Friday, November 21, 2008

What's wrong with GM is what's wrong with the American LABOR MARKET II

What's wrong with GM is what's wrong with the American labor market. We allow other nations to come here and build factories to pay our workers less than they pay their own workers (e.g., German) and less than our domestic brands pay theirs. On top of that our "primitive" private health and pension insurance piles legacy costs on top of whoever came first, making permanent advantage for Johnny come latelys.

The ULTIMATE answer (my ultimate answer for everything) is instituting sector-wide labor agreements here, wherein (just like Germany, Italy, France, etc.) people doing the same job in the same locale (which can be the whole USA for nationwide industries) BY LAW work under a single collectively bargained contract for multiple employers.

Don't do that and those who say the bridge loan could be a bridge to nowhere could ultimately be right -- not necessarily; but could be. (The coming easy to engineer, perfectly reliable, 100 mpg electric technology gives auto manufacturing a more promising future.)

Want to understand the "economics" of the free labor market -- took me 7-8 years of digging to figure it all out. Understand what a last lot situation is like? That's when you are buying up lots for a project and one seller holds out on that indispensable last lot.

Tishman in NYC a couple of decades ago wanted to build a skyscraper but one guy with a little four story taxpayer held out for $250,000 against Tishman's offer of $100,000. Finally Tishman gave in but the seller then decided he wanted $500,000. At long last Tishman gave in to that only to have the seller jump his demand to $1,000,000, at which point Tishman told him to stuff it and built around him.

Take the last lot effect and multiply it by billions -- of employees that is -- and you have the working model of the labor market since the beginning of industrialization. As long as employers need someone to work but not you in particular, the employer is the last lot seller. Even if there are many employers to choose from, as long as there are many times more employees, it usually works this way.

If you have proper unionization (sector-wide in today's race to the bottom climate) or the highest practicable minimum wage then the employer needs you in particular and you are both last lot sellers and you can come to a fair and balanced agreement that will give labor as high a price as its utility can justify. This is the whole law and the prophets about the free labor market.

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