Where Have All Our Wages Gone?
Mar 24, 2015 9:00 AM EDT
By Megan McArdle
Many theories have been advanced for why unions, and median wages, aren't growing very fast. Some say there's a causal link, which runs something like this: The Reagan administration gutted union protections, making it harder to organize workers. Without a powerful union to represent them, workers were at the mercy of greedy bosses who ruthlessly forced down their wage packets. What America needs, therefore, is a powerful labor movement, protected by more powerful laws that favor organizing of employees.
It's an obviously attractive story, both because it gives us a nice, satisfying morality tale and because it offers a (relatively) easy policy solution. But there's a little problem with this story: How, then, do you explain the fate of the United Automobile Workers employees at General Motors? Theirs was a very powerful union, one that managed to stave off a lot of job-threatening changes. And thanks to that power, the union was able to mobilize politicians to get them a much better deal out of GM's bankruptcy than they probably would have gotten in a more normal proceeding. What they weren't able to do was save the old wage structure. Old workers still have some semblance of the old package, but new workers make substantially less. Meanwhile, there are a lot fewer of them than there used to be. In the 1970s, GM employed nearly a half million auto workers. Today, that number is more like a tenth of that.
What happened? The same thing that happened to workers across this great land of ours: competition from machines and competition from abroad. GM now has robots doing a lot of the work that used to be done by hand. It also faces a lot more competition than it did in those happy days when the Big Three automakers had virtually total control over the U.S. market. The company that once sold half of all the cars on American roads now commands less than 20 percent of the domestic market.
Organizing a quasi-cartel like the mid-century automakers is a very different project from organizing a company that competes with companies from all over the world. When you're dealing with a cartel, it's easy to make big wage demands, because the companies can just pass those demands on to consumers, either by raising the price or taking some quality out of the product. If the consumers don't like it, well, they can walk. But when you open up that market to competition, consumers have another choice: They can buy a product that isn't produced by your union. Your company loses market share, your members lose jobs.
In a competitive market, the price is the price is the price. You can rail against it, you can jawbone people about it, you can complain that it should be otherwise. What you cannot do is change it. If you try to force the price above the market-clearing level, you can do so only by sacrificing sales. GM managed to hide that fact from itself for a while, because it lowered the quality of its cars rather than raise the sticker number. That let it run things out a while longer, though at the price of eroding its brand. When the market figured out that the cars weren't as good, the price became the price again, and its market share fell accordingly.
more...
http://www.bloombergview.com/articles/2015-03-24/unions-wages-and-the-hand-of-competition
= new reply since forum marked as read
