I feel a fisking coming on. And the target of my fisking is this article on TruthDig (a “progressive online magazine”) by Marie Cocco, who claims that “unions aren’t the problem.”
Here goes.
As Congress and the White House lurch toward possible approval of a loan package for the crippled auto industry, we are undoubtedly in store for more union-bashing. Note well that we did not hear any such tirades when vastly larger sums of taxpayer money—with fewer strings attached—were lavished upon the banks and financial industry wizards who created the credit crisis.
Um, if you did not hear any tirades about the $750B financial bailout, it must have been because you had your fingers in your ears going, “NA-NA-NA-NA-I-CAN’T-HEAR-YOU.” There was a LARGE outcry. I spoke out harshly against it myself, here and here and here and here.
But regarding union bashing… I’ll save mine for after the fisking.
And to blame the credit crisis on “the banks and financial industry wizards” is, at best, only partially correct, and at worst, indicative of a lack of understanding of the factors that caused this crisis.
Put aside for a moment the misinformation and outright untruths that characterize conservative attacks on the autoworkers’ unions. No one should be allowed to cast blame on workers who want nothing more than to maintain a middle-class life.
“No one should be allowed to cast blame?” Sorry, disagree. This is still America, and we still have free speech, and people should be allowed to cast blame where they want, even if they are wrong. Hell, Marie cast blame herself in her opening paragraph! (And she was wrong!)
Unions aren’t the problem. They are the solution.
Creating a viable middle class has been the goal of organized labor since labor first became organized. And it is this goal that was abandoned outright by American political and business leaders as they did all they could over the past three decades to encourage a relentless race to the bottom in wages and benefits.
I’m pretty sure that the original goal of organized labor was to protest against poor working conditions and the exploitation of workers. To the extent that this may have also helped to expand the middle class was an unintended side effect. So this goal was not “abandoned” by “American political and business leaders” because it was never a goal in the first place. And as far as them doing all they could “to encourage a relentless race to the bottom in wages and benefits,” this statement is just an unsubstantiated assertion that smacks of class warfare.
Strip away the financial mumbo jumbo and the credit crisis comes down to this: For decades, as wages and benefits for working and middle-class people stagnated or fell, the only way for them to purchase the goods that make the economy hum was through credit. This was true whether the item purchased was a home, a car—or all the unnecessary gizmos that retailers have been more than happy to tell consumers were the must-haves of the day. Until we understand that we are in the midst of two crises—one the short-term credit crisis and one the longer-term crisis in the failure to pay workers what they need to sustain themselves—we are doomed to repeat this horror.
The premise “For decades, as wages and benefits for working and middle-class people stagnated or fell” is patently false. The consequent — “the only way for them to purchase the goods… was through credit” — is therefore unsupported. She is trying to blame the current credit crisis on declining wages and benefits here, which is really quite sad, particularly because she already blamed it in her opening paragraph on banks and financial wizards. She can’t even make up her mind within her own article.
“If you are a man with only a high school education … your chances of making a wage or salary as good as what your father was making in the late 1970s are not good,” says Gary Gerstle, a Vanderbilt University historian. “We are looking at a deterioration in their life opportunities and living standards, at the same time that an enormous amount of wealth has accumulated at the top of the income ladder.”
This is an unsubstantiated assertion. It is also a false one; wage statistics have shown growths, not declines, in income. The statement also ignores income mobility. See, e.g., here and here.
It is true that some individuals were reckless in taking on debt. But it is equally valid that American workers simply haven’t been paid what it takes for them to spend enough to keep the American economy growing. “The economy needed levels of expenditure and consumption that most Americans literally could not afford,” Gerstle says.
“American workers… haven’t been paid what it takes for them… to keep the American economy growing” is a patently false statement, because the economy has been growing for quite some time. But even if it was a true statement (which it is not), it is not the responsibility of companies to pay workers what it takes to keep the economy growing; it is the responsibility of companies to maximize the value of the company for their shareholders. And the shareholders of companies in the U.S. are predominantly normal middle-class Americans, who own stock through their 401K plans and managed retirement accounts.
What do unions have to do with this? To start with, unionized workers make about $200 more per week than do nonunion workers, according to the Bureau of Labor Statistics. The great expansion of the American middle class and an unprecedented rise in living standards occurred between the end of World War II and the 1970s—when unions were far more common and powerful than they are today. Beginning in the 1980s, an ideology of deregulation and anti-unionism took hold, with free-market capitalists arguing that no intervention in the markets—including labor’s intervention—was ever beneficial.
The fact that union workers make $200 more per week than nonunion workers is a big part of GM’s problem (and Ford’s, and other companies in other industries). Unionized companies cannot compete very well, in general, with non-union companies. The bottom line is that you don’t get something for nothing. (Or, as Robert A. Heinlein famously put it, TANSTAAFL.) You cannot expect to have the benefit of higher union pay without a commensurate negative consequence to the financial well being of the companies, and by extension to that of their shareholders (who are overwhelmingly members of the middle class themselves).
And to claim that unprecedented rises in living standards and expansion of the middle class is attributable to unions is to make the cum hoc ergo propter hoc fallacy. In other words, correlation does not imply causation. There were likely many factors which caused standards of living to rise post-WWII, and it’s not entirely clear that union labor had anything to do with it.
“The promise of deregulation was that this would create so much energy and dynamism at the top that it would all trickle down,” Gerstle says. “Not only would people on Wall Street make all kinds of money, but people on Main Street would find that there would be more dynamism in their lives, more opportunity, more wages.”
I’m not sure what particular deregulation he is talking about, since the author has taken these little quote snippets out of context without providing any of the necessary background.
Well, people on Wall Street did make all kinds of money. People on Main Street got depressed wages, the demise of guaranteed pensions and 401(k)s that crashed with the stock market. They got health insurance that is barely affordable, if they’ve got insurance at all.
Regarding depressed wages, see my earlier statements. Regarding health insurance, that is an entirely separate topic, and has more to do with government subsidies driving up the costs of health care, along with growth in malpractice insurance and numerous other factors that have little or nothing to do directly with Wall Street.
We are engulfed by an economic morass that holds the prospect of being the deepest and broadest downturn of the post-World War II era. It is no coincidence that the percentage of private-sector workers in unions—about 7 percent—is roughly the same as what it was before the Great Depression. Historically, Gerstle says, social movements have needed direct and often unsettling action to capture the public’s imagination and take hold.
“It is no coincidence…” is another occurrence of the cum hoc ergo propter hoc fallacy. Yes, it is just a coincidence.
This is why we can only hope that events such as the unfolding peaceful occupation of a Chicago window factory by its newly laid-off workers is the start of something much, much bigger.
End of article. Thankfully.
Now for some union bashing.
The National Center for Policy Analysis has the following to say about unions:
While there are no doubt many individual members of labor unions who feel they have benefited from collective bargaining, the overall evidence is overwhelming that labor unions in contemporary America have had harmful aggregate effects on the economy.
- The economic cost of unions (determined by combining lost income and output over the period 1947 to 2000) exceeds $50 trillion, according to estimates by economists Richard K. Vedder and Lowell E. Gallaway.
- Unionization lowers incomes for all, albeit more in the relatively higher income states that on average have higher levels of unionization.
- A state with a 10 percent unionized work force can expect a 0.7 percent increase in its unemployment rate.
- For each four additional workers who become unionized, one less person works.
In the final years of the 1990s, the decline in union density in the private sector has been sharp, adding to the vitality of the economy at the beginning of the new century. As a result, there has been renewed economic growth and a rising proportion of the working age population that actually works.
Source: Richard K. Vedder and Lowell E. Gallaway, “Do Unions Help the Economy? The Economic Effects of Labor Unions Revisited,” Government Union Review, Volume 20, Number 4, December 2002, Public Service Research Foundation.
I should also add that unions serve the purpose of colluding on the price of labor, which should be prohibited in a free market economy.
Tags: Economics, Politics, Critical Thinking // 2 Comments »