Tuesday, February 16, 2016

What is the multiplier effect of investing political capital in increasing union density?

I wonder what is the multiplier effect of investing political capital in increasing union density?


” They worry that Mr. Sanders, as president, would exhaust his political capital on what they call a fool’s errand, at the expense of other initiatives on education, infrastructure, climate change, worker benefits — and the Affordable Care Act itself. "

” if Mr. Sanders were elected and fought for a single-payer plan, it ‘would rapidly destroy his administration by using up every ounce of political capital he’s got.’ ”

My comment over at Economists View:
The answer is to build up an unbeatable mountain of political capita by rebuilding union density. How? Starting in progressive states with Democratic legislative majorities — make union busting a felony.

There are all sorts of restrictions on union bargaining methods — e.g., no secondary picket lines — that are enforceable. None of the restrictions on illegal union busting are the slightest bit enforceable.

Make unions attractive by example — let people in red states see how positively they work — make people in red states jealous. Change the culture — get more union states. Then — on only then — we can get everything we want.

Sunday, February 14, 2016

Social welfare spending hasn't reduced poverty much? No surprise.

Social welfare spending hasn't reduced poverty much?  No surprise. Example: EITC, $60 billion -- sound like a lot?  Equals 1/3 of one percent of GDP in an economy where 45% of the workers are earning less than what the minimum wage could very practicably be: $15 an hour.

BTW, that minimum wage would shift 5% of income from the 55% who now take 90% of overall income to the 45% (or should we say shift 5% of income from the 54% who now take 70%?).

What are needed are non-skilled jobs that pay between $600 and $800 a week -- the same jobs that exist now but don't pay enough to keep 100,000 Chicago gang age males (out of approx 200,000) out of street gangs.  My old job doesn't pay even near $800 any more: taxi driving (NYC, Chi, SF).  Fast food work in Chi is owned by Mexican and Indian immigrants because American born wont work for so little (even $10 an hour minimum in Chi -- of course the min was $11 in 1968 when per capita income was half today's).

The money is there -- to pay people to work.  If it isn't there we can forever forget about reducing poverty.

Wednesday, February 3, 2016

Re: "The costs of inequality: When a fair shake isn’t" by Alivin Powell

Re: “Inequality, it’s not just about wealth, it’s about power. It isn’t just that somebody has some yachts, it’s the effect on democracy. For me, the big issue is the power problem. … I think we’re in a really scary place.”
— Marshall Ganz

We can trace poor education in ghetto schools down to low pay in the low skill (entry level, e.g., retail clerk) job market. We can trace crime (especially homicides -- e.g., Chicago's daily shoot-em-ups) down low pay in the low skill job market.

Berkeley professor Martín Sánchez-Jankowski learned that ghetto schools don't work because students (and teachers!) didn't see anything remunerative enough waiting for them in the job market to make any extra effort -- while spending nine years on the streets of five poverty stricken neighborhoods in NYC and LA.

100,000 out of my guesstimate 200,000 Chicago, gang-age minority males are in street gangs. My assumption -- based on my and my fellow co-workers parallel experience (below)-- because the kind of jobs easily available pay about half a grown man minimally needs to earn to live like an adult (even with another adult): only about $400 a week.

Noto Bene: Back when Lydon Johnson was president -- and per capita income was only half of today's ($15,000 v. $30,000) the federal minimum wage was $440 a week! !!!

My old (especially "old" -- I'm 71) Chicago taxi drivers "gang" used to make about twice what I guess these guys make today. That was before the fare dropped off 50 cents a mile, while 40% more cabs were added, opened unlimited limos and build subways to both airports. Unlike the former lease system (60/40 split) ALL the fare shortfall now comes out of the drivers' ends.

The money is obviously there for the drivers -- it was there before. $15 an hour is there (without waiting 5 years to sneak up on it) for high labor costs businesses like fast food (uniquely 33%). $20 an hour should be there for 10-15% labor costs businesses. Was before in supermarkets -- before Walmart two-tiered their contracts. Is definitely there for very high skilled regional airline pilots who are making $500 a week hoping to move up to the "big time" while living on food stamps!

The money is there because the consumer has it (two generations after the minimum wage was $11 -- something about economic growth) and is willing to pay it. But, the only way employees can test consumers' willingness to pay (other than a minimum wage at the very bottom) is collective bargaining with the employer (with one eye on how far to push the consumer -- just like when you set the minimum wage).

There's not even that much money involved: about 5% of income shift will pay for $15 min wage -- maybe 10% (pure guess) to get most low skill jobs more in the range of $20 (collective bargaining will keep a sharp eye on the consumer here). Remember, per capita income typically grows 20% over 10 years -- along with the free gifts of technology -- so the consumer will get it back. That is, if the top 1% stops bleeding off all the growth; high labor density (AND ONLY HIGH UNION DENSITY!) will take care of that -- by hook or by crook.

At one time we had high union density and everything worked fine. The legal mechanism even then didn't say too much more than that if management stole it had to give some of the money back -- meaning if they fired organizers and joiners they had to re-hire. As such labor union law as sort of on the honor system, but because of social consensus it somehow worked ...

... which consensus has long since disappeared and taken the whole nation's economic and political health down system with it.

Union busting is much more pernicious than labor union racketeering. Racketeering only bleeds some of what you've got. Busting steals it all (including your political sinews) before you get it -- but busting is done by the upstanding natural leaders of the community, so we just don't seem to catch on.

To approach perfect competition the monopsony condition of the labor market (one buyer) must be balanced off by the monopoly of a labor union (one seller) -- only way for half the means of production (the labor half) to test the willingness of the (ultimate) consumer to pay.

Management can claim there are many monopsonists in the labor market (therefore many buyers) but that just prevents on super monopsonist from paying computer programmers as much (as little) as burger flippers. That sets up what we have in the US -- what I call a subsistence-plus labor market where labor's price is set according to what it has to offer compared to other labor -- rather than what the consumer market is willing to pay.

The perfectly competitive market is exactly what labor needs -- as long as you know exactly what a perfectly competitive labor market really means.

Any other form of market warping and muscling is quite rightly heavily penalized (try to take a movie in the movies and tell them you were only kidding -- see you in a couple of years). Forget Congressional help for now. Progressive states are beginning to understand that they can set their own labor standards that add but not subtract (federal preemption) from federal law (just as with local minimum wages).

To restore American economic and political health, progressive states can make union busting a felony -- automatically invoking RICO for persistent abusers (which can deter "playing at" union busting -- 33 states have their own RICO statutes).

In Maryland for just one instance Democrats have a 33-17 edge in the State Senate and a 91-50 edge in the House. WA, OR, CA, IL, NY, anybody listening?

Tuesday, February 2, 2016

Collective bargaining is closer to perfect competition

Collective bargaining moves closer to the definition of "perfect competition" -- for whatever that's worth.

Jimmy Hoffa would say that labor owned half the means of production -- the labor half -- and that short of a law requiring labor, ownership and the (ultimate) consumer to get together to set all product prices (an impractical way to sell candy bars), that collective bargaining is the only way to keep labor in the price setting game.

I know the dictionary definition of "perfect competition."  I don't know if economists (or some economists and not others) think that any deviation from such results in lower efficiency.  Seems to me that unblanced market power just rearranges distribution of the "lump of product."  No matter.

What I want to load on the balance in favor of labor union practicality is that, by definition, unions bring the market closer to perfect competition -- by balancing the monopoly power of labor -- one seller (ask any conservative if a labor union is a monopoly) -- against the monopsony power of ownership -- one buyer.

Ownership could counter that there are many "one buyers" in today's labor market.  Which surely moves the market closer to perfect competition than the extreme of one big buyer hiring all labor: which might allow ownership to pay computer programmers the same as burger flippers.  What multiple monopsonists do create (what we do have in the US today) is a subsistence-plus market wherein labor's price is set by subsistence (if that much) plus how ever much more labor is worth compared to other labor -- working up a skill increment ladder -- rather than paying labor by however much the ultimate consumer might have been willing to shell out.

If another definition of perfect competion/efficiency might be the balancing of market satisfactions/dissatisfactions all around -- as is achieved when labor/owner/(ultimate) buyer get together to make a deal -- then collective bargaining is the only known way to achieve that kind of balance. 

US labor market monopsony hits the lower skill labor market three-ways hard: the customary race-to-the-bottom price problem, aggravated by the infinite supply of interchangeable employees, which employees have to sell today or "throw away" (maybe miss meals).  

A subsistence-plus labor market ultimately distorts output in favor of which employees may be manhandled the most/least.  Collective bargaining more structures an economy to produce in accordance with pure consumer preference.