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On public opinion & public employee unions

Some Democrats as well as their ideological allies in the media and the leaders of their various auxiliary organizations seem to see victory in their defeat in Wisconsin this past week.  “AFL-CIO President Richard Trumka,” for example “dubbed Gov. Scott Walker Thursday ‘the Mobilizer of the Year’  for the labor movement, saying Walker’s move to take away collective bargaining rights for public employees will boomerang on Republicans.”  James Taranto summarizes E.J.Dionne’s recent column as saying that “Republicans won a legislative victory but overreached, just as Democrats did a year ago [with Obamacare], and they are going to pay a political price, just as the donks did in November.

Now, to be sure, the recent poll numbers among Wisconsinites for Walker’s modest reforms don’t look much better than do those for Obama’s major health care overhaul.  Yet, here’s one distinction to bear in mind.  The intense debate over Walker’s plan took place over three weeks, a relatively compressed time frame for a debate of this magnitude.  By contrast the debate over Obamacare unfolded over three seasons (Summer 2009, Autumn 2009, Winter 2009-10), with the House passing the bill just after last year’s Spring Equinox.

The shorter time frame for the Wisconsin debate has not given people much time to consider all the issues involved in this reform/budget package.  Consider, for example, polling on Obamacare.  While Democrats had been talking about reform since the transition, the debate didn’t start heating up until the spring of 2009, becoming really intense that summer.  At the beginning of that sultry season, a slight plurality favored the Democrats’ reforms.  While people supported health care reform in the abstract, once they learned the details of the plan crafted in Washington, D.C., they became increasingly skeptical and indeed outright opposed.

Similarly, while people favor the rights of public employees to organize in the abstract, the more they learn the details of Walker’s reforms curtailing their privileges, the more citizens will realize how these reforms protect Wisconsin taxpayers from unions who have gained an inordinate amount of power in recent years.  As the reforms limit the unions’ privileges, they giving local governments (including school districts) greater flexibility in providing benefits to their employees.

Over at Campaign Spot, Jim Geraghty’s political guru, the man he has nicknamed Obi-Wan Kenobi offers similar thoughts:

The mistake political junkies always make is wildly overestimating how much detail normal folks have about politics and government. (Not a criticism of normal folks.They are sane.We are not.) So with Chris Christie and now Governor Walker, the public is just beginning to gets its head around the pay and benefits and pensions of state employees. And Wisconsin has brought the whole question of giving state employees not only civil-service protections but the kind of collective-bargaining rights that corrupt current politicians into giveaways that force generations of taxpayers into indentured servitude and ultimately hurt public employees by bankrupting their pension funds.

So Walker’s numbers are irrelevant. Get into any controversy and the numbers tremble, but look at former Michigan governor John Engler and Christie and, for that matter, Thatcher and Reagan. People cut through the noise, figure it out and the political dividend is huge. I’m almost sorry Walker had this quick a victory.

As time passes and people consider the details of the reforms Republicans enacted in Wisconsin, they may well come around to seeing them as beneficial to the Badger State.  Governor Walker was wise to hold firm.  He will assuredly have more than a Pyrrhic victory.

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60 Comments

  1. Hi ILC,
    “the word/concept she might have really wanted (but failed to use on me) was monopsony. Not monopoly.”

    Break it down further, as you are still a little unclear in your usage:

    Assume a union and a monopolist firm. Workers in the union have monopoly power in the labour market, supply side (as it is the only SELLER of this type of labour). The corporation has monopoly power in the product market (as it is the only SELLER in the product market). The firm also has monopsony power in the labour market (as it is the only BUYER of this type of labour, for its monopoly product).

    Comment by Cas — March 14, 2011 @ 2:25 pm - March 14, 2011

  2. #47 – Fits with what I said. “19th century” means England was coming out of the Middle Ages, a time in which both the girl and her mother probably would have starved. That the job existed for them to not starve was, at the time, something of an advance. That general living standards continued to rise, eventually eliminating that job and providing still other means of support, was a further advance.

    #51 – Yes, exactly what I had in mind.

    #50 –

    you are saying, at the limit, workers get all of the economic profit.

    No. I’m saying that labor is a market, with supply and demand factors that result in a market price and quantity. I’m saying that whenever a situation exists when the price is forced above-market by government action(e.g. monopoly privileges to the union – but it could also be dictated e.g. wage controls), then employers – whether monopoly, monopsony, both or neither – must and will consume a lower quantity, creating the situation of oversupply known as “unemployment”. I’m saying that no employer exists in the real world – not even government – which can set a point of production without regard to consumer price, and so can infinitely pass above-market costs onto consumers, leaving bankruptcy as another possible cause of eventual unemployment.

    Comment by ILoveCapitalism — March 14, 2011 @ 3:01 pm - March 14, 2011

  3. (continued) Now, in a case where government has granted monopoly and/or monopsony privileges to the employer – an example of the latter might be a slave labor camp – then yes, the employer can force a below-market wage. And a union, possibly with government privileges also, will counteract that. But the best solution (by far) would be for government to abolish all the artificial privileges. No slave labor… and no slave employers.

    Comment by ILoveCapitalism — March 14, 2011 @ 3:13 pm - March 14, 2011

  4. Hi NDT,
    People lose jobs for all kinds of reasons. Sometimes, it is because unions ask for too high a wage in a perfectly competitive market, and so workers are laid off. I grant that happens. It is bad.

    Sometimes firms cut back because the economy goes south, and aggregate demand falls (and hence demand for their product), so they don’t need as many workers as they once did. In that case, union rules act to stop management from cutting higher paid workers (usually more experienced and skilled). Unions are not the cause of the lay-offs. As my post made clear, it helps protect older workers; and this is something that hurts younger workers. I would like more flexibility, but I also understand why unions support this rule–older workers tend to have families to support in larger numbers than do younger workers. Younger workers are not affected by ageist prejudice (yet!).

    “A less-senior, more low-paid, and better-performing individual may be retained in place of a higher-paid, less-productive individual. In the union situation, the less-productive individual is retained and the more-productive individual is let go.”

    Yes, I grant that can and sadly, does, happen. But it also happens in a non-unionized workplace, that a highly skilled and productive individual will be let go, to make way for a less skilled and less expensive alternative. Private schools make these kinds of decisions. Corporations do as well. It might not be rational, but if the key statistic is lowering costs, one can cut off one’s nose to spite one’s face (short run good, long run bad).

    “Economic efficiency involves the minimum use of resources to produce the maximum amount of value. “Economic efficiency” is NOT simply the sheer volume of what can be produced.”
    Sounds reasonable to me. When I say “pick a level of output” put whatever qualifiers you want on it–be it quantity and quality constraints.

    Comment by Cas — March 14, 2011 @ 3:46 pm - March 14, 2011

  5. Hi ILC,
    “I’m saying that whenever a situation exists when the price is forced above-market by government action(e.g. monopoly privileges to the union – but it could also be dictated e.g. wage controls), then employers – whether monopoly, monopsony, both or neither – must and will consume a lower quantity, creating the situation of oversupply known as “unemployment”.”

    I grant you your case, for competitive markets. But when market power exists, your result does not have to hold. The Sweezy kinked demand model is an illustration of this.

    Comment by Cas — March 14, 2011 @ 3:50 pm - March 14, 2011

  6. Hi ILC,
    “Fits with what I said. “19th century” means England was coming out of the Middle Ages, a time in which both the girl and her mother probably would have starved. That the job existed for them to not starve was, at the time, something of an advance.”

    Yes, you could see it this way. Would it make any difference to you if I told you that England had been going through a long period of enclosures, which robbed many in rural England of the ability to make a traditional living in the countryside, so that they would have to come into the cities to find jobs or starve? They went from one untenable position (caused by government handouts to the wealthy) to working in the cities for bare subsistence, in occupations that left them debilitated and dead before their time.

    Comment by Cas — March 14, 2011 @ 3:56 pm - March 14, 2011

  7. And once again, Cas contradicts itself.

    Younger workers are not affected by ageist prejudice (yet!).

    Except for the blatant ones Cas has, in which it states that younger workers are expendable because they are always less experienced and don’t have families.

    In that case, union rules act to stop management from cutting higher paid workers (usually more experienced and skilled).

    I would like more flexibility, but I also understand why unions support this rule–older workers tend to have families to support in larger numbers than do younger workers.

    So Cas is making assumptions based on peoples’ age and defending rules that discriminate on the basis of age and seniority rather than actual performance and contribution.

    And that makes this contradiction utterly hilarious.

    But it also happens in a non-unionized workplace, that a highly skilled and productive individual will be let go, to make way for a less skilled and less expensive alternative.

    Of course.

    Like when a company decides to cut unnecessary layers of management.

    But what makes this really funny is that leftists like Cas will shriek bloody murder when a company lays off lower-paid and less-experienced employees and retains executives and managers, which ARE more experienced and skilled.

    This is where companies are far superior to unions. Companies will do that which makes the most business sense — namely, figuring out who needs to be retained based on net contribution and value to the organization.

    Unions, on the other hand, do not care about contribution or value to the organization; they only care about jacking the cost of labor higher and higher regardless of performance and of ensuring that the haves always win out over the have-nots.

    Again, the projection here is hilarious. Cas rails against alleged practices of corporations and private businesses while defending and supporting these very same practices by unions.

    Comment by North Dallas Thirty — March 14, 2011 @ 4:08 pm - March 14, 2011

  8. No worries NDT,
    If you see words like “tend” and want to assert that means “always” knock yourself out. And as for the rest, arguing with you about what is written and how you interpret it, is pretty pointless. Too-de-loo…

    Comment by Cas — March 14, 2011 @ 7:41 pm - March 14, 2011

  9. when market power exists, your result does not have to hold

    Well then. Kindly name one firm with such pricing power that no matter how high labor costs go, it can *always* pass the cost on to its customers.

    As you prepare to do so, kindly reflect on the fact that if such an entity ever existed, it would have to be destroyed, because it would have no incentive to contain either labor costs or what it takes in profits; it could and would increase either or both, until it had drained all wealth from the rest of society.

    The Sweezy kinked demand model

    Fine. Go look at the illustration of it, in the upper right corner of this page: http://en.wikipedia.org/wiki/Kinked_demand

    Now kindly reflect on the fact that the diagram has failed to show a fourth MC curve, let’s call it MC0, sitting a sufficient distance above MC1 that it “exhausts” the MR dotted line, driving the firm out of business and causing unemployment.

    Every firm has its breaking point. Yes, in situations where the government has created barriers to entry (e.g., regulatory) giving a firm monopolistic power, and then likewise privileges a union with monopolistic powers on the labor supply side, there will be a zone where the union’s efforts merely extract profits from the firm in a bipolar zero-sum game; as I have stated before (and in effect). That zone is not infinite. Grant the union enough privileges – drive labor costs high enough – and you will bankrupt the firm, even if it is monopolistically privileged by the government (or perhaps, is the government). The solution, both from an optimization standpoint and morally, is for government to strip *both* the firm and the union of artificial privileges violating general rights of property, free association, production and trade. In other words: Eliminate government-created barriers to entry, in both the firm’s market and in the labor market, other than criminal law which must be enforced impartially. Or: Total separation of Business and State.

    Comment by ILoveCapitalism — March 14, 2011 @ 8:32 pm - March 14, 2011

  10. Hi ILC,
    “Well then. Kindly name one firm with such pricing power that no matter how high labor costs go, it can *always* pass the cost on to its customers.”

    Honestly, I can’t. By all means push the example I offer to breaking point, but as I said before, the real world doesn’t appear to work that way–it tends to work by negotiated settlements where unions get more for their members than what firms want to give them, and firms keep making the product, and they don’t fire people (given the market conditions I outline).

    But remember, if you do push this example to breaking point, it is only fair to allow me to push favoured positions on this blog to such extremes–after all, if less taxation is better, why not keep going, till we have none, so we have no government at all? That will work best, right? Get government out of business’ way all together. And when I ask the question–can you think of nations with that situation, I will acknowledge some candidates: they are usually called “failed states.” So, I think reality suggests that there is room for some government,..

    As for government regulation of business–I believe there is an optimal level, and I guess you and I can argue about that another time.

    Comment by Cas — March 14, 2011 @ 9:32 pm - March 14, 2011

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