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11/17/2012

Comments

J. Hohn

On fast food--

I agree that this is distressing. I think the root issue here is the question of whether being free to make bad decisions is a good idea.

I would contend that if you are not free to make bad decisions, then you aren't free. Removing the freedom to err also has an infantilizing effect upon the populace. President Obama made a speech in which he lamented the lack of job training for things like showing up on time and getting along with people. These aren't job skills, they are life skills. Someone who cannot show up on time or get along with someone will struggle in life, not just in employment.

But what is preventing these skills from being learned? Accountability. Consequences for bad judgement.

When we remove bad consequences from bad decisions, there is no feedback loop to prevent getting more of them. Chain smoke all you want-- then let Medicaid pick up your emphysema treatments. Eat the gooey double-heartattack McWhopper daily- the taxpayers will pick up the tab for you.

I would submit that almost every argument to control people for their own benefit is paternalistic and makes us less capable people as a whole.

This is why I think freedom is a tough sell. Everyone is all "Yay! Freedom!" when it means you can speak your mind and not go to jail. But when it means your neighbor can harbor racist attitudes or drive a gas guzzler, the enthusiasm for freedom fades quickly. When it means you have to work hard to make it-- and that some struggle far more than others, it offends our sense of justice. Is freedom so great when it allows for such inequity?

There is also an intersection of freedom and virtue that we aren't often talking about. If freedom works with virtuous people-- does it work ONLY with virtuous people? Is it the case that only those who police themselves can do without external policing?

I think we may need to ask ourselves if freedom is an end in itself, as many of my fellow conservatives seem to think it is.

The answer involves discussion of who people are in the state of nature and devolves into political philosophy. Are we Hobbes' brutes or Rousseau's angels?

And yes-- all that relates to fast food and gardening ;)

J. Hohn

You raise several good points. There are a couple points to which I'd like to respond.

The idea that the free market is the race to the bottom is something I would also be concerned about if I felt that the free market led to such outcomes. I think that history and reason show that usually the opposite is the result.

As Adam Smith pointed out, in a truly free market a transaction will not occur unless both parties to it believe they will be accordingly better off. Will someone knowingly enter into a market transaction that he believes makes him worse off?

I get my haircut for $12. The implied truth is that the haircut is worth more than $12 (or else I would keep the $12). But to my barber, the haircut is worth LESS than $12 (or else he would charge more for the haircut).

Thus, both my barber and I believe we have moved UP, not down as a result of the transaction. We have traded something of lesser value for something of greater value.

The same is true in the labor market in general. People work when the benefits of work (financial and otherwise) exceed the benefits of not working AND the cost of transitioning to work.

There is a "race to the bottom" in the sense that a competitive labor market drives down wages. Less competition means higher wages. This is, after all, the essence of a union. This "race to the bottom" drives down the market value of what many people can produce.

But it also drives down the market value of what people consume. This lowers prices and allows the reduced wages to go further.

If the former is the more powerful force, then we would have people's wages drop and the national income (per capita) would decrease. If the latter is the more powerful force, then people's standard of living would increase and the national income (per capita) would increase.

It turns out that GDP per capita in the US for the last century or so has steadily climbed higher and higher: http://visualizingeconomics.com/blog/2011/03/08/long-term-real-growth-in-us-gdp-per-capita-1871-2009

Not only in the US, but per capita world GDP is growing as well, so it's not a zero-sum game. http://4.bp.blogspot.com/-lwKmwKN5tHs/UHbc3oisBpI/AAAAAAAABwM/i3jFc4kT32c/s1600/world+gdp+per+capita.png

Current data, history, and reason all suggest that free markets are not a race to the bottom, but rather a race upward.

crawjo

There's an awful lot to respond to here, more than I can handle in one post, but let me just make a few points. The per capita incomes of people in other countries have to be adjusted for the cost of living, which will vary a great deal depending on the local economic conditions.

People in very poor countries (and this is something I have direct experience with) often do not survive on the wages they are given. In many African countries people survive mainly thanks to the informal market. And then, of course, there are those who don't survive, either because they lack proper medical care or proper nutrition. In the country where I do most of my research, Namibia, the infant mortality rate is very high and the average life expectancy is abysmally low, in the 40-45 year range. Children there die of malnutrition all the time...I saw it with my own eyes.

Americans do indeed have it very good. In Namibia entire families live in corrugated shacks, often without electricity or running water. The "cost of living" is very low because they survive on a hand-to-mouth existence. In the United States this very rarely happens. If you were to try and raise a family in those conditions here, Child Protective Services would be called and your children would be taken away from you.

Let's cut to the chase. Here's what I'm concerned about: that our free market economic system is basically a race to the bottom, where we end up with a society where everyone works at Wal-Mart and that's also the only place they can afford to shop. The fact that we are a fat nation is deeply distressing to me, because it means that in many cases it is more affordable for families to buy fast food than to buy food for a proper diet. The fatter we get, the more health care we are going to need, the more health insurance will cost. Yes, there's also a high degree of personal responsibility that is lacking in our society, which is why I think Michelle Obama's initiatives on healthy eating and gardening are crucial, especially for African-American families where the problem has reached epidemic proportions.

Here's the thing, though. I don't see what this assault on labor unions is achieving. I don't think the pie is growing in a way that is allowing the bottom of the population to live better lives. I think that poorer Americans are trying to keep up by living in debt, but eventually that is going to catch up to us. Poor Americans are going to find themselves maxed out and when they do, they won't be able to buy more shit, and when they won't be able to buy more shit, the economy as a whole will suffer.

I think that labor unions are important for maintaining a watchful eye on businesses that violate the law--whether by forcing employees to work extra-long hours or hiring children or creating unsafe working conditions. I don't think the government has the resources or the motivation to police these kinds of things effectively, which is why I think labor unions are necessary. I don't always side with unions in every dispute, obviously, but I think it is an important institution in our society and I think one of the problems of the last 30 or 40 years has been the decline of labor unions. I know that a lot of those unions are gone because they were broken when the jobs were shipped overseas. But that to me again is a race to the bottom and not what we should be striving for. In some cases the arrival of those jobs in other countries helps people start to get ahead and creates a middle class, in other cases I think it is just raw exploitation, pure and simple.

J. Hohn

What worker's rights to you presume need protecting? By my reasoning, workers have no "rights" as you intend the meaning.

Jobs exist because enterprises need labor of varying skills. To fulfill that need, they engage in mutually beneficial transactions with providers of labor. The laborers do not own the job-- they are awarded the job under an employment contract to which they have successfully bid.

There is the accusation that businesses collude with one another to keep wages low-- but what is the evidence for such a claim? It may exist in rare circumstances where the labor or labor market is highly specialized and monopoly or monopsony conditions exist or nearly so. But in the broader market, evidence of collusion is exceedingly rare. I think of something like pro sports, where the owners control the market (and so could depress wages) but the labor is also highly specialized, and so artificially HIGH labor rates could also result.

Even if wages in one area are artificially low due to collusion, most often the laborer will know the wage rates of his expected profession. Is he not free to choose another, more ably-compensated profession? Is it not disingenuous to knowingly enter a career that pays $25/k year and then complain about 25k/year being far too little?

Even collusion-- which I contend is exceedingly rare-- cannot justify someone's complaining about his compensation or work conditions. We are still mostly independent actors that can change our minds about things.

Unless someone argues that the ENTIRE labor market is price-fixed and that NO career offers a living wage, then the collusion argument is rather weak, I think.

Free market policies do NOT guarantee the prosperity is evenly distributed- of this you are absolutely correct. But why should it be? There is already an inequitable distribution of height, weight, physical beauty, musical aptitude, and any other traits. We consider this inequity to be completely normal. What is the basis for believing that economic outcomes would be different?

Economically, we are much more equal than we are in nature. The person who isn't strong enough to be an athlete can start a business that may still generate a large income.

I really do not understand the focus on the share of the pie each person gets rather than the amount of pie. For example, if I get a 10% raise at work, I will be elated. But if I find out the next minute that everyone else got 50%, I will be angry. Why? Because we tend to assess our prosperity in relative terms. It's not enough for me to get better in absolute terms-- it's the relative gain people see.

It's completely irrational. But who said people are rational? So if the bottom quintile has rising incomes, that's a good thing. But when it rises more slowly than the top quintile, somehow that same increase now seems unjust. Why? Is it not just envy?

What is a "living wage"? If you make $34k, you are in the top 1% of the entire world. 50% of the world lives on less than $1300/year.

In other words, $1300 a YEAR is a "living wage" for 50% of the world's population.

The real question is standard of living-- not just a "living wage." What standard of living is an American entitled to, and at whose expense? THAT is the real question.

It seems to me that most Americans would feel they are "entitled" to be in the planet's top 1%-- 34K or more. That doesn't seem tenable to me.

Only in America can you have a large TV, air conditioning, be 50+ lbs overweight, have a cell phone and a car and be considered "poor."

The typical social security benefit is 10X the level of the global median wage. Poor?

The key other key question is "relative to what?"


I think you're indulging fallacy to conclude that businesses are getting away with paying a lower wage intentionally because of food stamps and medicaid, etc. The presence of these benefits reduces the marginal benefit of work. After all, if a job is $1k/mo and welfare is $500, then the opportunity benefit of the job is only $500, because the welfare would be forfeited. This perverse incentive not to work actually takes people out of the labor market at the bottom end and RAISES the wage paid to unskilled labor (fewer laborer competing).

VERY few people are actually working at the minimum wage, anyway. Even Wal-Mart employees are paid over the minimum wage.

As for moral obligations, I think that one great thing about the free market is that we can make our own value judgments. Those of us who believe Wal-Mart underpays people can refuse to shop there. Those who think a business is killing the environment can refuse to work there. Etc.

The minute someone wants to inflict their economic value judgements on me, I will have a problem with that, though-- as he should if I attempted to do the same to him.

crawjo

What, other than the free market, would protect the rights of workers in a world without labor unions? The economic freedom you speak of seems rather idealized to me, in part because businesses also collude with one another to keep wages low. And, of course, such free market policies do not guarantee that the prosperity gained by economic freedom will be spread throughout society, rather than concentrated at the top of the pyramid.

My view is that the consumer has an ethical obligation not to support businesses that do not provide their workers with a living wage. Businesses that do this are in effect relying upon the taxpayer to provide for their workers, whether it be through food stamps or Medicaid or other government programs.

J. Hohn

The short answer is no.

The long answer involves my concept of fairness. A labor union in effect is a price-fixing conspiracy. I'm rather certain that a union member would be upset if all the local gas stations colluded to fix the price of gasoline at $6. But they turn around and do the very same thing by conspiring to fix the price of certain kinds of labor in the market.

Labor unions have gotten away with perpetuating the myth that it is the company vs the laborers, the holders of capital vs the providers of labor. Bourgeoisie vs proletariat, to Marx.

But in actuality, this is not the case. It is labor vs labor. The unions are protecting their membership from the competitive pressure of rival suppliers of labor in the market-- rivals whose competition would drive down the price of labor. It is no different than any rent-seeking big business asking for tariff protection from Congress.

Collusion to fix prices is in most cases illegal. But with labor unions, it is sanctioned.

That said, I see no reason to ban labor unions in the private sector (the public sector being a *very* different story). If unionization is truly a competitive disadvantage or advantage, the market will sort that out, and unionized business will either thrive or not.

Of late, the tendency has been for them to not thrive, place businesses at a competitive disadvantage, then complain about jobs being shipped overseas.

We should strive to raise wages, but not through bad ideas like labor price collusion (unions) or minimum wage escalation (which causes unemployment). These are cures worse than the ailment. Wages rise when productivity does. We should strive to create in the US the most fluid and dynamic market for goods and services.

Prosperity follows from economic freedom.

crawjo

Justin,

Do you think that labor unions have any role to play in society?

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