Monday, June 01, 2015

Hypocrisy, Thy Name Is Union

Remember how the unions got all those carve-outs from Obamacare?  They want to be exceptions to minimum wage laws, too:
As readers of this column know, Los Angeles recently decided to raise its minimum wage to $15 an hour across the board, including even tipped workers like waitstaff. A lot of businesses opposed the new rule on the grounds that it would make their operations unaffordable. Now a new group is joining them in saying the law's not right for their operation: union leaders.

You read that right. Union leaders are saying that the $15 minimum wage is a bad idea. Not for everyone, of course; for most businesses and workers, they think it's splendid. But for union operations, they need an exemption. Rusty Hicks, the head of the Los Angeles County Federation of Labor, said businesses that have collective bargaining agreements with employees should be able to negotiate a wage below the "minimum."
Update, 6/7/15: From EIA (6/1/15):
Quote of the Week. “With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them. This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.” – Rusty Hicks, executive secretary-treasurer of the Los Angeles County Federation of Labor, which is lobbying for a unionized workplace exception to the county’s new $15 minimum wage law. (May 27 Los Angeles Times)


maxutils said...

This isn't hypocrisy. You're focusing on the short run, and not the end game. Virtually everyone believes that the minnimum wage, having not been corrected for inflation in forever, is likely below the true market wage in most industries. Even raising it will still probably not fix it. The best way, economically speaking, for a worker to get the highest wage that the market will bear is through unions --but, union membership is on the decline.

So, here's what the unions are trying to do: by offeing an incentive to employers to become unionized, due to the fact that they could pay below minimum wage if they were, one could expect unions to begin to grow. Then, once the union exiss, they negotiate a wage higher than the minimum -- and closer to the true market wage. It's actually a pretty clever strategy, and one which would not have anegative impact on the market --merely forcing employers to make a normal rate of return rather than the exaggerated one that they are able to make by paying workers below the true market wage.

Darren said...

You're seeing "clever strategy" where there's in truth nothing more than self-interest.

If you want to see the "benefits" of high union wages, go to Europe. Everything costs there, and it costs a lot. Everywhere you go in Western Europe it's like being in San Francisco. Not the kind of society I'd wish to live in.

maxutils said...

Wait … at what point did I say it wasn't self-interest? Of course it is. But that's not hypocrisy. I can't speak to how unions work in Europe, but the concept of 'high union wages' is bogus. In negotiations, management tries to get as much from the worker as possible, and labor does the same. They should meet in the middle. And, yes, that will likely mean that goods cost more … but the non union alternative is that manufacturers will under pay their workers, pocket the money that could have gone to them, and keep prices just low enough to make unions unpopular. I think you pretty much nailed it, but I'd like to live in a society where workers can afford to buy the products they make.

Darren said...

One way to do that is to lower the cost of the products they make, which can be done by....

maxutils said...

What you're completely missing is that there is a distinct difference, in economics, between the cost of a good and its price. The formerr is determined solely by the producer; the latter, by both the producer and the buyer. And it's the latter one that matters. I'll post a more detailed response later.

Anonymous said...

Ooh, I know this one. Offshoring production to third world countries where small children work 14-18 hours a day making our cheap goods, and then for the stuff that can't be offshored like services, hiring Guatemalans because the Mexicans cost too much.
How does maxutils calculate market wage? Isn't it the wage at which employers can find willing workers and at which employees will accept jobs? Seems in the non-union states like Texas, we've got that situation already. People are flocking here from all over, some of them literally risking their lives to get here.
It's a global economy whether the fiscal liberals like it or not. Why are we still paying able bodied native born people to sit on their stoops when there are jobs that other people are taking willingly?

maxutils said...

Okay, I'm back. First, anonymous -- free trade between nations is a great thing which benefits all participating countries -- except when some of them don't play by the same rules, whether through child labor or unsafe working conditions … but, you're always going to have an outsourcing of some jobs if a country can produce a good at a loer cost -- and unions definitely must consider that when they negotiate, and it is a natural brake on 'excessive' wages.

That said, the way that a firm (and union) find an equitable wage is by determining the marginal revenue product of workers, which is ased oon the supply and demand for the product. That indicates a market price for the good; from that, you can derive exactly (well, not really, but close) the MRP, which essentially means the revenue added by each additional worker. Workers will be hired as long as their MRP is higher or equal to their marginal cost -- their wage. The more desired the product? The higher the price, the higher the MRP, and the higher the wage. The harder it is to find workers? The more scarce the product, so the higher the price, and the higher the wage. The firm has no incentive to pay a wage lower than this, because they won't attract enough workers and will lose sales that would have been profitable. The union has no incentive to ask for a higher wage, as that will make their cost higher than the ideal MRP, and cost jobs. Doesn't always work out that way -- which is why you have industries where union workers agree to pay cuts based on changing circumstances. It's not exact, either. But it does provide the best sitation for worker and firm -- and if workers in the U.S. prove to expensive, then yes -- they get outsourced.

maxutils said...

As to the update? Yes, that's exactly what unions allow. And raising the minimum wage to a level that is still likely below the market equlibrium wage in most industries, but higher in some undercuts the collectivisation of labor. I don't understand how any one can possibly be for both raising the minimum wage AND supporting unions, but that appears to be the tack the Democrats are taking.