sure that the default union attitude toward me is that I can go fuck myself sideways. After I hand over my wallet. (This is not entirely idle speculation, either.)

Here is and article with reference to one study suggesting, that in Wisconsin, at least, public sector union influence has not resulted in overcompensation vis a vis the private sector.

Here is another one in harmony with Marc's arguement here.

Here is a longer scholarly piece from Georgetown, which includes historical context. It also reports that most studies continue to find that upper and mid-level pubic sector employees lag behind private sector employees, even counting pensions. It concludes that the argument that public sector unions are drivng state and local governments to bankruptcy is not supported by the facts.

Roland, only your middle link goes anywhere.

The middle one brings up the very painful and under-discussed point that demographics and increasing life expectancy are playing a role here, too.

"My understanding was that the unions wanted to be able to discuss the cuts and how those cuts were structured to employee plans (ie money vs. benefits) not who was being cut. "

Is there a link to this... from before the standoff preferably? There has been so much flat out disinformation touted its hard to know the truth (and shame on Rachel Maddow and others for repeating bold faced lies such as the notion that Wisconsin's budget was solvent before the governor took office).

Try this link to the McCartin article. I've tested it and it should work.

Roland, you realize that's a 'Cry Wolf Project' paper?

One frustrating thing in this area is that there is virtually no research that wasn't done by someone with a dog in the fight.

I'd love pointers to some if anyone knows of any...

Marc

The unions represent union members.

That might be amended to say that unions represent the interests of senior union members. If any of these mandarins have their jobs eliminated - and they frequently inhabit the most useless departments - they just "bump" less senior members elsewhere in the union and take their jobs.

This is why the union leadership is never impressed by threats of lay-offs, which they always prefer to pay and benefit cuts. The shop stewards and the overpaid lardasses are immune to them. This is also why city and state governments who lay off public employees wind up saving less money than they expected. The cheap workers go, regardless of their merit or the importance of their job.

This is quite apart from the contempt that unions show their members in the matter of electing leadership.

It's also not much of a paper on its own merits, A.L.

A good half of it is a collection of recent quotes and a collection of quotes from a few decades ago, the gist being, "These are the same, therefore they're false." The conclusion is barely more detailed than that. This shouldn't pass muster in a freshman level political science course.

Who is it that thinks that Unions Represent anything other than Unions? Everyone knows that and they also know political puffery when they see it.

Who is it that thinks that Unions Represent anything other than Unions? Everyone knows that and they also know political puffery when they see it.

alchemist, when you say they 'lobby' it's kind of disingenuous - the reality is that they are such a powerful lobby, and so many electeds owe their offices to them that it's more like a staff meeting than a lobbying one...

I would imagine that this is how powerful lobbying groups deal with those elected officials they are trying to influence. Is there something that makes these unions different in some regard?

If so, can you explain how?

The last time I looked,Government and Politics were Influence. "Special Interests" are short hand for "The Guys that give my Opponent Money", or have I missed something.

It will be interesting how these things turn out nationally over the next six months.

Toc, #32:

Well, right here in this thread, Roland seems to be under the illusion that they represent (or advance the cause of) some broader middle class agenda. So does Kevin Drum, in the original quoted material.

Marcus, my read is that the public-safety unions were supporters, and so Walker is doing the standard 'reward-your friends' thing that I dislike in politics...

AL, my understanding is that while a few of the local fire and police unions endorsed Walker, the State-wide organizations endorsed his opponent and oppose Walker’s proposal.

The argument that public sector unions represent "the middle class" is pretty much wrong on its face if you define middle class in any sort of reasonable way. The average Wisconsin school teacher makes about as much as the median family in the US.

A family of school teachers, say a two parent household, is, by the sort of metric I see school teachers routinely complaining about when they talk about the wealthy... quite wealthy. In the top 20% of all US incomes.

I don't know what's worse... the fact this is the case or the fact that people don't understand this.

-------------

Nor do I understand the argument that such unions promote the agenda of others. One of the classic questions I ask students in my basic econ classes is "Why do unions argue so strenuously in support of raising minimum wages?" If you're already in a union, odds are you're making more than min wage anyway.

Supporters of unions state this in terms of their solidarity with lower wage workers. In practice, however, something else becomes pretty clear.

Suppose you've got two ways to do a job. You can hire Al and Bob to build a fence for you, and pay them $5/hr. They show up with their shovels and a case of bear. At the end of an 8 hour day, they've built your fence for $80 + the cost of material.

Or, you can hire Charlie, from the local fence digger's union. He shows up by himself and charges $10/hr, which covers his time and the post hole digger he users. At the end of the day, he also costs you $80+materiel.

Now suppose Charlie and the other guys at the local get together and lobby the state to raise the minimum wage to $7.50/hr. Suddenly, Al and Bob cost you $120 and Charlie has a serious competitive advantage. In fact, Charlie can raise his own wage to, say $14/hr and still have a competitive advantage.

I have a pretty hard time figuring out how that's a force for good.

MikeDC,

I may well be missing something key here, but am I to understand you are asking why a system that results in increased hourly wages for fence builders is a good one?

How about prosperity?

Assuming there's enough fence building to provide Al & Bob work 8 hours a day, 50 weeks a year (let's let Al & Bob take 2 unpaid weeks off to go the beach in July), before the intervention of Chalies' union in your scenario to raise their wages 50%, Bob & Al are making $10,000 a year, and Charlie is making $20,000 a year.

Following the union intervention, Bob & Al are making $15,000 a year & Charlie is making $28,000 a year. How is that bad?

You've increased the purchasing power of our trio from 30K to 43K. I'm sure all the beer sellers in the area are happier and better off, as well as every other goods and service provider in the area, from whom Bob, Charlie and Al no doubt will buy goods and services that they were previously unable to afford. Plus, there is the added & incidental bonus of pulling two guys out of poverty and one guy a little closer to the middle class. I.e, the American Dream in action.

Also, you seem to feel that a school teacher deserves to make less than the median household income. What do you think is fair compensation for a school teacher? Do you think it is wise to base compensation rates on the assumption that most school teachers are married to other school teachers? I question how fair it is to compare an individual's income to household income in determining whether salaries are equitable. For example, if you can trust Wikipedia (a big if, admittedly), median US household income is roughly $10K less than the mean individual income for a man over 25 with bachelor's degree, and about $10K more for a woman of comparable age and education. In other words, the average Wisconsin school teacher makes an annual salary exactly halfway between the the median individual salaries of men and women over 25 with BAs, the very categories I imagine school teachers fall into. (Again, this is IF you can trust Wikipedia.) This seems fair to me, or shall we pay school teachers the same wages we pay Bob & Al?

Mark,

Of course! Why didn't we see it earlier. In fact, we could have an entire government department that goes around and breaks windows, so that the unemployed can be employed as glaziers! Think of the economic renaissance that your idea will engender!

Or maybe you actually realize that people paying 50% more for fences represents a cost that matches (more or less exactly) the benefit you've pointed to.

You can argue that minimum wages are justified in the sense that people who make very small amounts of income are generally eligible for some sort of government assistance, and there's no sense in the government subsidizing really low wages. In fact I hope that you're thinking along these lines and just not saying the rest of it...

But none of this is anything to do with government-worker unions. AL's saying that one reason to oppose them is that money that's spent on public workers is not, more or less by definition, being spent on the public; spending more on the workers inevitably means that you've got less to spend on what you actually wanted to do in the first place.

Think of them like charities. If you had a charity-worker union that said "gee, we deserve 20% more pay from the charity," do you think donors might sit down and say "hold on now, I don't want my money to go to your workers, I want it to go to your mission"? And that if it kept on like that, suddenly donors might be less enthusiastic about donating at all? Why would that be less the case when it's money moving through the government's hands?

That's a badly phrased assumption, Mark: It's not enough to specify some quantity of fence building, but to specify a curve of fence building demand vs price.

Even under the badly phrased assumption, you're cherry picking only the good effects of the market manipulation. You're not mentioning any of the bad effects, like the fence-purchasers not purchasing other things, or not producing other goods, or laying off other workers.

In one breath, you managed to personify the two classic flaws of leftward economics: You assume that the fence-builders (i.e., "the rich") have no agency at all, and won't adapt to your market manipulations except the way you want; and you assume that the entire economic universe consists of whatever special interest (i.e., "the fence-builders union") you're currently looking at.

This conveniently lets you ignore all possible bad results of your plan.

Avatar,

I wasn't really addressing AL's general thesis about unions. I was addressing MikeDC's very specific & apparent belief that increased wages for workers at the lower end of the economic scale are a bad thing. I have to assume a certain common belief that increased prosperity throughout all strata of society is a desired goal.

However, I think you've shown a light on one of several flaws in AL's thesis. Your claim that money spent on public workers is not money spent on the public is, in most cases, I think quite wrong. If you are building roads, most of the costs will be for labor not cement. If your educating children, most of the money spent will be for teachers not books. If you are protecting the public, most of your costs are going to pay police officers. Mostly what the government provides is services, not products, and that generally requires labor of one sort or another, aka people, aka voters, aka taxpayers. The question is: are the labor costs fair?

To answer your question in the analogy of charities, since it is the area in which I actually work, I can say that it depends entirely on what the mission is. If my mission is to feed the hungry in a soup kitchen, I'm going to spend a certain amount on soup, but I'm also going to need someone to make the soup and to ladle it out. If I am asking you, my donor, to increase your donation so that I can increase the number of people I can feed in the day, a lot more of my increased costs are going to go to labor not soup. No donor is going to say, "why don't you pay your staff less and hire more people." Unless, of course, I am paying them (or myself) exorbitant salaries. But it is well understood among donor that labor is a legitimate cost, and often the greatest cost, depending, of course, on the mission.

If I am offering afterschool sports programs for kids and I want to double my offerings, I may have to buy more soccer balls, but I will also need to hire more coaches. No donor is going to say, "why don't you pay your coaches less so you can hire more."

Donors do say, "Show me the need and show me your costs are reasonable."

In the matter at hand, the public employees in Wisconsin, by all accounts their compensation is reasonable. Furthermore, by all accounts, they have agreed to accept a larger share of contributions to their health and retirement benefits that will equal the amount the governor says is needed to balance the budget. If this is true, it argues strongly against AL's claim that unions will always refuse to make sacrifices and are giving the finger to everyone else. I just don't find that an accurate portrayal.

Personally, I see these as practical not ideological problems. I do make basic assumptions, such as, we want to pay people decent wages & salaries, we want to provide basic and essential services, and we don't want to tax ourselves so much that our overall prosperity is put at risk.

Marcus,

Perhaps you can outline some of the bad results from my plan to have full time work elevate the workers above the poverty line.

What bad results do you anticipate from the minimum wage rising from $5 to $7.50? 'Cause that was pretty much my only point. I suppose you could generalize my point to this: it is detrimental to the entire society to have a working class that lives below a certain economic standard. What that standard is will depend on a variety of factors. I don't expect the lowest paid worker in Cameroon to receive what the lowest paid worker in Switzerland makes.

Perhaps you don't think there ought to be a minimum wage and that it should be perfectly acceptable to pay people as low a wage as you can get away with paying. If so, then we disagree. If not, then we may only disagree as to what is the proper amount in a given place at a given time.

Mark, in the very post you're responding to, I mentioned the notion that increasing minimum wage may (not "is guaranteed to" but "may") result in layoffs. That seems like a bad result to the people getting laid off. Other bad effects would be reduced production, slower hiring, etc.

That's my point: Proponents for increasing minimum wage assume and assert that it's unalloyed good. It's not.

My personal feelings on minimum wage are ambivalent in that, yes, obviously I'd like to see everyone flush with cash in rich rewarding jobs. But on the other hand, obviously it's not as simple as waving a magic wand, pulling the wage lever, and watching only wages adjust without the wage-payers adapting to the new conditions. I find it tedious beyond measure to read opinions and "analyses" which treat wage-payers as though they were static features of the economic landscape, and not motivated agents with plans and intents of their own.

So back at you: Perhaps you think minimum wage should be set at $50/hr, and that won't have any adverse effects on anyone. If so, we disagree.

Marcus,

Hmmmm, I never heard anyone argue that minimum wage was going to solve all problems, like a magic wand. It is/was meant to improve conditions where it was previously absent. Historically, it has made things better, not perfect.

Your fears of layoffs and reduced production are normally raised about minimum wage being too high, not at the notion of a minimum wage itself.

I don't think there are any historical examples of rising unemployment or decreased production as a result of a minimum wage being instituted. I believe, in fact, that in the US, at least, minimum wage was instituted at a time when unemployment was already quite high and production quite low. I also believe that ever since we've been doing comparatively well than we were before. I further believe that those societies that have a minimum wage fare much, much better than those that don't. Historically and currently. So, yes, I would conclude that it is an unalloyed good, as opposed to having none at all.

That is not to say that it is an easy matter to figure out what is the optimal minimum wage in a given time at given place. I don't think I've ever written anything here to suggest that there should be no upper limit. I think the minimum wage should at the very least ensure that a full-time job would put the worker above the poverty line. Obviously, that requires determining what the poverty line is, which is itself necessarily a subjective endeavor. However, before you try to figure out what is the best minimum wage for a given place at a given time, you first have to at least agree that having one is better than not having one. Again, history seems to suggest the answer there.

I don't believe anyone is suggesting that wage-payers are or should be treated as static actors. That strikes me as a bit of windmill you keep tilting at.

Upward pressures on wages such as collective bargaining and minimum wage laws have hardly been the ruin of Western economies. Prosperity in the West has been incomparably greater since the advent of both than it was previously. There are plenty of places around the world where those upward pressures don't exist. I wouldn't want to live in any of them.

Historically, people who have advocated for increasing the minimum wage have done so in a pretty reasonable and responsible way, I believe. I count myself among them and so, I can safely say that $50 p/h would be to high right now. Current minimum wage is about $7.50. I don't know the last time it was raised. I don't know that there has been significant enough inflation lately to want to raise it much higher. I know some states have it closer to $9 p/h. That would seem to be about the upper limit right now. But I certainly don't think Bob & Al should be building any fences for five lousy bucks an hour; (maybe Roberto & Alfonso, but not Bob & Al.) Whatever adverse effects paying Bob & Al $7.50 instead of $5 are, to my mind, far far far outweighed by the benefits.

Look, Mark, it's like this:

Don't try to get a rise out of me by implying I would like to eliminate minimum wage altogether, and then get all in a twist when I imply you would like to raise minimum wage to $50/hr. I was hoping you'd clue to the idea that putting extreme words in peoples' mouths was uncouth, but I guess that didn't work.

In any case, this has wandered far afield from the actual topic of discussion, which is public sector unions in Wisconsin.

I may well be missing something key here, but am I to understand you are asking why a system that results in increased hourly wages for fence builders is a good one?

Yes, you are missing something key here. Try and figure out what it is. My predominately working class students almost universally figure out, pretty quickly, that Al and Bob end up unemployed, or at best underemployed.

Now, I don't raise this point to take things off to a discussion of the minimum wage, but to point out the fallacy of saying that unions somehow help their competition. No they do not. They obtain a competitive advantage through legislation and take work away from other working class people.

Increased wages are not per se, a good or bad thing. A scheme through which an artificially generated wage increase transfers wealth and opportunity from a larger number of politically unconnected folks to a smaller number of of politically connected folks, both of whom actually do the same thing, is certainly a bad thing.

As a side note, I find it a bit odd to, within the course of a single paragraph, profess that advocates of minimum wage increases are "reasonable and responsible" and then admit you do not know what the minimum wage actually is or when it was raised.

I'll point out two things:

-The minimum wage was increased from 5.15 to its current level in the last five years, and

-We're currently experiencing absolutely unprecedented levels of unemployment among teenagers (usually the workers most likely to be earning minimum wage). Official unemployment rates - not "including discouraged workers", but the actual official rate - over 25%. Yeah, unemployment is high everywhere, but not that high!

Correlation is not causation, but it's at least suggestive. Certainly youth unemployment never got anywhere near this high in the last few recessions.

Granted that some public employee expenditures are on the actual good (i.e. teaching) and not just managing overhead. And that can justify wanting to organize for increased compensation. But does it justify the work rule effects? Or the other distortions caused by public union participation in the political process? Think about the influence of law enforcement union groups on drug policy, for example.

Let me put it in simpler terms, mark. You're assuming "80 hours per week of fence-building work". That assumption is really, really deficient. In the examples being used, there's 80 hours per week at the price of $80 per day. Not at $120 per day. I might pay $80 for a service, but choose to build the fence myself at $120. I might decide to have it built, but only by somebody with certificates of liability insurance. I might let the fence stay unbuilt or unrepaired at that price, also. All three of those options remove the minimum wage workers from consideration. So much for your prosperity. The minimum wage workers may end up without any work at all.

This brings up a really good point that has gone unchallenged for too long: that what is good for those hired to help the public is the same as helping the public. IE- we need teachers to have lavish benefits because that is automatically good for the children. At least 50 years of educational decline demolishes that argument. It seems that the unions really do believe that koolaid, getting us to the Orwellian position where closing done schools (via lies no less) in order to fight over money (while claiming a childs education should never be held hostage to money, the irony is too thick) is in the kids best interests.

And that's part of our bigger delusion, that spending money equals caring. That our budget cant be cut because every penny is precious help for the needy... instead of the far more likely scenario where the vast majority is either wasted, shuffled to the politically connected, and/or going to pay for the bureaucratic infrastructure of the program itself.

If the republicans were smart they would present the senate with budget extensions department by department- the senate will have to sign off on the essentials (defense, entitlements, etc) and if they wrangle over all these other 'vital' programs like Education, Agriculture, and HHS so long that they shut down, well I guess we will have a real insight into just how vital they are. Will the world stop? I doubt it, I doubt most people would even notice, and that should scare democrats more than anything.

And apparently, Indiana Democrats are pulling the same stunt: http://www.washingtonpost.com/wp-dyn/content/article/2011/02/22/AR2011022204427.html

I don't want to hear one word-- not one more god damned word-- from people like Yglesias bitching and whining about filibusters.

LOL, first I saw of this was on the news tonight (I'm a Hoosier) and the Dems actually left what the news anchor described as a "list of demands" on their way out.

I didn't catch if the demands included a suitcase of unmarked bills, but I wouldn't be surprised.

If you could sell hypocrisy by the bushel, they could balance all of their budgets, and pave I-80 from Chicago to Youngstown with gold bricks.

I predict that a couple of years from now Scott Walker will still be under attack, for not having gone far enough.

I know AL asked for links with "no dog in the fight", but this is the best research I've been able to find all week

They do a pretty good job comparing oranges to oranges to compare teacher pay. The one thing they don't look at is administrator pay (which is my understanding of where the system does overpay... at least that's the rumors I hear).

Here another that compiles performance studies from union/non-union schools. The studies show some data trending with unions, but also talk about some cases were unions did not help.

alchemist - EPI is not exactly a neutral source...

"WE BELIEVE IN:

FIGHTING FOR WORKING FAMILIES
We expose inequalities, champion bold solutions, and push progressive economic issues to the forefront of the national agenda.

BROADLY SHARED PROSPERITY
EPI’s efforts focus on growing the economy for the benefit of all Americans, not just the already wealthy.

ACCURACY.
Our research is reliable and rigorous, so that we can tell the story of working Americans and counter much of the misinformation in the discourse on the economy.

PROGRESSIVISM.
Government must play an active role in protecting the economically vulnerable, ensuring equal opportunity, and improving the well-being of all Americans."

That EPI article is terrible and doesn't compare oranges to oranges at all, unless, for example, you think a bachelor's degree in teaching or social work is in any way equivalent to a degree in math, economics, or an engineering field. Which nobody I've ever talked to about it would take remotely seriously. In truth, the sort of over-credentialization of public employment that is used as a cover here is a double edged sword. Teachers are overpaid and have too much security, but to get the cushy overpaid job they have to give up a lot of their rents to someone else in another cushy overpaid job to maintain them.

alchemist - EPI is not exactly a neutral source...

I didn't say it was, I just said it was the best research I could find (I was trying to point out that it wasn't neutral, but it was the best I could find, it at least compared bachelors pay to bachelors pay, most articles don't)

for example, you think a bachelor's degree in teaching or social work is in any way equivalent to a degree in math, economics, or an engineering field

Well, those fields would all be on the high end of bachelors degree, not the average, or mean. (just as math/engineering teachers make more than regular teachers, but not nearly as much). Still, short of breaking down every type of teacher and salary, or every private employee type and salary, this is the closest I've seen. Got anything better?

Here's another article on budget deficits and state unions. No correlation If you look at the housing bubble instead...

There is a bigger problem with that EPI study methodology. Not that they control for 'organizational size'. In their words:

"An employer’s organizational size greatly influences employee earnings; it produces a basic wage gap of 35%... While large organizations employ more educated, experienced, and full-time workers, they nonetheless pay a premium even after accounting for these factors (Troske 1999). And the compensation premium grows when benefits are included in the comparison."

This is sheer slight of hand. They are comparing public workers in, say a school district with hundreds of employees with the very well compensated workers at large private corporations... but the majority of workers do NOT work at large corporations.

In fact it entirely rules out the small business with under 50 employees from ANY comparison (how many schools have less than 50 employees?).

They make the assumption that working at a huge organization such as the Milwaukee School District should be equated with working for a large corporation like Kraft or John Deere. That is entirely unfounded! For an educated worker (say an MBA), working at a large corporation is a prestigious position that attracts high level candidates. Does that sound like working for Milwaukee Public Schools? You can well argue working for a larger entity in the public sector attracts less qualified candidates- suburban schools are smaller and tend to attract better candidates. This correlation could well be inverted.

And as EPI themselves said, the true gap they are measuring is between large corporations and small businesses. It is absolutely unfounded to compare public workers with exclusively the (far better compensated) large corporations. Aside from their size they have no correlation I can think of. Essentially they are assuming is that every teacher with a masters degree is equivalent to the MBAs and master degree employees at large prestigious firms. There is no way to reconcile this unless you assume teachers simpler are the highest caliber of employee and should be so compared... and not just some teachers but essentially all.

For an educated worker (say an MBA), working at a large corporation is a prestigious position that attracts high level candidates

But does it attract higher pay? Do small corporations attract lower pay? Do large corporations pay less because the positions have more competition? Who knows?

My guess is that it's much easier to find the pay of larger corporations (it's probably easily available on tax info) than to compile a list of all paychecks for the entire state of WI, which would contain literally thousands of small businesses.

It's also going to be difficult to track down degree and earnings in smaller businesses. So they tracked the fastest, and largest data pools, and compared those.

Again, if you can find something better, I would love to take a look at it.

Who knows?

The authors of the study you cited claim to know, alchemist. That's what they mean by "organizational size ... produces a basic wage gap of 35%".

"But does it attract higher pay? Do small corporations attract lower pay? Do large corporations pay less because the positions have more competition? Who knows?"

The labor department, via the study you cited.

The logic is pretty simple- large corporations can pay for talent because they can afford to, and people generally go where the pay is... which is what makes the job prestigious.

Consider law firms: you generally make much more money working for bigger law firms. They are bigger because they are more successful and the are more successful because they hire better talent and they hire better talent because better talent makes them more successful.

Moreover, the benefits portions are entirely quantifiable- larger firms pay less for better benefits, the economy of scale. The article points to the proof of this, but its also obvious. A large organization has the muscle to negotiate better deals with health care and pension providers.

Moreover if it really didn't matter, the EPI is using bogus numbers. My point is the only reason they got a result that says public employees are underpaid is because they compared organizational size. If you don't control for organizational size (but continue to for education level, experience, etc) you don't get that result at all.

Now if you throw in hours worked per year, you get a real disparity in favor of public employees, which is what CATO and others point to. Thats, of course, contentious because we are supposed to pretend teachers dont work less than 9 months a year (they are obviously off meditating about education all summer, which is equivalent to the rest of us slogging along). In fact this is another area where you have to check the studies work- evaluation of teachers hours worked per year is another very gray area.

On rereading, you're right, I was wrong. But only partially wrong. I was right that the did skim numbers from the largest companies, and then trend down using the 35% mark to get the average employee wage of a company with 100 workers. (since 60% of Wisc private workers were in a company with 100+ people).

Using large private companies as a benchmark, they found public teachers make (roughly) 30% less. That more or less correlates with employees of a company with 100+. But I'll have to look at the numbers again when I get home, my work computer is suddenly having adobe issues.

_(since 60% of Wisc private workers were in a company with 100+ people). _

This was another little trick I caught- 60% of ALL Wisconsin workers are in 100+ organizations, including public workers. So the percent of private workers only in 100+ is somewhat less.

According to the census about 12.2% of Wisconsin employed are government workers (the vast of which are rated to work at +100 organizations), so you have to toss them out to figure what the percentage of private workers in +100 are (I know nationally its less than 50%).

about 12.2% of Wisconsin employed are government workers ...

Sad that this is low average. New York state is 16%, Hawaii is a whopping 20%.

Leave a comment

Here are some quick tips for adding simple Textile formatting to your comments, though you can also use proper HTML tags:

*This* puts text in bold.

_This_ puts text in italics.

bq. This "bq." at the beginning of a paragraph, flush with the left hand side and with a space after it, is the code to indent one paragraph of text as a block quote.

To add a live URL, "Text to display":http://windsofchange.net/ (no spaces between) will show up as Text to display. Always use this for links - otherwise you will screw up the columns on our main blog page.




Recent Comments
  • TM Lutas: Jobs' formula was simple enough. Passionately care about your users, read more
  • sabinesgreenp.myopenid.com: Just seeing the green community in action makes me confident read more
  • Glen Wishard: Jobs was on the losing end of competition many times, read more
  • Chris M: Thanks for the great post, Joe ... linked it on read more
  • Joe Katzman: Collect them all! Though the French would be upset about read more
  • Glen Wishard: Now all the Saudis need is a division's worth of read more
  • mark buehner: Its one thing to accept the Iranians as an ally read more
  • J Aguilar: Saudis were around here (Spain) a year ago trying the read more
  • Fred: Good point, brutality didn't work terribly well for the Russians read more
  • mark buehner: Certainly plausible but there are plenty of examples of that read more
  • Fred: They have no need to project power but have the read more
  • mark buehner: Good stuff here. The only caveat is that a nuclear read more
  • Ian C.: OK... Here's the problem. Perceived relevance. When it was 'Weapons read more
  • Marcus Vitruvius: Chris, If there were some way to do all these read more
  • Chris M: Marcus Vitruvius, I'm surprised by your comments. You're quite right, read more
The Winds Crew
Town Founder: Left-Hand Man: Other Winds Marshals
  • 'AMac', aka. Marshal Festus (AMac@...)
  • Robin "Straight Shooter" Burk
  • 'Cicero', aka. The Quiet Man (cicero@...)
  • David Blue (david.blue@...)
  • 'Lewy14', aka. Marshal Leroy (lewy14@...)
  • 'Nortius Maximus', aka. Big Tuna (nortius.maximus@...)
Other Regulars Semi-Active: Posting Affiliates Emeritus:
Winds Blogroll
Author Archives
Categories
Powered by Movable Type 4.23-en