Sunday, 14 July 2013

"We need unions. But not as Labour's bankers"

Lola's brief post, questioning the notion of the "fiscal multiplier" ended up generating 41 comments so far, and DBC Reed kept referring to an editorial in last weekend's Observer. It's a good job he didn't provide a link as Blogger has decided to mark all users who include links as spam, so I'll link to it myself, and let's have a look and see if we can spot any inaccuracies or platitudes in the first two paragraphs...

Effective trade unions are vital components of a strong economy and a vigorous society.(1) Today their weakness is hindering economic recovery.(2) There will be no sustained increase in consumer spending without a rise in real wages,(3) together with the confidence among consumers that these gains are durable.(4) Innovative companies need confident customers whose wages are rising to buy their goods and services, allowing them to break into the virtuous circle of more production, technical innovation and greater spending.(5)

Nor do the positive effects of unions stop there.(6) Efficiency and productivity in the workplace are also closely linked to high trust and trust comes best between partners who are sure they will be heard. Disorganised, atomistic workforces, where workers are disposable commodities always fearful of being sacked, whose voice is neglected or ignored, are mistrustful and low-productivity places,(7) particularly where an employer requires his or her staff to think on their own.(8)


1) Supposition.

2) Although the Thatcherites exaggerate this effect, it is fair to say that in the 1970s and 1980s, the highly unionised industries like car manufacturing fared particularly badly. Or was it that they fared no worse than anything else, but they just kicked up more of a stink? Or was it that the most highly unionised industries were the nationalised industries which had been on life support for decades and Thatcher just pulled the plug?

In the meantime, the number of vehicles manufactured in the UK has gone back up to the levels of the 1970s, but I'm not aware that today's car manufacturing workforce is highly unionised.

3) That's a tautology. Spending = output, consumption = production, and production = wages + profits, and people spend their share of the profits (wages or dividends) and businesses reinvest the profits which are not paid out as dividends (which in turn is somebody else's wages or profits).

4) Confidence is always good.

5) Yes, but that's the same tautology or chicken-and-egg problem as in (3).

6) Woah! The editorial hasn't actually mentioned any "positive effects of unions" yet.

7) Agreed. Trust is good, and good/successful employers know that. They'll do it out of self-interest, recognising that wages are not really a "cost" but a "profit share" and these businesses will thrive. Then there are some employers who treat their employees like shit, these will tend to go out of business anyway.

Nowhere does the editorial explain why trade unions need to be involved in this process. And let us not forget that nowadays, "trade unions" and "public sector employees" are largely synonymous, from BIS/ONS:

Table 1.3 presents trade union density in GB and in UK by gender for public and private sector employees from 1993 to 2010. It shows that trade union density has generally been falling in both sectors during this period.

In 2010, trade union density of public sector employees fell marginally by 0.3 percentage points to 56.3 per cent from 56.6 per cent in 2009, and down 5.0 percentage points compared with 1995. This represented a slight fall in membership of 34 thousand from 2009.

For private sector employees, 14.2 per cent were union members, a decline of 0.9 percentage points compared with 2009, and down 7.2 percentage points compared with 1995.


8) What's so terrible about "requiring... staff to think on their own"? Most jobs are pretty much pre-programmed, but everybody has to "think outside the box" occasionally. Conveyor belts can break down, bus drivers have to decide when to skip a stop (because the bus is full or because the people at the stop look a bit unsavoury), tax advisors have to decide whether it's worth unpicking and resubmitting a tax return because the client later remembers he made a £50 charitable donation.

So in summary, although historically trade unions were A Very Good Thing indeed, most of what they reasonably demanded - redundancy protection, maximum working hours, health and safety, pay equality, minimum wage etc - has been enacted in law. Maybe the law goes too far for some and not far enough for others. Personally, I think it's gone slightly too far but broadly speaking, it's "about right".
------------------------------------------------------
The reason we are in a bloody great recession has nothing to do with all employers suddenly turning into evil bastards....

[Don't forget that the supervisor is also an employee, and the supervisor's manager is an employee and so on all the way up to the Board of Directors (admittedly, most of them live in a separate universe and collect rent/ransom rather than actually working, but hey). It wasn't just the humble check-out assistants at Woolworth's, Comet and HMV who lost their jobs, everybody did. Those retailers did not go into administration because they weren't paying their employees enough money. They simply didn't have enough money to pay them their existing wages, let alone giving them all an increase.]

... and everything to do with the fall-out of the credit bubble, aka Home-Owner-Ism. It's the massive indebtedness, high rents and high taxes on earnings and output which are dragging everything down, and no amount of trade unionisation is going to change that.

31 comments:

Kj said...

DBC will lay it on you now.

The Stigler said...

I'm pretty skeptical about the role of trade unions, and my own belief is that the rise of the motor car and trade being less local reduced their necessity.

When the only job you could get was at t'mill or the factory in walking distance, and when employers could only get people from the village to work at t'mill, you had a situation where both sides had to make it work.

When people can drive, or take a bus, they have a lot more options of who they can work for. You don't need to strike to address a grievance, including paying a representative. You're that pissed off, you get another job elsewhere.

And anywhere that employees get one up on their employer because of powerful unions soon finds themselves going downhill. End result: companies without union power replace those with. The only exception being the public sector, where most union workers are.

Now, you can follow this through and see why unions are so dead against privatisation of the NHS. Once you have competition, people can just up and go somewhere for more money/better conditions. Which means that, well, they don't need a union.

Mark Wadsworth said...

Kj, we'll see.

TS, that is also a fair point.

The ultimate point being that the best guarantee of "worker's rights" is "full employment" because that makes it easiest to switch jobs, and the "bad" employers will soon go out of business.

For example, what the Socialists can never explain is why any employer anywhere pays a penny more than Minimum Wage.

DBC Reed said...

@MW
From MW "good successful employers do it out of self interest ,recognising that wages are not really a cost but a profit share Then there are employers who treat their employees like shit ,these will tend to go out of business anyway"
From Evening Standard 26.ii.12."The Joseph Rowntree Foundation said over six million classed as living in poverty were in households where people worked."
From Mirror 23.vi.13 Headline "Working poor worse off than ever."
In the world you describe where employers always pay living wages there would no such thing as working poor: it is not logically possible.
If there are no working poor there would not be a minimum wage in the UK nor would there be working tax credits which actually encourage employers to pay bad wages in the knowledge that the Guv will supplement them. Speenhamland rides again though that old system of poor relief was levied on the rich enclosing farmer/rate payers, not other, better off workers as now.

The trouble with your fisking approach is that the fisker selects the points s/he wants to put down with flip,unsupported comments and avoids the tricky stuff e.g.
MW " Business reinvests the profits which are not paid out as dividends."
Observer para 5 (no go area apparently) "...companies are hoarding their profits and withholding investment ,while workers are having their wages squeezed. Britain ranks 159th in the international league table for investment as a share of GDP."
These facts are incontrovertible, I'm afraid.
BTW You have made a complete Horlicks of the point about "requiring staff to think for themselves" The Observer is saying it is good for staff to think for themselves not that is terrible.
It is also a cheap shot to fisk the Observer's first sentence with (Supposition).Of course it is ,they have n't proved anything yet: they are introing their theme to give supporting evidence in the ensuing paragraphs in the formal academic manner.

Not up to your usual standard!

Mark Wadsworth said...

DBC, as to the "working poor" this is because those jobs add little value in the first place, not because their employer takes a too large share of the gross.

""...companies are hoarding their profits and withholding investment"

Woah!

Two quite separate topics which are being jumbled together.

Businesses "hoard" their profits by leaving money in the bank, and in an ideal LVT world, banks would be lending that money out to others who want to invest it in new businesses (which in turn would drive up wages).

So it is not the "leaving money in the bank" which is the problem it is the fact that the banks are lending it out for entirely unproductive stuff i.e. land speculation.

And the whole Home-Owner-Ist system is what guarantees that too many people will waste their lives and their money chasing the Holy Grail of becoming landlords rather than going out and working for a living.

And yes, "workers" are having their wages squeezed but the entire productive sector is having its income squeezed thanks to the One Per Cent bankers, landlords and other wankers, it's just that the people at the bottom get the worst of it.

Kj said...

If there are no working poor there would not be a minimum wage in the UK nor would there be working tax credits which actually encourage employers to pay bad wages in the knowledge that the Guv will supplement them.

Wot? Who says the working poor does not exist? MWs point was that by far, most employees are paid above the minimum wage, something that isn't possible in your world where you need all sorts of interventions to raise wages.
And working tax credits is a crap system that subsidizes employers for low-paid employees, yes, what does that have to do with anything? Who has argued for working tax credits?

Kj said...

The trouble with your fisking approach is that the fisker selects the points s/he wants to put down with flip,unsupported comments and avoids the tricky stuff e.g.

What, one always needs to quote some opiniated Observer-article instead of producing arguments?

Morgan Charles said...

"From Evening Standard 26.ii.12."The Joseph Rowntree Foundation said over six million classed as living in poverty were in households where people worked."
From Mirror 23.vi.13 Headline "Working poor worse off than ever."
In the world you describe where employers always pay living wages there would no such thing as working poor: it is not logically possible."

This entirely depends on how you define "living in poverty", "working poor" and "living wages". In the absence of those definitions, no-one can conclude anything.

Mark Wadsworth said...

Kj, agreed on tax credits and thanks for back-up.

MC, yes, the working poor do exist, however you define it.

But as I said above, the main reason why there are so many low paid people is because there are a couple of million unemployed (or immigrants) prepared to do it for the same low wages.

So get back to full employment (and possibly restrict immigration of the low- and non-skilled for the same reason that Henry George explained) and that problem is solved as far as possible.

Further, even if somebody is low paid, if he doesn't have to pay any rent (i.e. he receives a Citizen's Dividend = the LVT on his home) and that improves net incomes as well.

Seeing as shifting from taxing incomes to taxing land values boosts employment and raises the money for the Citizen's Dividend, we have thereby solved the problem of the "working poor" as far as possible.

Not completely, but as far as possible, and nothing will ever be perfect.

Lola said...

MW. Thanks for fisking the article.

I particularly like your pt 8 - I work very hard at leaving as much discretion with my employees as possible, Responsibility breeds responsibility. I want (to quote) the 'thinking fighting man' in my business. DBCR has a very flawed idea as to how all businesses work.

paulc156 said...

The one thing that seems pretty straightforward about the article is the claim that Trade Unions will tend to raise wages [where that is possible].
That higher wages, even if it means lower profits [it should]are a good thing, not bad.

That said Stigler's comment:"Now, you can follow this through and see why unions are so dead against privatisation of the NHS. Once you have competition, people can just up and go somewhere for more money/better conditions. Which means that, well, they don't need a union."

Maybe, maybe not. I tend to think not. For one thing it's not just unions, but, well rather than list them all let's say 'everyone' who works in the NHS is against more privatisation [there's already quite a lot of it]in the NHS except 'management'. So, far more likely is that unions are against it because they see it like most health professionals and joe public, as bad for health provision. Large scale privatisation of the health service is widely viewed by health professionals be to the detriment of the service and we already know that there is a strong positive correlation between the level of private health provision and the cost.

@MW. You make the very same point I heard made by Andrew Kliman [bone fide Marxist] in an interview I listened to only a few days ago. Re the cash hoarding and banks not lending out whereas if business was profitable banks would be expected to lend.
I would just add that banks may prefer to invest in property related exploits and investment banking operations etc but the investment strike by firms is simply evidence of the lack of potential profit as perceived by those firms. Another reason why banks wouldn't want to lend out. There aren't that many takers.

The Stigler said...

paulc156,

For one thing it's not just unions, but, well rather than list them all let's say 'everyone' who works in the NHS is against more privatisation [there's already quite a lot of it]in the NHS except 'management'. So, far more likely is that unions are against it because they see it like most health professionals and joe public, as bad for health provision. Large scale privatisation of the health service is widely viewed by health professionals be to the detriment of the service and we already know that there is a strong positive correlation between the level of private health provision and the cost.

Yeah? Want to send me a chart showing that correlation, including various systems of healthcare?

Lola said...

PC156. I just do not buy your bit bout private healthcare being more costly than nationalised healthcare. In every other sector I can think of - including defence - that is just not the case. The problem may be that all the notionally private healthcare systems are in some way distorted. This is certainly true of the US where there is massive cronyism and protectionism, all made possible by political boondoggles.

DBC Reed said...

@St
Bubblebubble.com is now listing the American healthcare system as the next big asset bubble. This site is, BTW, an excellent source of charts on house price bubbles round the world down to really obscure house price disasters in the Philippines etc.
@MW You keep ignoring Stigler's notorious comment that wages could be adjusted downward post LVT ,people needing less rent money.(Rudolph Steiner, in a venture into Economics,
urged people to carry on drinking because Prohibition would lead to general wage cuts.)
@lola You misunderstand MW 's point 8 .He had misread The Observer which was saying that employees should think for themselves but are now ,in general, too demoralised to care.
@KJ In the UK the standard practice is to support arguments with at least three bits of third party evidence(quotes, references and instance) from respected sources. In this case the Observer is to be respected for being unusually coherent with telling supporting evidence.(I notice no one is challenging the fact that Britain is 159th in international measures of investment.)
BTW Henry George made his name for straightforwardly racist attacks on The Chinese on the Pacific Coast" I May 1869 in which he called them "utter heathens, treacherous ,sensual cowardly and cruel. They bring no women with them(and probably will not for a while yet." (Sorry for all these facts and quotes.)It is probably not a good idea to call George in aid when discussing immigration (never mind all that shenanigans when he altered JS Mill's land tax and came up with a version which is very hard now to implement>see Martin Wolf "Why we must halt the land cycle" FT 8.v.2013)
BTW IMO Gentlemen don't fisck.

DBC Reed said...

PS Or fisk .

Mark Wadsworth said...

DBC: " You keep ignoring Stigler's notorious comment that wages could be adjusted downward post LVT"

I'm not ignoring it - firstly he never said that, and secondly even if he did then it's not true anyway. Profits would go up and so wages would go up as well and unemployment would go down.

The world would not be perfect but as good as it will ever get.

Morgan Charles said...

"MC, yes, the working poor do exist, however you define it."

It's not their existence, but their number and the conclusions you can draw from how that number is changing, that depends on how they are defined. Having said that, it is perfectly possible to draw up a definition of the "working poor" that reduces their number to insignificance.

"I notice no one is challenging the fact that Britain is 159th in international measures of investment"

It would, perhaps, help, if you explained what "international measures of investment" are. AFAICS, the vast majority of what is called "investment" is simply people with money buying stocks, shares or commodities, in the hope that they will increase in value, a practice that benefits nobody, except the "investors" and their brokers.

Kj said...

@KJ In the UK the standard practice is to support arguments with at least three bits of third party evidence(quotes, references and instance) from respected sources. In this case the Observer is to be respected for being unusually coherent with telling supporting evidence.

Hehe, "in the uk" eh? Is this for each blogcomment or each stated opinion? So appeals to logic and argument is not UK tradition? Sorry for everything being questions, but this thing of yours where you chug along with new, vaguely relevant statements, now including UK blogpost rules (which you seem to ignore yourself), is so exciting and new.

The Stigler said...

"You keep ignoring Stigler's notorious comment that wages could be adjusted downward post LVT ,people needing less rent money.(Rudolph Steiner, in a venture into Economics,
urged people to carry on drinking because Prohibition would lead to general wage cuts.)"

I didn't say wages could be adjusted downward, more that some wages WOULD be adjusted downwards.

We already have differentials on wages in the UK. A software developer in Birmingham costs less than one in Swindon, who costs less than one in London. That differential is about rent and other living costs on the location.

If you give people living in Hull a tax incentive over people in London, the differentials will widen still further.

Now, this probably gets a lot more complicated than this, as once companies start moving to Hull because it's cheap, you will boost the economy of Hull and wages will then start to rise to pay the tax. But some degree will retain as there is always some forms of subsidies to London because of where the government, whitehall, and so forth are based.

None of this makes people in Hull poorer. They may have lower wages, but the tax they're paying is also lower.

Overall, if combined with CI and if we removed the minimum wage, this would be good for the economy. The sort of "mobile" employer would come to Hull because the cost of labour would be cheaper than elsewhere. Companies might put their call centres in Hull rather than Kerala because it's a better deal.

There's nothing "notorious" about this. It's the result of what would happen and we, and especially people in those poor areas, would be better off as a result of it.

The Stigler said...

and yes, I never said that in this thread but in another.

With regards to trade unions and wages, at best, trade unions only increase wages in the short term. If BA cabin crew are earning more than Ryanair cabin crew, they make more money. But that then raises the cost of a flight, and then either BA then has to raise prices or BA has to make less profit, and that's not going to be sustainable.

A lot of employees can't see this. There's a big strike going on in France, at Goodyear in Amiens. The company wanted a small number of redundancies. The union dug their heels in and dragged Goodyear through the courts. Each time they did it, Goodyear just made things worse - they're now closing the factory. And why wouldn't you if a realise that the factory is a bunch of obstinant pricks.

paulc156 said...

@Lola. "I just do not buy your bit bout private healthcare being more costly than nationalised healthcare."
No system of healthcare in the OECD is entirely nationalised that I know of. So we're talking about public private mix here. Private health provision in the context of a monopoly provider is no better than public provision with higher profits, dividends and possibly wages [ala PFI minus the wages]. Private provision in the context of a competitive market implies large marketing expenses and higher profits, dividends and possibly wages for the successful supplier. It ain't like buying shoes either. How are you going to decide who does the best knee replacement if not by comparing marketing splurges? Most patients when asked want excellence before choice. Most health professionals want more integration, less competition.

@stigler "Yeah? Want to send me a chart showing that correlation, including various systems of healthcare?"

Here's a chart showing the correlation between spending on health in a number of European countries versus 'healthy' life expectancy at birth:
http://ablog.typepad.com/.a/6a00e554717cc98833015432e78484970c-pi

Source if you want it is OECD.Health at a Glance: Europe 2010.

If you look at the Northern European developed economies there are three which are significantly above the correlation line, which means that they have an above average 'h' life expectancy relative to the amount of health spending, and there are three significantly below. The three above the line are Britain, Sweden and Denmark. The three countries below the line are Austria, Germany and Finland. Those above were achieving greater life expectancies than those below.
In Britain, Sweden and Denmark the public sector accounts for an average of 81.6% of all spending on health in the period concerned. In Austria, Germany and Finland the public spending sector funds an average of 75.9% of all healthcare provision.The average total spending, both public and private sector spending of the higher longevity countries is €2,920 per person per annum. Total spending in the second group is higher at €3,066 per annum. Hence a positive correlation between proportion of public funds spent on health and healthy outcomes despite the fact that the below line countries actually spend more in total per capita than those above the line. Sources for the private public ratios are readily available from OECD reports. Purchasing Power Parities and Real Expenditures data from OECD.

The Stigler said...

paulc,

Perhaps you could explain why Denmark is below the line now (p17 of

http://www.oecd.org/els/health-systems/HealthAtAGlanceEurope2012.pdf).

Frankly, the chart is a crock anyway. There's so much variation between the spending and life expectancy ratios that what they tell you more is that life expectancy is about a lot more than healthcare spending. And you then want to draw conclusions based on a difference of about 5%? Seriously.

Mark Wadsworth said...

TS, that's a bit harsh!

What PC and you link to says to me something "it all looks pretty much the same, there is no huge advantage to spending marginally a bit more or less or having the taxpayer-funded bit slightly larger or smaller."

DBC Reed said...

@ST
Your examples are of regional variations: with LVT you are going to get a national drop in rents. This would, by your logic , mean a fairly uniform percentage drop in rents and subsequently wages across the country post LVT. Still, at least you are admitting you indicated a post- LVT wage drop, albeit on another thread. Its alright ,the Boss (MW) has n't noticed!

paulc156 said...

@The Stigler.
Excuse me for offering data that doesn't conform to your, erm... standard?[A standard which should be noted by it's complete absence as of this moment]. Of course reaching conclusions from a priori principles derived from an ideological preferences is an alternative when one is scrabbling around for anything better.

Re Denmark's reduction in healthy life expectations in 2012. I see it's 'still better' than their private friendlier laggards from the earlier dataset. Isn't it?

It's not as you say 'life expectancy ratios' [which is too vague] but HEALTHY life expectancy ratios which I refer to. This is based on conditions such as heart problems, stroke, cancer, diabetes etc which approximate fairly well the sorts of conditions people may suffer with as they advance in age.

All the countries mentioned are northern European economies with high standard of living and no highly recommended 'mediterranean' diet to aid them so are comparable.

Regards your 5% gripe. Yes, the below line group of states spend about 5% 'more' on private health per capita [you think things would change if it were 10, 15 or 25% more?!] than those above the line but also spend more in total[public and private combined] which is the exact opposite of what one would expect considering those same laggards get worse outcomes.

In addition the above line states have a combined GDP per capita [PPP] from 2005-2012 [world bank]slightly lower than the health laggards below the line. Again, the opposite of what we might expect if higher private health spending ratios were delivering.
[and all this without a single reference to the world capital of private medicine which is of course providing the wrong sort of private medicine]

Still the onus is clearly on you to find the equivalent situation in reverse. Will await your own empirical findings with anticipation [joke] :)




Mark Wadsworth said...

@ DBC re your reply to TS, you can say what you like, simple facts are post-LVT economy is bigger and share going to rents is negligible.

Ergo, amount going to wages + profits = much bigger (and there's less or no tax deducted from them).

It is quite possible (but unlikley) that "profits" will increase disproportionately, but share going to "wages" will go up markedly in absolute terms and cost of stuff in shops will go down.

What's not to like? Don't go all Richard Murphy on me!

Lola said...

@PC. "How are you going to decide who does the best knee replacement if not by comparing marketing splurges? Most patients when asked want excellence before choice. Most health professionals want more integration, less competition."

You don't. You get an expert comparer to do it for you. Intermediaries become the gatekeepers for mechanics. In the case of healthcare the obvious choice are GP's. GP's would be in constant touch with the market and would know where to send you. As they are professionals they would have to declare any interets so that removes bias.

The bit about profista nd advertising whilst true in theory does not work out in practice since competition keeps prices low.

I think that internationally healthcare is either fully or partly nationalised because it's a great way for the political class and their bureaucratic satraps to buy votes by appealing to all our worst fears.

paulc156 said...

"You don't. You get an expert comparer to do it for you."

GP comparers? It doesn't remove bias does it. If your GP tells you he has an interest in Circle but they really are the best people for you. You'll go to Circle.

Yes, in theory the only way you keep profits down is with a high degree of competition... precisely the opposite of what the doctor ordered... ha ha, get it! In any case even the outgoing much hyped chief exec' Nicholson has voiced his disapproval of wholesale competition ['carpet bombing']in the NHS.

The Stigler said...

paulc156,

Still the onus is clearly on you to find the equivalent situation in reverse.

No, it isn't and I don't have to do anything. You made a claim, if you want to convince me, if you think I'm worth trying to convince, convince me. Because you haven't.

paulc156 said...

@The Stigler. "No, it isn't and I don't have to do anything."

You couldn't. That 'was' the point of me asking. If 'anyone' wants to make the counter factual claim that private healthcare systems provide either cheaper healthcare or better outcomes per $ spent ANYWHERE then let 'those' people present their case, since you won't/can't.

The only conditions are that their data set is limited to planet earth.
They can of course exploit the data from the behemoth of private health care states that I didn't even look at. :)

The Stigler said...

paulc156,

No, you made an assertion about correlation which is at best, weak, and if you can't see that there are numerous factors beyond healthcare on that statistic, I'm not going to waste any more of my time on it.