Saturday, October 31, 2015

Only way to clear multi-cultural American market (especially labor market): high union density

Re:  Check Your Economic Bias  --  Noah Smith

" ... some measure of welfare will lead [some] economists to oppose redistribution taxation, which makes the economy somewhat less efficient ... "

Does any rearranging economic flows make the economy less efficient or productive: even adding or subtracting rentiers and monopolists -- or just rearrange the same overall distribution?  The perfectly free market people may be right that, if left alone, the market will achieve max efficiency and productivity.  Ideology blinds them to the same eff and prod reached under almost any market configuration, e.g., no unions, half unions, all unions (equivalent of all co-ops).  Unless some human factor intervenes, e.g., the rich slow down the velocity of spending, the poor are much less productive because ill educated, etc.

" ... how much taxes discourage work ... "

Low pay (in relation to the productivity of the era) can discourage work.  I'm too old now (71) but you wouldn't find me (American born ) driving a taxi today -- as I did for 28 years in NYC, Chi and SF.  Used to make some thing like $12 an hour in Chicago, more like $18 in SF in 2004. 

Would guess they make more like $8 now in Chicago only because I cannot imagine them working for less (but don't quite see how they make that with 40% more cabs, meter 50 cents a mile lower than when I started in 1981, since when the city put on trains to both airports and unlimited limos.  SF doubled number of cabs since I left in 2004. 

In Chi new supermarket employees are much more likely below child raising age since Walmart forced two-tier contracts.

In Chi 100,000 out of I guesstimate 200,000 gang-age, minority males are in street gangs.

In 1956 folks were very happy to work for a minimum wage of $8.75 an hour because the overall productivity of their society (40% today's) led them to feel they were doing relatively well.  Ditto for 1968's $11 an hour.

Did anybody see the movie Bye, Bye Braverman (1968)?  View a bunch of upper-middle class Manhattanites.  Their small apartments would make most people today feel very constricted.  They never heard of an "up to date" kitchen.  They didn't know the difference.

Market configuration and clearing conclusion: If you have no to almost no unions (also possible with half unions but politics might ameliorate much of the clearing gap then) -- and -- you have  two segments of the work force with very different ideas about what makes at least minimally satisfactory employment  (economist call that a reserve wage I think) then you can have a huge dropout of people looking for work.

Bottom line: in a two-tier expectations workforce -- if the consumer is not being tested by labor (via collective bargaining -- especially centralized bargaining) to discover the max said consumer will pay -- if instead labor is paid according to what I call subsistence-plus (want a little more; pay a little more); according only to how much labor is worth in reference to other labor: a big drop out from the workforce is likely to happen  ...

... with all the attendant loss of efficiency (including police chasing people around) and productivity.

Upshot to all this: the only way to clear the labor market (or just the market) in a multi-cultural, endlessly inundated with immigrants labor market like America's is to reach very high union density (Continental European-like).  Testing the consumer's willingness to pay to the max across the board, everywhere much shrinks the range of income from top to bottom.  It is thus in America the only market oriented answer to so-called "inequality" -- I prefer "Great Wage Depression". 

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