Labor’s Need for Surpluses

24 08 2011

Beer and neoliberalism:

But I do hear a lot more from people who think of themselves as being “to my left,” who seem to me to spend a lot more time talking about the desirability of being more supportive of labor unions than they do talking about what concrete steps they want to take to achieve this mission. In a highly competitive market, there’s not much surplus for unions to get a share of.

It really, really annoys this man that anybody consider themselves “to [his] left.” He is determined to prove that anybody who does so is irrational or unserious.

This has to be one of the most profoundly frustrating things I’ve ever read on this topic that wasn’t in a comments section of Crain’s. Presumably Yglesias knows how labor markets and collective bargaining work, and he realizes that surpluses have precisely nothing to do with either the process of unionization or the right entailed by collective bargaining.

Ignoring for a moment the tone deafness of making his point about surpluses by using the socially necessary and universally identifiable world of craft beers, Yglesias says that cartelization of an industry (in this case, the beer market) makes unions stronger because they’re in a position to demand more of the rents. Yes, sometimes. So? Does that mean you can’t have competitive firms with heavily unionized workforces? For example, Southwest Airlines, or any of scores of other examples? Alternately, when single firms enjoy massive marketshare, does that make them somehow more amenable to unionization in the first place? I’ll pick an example out of the blue–Wal-Mart.

Wal-Mart is immensely profitable not thanks to any cartelization but in part because it is able to keep wages and benefits shockingly low while its competitors, particularly in the grocery markets, cannot–because they are unionized.

The argument being made here is that if unions go around unionizing small, barely profitable firms, they aren’t going to get much cash. Or that unions need cartels to grow. Or something. This misunderstands two key things: first, collective bargaining isn’t about skimming cream, it’s about a more even bargaining position for wage earners at firms, particularly large firms; second, it is getting to the point of collective bargaining–where the issues of profitability and “surplus” kick in–that is the hard part. When we talk about the need to grow unionization, we mean we need to make it easier to organize in the first place. The question of the competitiveness of unionized firms relates directly to the difficulty of unionization.

The problem labor has in competitive market places is not the lack of this “surplus,” it is the fact that firms whose union-busting is more efficient are able to force prices downward to a point that drowns their union competitors. Wal-Mart provides a perfect example of this, but you can look at any market. This was the entire concept behind SEIU’s infamous Justice for Janitors campaigns of the 1990s–going after the largest employers in a market simultaneously to prevent a situation where unionized firms were starved out of the market by union-busting firms. The lack of enforcement of collective bargaining rights on par with property rights puts union firms at short-term competitive disadvantages. But Yglesias starts his kvetch at the bargaining table, not the boss fight–in other words, after the hardest part is over. So when we–we loony, unserious, left-wing supporters of collective bargaining rights–talk about “concrete steps” that are “workable” what we mean is that we need to enforce worker rights as property rights precisely so that union-busting does not provide such a short-term advantage to firms. The reason SEIU went in and organized the largest employers in metropolitan janitorial markets all at once was to preclude the emergence of this comparative advantage for better union busters.

The right to unionize is not protected in this country–not by legislatures, not by administrative bodies, and not by the courts. That needs to change. How? Well, one start would be for people who claim they are progressives to stop talking about unionization as an abstract market strategy and realize that it is a fundamental human right. But more importantly, when unionization is easy, employers will no longer have such a strong pressure to bust unions, and the comparative advantage of staying union-free disappears. There are any number of big picture, fundamental reforms that progressive leadership could pursue–amending or abolishing the doctrine of at-will employment state-by-state, exactly as the right wing did with right-to-work; comprehensive reform of the Wagner Act; labor participation in corporate governance; funding for enforcement.

Here’s a start though: Democrats and their progressive enablers at think tanks could stop shrugging off every betrayal of workers’ rights–whether Striker Replacement, Employee Free Choice, or the creation of “free trade agreements” with nations that tolerate violence against union organizers.

I understand his point that unions can drive up costs (though this is a function of corporate governance as well), and that this puts union firms at a comparative disadvantage. But this takes as a given the difficulty of unionizing in the first place. The idea that unions need cartels to thrive, and with cartels we’d have no Rogue Ale, is simply not factual.


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24 08 2011
Matthew Yglesias

So…imagine a firm in a non-competitive market. That firm is in a position to obtain some monopoly rents. Excellent news for owners and managers! But now say the firm is faced with a strong labor union. Worse news for owners and managers — the union forces them to share their rents with a broad swathe of workers. But good news for workers!

Now some new firms enter the market. More competition, lower prices, lower profits. Excellent news for consumers. But less rents for the previous incumbent. Now the owners, the managers, and the unionized workers all need to make do with less. And this is true whether or not the new firms are unionized.

24 08 2011
ramsincanon

I understand your argument. But what you said was that those of us wanting to be “more supportive” of labor unions cannot offer concrete ways to achieve this, within the context of how craft beers are taking market share from major beer producers. What I’m saying is that the two things are not related.

Smaller profits for the one firm may compel the union membership to make concessions–unions have a long record of doing this when necessary, though not without insisting on shared sacrifice by management and shareholders. Being supportive of labor unions means wanting as many workers to be free to collective bargain as possible. So while these specific members may see their personal incomes/benefits stagnate or even decline, the workers at the other breweries will still be better off than if they had no union. What’s more, because these new firms cannot merely rely on an ability to pay less, the pain caused to the unionized employees is mitigated.

In your piece, you seemed to be making a connection here–that “being supportive” of labor unions somehow requires being opposed to competition in industries. But that doesn’t need to be the case for the reason stated above: so long as unionization can happen freely, being “union-free” is not going to be such a great advantage, and the pressure to bust unions will dissipate. While you’re of course correct that the more competitive an industry, the smaller the leverage for the bargaining unit, they will still have more leverage than if they were not bargaining collectively, and wealth would therefore not accrue so severely to the top. What profits there are will be more fairly distributed among labor and capital.

It is precisely because of the advantage of union-avoidance in competitive markets that strong advocacy for workers rights is so important.

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