Monday, July 27, 2015
My labor market -- any labor market
The American labor market I see traveling around my (middle) middle class Chicago neighborhood:
Bus drivers: American born (mostly), decently paid, unionized;
Drug chain employees: American born, $400-500/wk;
Supermarket employees: American born, a little bit better;
Fast food employees: (all) foreign born, $300/wk (can't get 40 hours);
Taxi drivers (my 3 decade gig): foreign born, don't know how they make minimum wage in Chicago (50 cents/mile below 1981 when I started here -- post 1991 built subways to both airports, opened up unlimited limos, put on free trolleys between the hot spots downtown and added 40% more cabs.)
UPS drivers: American born, well compensated, Jimmy Hoffa's union.
Almost forgot one cohort of American born workers who like the former cab drivers wont work for today's sub-LBJ-minimum wage: 100,000 out of my guesstimate 200,000 Chicago, gang age, minority males.
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The labor market -- any labor market -- as I see:
Large swings in wages may effect small to even no changes in product price -- and very little or very big changes in profit. If labor is 10% costs and ups its price 50% (5% more cost), sales and profits may suffer only 5%. Conversely, If labor costs are 15% and a firm can squeeze down 5% (33% cut) of that the firm may double profits at the same product price.
Labor must sell what it has to offer every day or what it offers disappears. If labor does not sell what it has to offer labor itself may disappear (into the "workhouse").
Given the giant incentive to squeeze labor costs and labor's intrinsic vulnerability in the market, some mechanism(s) must be put in place to give labor a chance to extract the highest price the market (meaning the ultimate consumer) is willing to pay for its efforts. Which means a useful collective bargaining function and/or a sensibly calibrated minimum wage.
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Acquire an effective American collective bargaining function by simply treating labor market arm twisting the same way every other form of market arm twisting -- or arm twisting in every other market -- is treated: as a felony (state or federal invokes 33 state and federal RICO statutes).