Friday, November 16, 2007

Post-Hubert Humphrey labor law (economistsview.typepad)

The legislating needed today is revamping sorely outdated labor laws -- to end the race to the bottom -- by making unionization practicable and effective (effective ultimately means sector-wide). Newt Gingrich himself stated on Hannity the other night that 90-95% of Americans don't want workers deprived of the right to free elections. Of course Newtie's version of free elections was Catch-22, where you have to have an election -- but you cannot get past the gauntlet set up by management to get one (Newtie wants to deprive labor of the card check TOO).

Taking Newtie one more logical step (in the right direction) we could propose unionizing elections, periodically, in every workplace -- or perhaps more practically, that a 10 or 15% unionizing sign up (card check?) would require an election.

More fundamentally, what new labor law must end is the race to the bottom. If Adam Smith had been born 50 years later he would have viewed the newly instituted race to the bottom in newly industrial England and would surely have included a cogent description of it in his writing.

It took (I think) Europeans about 150 years to produce a full answer to the race to the bottom: sector-wide labor agreements or their equivalent. America (I think), even in the late nineteenth century still had enough diversity of opportunity to create enough of a permanent labor shortage to hold off a full-fledged race to the bottom.

America's downward wage and benefit spiral only began post-1973 as productivity growth finally slowed and after the winners and losers had finally sorted themselves out after the "great compression" (depression and WWII) so there was a reason to squeeze wages and someone to do it (I'm sure there is more to it -- especially American complacency given no previous experience racing).

If you told Americans of 1968 that by early 2007 a quarter of our workforce would be working for less than LBJ's minimum wage and would be below a realistic poverty line (not three times the price of the lowest survivable food budget), they might have speculated a small nuclear war, repeated depressions, plagues or some combination of same could be the only explanation.

The race to the bottom can produce just as devastating an economic catastrophe. In 1972 the top 1% took home 7.6% of overall income;l by 2001 it was 17.6%, by 2005 22.5% -- when will it be 27.6% the way we are going [a very recent story; can't put my finger on web address at the moment].

The simple answer to the race to the bottom -- worked out before our race even began around the better paying OECD world -- is some form of sector-wide labor agreements. Walmart has exited Germany (88 stores!) because its business model could not survive paying the same wages and benefits as everyone else. Let's wish WalMart better luck back in the states once sector-wide collective bargaining becomes the norm (Hubert Humphrey will be looking down smiling).

posted 11/15

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