Friday, 14 June 2013

Do you own your job?

Unions aren’t all bad, but the reaction to the private members bill by newish MP Jamie Lee Ross allowing employers to employ non-union labour has brought out the worst in those who speak for the monopolists of labour.

_JamieLeeRossIf passed, Ross’s bill would give employers the right to employ replacement labour when unionised employees strike. Labour MP Darien Fenton knee-jerk reaction to it say this “is another attack on the hard-fought rights of Kiwi workers.” But is it?

Strike action by unionised employees is certainly their right.  But the unionised employees have no right to forcibly exclude non-union labour from taking the jobs from which they have voluntarily walked away.

They will disagree with me. They would place pickets and law in the way of employers hiring new folk to replace those who’ve walked out. They will argue, essentially, that they own these jobs and have a right to exclude others from taking them—to exclude them by force, if necessary.

But they don’t own those jobs, and the mistaken idea that they do is what gives unions their power to destroy.

-FentonIt’s often thought that a loyalty to the interests of workers makes you a friend of union action. But consider this observation by William Hutt:

Unions gain at the expense of other labour, not capital, and the transfer reduces total output.

The meaning of his observation is this: Union action does nothing to raise productivity, and in general reduces it;  so to the extent that unionised workers earn more by their actions, it’s because more is being taken from what non-unionised workers would have earned. Or in other words, as history shows:

Gains [of the unionised few] were always ‘at the expense of the equal right of the industrious to acquire skill and to exchange their labour where and how they may.’

Darien Fenton might see herself as a friend of the working class and an enemy of capital.  But as William Jevons long ago pointed out, her loyalty is very much narrower:

The Unionist overlooks the fact that the cause to which [she] is so faithful is only the cause of a small exclusive class; [her] triumph is the injury of a vastly greater number of his fellow-workmen, and regarded in this point of view, [her] cause is a narrow and selfish one, rather than a broad and disinterested one.

Fenton’s response reveals she has loyalty to a class all right: she is loyal to the union class. And to the league of non-union workers whom she would forcibly exclude from taking jobs other have walked away from, she is an enemy.


  1. Gains [of the unionised few] were always ‘at the expense of the equal right of the industrious to acquire skill and to exchange their labour where and how they may.’

    Because before unions all those workers competing on equal footing routinely improved their situation through the uninterrupted glory of free competition that made everyone so rich before evil unions spirited away their freedoms.

    This opinion piece seems to ignore the illustration of history when making statements denigrating the effects of unions. If it's arguments were at all true one would expect observation to reveal a better world pre-existing unions than what followed their establishment and increased influence.

    But one does not see this looking back.

    Now I'm willing to believe that the past is a different place and technology changes circumstances and what rough and ready forces were once needed to force change to the good may outlive their purpose and become an obstacle to further improvement.

    But arguments predicated on blithe assertions that are clearly not true do not convince me and undermine the credibility of their proponents.

  2. Fentex, it might sound good in theory, but in practice unions always become corrupt and destroy wealth. Look what they did to British industry, often just for bloodymindedness' sake.

  3. My point is rather that practice can be observed - and when one looks back at the lot of people before and after unions the improvement to their circumstances is striking.

    So assertions such as "unions always become corrupt and destroy wealth" in isolation of history do not persuade a person mindful of what unions have improved.

    Pointing out how British industry suffered in the 60's and 70's is an argument though. The entrenched class conflict held that country back and there was a need for drastic reorganization, but it's an argument to be studied in it's context.

    Context free assertions that unions are bad fail when the educated audience recalls a context in which they contributed a great deal.

  4. It's unlikely that working conditions would still be as poor as they were historically even if the unions hadn't been influential.

    The freedom of each person to offer or withdraw their labour to/from an employer is what empowered the improvement of working conditions, especially once skills became more important than brute force.

    Unions have historically always resisted any changes that would reduce the power of the union leaders, regardless of whether their members would ultimately be better off or not. Therefore, for example, if a technology change would put some people out of work but greatly improve the lot of those left, it would be rejected by them.

  5. @Fentex: Before unions? You'd have to go back a very long way, perhaps before the medieval guild system--a system whereby the members of a trade organisation excluded non-members from practicing the trade.

    But life since medieval times was not made better by this sort of legally granted monopoly--it has been made **despite** such practices.

    Correlation is not causality. What has made workers across the board wealthier over recent centuries is not by gaining more rights to exclude others, but through advances in productivity--for none of were unions responsible qua union.

  6. This may all be a bit pointless When we finally got a choice we abandoned unions by the thousands. That would indicate that the thousands were sick of supporting lazier but militant types, were sick of English accents at work, were sick of their funds being used by the sectretaries to self serve, sick of funds going to Labour who they may not have personally supported. And so on.

    Even in desperate wartime there were strikes and work to rule. The wharfies wouldn't unload marine equipment in Wellington in 1942 because it was raining and the yanks did it themselves. Pilots in England waited and waited on newer and better aircraft because the unions struck. That kind of self serving nonsense cost lives of those at the pointy end.

    When unions make sense or offer perceived value for money they will come back but they need to be apolitical to tempt me.


  7. PC: you say correlation is not causality, then in the same sentence you link higher pay to higher productivity.

    The reasons workers in developed countries are paid more are primarily inflation, and governments forcing employers to pay decent wages, holiday pay etc.

    Generally when employers are free to treat workers however they want, they treat them like crap.

  8. Well said Peter. Libz has a supportive press statement:

  9. Paul how do you explain the fact that the average wage is higher than the minimum...government and unions - or a competitive labour market?

  10. @Paul - You have a strange view of reality if you think there's no connection between what someone is paid and the value of their work to their employer.

  11. @RW - How do you explain the fact that there are 0 employees on any given 'rich list'? It's because business owners take the lion's share of their workers productivity while the worker's wages are determined by the supply/demand of the labour market. Minimum wages just put a 'floor' on that market.

    @Mark - There is a correlation between productivity and pay but how many jobs directly produce income for the employer? not many. And the employees that do - such as sales reps - get vastly underpaid compared to the business they bring in.

  12. Taking the side of big business collectives against individual workers. It's the libertarian way.

  13. @Judge Holden: I suppose that in your parallel universe people who employ other people should have no rights.

  14. Your world (and Darien's) might be focussed around warring collectives, Judge. But the real world is not.

  15. @Paul: They might be wrong, but every worker is only employed because the employer thinks it will improve the company's income--to the extent that each does what's expected of them, each contributes to productivity. That's part of the point of a division of labour.

    Regarding your "floor" put on the labour market by the minimum wage, below which you presumably suggest wages would be driven down to subsistence level because of employers' greed and employees' desperate need for paying work, you might also be surprised to discover that neither worker need nor employer greed are relevant to how wages are actually set in the real world.

  16. "I suppose that in your parallel universe people who employ other people should have no rights."

    Oh poor Atlas! On your planet those who actually produce the wealth should have all their bargaining power removed in order to give an already privileged collective an even greater share of the rewards. It's just how libertarians roll.

  17. This Bill is pathetic! It reveals the true nature of Slimy-Lee Ross though. Manukau's gain ('losing' him as a city councilor) is NZ's loss.

    Peter - putting aside high skill workers who may be in short supply, what power does an unskilled worker in NZ have when there are over 100,000 other unemployed workers willing to do the job of the striking worker? If govt does not ban that boss from bringing in a scab, the boss will hire a scab instead of negotiate.

    In other words, unskilled workers have no power other than to extend their hours and drop their pay & conditions to whatever the boss demands. Not much freedom or liberty there!

    Mad Marxist.

  18. Mad Marxist questions, perhaps rhetorically, what power unskilled workers have. They have the power to acquire skills, following which this debate comes pointless.

    Chris R

  19. "They have the power to acquire skills, following which this debate comes pointless."

    Sorry, on planet libbo that's unaffordable. Thus your "point" becomes pointless.

  20. It always baffles me that Libertarians so easily recognise that unions can use monopoly power to extort compensation in excess of their value, but refuse to believe producers might be capable of the same.

  21. @Sam: Not at all. As subscribers to Adam Smith, we're on all fours with his observation that "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."

  22. @Mad Marxist: Your comment shows the point of the post: that whatever gain the unionised workers my make is at the cost of both non-unionised workers and the 100,000 involuntarily unemployed non-workers, for whom higher rates and minimum wage rates have made them unemployable at those rates.

    You ask however , "what power does an unskilled worker in NZ have when there are over 100,000 other unemployed workers willing to do the job of the striking worker?"

    But as I say in quoting the link above, "neither worker need nor employer greed are relevant to how wages are actually set in the real world." The power every one of those 100,000 is to do work of more value than the wage they take home.

    To be sure, it is to everyone's advantage for them to be working. Take away the need for every worker to help pay for those 100,000 out of his own earnings, and you can see that every existing worker will be better off for the removal of this extra weekly payment.

    And every existing worker will also be better off for the extra goods and services 100,000 people can add to the goods and services we can presently purchase.

    Now, it's almost certainly true that most of those 100,000 are only presently employable at money wage rates below the minimum wage. (If this were not true, most would be working already.)

    But the fact is that, once their own supply of goods and services is added to the present supply of goods and services, the price of all goods and services reduces by precisely the amount of that supply--which makes whatever REAL WAGES they earn (i.e., the amount of goods and services a wage can command) that much higher.

    This is true too for existing workers, who might experience a drop in monetary wages because of the employment of these 100,000 at lower rates. This is existing worker, too, will however experience a rise in REAL WAGES corresponding to the increase in goods and services produced by those previously unemployed 100,000.

    So, contrary to the notion subscribed to by the unionists--i.e., that those 100,000 are a threat to employed workers' livelihoods--in fact, their employment would be a boon to all.

  23. @Peter

    That's good to hear, but it begs the question: how can free markets function optimally when they can be distorted by monopolists (both labour and capital) for their benefit?

    To me, this is where the Libertarian point of view struggles. You have the very strong (and admirable) moral grounding in non-coercion, but you twist yourselves in knots trying be Utilitarians too, desperately asserting that a Libertarian society would make everyone better off.

    I think you should be honest with yourselves and admit that the poor and vulnerable would be worse off under Libertarianism, but that this is a trade-off society should be willing to make for freedom.

  24. @Sam: We argue that the moral is the practical--that because reason and non-coercion are human values, that they do result in a good outcome for humans. That's why they're values.

    We're certainly aware of what, for instance, the Public Choice economists tell us all about the way big government in a mixed economy is captured by rent-seekers, parasites and moochers of all types. (As they say, when buying and selling is controlled by legislation, the first thing to be bought and sold is legislators.)

    But we argue that when government is unable to grant favours, because it's properly and constitutionally constrained, then no distortion is possible. Or at least, not easy.

    Tell you what, why not give some examples of distortions by monopolists (both labour and capital), and let's test and see if they're still possible in our ideal constitutionally constrained government.

  25. @Peter

    That's a fair Utilitarian argument for Libertarianism, but it assumes people value non-coercion ahead of equality, poverty relief, and other aims of government. However, even if we assume EVERYONE who voted for Act, National and Libnz in the last election believe taxes are immoral, that doesn't even come to half the voting public. It seems that people are comfortable with this form of coercion in exchange for less poverty and more fairness, which undermines your argument about people's values.

    As for an example of monopoly distortion, I'd suggest any pharmaceutical company selling a brand name drug is operating outside of the perfectly-competitive ideal.

  26. Microsoft would be one of the best examples of monopoly distortion.

    Once it got a foothold in the market it focused on shutting out smaller competitors with superior software. Can't blame the govt for that.

  27. @Ross: I wouldn't agree with you shutting out competitors with superior products is any sort of "distortion."
    If it’s non-coercive and providing a service people want, which is what gives it a monopoly position, then what's the beef?

    And no non-coercive monopoly lasts for ever anyway, as the likes of ALCO, IBM and even Microsoft tend to show. (Indeed, the picture of Microsoft as an unstoppable monopolistic behemoth that cried out for antitrust Nazis to bring to book just a few years ago is now a very different puppy -- as the Los Angeles Times noted a few years back when Microsoft sales first began to flag, “ it now looks as though the Internet has accomplished something that antitrust regulators failed to do -- break Microsoft's ability to monopolize software markets.”)

    @Sam: Well, let me at least start off on the right footing by saying that I think the very notion of a "perfectly competitive market" is a nonsense.

    So, having said that, why don't you lay out your argument--being careful to fully account for the enormously costly regulatory hurdle for the introduction of very new drug that is the FDA.

  28. @Peter

    I'm glad to hear you don't believe perfect markets exist in the real world. That Reisman piece was actually quite interesting until he went on a rant about how perfect competition is a collectivist conspiracy.

    My opinion is summed up by this sentence:
    "Perfect competition is... a standard by which to measure the varying degrees of imperfection that characterize [markets]."
    Markets are less efficient than this ideal by varying degrees.

    Markets are fantastic when incentives align: I want a haircut, you want to maximise your profit as a hairdresser so you give me a good haircut. I would not advocate regulating such markets (which I believe are the majority).

    However, there are some very important situations where incentives don't align, or they take too long to.

    Consider the FDA/pharma example - someone has to verify the safety of new drugs. We could use the principle of caveat emptor and have consumers determine a drug's safety for themselves, but it's clear that a typical consumer doesn't have the time or knowledge to do so, particularly if they're ill and perhaps desperate.

    We could let pharmaceutical companies verify their own drugs (or pay a lab to do the verification), but this creates an obvious perverse incentive for the trial to produce a positive result for the sponsoring company.

    The best solution, therefore, is for the government to mandate a drug be independently verified before it can be sold. This may introduce compliance costs over and above what a pharma company would pay for verification, but this is justified in order to remove the perverse incentive present in the unregulated market.

    An objection may be a pharmaceutical company wouldn't knowingly release a potentially unsafe drug for fear of damaging their reputation, and therefore no perverse incentive exists to fudge a positive result, at least in the long run. However, a number of studies show that industry funding and the profit motive produce industry-friendly results in clinical trials; the perverse incentive isn't hypothetical.

    And yet we aren't seeing consumers boycott companies over such ethical concerns because of the information asymmetries inherent in healthcare - most patients couldn't hope to name the pharmacuetical company that makes the drugs they take, couldn't hope to have the statistical and medical knowledge required to interpret drug trial results (those that are even released), and wouldn't think of questioning their doctor's prescriptions (doctors who can have their own incentives to favour certain drugs).

    I think this is a great example of a situation (I won't call it a market failure) where government intervention can improve the efficiency of a market.

  29. PC: I said "competitors with superior software" not "shutting out competitors, with superior software."

    One of Microsoft's favourite ploys was to blatantly infringe on copyrights and then when the other company tried to sue, simply bought the plaintiff. Usually the next step would be the quiet elimination of any software that was competing with established Microsoft products.

    The fact that Microsoft has not been able to keep this up indefinitely is of little consolation to consumers who have missed out on choice in the software market for the past 20+ years.

  30. @Sam, thanks for your reply.

    You might consider the reasons you cite good ones to institute the regulatory hurdles in the way of drug manufacturers--but you should at least recognise the responsibility those hurdles bear for the problems you cite.

    I invite you to consider that each new drug costs drug companies many, many years and between $1 billion and $12 billion to bring to market, largely as a result of these regulatory hurdles.

    Naturally, this process favours existing large companies and erects enormous barriers to entry for newer, smaller companies. It also positively invites the rent-seeking, regulatory capture, capture of the regulators themselves and all the perverse incentives and attendant bribery and glad-handing of physicians that you cite and properly abhor--along with many, many other problems, not least the enormous number of newer, cheaper, better drugs that have never and will never come to market because the would-be developers of them just didn't undertake the process.

    So I'm not sure you can truly say that govt intervention has improved this market...

  31. A long watch, but a worthy one on this very topic:

    The outcome of the debate was strongly in favour of the affirmative.


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