Labor Unions and Evolution

Maia, a real, live Marxist guest-blogging at Alas (a blog), makes some snide comments about a campaign by the Engineers (a New Zealand labor union) to encourage productivity increases. From the press release:

Improving workplace productivity is important for the future of your job, the industry you work in and New Zealand's economy.

[...]

A productivity campaign doesn't mean we'll be taking our foot off the accelerator in demanding a fair share for our members though. What it does mean is we'll be looking to grow that fair share. And that means growing productivity.

The EPMU will support employers who develop genuine productivity initiatives.

Encouraging productivity improvements is a bit out of character for labor unions, but with all the recent troubles that unionized companies have been having here in the US, it makes sense in a way. Natural selection acts against a parasite that places too great a burden on its host. Similarly, if a union burdens a business too heavily, it will eventually have to go bankrupt or lay off workers, and the scope of the union will wane.

There are a few ways unions can counteract this. One is to unionize an entire industry, so as to insulate themselves from nonunion competition. Another is to unionize new businesses at least as fast as the old ones fail. But globalization has made both of these strategies much more difficult. A third option is to work symbiotically with the employer. By using their expertise to increase productivity, the unions can drive up wages and increase job security without placing an undue burden on their employers.

If this strategy is successful, the unions which behave more symbiotically should begin to outcompete the parasitic ones, and may eventually replace them as the primary form of labor union. Of course, it's possible that I'm making too much of this or that this sort of thing has already been tried before without much success. But it may be interesting to see how it unfolds in the coming years.

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I've often said that I'm not

I've often said that I'm not reflexively anti-union, although some of the vitriol I spread their way may make one think otherwise. But the idea of a union is not a bad thing, and in some cases, they can work symbiotically with an employer. They can be the grease in the employer/employee relationship, and as long as the employees and the union consider themselves to hold the company's success as a top goal, the system can work.

At least for a while. Unions, much like government, love to grow their own power. Governments eventually have a tendency to grow larger than they need to, and eventually work for their own goals instead of those of the citizens they "serve". Unions eventually have a tendency to grow so powerful that the only way they can provide value to their members is to demand unreasonable conditions from the employer, forcing the employer into a position of laying off workers or going out of business.

And I'm not reflexively

And I'm not reflexively pro-union, but when I hear libertarians talk about unions being parasites and dysfunctional organizations - when corporations and moneyed interests engineered them that way via Taft-Hartley and Wagner - I can't help but feel incensed. You want unions that don't act like gov'ts? Then stop forcing them to be bureaucracies via labor regs, and let workers and employers come to authentic agreements without federal intervention.

I used to be a member of a

I used to be a member of a special kind of union where all of the companies were open shops and we competed with non-union employees and other unions directly. The cool thing was that the union and the employer would negotiate a price for a certain project and then the union would use however many people and the best suited people to get the job done quickly, with high quality, and at the lowest cost to the union.

Like most unions, this union handled my benefits and would even pay me when I was not working, though I would get more when I was actually working. It worked out incredibly well and we were such a popular union that we were actually invited in by huge corporations, in many cases to replace non-union employees, in some cases bringing their non-union employees into the union, or in other cases replacing non-union employees who had been laid off. We actually had a waiting list of companies who wanted to be unionized. It was great.

What was the difference betweeen my union and the way your run-of-the-mill union operates? Instead of approaching existing employees at a shop and getting them to vote the union in and then using laws to force the employer to go along, we simply hired really good people and then shopped the union (and the union members) around directly to the employers.

By the way - said union no longer exists. One of the employers was so impressed that they wanted to give the union a monopoly over their own workers in exchange for having a monopoly over the union's contracts. The employer also paid a huge amount of money for this privilege. Unfortunately, said employer later went belly-up due to the fact that their CEO followed what the stock market wanted a little too closely.

jeremy, you are confusing

jeremy, you are confusing how "libertarians" feel about dealing with unions with conservatives, corporations and such.

Unions, much like

Unions, much like government, love to grow their own power.

They are the same thing! Unions would not exist without the government-backed force to exclude competition. That is a union's basic essesnce and function: to forcibly exclude potential competition for employment. Everything they do, their entire raison d'etre is based on this one element. In places where the employees who would otherwise be forcibly excluded have the right to seek employment without submitting to union dictates, unions essentially cease to exist.

Labor regs are the essence of interference with the freedom of employers to hire different (non-union) employees. Labor laws are an inherently anti-free-market device, and they are designed to interfere with the basic free-market situation in which employer and employee bargain with each other without coercion, leaving them the mutual freedom to seek alternatives.

By forcing one side of a bargain to have fewer (or no) alternatives, the government effectively manipulates the price, just as if the government declared one provider to be a monopolist of a good or service. In every case, the price of the good in question goes up and the quality goes down. That's what happens with unions: the cost of their employment goes up and the quality of their work goes down.

Jeremy does actually have a

Jeremy does actually have a point.

What you all miss is that over the past 20 years, NZ has had statutory voluntary union membership, and labour laws ranked by OECD as among the most deregulated in the world. That is the climate that EPMU have to operate within.

Where I work, there is one union member in a total staff of 45. There is no distinction made between him and the remainder of the staff. He works and is paid under the same contract as everyone else.

What the new law did do was to give the Unions both the duty and the power of policing application of the labour laws and direct involvement in H&S, replacing functions previously carried out by government agencies. There is still (without duplication) government involvement in workplace deaths and in "serious harm" accidents. That gov't involvement is required as the law provides for some pretty heavy penalties if H&S law has not been properly observed and death or serious harm results.

What was replaced was compulsory union membership, union control of the workplace, closed shop practices, and the regular withdrawal of labour to force union negotiation positions. As an example, 30 years back the major building construction engineering industry was essentially controlled by some 200 riggers and boilermakers. These were the guys who erected the steel framework. Entry to the Union was on nomination only and numbers were strictly controlled. As a result, contractors could be literally held to ransom with work being done for the highest bidder. One project in Wellington at the time sat with nothing happening for over 2 years. In the end the government threatened to use army specialists to do the work of the riggers. Similarly, it was almost a tradition for the waterfront to be closed down for two weeks late October and early November, just as the Christmas shipments began arriving.

Characterising workers and

Characterising workers and labour unions as parasites on capital is stupid beyond description.

And Gaskell, ask yourself how many corporations got rich through government assistance (direct or indirect) before you start talking crap about unions.

This reflexively pro-corporate crap doesn't belong in libertarianism.

- Josh

And Gaskell, ask yourself

And Gaskell, ask yourself how many corporations got rich through government assistance (direct or indirect) before you start talking crap about unions. This reflexively pro-corporate crap doesn’t belong in libertarianism.

How very ... odd. You seem to be locked in a mentality of us-versus-them, labor-versus-management.

I happen to be as anti-corporation as I am anti-union. Corporations would not exist (to their current extent, anyway) without the State to provide shareholders with limited liability. That limitation is artificial and decidedly anti-free-market.

People who are involved in a business enterprise should certainly be free to arrange their rights and liabilities as to each other however they want. If a corporation wants to indemnify the shareholders for any liability, that's fine, but not as to third parties! The idea that the people who own and control a corporation are immune from liability to third parties, by state fiat, beyond their ownership interest is absurd. The only thing that shareholders have to risk is the value of their stock. That is something to lose, of course, but small compared to unlimited liability. Shareholders would be a lot more careful if they had no such artificial immunity.

But none of this remotely justifies the existence of unions. Unions are still parasites. One form of protectionism does not justify still more protectionism.

Characterising workers and

Characterising workers and labour unions as parasites on capital is stupid beyond description.

Why? If and when workers and unions act as parasites, shouldn't they be described as parasites?

This reflexively pro-corporate crap doesn’t belong in libertarianism.

Can you point out which part of Brandon's post is "reflexively pro-corporate"?

If and when workers and

If and when workers and unions act as parasites, shouldn’t they be described as parasites?

What good is capital without labour? None. That makes capital-labour a symbiotic relationship. Labour isn't a parasite on capital because workers and unions want to raise their prices.

Can you point out which part of Brandon’s post is “reflexively pro-corporate"?

Sure:

Encouraging productivity improvements is a bit out of character for labor unions, but with all the recent troubles that unionized companies have been having here in the US, it makes sense in a way. Natural selection acts against a parasite that places too great a burden on its host.

Who is the "parasite" and who is the "host", in Brandon's analogy?

- Josh

What good is capital without

What good is capital without labour? None. That makes capital-labour a symbiotic relationship. Labour isn’t a parasite on capital because workers and unions want to raise their prices.

Labor is not a lump. Unions act as parasites when they use legislation and/or threats of violence to prevent non-union workers from competing with unions. When they do, they act as parasties both off the enterprise itself and less well-to-do workers.

Encouraging productivity improvements is a bit out of character for labor unions, but with all the recent troubles that unionized companies have been having here in the US, it makes sense in a way. Natural selection acts against a parasite that places too great a burden on its host.

Who is the “parasite” and who is the “host", in Brandon’s analogy?

Let me add in the sentence that follows and provides the necessary context:

Similarly, if a union burdens a business too heavily, it will eventually have to go bankrupt or lay off workers, and the scope of the union will wane.

They key word is if. If a union burdens burdens a business too heavily, the business itself will go bankrupt. What's reflexively pro-corporate about that? Sounds entirely reasonable to me. Brandon did not characterize * all * unions in the same way. If anyone's being reflexively one-sided, it's you.

What good is capital without

What good is capital without labour?

The issue is competition—laborers competing for various skilled and unskilled jobs (and of course, capital must compete as well). The allure of unionization, however, seems to be the artificial inflation of wages by limiting competition (like that from “illegal immigrant” workers). In my view, it’s tantamount to extortion.

The crucial point to

The crucial point to understand is that someone who advocates the free market does so not only for all entities in the market, not just some of them. Nor would we advocate government intrusion or anti-competitive on the part of one entity just because another entity is doing the same thing. This is silliness compounded. And, whether it is a union or a corporation, if they are trying to use law and regulation to gain an anti-competitive advantage, they put themselves in the position of being parasitic.

They can be the grease in

They can be the grease in the employer/employee relationship, and as long as the employees and the union consider themselves to hold the company’s success as a top goal, the system can work.

I'm way out of my depth in arguing economics, but from my layperson point of view, this strikes me as, well, counter-intuitive. Wasn't the point of capitalism supposed to be that my top goal is to make myself rich? It's the invisible hand that then steps in (so to speak) to make the actions of all us greedy little individuals work out for the overall benefit of society as well.

Wouldn't it follow, then, that the success of the company should be a top goal only for those who, you know, actually own the company. The top goal for its employees should be to make as much money as possible. Admittedly, if employees are appropriately rational (i.e., if they care about their long-term in addition to their short-term self-interest), then they will have to be at least somewhat interested in the fiscal health of their company. But even that doesn't seem to logically imply that the success of the company is a top goal; all I really care about is that the company stay in business and continue to pay my salary. From the perspective of the employees, a company that limps by but still pays my (really high) wages is just as good as a company that is a smashing success and pays the same (really high) wages.

If your point is just that the success of a corporation is often instrumental in getting me a bigger paycheck, then I suppose that your point is fair enough. But it sounds as if you are claiming that employees ought to value the success of a company intrinsically. I don't see any reason at all for an employee to do that. Am I missing something here?

I'm not going to deny that

I'm not going to deny that I'm generally not very union-friendly, but I don't think anyone can dispute the fact that most unions are parasitical with respect to employers. If this weren't the case---if their relationship were symbiotic---then employers would welcome unionization with open arms, and people like Maia wouldn't be implying that unions who work with employers to increase productivity are just right-wing shills.

Jeremy:
Why are you blaming the Wagner Act on corporations and moneyed interests? Wasn't it a pro-union bill?

Joe Miller, Employees are

Joe Miller,

Employees are indeed not particularly required to care about the company as a "top goal". Like other individuals in the economy, they focus on maximizing their returns. The essence of the relationship as I understand it is that the employee exerts his labor and receives compensation now whereas the capitalist does not, and in return the capitalist receives the interest earned by capital in the future. So yeah, it would perfectly consistent with a free-market for employees to get a job, wait till the company tanks, then get another job, etc. (After all, what do you think laid-off employees do? Cry and reminisce about old times working for their boss? Or look for new work? :wink: )

Joe, What you're describing

Joe,
What you're describing is, I believe, the essence of the Principle-agent problem. One way of aligning interests is to give more people an ownership stake in the company (ex. stock options).

Joe, Wouldn’t it follow,

Joe,

Wouldn’t it follow, then, that the success of the company should be a top goal only for those who, you know, actually own the company. The top goal for its employees should be to make as much money as possible. Admittedly, if employees are appropriately rational (i.e., if they care about their long-term in addition to their short-term self-interest), then they will have to be at least somewhat interested in the fiscal health of their company. But even that doesn’t seem to logically imply that the success of the company is a top goal; all I really care about is that the company stay in business and continue to pay my salary. From the perspective of the employees, a company that limps by but still pays my (really high) wages is just as good as a company that is a smashing success and pays the same (really high) wages.

The primary problem is the barrier that the union creates between labor and management. Inherently, a union must be concerned with all of its members. When jobs are rigidly structured, it is certain that there will be a wide dispersion of value to the company among workers at the same pay grade.

Without a union, the company is free to bargain with each individual worker for as much value as he is willing and able to provide. Part of current pay will be forward looking to try to prepare employees for future increased responsibilities.

The union environment is great for workers of minimal ability or ambition. They will be overpaid but never advanced. For ambitious and adaptable employees, OTOH, the union is an anchor on their potential.

Regards, Don

IMO, stock options really

IMO, stock options really don't make that much sense as a solution to the principal-agent problem for anyone except senior management. There's really not much a lower-level employee at a major corporation can do to make or break the company, so the effect of his actions on the value of his stock options is vanishingly small.

Assuming that it's not just a fad, I can see two reasons to give low-level employees stock options:
1. Retention. Employee stock options generally take at least a few years to vest fully, and they don't expire for a few more years. So it gives employees a disincentive to leave, if the company's doing well.
2. It's a good way to give your employees a perceived benefit without actually having to pay out cash, when it's tight.

I think Don's point is

I think Don's point is critical to consider. Typically, in a closed union shop, the performance, pay, etc. metrics are geared to the lowest common denominator. I have a friend who left The Netherlands and immigrated here because everyone, essentially, is unionized there. No matter how hard he worked, he was getting the same annual pay raise as someone who sat on his ass and did nothing. Not only that, his pay was capped based on his years of experience and education, no matter how valuable he was to his employer.

A union serves two purposes:

1. to create artificial scarcity in the labor market, benefitting union members, but no one else
2. to create a collective that meets the needs of some portion of the group, but leaving individuals with no ability to act to meet their own needs.

Stefan: Regarding pooling

Stefan:
Regarding pooling risk, the problem with this is that it creates moral hazard. If hard work isn't rewarded, why bother? Also, it's not really risk. You have direct control over how hard you work.

The union environment is

The union environment is great for workers of minimal ability or ambition. They will be overpaid but never advanced. For ambitious and adaptable employees, OTOH, the union is an anchor on their potential.

Maybe that's the idea - if pooling risk is the function of the firm then unionizing disperses the risk even more, so that workers sacrifice future opporutunity for additional value in the present. If that's what they want, then the unions should serve them well.

Of course there is the mutualist argument that once the state is abolished the labor market will be so competitive that bosses will be subservient to employees rather than the reverse as it is now. I get the sneaking feeling however than aside from Sean Lynch, few catallarchs would feel sympathetic toward worker's co-ops, mutualist credit unions, and all the rest of it.

stefan, Maybe that’s the

stefan,

Maybe that’s the idea - if pooling risk is the function of the firm then unionizing disperses the risk even more, so that workers sacrifice future opporutunity for additional value in the present. If that’s what they want, then the unions should serve them well.

Until the inherent inefficiencies render the companies non-competitive and non-viable despite any protectionist tariff barriers.

Regards, Don

That's correct Brandon, you

That's correct Brandon, you do have control over how hard you work, but not direct control over whether your employer chooses to fire you in particular or not in low-skill professions where people are all doing the same kind of work. Perhaps that's the only risk-pooling that's in fact going on....

Until the inherent inefficiencies render the companies non-competitive and non-viable despite any protectionist tariff barriers.

I often wonder if mutualists and syndicalist-types will say "Oh well, guess capitalism is better" if their worker-owned firms all go belly-up, or if they'll just try to recreate the state and use it to get what they want. I confess I'm none too confident about some of them...