September 17, 2007
Alan Greenspan: The Age of Turbulence
Alan Greenspan's memoir The Age of Turbulence: Adventures in a New World was officially released today and I've just begun to digest it.
In the introduction we get a first (though not surprising) glimpse at Greenspan's contextual/functional view of unions:
Keynesian interventionism was still overwhelmingly the dominant paradigm in the mid 70s, though it was already on the cusp of decline. The consensus with the Economic Policy Committee was that letting the market set prices and wages was inadequate and unreliable and needed to be supplemented by "income policies." These differed from country to country, but generally set guidelines for wage negotiations between unions, which were very much more widespread and powerful than today, and management. Income policies fell short of all-out wage and price controls in that they were ostensibly voluntary. The guidelines, however, were generally backed up by the regulatory levers of government which were employed to "persuade" transgressors.
Given some thought this paragraph sheds light on the predicament of labor in 2007. The election of Ronald Reagan signaled a shift (though policy changes began before that) from Keynesian policies to more market based approaches. The "regulatory levers" would no longer work to actively persuade transgressors but to actively encourage them.
September 09, 2007
Secret History of the Free Market
This looks like it will be an interesting book/film. One thought that comes to mind is if the labor movement was also the product of a shock. I believe there is a Richard Freeman paper that touches upon that.
September 08, 2007
Labor Market Rigidity Questioned
A rapidly expanding empirical literature has addressed the widely accepted claim that employment-unfriendly labor market institutions explain the pattern of unemployment across countries. The main culprits are held to be protective institutions, namely unemployment benefit entitlements, employment protection laws, and trade unions. Our assessment of the evidence offers little support for this orthodox view. The most compelling finding of the cross-country regression literature is the generally significant and robust effect of the standard measure of unemployment benefit generosity, but there are reasons to doubt both the economic importance of this relationship and the direction of causation. The micro evidence on the effects of major changes in benefit generosity on the exit rate out of unemployment has been frequently cited as supportive evidence, but these individual level effects vary widely across studies and, in any case, have no direct implication for changes in the aggregate unemployment rate (due to ``composition" and ``entitlement" effects). Finally, we find little evidence to suggest that 1990s reforms of core protective labor market institutions can explain much of either the success of the ``success stories" or the continued high unemployment of the large continental European countries. We conclude that the evidence is consistent with a more complex reality in which a variety of labor market models can be consistent with good employment performance.
September 02, 2007
Happy Labor Day - Wall Street Style
It never fails.
This time of year (Labor Day weekend) the business press is always full of editorials and articles denouncing labor unions. Today's Wall Street Journal ( The Strange Career of Affirmative Action )dedicates half of a page to an op-ed on how labor union's introduced the concept of affirmative action in the early 1900's as a way of protecting white workers. Upon finishing the article one who did not know better would assume labor unions were one of the primary institutional players fighting against the civil rights of African-Americans.
While it is certainly true that some unions had a racist agenda the majority played a significant role in the struggle for racial equality and still play a progressive role to this day. I should not be surprised since this type of intellectual dishonesty is to be expected from the business press.
Yet even better are the op-eds that ignore economics and use simple arguments to draw erroneous conclusions. Such can be found ain today's Barrons.
Thomas Donlan writes:
AMERICAN CAPITALISTS HAVE strong reasons to celebrate on Labor Day. The holiday has become a hollow celebration for organized labor, because the power of unions continues to decline in the private sector. Partly in consequence, American labor productivity continues to lead the world, and brings prosperity to Americans in just proportion to their achievements.
Productivity, after all, does not measure how hard workers work. It measures how well capitalists invest, and how well managers manage. The tools purchased by capitalists and the working conditions set by managers enable workers to turn out more product per work hour. When unions impose work rules in the name of job preservation and seek wages beyond the value of their members' labor, they strangle productivity increases.
Let's start with Donlan's suggestion that productivity is a measure of how well capitalist's invest. When union's raise wages within an industry or firm they provide incentives for firms to invest in labor saving technologies and for other firms to invent and produce such technologies. Firms that have a constant supply of cheap labor tend not to invest in innovative labor saving technologies that serve to increase productivity.
Another thought that comes to mind is if the productivity increases Donlan refers to are actually the result of the tools purchased by capital and lower wages? What about Multi-Factor Productivity? This type of productivity which is also sometimes referred to as "free-lunch" productivity typically counts for more than half of all productivity growth. The main component of multi-factor productivity is technological innovation. Of course the primary new technology of this economy is the internet (you know, that project born from bureaucrats in the government making R&D investments).
And what about the working conditions "set by managers" that Donlan suggests enables workers to be more productive? Human Resource managers have spent years trying to create workplaces which mimic unionized workplaces in that managers get open and honest feedback from the workforce in order to create these better working conditions but to do so without the workers actually having a union. These attempts are largely unsuccessful because of course who is going to give open and honest feedback without being protected from the arbitrary wrath of bosses and managers?
What worries me most is when the business milieu (and labor for that matter) begins to believe its own propaganda and the above two articles are indicative of that.
October 22, 2005
One View of GM-UAW Healthcare Concessions
I just read Nathan Newman's post on What Makes Unions Strong. Its a quick article and it is right on point. Here is my favorite excerpt:
Let's be clear about one thing. The very fact that General Motors is negotiating with the UAW over health benefits reflects why unions matter-- because in the rest of corporate America, almost 20% of employers have dropped coverage altogether in the last decade, adding to the 40% that weren't providing health insurance before that.
October 18, 2005
Interview With Delphi Boss
Yesterday's Wall Street Journal featured an interview with Delphi's boss.
Here is the link and brief excerpt:
Reassembling Delphi (WSJ Subscription Required)
WSJ: Can you elaborate on those forces?
Mr. Miller: Globalization is a fact of life these days. What has been brought into sharp relief is the differing value the global market places on knowledge workers versus basic manufacturing workers. I was struck by what I saw when I visited our Delphi operations in Mexico last week. Our average hourly worker makes about $7,000 a year, while the average salaried worker makes about $35,000 a year. A spread of five times. The same spread, or wider, exists in all low-cost countries. The implications for America are enormous, and it boils down to this. If you want your kids to enjoy the great American dream, get them a good education. The days when manual unskilled labor can deliver a $65-per-hour wage are disappearing.
My recent experiences have been with industries that are undergoing profound change What they have in common is a social contract, worked out over the past half-century with strong centralized labor unions, to elevate their work forces with elaborate defined-benefit retirement programs. Back in the days when you worked for one employer till age 65 and then died at age 70, and when health care was unsophisticated and inexpensive, the social contract inherent in defined-benefit programs perhaps made some economic sense.
Today, defined benefit programs are an anachronism. First off, they force people to stay with one employer, even though we have a much more mobile and flexible population these days. Second, the notion of having all your retirement eggs in one basket -- your employer -- is a concentration of risk that is simply inadvisable for anyone in today's fast-moving economy. Finally, people are living longer these days. Of course, that is a good thing. But the question is, how can we afford it?
October 15, 2005
Chapter 11 Weapon
FInancial Times Columnist John Gapper blows the Delphi Chapter 11 wide open in his most recent column. I provide a link and excerpts below:
John Gapper: The Danger of Rewriting Chapter 11 (Financial Times subscription required)
Steve Miller, chief executive of Delphi, was in New York this Monday to explain why he was putting the Michigan automotive parts supplier into Chapter 11 bankruptcy. “We are broke,” he said, holding his hands in the air. “I am sorry to be the one delivering that message.”
Mr Miller did not look very sorry. In fact, he seemed like someone whose bargaining position with his employees had just become a lot stronger. Instead of having to wheedle unions into accepting cuts in pay and benefits for Delphi’s 34,000 hourly-paid US workers, he can threaten them with the company defaulting on its defined-benefit pension plan.
Organised labour, meet organised capital. Chapter 11 of the Bankruptcy Code used to be regarded as a bizarre US arrangement allowing a troubled company’s managers to stay at the helm and restructure instead of being kicked out by the creditors. Eastern Airlines went into Chapter 11 in 1989 and remained there for two years losing money before collapsing.
These days, managers and creditors are often on the same side from the start. Chapter 11 has become a device for reasserting management fiat over workers with the backing of bankers. Financiers have forced steel industry employees who were used to being highly paid to accept lower wages and fewer benefits. Delphi’s Chapter 11 filing suggests Detroit’s workers and retirees are next in line.
The way that Delphi is handling its bankruptcy shows how things have changed. David Skeel, a University of Pennsylvania law professor, says the interests of managers and creditors have been aligned by two things: companies are supported – and controlled – with specialist financing and managers are given very large financial incentives to act rapidly and to take tough decisions.
All of this carries a price. They say you should not visit a sausage factory if you like eating sausages and in this case the ingredients being ground up for profits are health and (perhaps) pension rights. It does not take a union activist to be disturbed by the prospect of Delphi workers losing benefits that they dedicated their lives to gaining by working there.
The stark contrast between workers’ losses and managers’ gains was one reason for changes to Chapter 11 in the bankruptcy reforms that come into effect next week. The new law bars companies from paying managers Chapter 11 bonuses and limits the time during which they have the sole right to propose a restructuring plan. Managerial prerogative, as well as wealth, is taking a haircut.
October 11, 2005
Losing Hearts & Minds or Lack of Political Power
Many progressives, liberals and unionists would probably say that our problems stem from lack of political power. But our lack of power has its roots in something even more important and that is our inability to capture the hearts and minds of the people. Strategy is important, tactics are important but fundamental to all of this is having answers to peoples problems that make sense and are easy to understand.
Recently I had a conversation with a Professor who asked my opinion of what has been happening in the labor movement. I responded by telling him that I think our main problem is that we are coming up with answers to the question 'what do unions need to do to increase membership?' rather than asking the question 'what do workers need in today's economy?'.
Answers to the first question can lead an institution to do many things, even come up with strategies to increase membership, while at the same time having little or no impact on the daily lives of workers. I think labor unions on both sides of the Change to Win/AFL-CIO split are essentially only looking out for what is in the best interest of their particular institution. To be sure these unionists (on both sides) do believe that what they are doing is ultimately in the best interests of their membership but they are viewing the terrain through the lens of the existing institution.
The second question is much more difficult to grapple with. While the unions in Change to Win have been making a big deal about how bold a move it was to leave the AFL-CIO in reality, major unions have been moving in and out of the AFL-CIO throughout the 50 years of its existence. A move which was truly bold would be one that fundamentally reorients and alters the institution. Such a change could only occur if unions asked "what do workers in today's economy need?"
But it is not only unions which are losing the battle, it is the entire progressive project. An article in today's NY Times highlights the problem:
Liberal Hopes Ebb in Post-Storm Poverty Debate (NY Times-Free)
As Hurricane Katrina put the issue of poverty onto the national agenda, many liberal advocates wondered whether the floods offered a glimmer of opportunity. The issues they most cared about - health care, housing, jobs, race - were suddenly staples of the news, with President Bush pledged to "bold action."
But what looked like a chance to talk up new programs is fast becoming a scramble to save the old ones.
Conservatives have already used the storm for causes of their own, like suspending requirements that federal contractors have affirmative action plans and pay locally prevailing wages. And with federal costs for rebuilding the Gulf Coast estimated at up to $200 billion, Congressional Republican leaders are pushing for spending cuts, with programs like Medicaid and food stamps especially vulnerable.
Once again the conservative agenda wins. It is not only because they have political power but it is also because the progressive agenda is just not capturing the hearts and minds of people. The best progressives have to offer is "saving the old agenda."
And many of us still don't get it:
"We've had a stunning reversal in just a few weeks," said Robert Greenstein, director of the Center on Budget and Policy Priorities, a liberal advocacy group in Washington. "We've gone from a situation in which we might have a long-overdue debate on deep poverty to the possibility, perhaps even the likelihood, that low-income people will be asked to bear the costs. I would find it unimaginable if it wasn't actually happening."
The most important clue in this article is the following and hopefully our arrogance doesn't cause us to miss it:
"This is not the time to expand the programs that were failing anyway," said Stuart M. Butler, a vice president of the Heritage Foundation, a conservative research and advocacy group influential on Capitol Hill.
While the right has proposed alternatives including tax-free zones for businesses and school vouchers for students, Mr. Butler said, "the left has just talked up the old paradigm: 'let's expand what's failed before.' "
There is a real sense among people that yesterday's solutions are just not up to today's task which leaves them open to new or different methods of treating what ails. Our problem is that the right wing has not only out-strategized us, but more importantly they are the ones providing a vision, providing alternatives and providing answers.
A typical response from many in the left is epitomized in the following paragraph:
Doubt about the effectiveness of some programs is only one factor shaping the current antipoverty debate. Another is political muscle: poor people do not make campaign contributions. Many do not even vote.
It seems to me this is more of an assumption than fact. The effects of Katrina and Rita affect people across the board. Sure, the experience of the poor was much worse because their lives were endangered, but the economic destruction and the eventual reconstruction affects an entire swath of the population even beyond the state's borders. The problem has nothing to do with whether or not poor people vote in large enough numbers or not(did they ever?), it is whether people are excited and convinced that there are solutions worth fighting for. The right has given new solutions and visions that are exciting more people, the left has only responded with trying to defend old institutions that no longer inspire.
A case in point is when Bush did away with labor and wage protections after Katrina. How many people, even in labor, knew or cared? There is almost a complicit silence that yes maybe it is better that these rules are relaxed. If even the core base which has benefited by these regulations are left uninspired how do we expect the broader population to care? Or maybe prevailing wage laws never affected enough people in Louisiana so defending them never entered people's minds? (We cannot just blame people here, it seems more and more unions themselves are looking out only for their particular union's interest).
As long as progressives spend their energy defending 20th century institutions and unionists ask themselves how to strengthen their institutions we will be one step behind. That doesn't mean we throw away our principles and the moral foundation of our project but that we reorient them towards a 21st century economy.
Unionized Grocers Move Concerns Union
Albertson's Plan Stirs Union Concerns (San Diego Tribune - Free)
Albertson's is in a major fight with regional supermarket union locals concerned about the struggling company's plans to expand Bristol Farms, its non-union subsidiary.
The 11-store Bristol Farms chain has announced that it will open outlets in the coming months at converted Albertsons sites in La Jolla and in Westchester in the Los Angeles area, a move union officials say will cut dozens of employees from their ranks.....
September 27, 2005
White Collar Unionism
Here are some excerpts from the first article mentioned above:
Mr. Davis represents one of the few bright spots for the struggling U.S. labor movement: Despite a blue-collar image, many of the fastest growing unions in the U.S. represent white-collar professionals, including physicians, nuclear engineers, psychologists and judges.
The growth of white-collar unions says much about the precarious nature of jobs of all types in the current economy. Decaying job security and benefits and the effects of global trade on labor costs all have begun to reach into the ranks of professional workers.
"Professionals join unions because they feel that their work is being devalued. Many of these workers had good pensions and good benefits, and they don't anymore," says Kate Bronfenbrenner, director of labor education research at Cornell University in Ithaca, N.Y. Professionals, she adds, may fear being replaced by independent contractors or seeing their jobs outsourced.