What's Good for the Goose...
Brad Spangler writes:
I recall seeing a lot of tsk-tsking from Paul Birch and others of like mind in some discussion forum several months back, about what blackguards union workers were for demanding higher wages when their labor was most needed. Golly, aren't these the same people who defend "price gouging" by the oil companies?
Here's what I think it boils down to. For Nixon and Bush, "when the President does it it's not illegal." And for vulgar libertarians, when big business and the rich do it it's OK. In response to someone who said it was perfectly rational for a worker to see how much pay he could get for the least work, Birch replied in offended tones that it might be rational to steal, too, or something to that effect.
Well, before we put "employers" on too high a pedestal, let's consider this quote from a vice president of PR at General Motors (in David M. Gordon's Fat and Mean):
And here, from the same source, is an advertising blurb from a union-busting consulting firm:
That kind of honesty is quite refreshing, after all the smarmy Fish! Philosophy shit I've been wading through lately.
I know, I know, I've read Economics in One Lesson. I'm familiar with the argument that "in a free market" wages are determined by productivity. I've also seen, in the real world, real wages that have remained stagnant or even fallen slightly since the 1970s, as the real GDP nearly doubled. That brings to mind a quote from Mises:
When the theory predicts that in a free market wages will be determined by the productivity of labor, and we see that they aren't, what's the obvious conclusion? That we're dealing with power relations, not market relations.
To accept that the state is banditry but simultaneously deny that the poorest among us are undoubtedly among those who have been stolen from the most (in one fashion or another) is not rational.
Against that backdrop, libertarians ought to re-evaluate their historic hostility to labor organizing. In a genuinely free market, all would rightfully have the opportunity to seek and negotiate the best deal for themselves and their associates that they can. If whatever price the market will bear is good for the plutocrat, it’s just as good for the worker negotiating wages. Personally, I’m proud to be a dues paying IWW member.
I recall seeing a lot of tsk-tsking from Paul Birch and others of like mind in some discussion forum several months back, about what blackguards union workers were for demanding higher wages when their labor was most needed. Golly, aren't these the same people who defend "price gouging" by the oil companies?
Here's what I think it boils down to. For Nixon and Bush, "when the President does it it's not illegal." And for vulgar libertarians, when big business and the rich do it it's OK. In response to someone who said it was perfectly rational for a worker to see how much pay he could get for the least work, Birch replied in offended tones that it might be rational to steal, too, or something to that effect.
Well, before we put "employers" on too high a pedestal, let's consider this quote from a vice president of PR at General Motors (in David M. Gordon's Fat and Mean):
....We are not yet a classless society.... [F]undamentally the mission of [workers'] elected representatives is to get the most compensation for the least amount of labor. Our responsibility to our shareholders is to get the most production for the least amount of compensation.
And here, from the same source, is an advertising blurb from a union-busting consulting firm:
We will show you how to screw your employees (before they screw you)--how to keep them smiling on low pay--how to maneuver them into low-pay jobs they are afraid to walk away from--how to hire and fire so you always make money.
That kind of honesty is quite refreshing, after all the smarmy Fish! Philosophy shit I've been wading through lately.
I know, I know, I've read Economics in One Lesson. I'm familiar with the argument that "in a free market" wages are determined by productivity. I've also seen, in the real world, real wages that have remained stagnant or even fallen slightly since the 1970s, as the real GDP nearly doubled. That brings to mind a quote from Mises:
If a contradiction appears between a theory and experience, we must always assume that a condition pre-supposed by the theory was not present, or else there is some error in our observation. Thedisagreement between the theory and the facts of experience frequently forces us to think through the problems of the theory again. But so long as a rethinking of the theory uncovers no errors in our thinking, we are not entitled to doubt its truth. [Epistemological Problems of Economics]
When the theory predicts that in a free market wages will be determined by the productivity of labor, and we see that they aren't, what's the obvious conclusion? That we're dealing with power relations, not market relations.
posted by Kevin Carson | 11:17 AM
13 Comments:
I find it really deeply troubling that the economy has expanded so greatly, but ordinary wages remain stagnant. I think there is a market explanation, though: the prevalence of international competition. International competition for industrial jobs has grown greatly over the past 35 years. That too is partially a product of power relations, to be sure, but in this world, it always will be.
- Josh
that should wash out, Josh, as products become cheaper...
UNLESS... there's something 'fish'y going on.
I mean Ben Tucker wrote about the market manipulation by the wealthy long before we had our current Keynesian nightmare going on. There's no reason to believe the market is any freer than it was in the 1800s.
In fact we know it is much less so.
Kevin,
It's a bit late in coming but I have that post up I mentioned. The theme is related to what Brad's talking about in the quote. Would love to get yours and other folks feedback on it. Thanks!
Josh,
I think a major cause is the culture of managerialism in American corporations. Writers like William Lazonick have contributed to a conventional view of Japanese corporations as hyper-managerial, Galbraithian technocracies. But according to Tom Peters, they are actually far less so than their American counteparts. The average American corporation has about three times the proportion of supervisory, non-production employees as in the rest of the industrialized world. So the actual cost competition in the global market is almost entirely in terms of production workers' wages, with savings on wages hardly compensating for the other ratholes of waste and inefficiency that money gets poured down.
A good example is the hospital where I work. CNA wages haven't been raised, not even a COLA, in a couple of years. But they only amount to around 3 cents on the dollar of the cost of a hosptial bed, and are the patient's first line of contact with the hospital in forming a judgment of the quality of service.
Increasing the staffing by half and giving everybody a 25% raise might increase the cost by another 3 cents on the dollar. And the cost would be at least partially offset by other savings. For example, the costs of employee disgruntlement: I've heard more people than I can count say that when they're understaffed and in a hurry, they don't bother swiping inventory bar codes in the supply room. Instead of charging items to the patient, they figure the hospital can afford to eat it since they're saving so much on labor costs. Another example: the costs of hospital-acquired infections, falls, etc., that result mainly from understaffing, but which management tries to solve by cheerleading and micromanagement.
If they increased the authorized staffing levels per patient, and increased wages to attract people, they could differentiate themselves from the local competition by being THE "customer service" hospital. A 50% increase in CNA staffing would mean completely eliminating complaints from patients who had shit the bed waiting for their call light to be answered, or who hadn't had a bath or linen change in five days, or spent all day waiting for something else to get done. And it would drastically reduce turnover (astronomical) and the training costs of replacement labor.
There are other costs, unrelated to staffing, that could also be cut. My hospital, with much fanfare, began construction of an ACE (Acute Care of the Elderly) unit, furnished like the Taj Mahal. When it was finished, at great expense, they quietly decided not to open it because it didn't meet the doctors' specs. They also remodeled the post-op care ward at great expense, resulting in a space actually less functional than the old one; if they'd just taken the money they spent on remodeling and flushed it down the toilet, instead, they'd have come out ahead.
At times the hospital has to refuse to admit people in ER because the wards aren't adequately staffed for new admits. So they get to spend the high overhead on all those exquisitely designed, empty rooms.
In short--penny wise and pound foolish. I think there's a special class in management school where they clean about half the gray matter out of your skull and then hook it up to a septic tank pump.
I suspect the problem is, if anything, too little competition. In the area where I live, the three big hospitals have exactly the same management philsophy--spare no cost on architecture and expensive equipment, and then keep the place as fucking understaffed as humanly possible.
I remember ten or fifteen years ago, Tom Peters was saying that corporations that didn't downsize management, replace first-line supervisors with self-managed teams, etc., would go the way of the dinosaurs. The dinosaurs in the Fortune 500 are still remarkably healthy. Again, I suspect that the cost of being a dinosaur is a lot less when every industry is cartelized between three or four dinosaurs.
Nick,
Great post. I especially like the combined emphasis on dismantling the state, and voluntary activity to replace the vacated areas with libertarian alternatives.
Reading more about wages over at Prof. DeLong's blog, it appears that the brunt of stagnant wages has gone to the unskilled: people with just a high school education or even less. People will college educations have seen solid increases in their average wage. Ditto for graduate-school students.
This seems to bolster my point that international competition from unskilled workers is hurting American wage growth. A guy without a high school diploma can turn a screw or assemble widgets just as well as a guy with 4 years of formal education in Vietnam.
I've thought for a few years now that the unskilled middle-class of post-WW2 America was a historical accident. World War II destroyed every major industrial country in the world but America. Unskilled American workers didn't face competition until a few decades later, and when they did, the price of their labour declined.
As for Adem's point, to some extent, the wage stagnation has been washed out in clothes, entertainment, and food. But other areas like insurance, health care, and housing have increased in price substantially. In health care's case, health care does far more now than in 1970. In housing and insurance, not so much. Not surprisingly, the government distortions in health care, insurance, and housing are enormous.
- Josh
Adem, the idea that things wash out is only meaningful with a convergence to an equilibrium. But with new changes being added to the system all the time there is a sort of inertial containment - the dust from one set of changes never settles as there's always new change coming along.
There's a lot of science and mathematics behind this insight, but I won't blind you with it. Essentially, it has to do with the stability criteria for tightly coupled systems of simultaneous differential equations (and it turns up elsewhere too).
Incidentally, this is also the flaw in the reasoning that genetic manipulation is "only" doing what evolution has been doing all along. When man-driven, the mutation and selection processes are occurring on similar, comparatively short, time scales and don't necessarily lead to the dust settling like natural evolution.
Bob,
Government intervention as well in making oligopoly industry fairly stable, and reducing the competitive disadvantage of managerialism.
Josh,
I think the two-tier polarization between educated and uneducated labor is at least in large part a byproduct of state action. State subsidies to R&D, tax advantages for heavy capital investment, and subsidized technical education mean the economy has been artificially shifted toward forms of production that rely more intensively on skilled labor. And the fact that educated workers are overproduced by government subsidy means that it's artificially cheap to get a person who's overeducated for his actual job requirements. It's becoming almost like the world of Kurt Vonnegut's Player Piano, where even people in surviving blue collar jobs, like (say) liquor store or grocery manager were expected as a matter of course to have a B.A.
As you say, the government distortions in the wildly inflated stuff are enormous. Your example of housing is probably disturbing the uneasy rest of Henry George's ghost, since economic growth creates demand for land without any new supply. But there's government action that artificially heightens even that effect, like the collusion between local governments and real estate developers (so-called "Urban Growth Machines") to inflate real estate prices.
I'd accept the quality offset to inflation to some extent in healthcare, except that the new and better stuff crowds out the older and more affordable stuff--which a lot of uninsured people would probably like access to at the old prices, on the "better than nothing" principle.
Jeremy,
I remember that Birch article at Anti-State.Com. From what I recall, he's something of an ethical utilitarian, if he was really the author of the article on anarcho-cap eminent domain I'm thinking of.
PML,
I'd be interested in seeing you develop that argument on the comparison of GMOs to natural selection. You could probably give Ron Bailey a run for his money at Reason Hit&Run.
Kevin, Josh,
Interesting you should mention the skilled/unskilled, blue collar/white collar dichotomy. My home (about a century old) has an enormous landscape retaining wall made of stone. It's in fairly bad disrepair, and I've been looking for the past few years for a mason to come and do work on it. Long story short, I've been able to locate *1* mason in the area in that time, and he gave me an estimate that was over 30% of the value of my mortgage! And he wasn't sure that he could fit me in last year (he did the estimate in June)!
Made me think alot about getting into the business, and how almost no kids think about the profession. Everyone is pressured in school to get a bachelor's at least, if not an advanced degree. I never seriously questioned my own drive to get an advanced degree until after I had obtained it and found I hated the work, while my neighbor the plumber makes more money than I do and enjoys his job.
I think there have been cultural shifts, whether related to the state (like I believe) or not, that have warped what we perceive as honorable, valuable, or just plain respectable. And this may be the greatest crime committed by the state.
"I've also seen, in the real world, real wages that have remained stagnant or even fallen slightly since the 1970s, as the real GDP nearly doubled."
Kevin, I don't believe this is true. Cafe Hayek has had many posts showing why this is wrong. When you take into account noncash income, the increase in product quality, etc., the average living standard is far higher than it was 30 years ago. Cox and Alm's Myths of Rich and Poor document that the labor time required by the average manufacturing worker to buy all kinds of things has plummeted, and that doesn't account for quality improvements. This doesn't mean we have a free market (we don't), but rising incomes are not inconsistent with the corporate state. It may mean that incomes would be even higher in a true free market.
"the fact that educated workers are overproduced by government subsidy means that it's artificially cheap to get a person who's overeducated for his actual job requirements".
Actually, subsidies like this merely feed into an existing tragedy of the commons, with everybody seeking to better themselves by becoming more employable with better credentials.
However, this merely raises the credential bar overall. Since subsidies are not the only thing feeding it - student loans do, too - the harm is much the same in aggregate. The only difference is whether the burden is spread via taxes or sheets home to the rising generation via, e.g., student debt.
Kevin's subsidies argument brings up a good point I hadn't thought of. With favourable corporate taxes for the largest businesses, and heavy government subsidy of transportation and international trade, coordinating bureaucracies are probably larger than they would be in a free market. That increases the demand for white-collar workers.
I've long thought that America is suffering from the religion of credentialism. Jobs that once required nothing more than a high-school quality education now require 4 year-degrees. What four-year degree prepares one to shuffle papers in an HR department?
I'll give two examples. My grandfather graduated high school and joined the Army to fight in WW2. He came home and, without any further education, got a job as a clerk in the local factory. He was a clerk for 30+ years, and by all accounts, a good one. He also raised five sons, bought three houses, and retired to Florida on just his income.
One of my sister's friends just graduated from a nothing college with a degree in nothing. She is now the "director of human management" for a factory, a job that requires paper shuffling but nothing she studied in school. Her salary? About $28k/yr.
Does this make sense?
- Josh
quasibill and Josh,
The phenomenon you both describe probably owes something to the ideology dispensed in the state's educational system.
"Professionalism," as a legitimizing ideology, has almost completely crowded out both the generic term "occupation," as well as the older ideas of the skilled trade and pride in craftsmanship that motivated much of the blue collar work force. In the process, the idea of pride in honest work has suffered.
PML,
I'm not sure that we disagree. Actually, guaranteed student loans are a subsidy of sorts, aren't they? In any case, I think we agree that the effect of such policies is to "raise the bar" by inflating the level of credentialing necessary for a given job.
Josh,
Another way the state has fueled the demand for white collar workers: deskilling of labor. David Noble's Forces of Production is a great history of one example: the introduction of digitally controlled machine tools. The technology was developed for the Air Corps/USAF in the 1940s, and first introduced in the big air force contractors. Digital control was deliberately chosen in preference to an alternative system of machine tool automation, the record-playback system, which would have involved blue collar workers on the shop floor in setting up production runs. Digital control, on the other hand, involved mainly engineers, and had the "virtue" of removing control of production from skilled workers and making them more easily replaceable.
Of course, neither the cost-saving nor the management control aspect panned out in practice: the high-tech, overbred machinery was quite vulnerable to breakdowns, and the demoralized blue collar workforce that survived was pretty passive-aggressive about sharing its knowledge when it came to preventing breakdowns and to lowering the scrap rate.
Sheldon,
According to the conventional measures of real income, at least, the wages of production workers adjusted for inflation have been flat (at best) for thirty years. And the incomes of senior management and investors have exploded upwards in real terms--no adjustment for quality needed.
I'm leery of the quality offset. To some extent, subsidized R&D and cartelization of industry results in newer, gee-whizzy stuff crowding out older, cheaper and more user-friendly stuff and rendering it unavailable. For example, a lot of uninsured people would probably love to have access to 1975-level medical technology (which would mean little loss of quality in basic stuff like antibiotics, treatment of traumatic injuries, and the like) at 1975 prices. That is, they'd like to have affordable "grocery insurance" that didn't *require* them to buy steak.
And as Josh pointed out, there some areas (healthcare and housing) that are far more expensive in terms of how much labor time they eat up.
Kevin,
I would take it a step further - the process is directly linked to the idea, nay, the raison d' etre, of the public school system. Namely, that there is something known as an objectively good education.
From this, everyone "knows" that person A with a 4.0 from an ivy league is "better" at pretty much anything you care to name than someone with a 4.0 from local community college. I spent years trying to convince our director that just because someone had Ph.D., or a 4.0 in undergrad, didn't mean that they were good candidates for a job in our lab. In fact, the opposite was usually true, but I could never convince him of it. He steadfastly weeded out the resumes we received according to his criteria and then got frustrated when all of the supervisors under him flatly rejected all the candidates he brought in for interviews.
While reputation and branding will clearly be even more important in a true free market, I can't help but see our current over-reliance on branding in education as a symptom of state interference. Clearly, the name of the school you graduated from says less about your abilities than most people think it does.
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