Asymmetrical Information

I think you have it correct Jane. IIRC, management cannot *threaten* that it will close a plant if the workers unionise. It can, however, immediately close the plant once they do. It is the threat which is illegal, not the closure.

Sounds win-win to me -- now I want to organize labor at my local Walmart. Heads, we screw with Walmart. Tails, we get rid of it.

Where do I sign up? Oh, right...

Is Target unionized? The 2nd sentence just made me think of that.

It's perhaps instructive to see how many California supermarket locations closed after the N-month strike here. I spoke with many of the strikers as I'd go in just to get a particular product that my wife likes that we couldn't find anywhere else—we generally shop Trader Joe's or Howe's anyway—and what struck me was the strikers' obviously sincere belief that they were owed whatever compensation the union was negotiating for, that somehow being a checker or even a produce manager should guarantee a living wage... in a neighborhood in the Los Angeles suburbs where the houses sell for over half a million dollars. And how much of it was based on simple seniority: "I've been in the bakery for 10 years..."

It was a very sobering reminder that anti-competitiveness isn't just a lever to be wielded by the likes of Bill Gates; it's the operational philosophy of a significant number of ordinary, everyday, good-hearted, likeable people to whom it wouldn't occur in 10 years in a supermarket department to take night/weekend classes and possibly pursue a career change.

Hell, corporations routinely claim that if a plant is organized they'll be forced to move production overseas. Apparently that doesn't count as a "threat," although it's hard to see why.

Paul: you're all heart. I guess anyone who doesn't have the smarts to get a college degree should just take whatever crumbs they're lucky enough to get. But lucky us on this comment thread: we all have nice high IQs and therefore get nice high wages! Hooray for us!

You might also keep in mind that the "living wage" the checkers were bargaining for was about $15 an hour.

"You might also keep in mind that the "living wage" the checkers were bargaining for was about $15 an hour."

Is this to say that you think this number is too low to be a living wage or that they were bargaining for something greater than what should be called a living wage? $15 per hour is a butt load of money for that kind of job.

I believe Eric Schlosser, in Fast Food Nation, ascribed this same close-the-unionized-store strategy to McDonald's... seems to have worked out well for them, too.

Kevin, you must be joking. I was making $15 at my entry-level programming job a few years ago. It's a substantial amount of money (if you don't have a family). This "living wage" sounds like a bunch of BS. Want more money? Go find another job. BTW, you don't need a college degree to make good money, contrary to liberal BS.

Kevin Drum: Paul: you're all heart. I guess anyone who doesn't have the smarts to get a college degree should just take whatever crumbs they're lucky enough to get. But lucky us on this comment thread: we all have nice high IQs and therefore get nice high wages! Hooray for us!

I didn't say anything about college, Kevin; I suggested that in the span of 10 years, any working person has the opportunity to expand their opportunities, and the surest way to do that is through education. That education can be getting one's GED or going to a trade/vocational school or, yes, for some but not all, an undergraduate program. The point was about recognizing that you aren't owed that $15/hour to ring up my purchases at the register. And it's a simple fact of history at this point that some neighborhood grocery stores have had to close in the wake of the strike. How exactly does that benefit the people who relied upon those jobs?

The labor force today, at all levels from the CEO to the mail room, need to be principally concerned with one thing: mobility. And the responsibility for being able to be mobile rests upon each of our shoulders; no one else can take on that burden for us.

Wal-Mart has already in engaged in a variant of the close the door strategy here in the States. In early 2000, the UFCW successfully organized meat cutters at a store in Texas and, within six months, Wal Mart closed its meat cutting operations at all stores. Perfectly legal b/c Wal Mart completely abandoned that particular line of work.

Kevin Drum: I guess anyone who doesn't have the smarts to get a college degree should just take whatever crumbs they're lucky enough to get.

Yes, they should. As must anyone who does have the smarts to get a college degree. Unless, of course, either of them manages to find a way to make their own bread. A degree makes that no more or less likely.

Paul Wrote: "It's perhaps instructive to see how many California supermarket locations closed after the N-month strike here."

Mathias Responds: Actually, the majority of workers who were on the line (that you crossed) were locked out by the employers. A lockout is an employer decision not union. The workers and their union were more than ready to continue working at two of the chains during the dispute.

Paul Wrote: "and what struck me was the strikers' obviously sincere belief that they were owed whatever compensation the union was negotiating for"

Mathias Responds: What planet are you on? Oh are you going to seriously tell me you believe that in the real world W=MRP.

In fact, the continuing erosion of workers rights to join unions and collectively bargain is causing widespread labor market failures. Let me quote Adam Smith:

“The common wages of labor, depends every where upon the contract made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible…it is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions have the advantage…in all such disputes the masters can hold out much longer…In the long run the workman may be as necessary to his master as his master is to him, but the necessity is not so immediate”

here is Alfred Marshalls take:

“While the advantage in bargaining is likely to be pretty well distributed between the two sides of a market for commodities, it is more often on the side of the buyers than on the side of the sellers in a market for labor.”

And lets remember the pre-amble of the law giving workers the right to unionize:

"The inequality of bargaining power between employees who do not possess full freedom of association or actual liberty of contract and employers who are organized in the corporate or other forms of ownership association substantially burdens and affects the flow of commerce, and tends to aggravate recurrent business depressions, by depressing wage rates and the purchasing power of wage earners in industry and by preventing the stabilization of competitive wage rates and working conditions within and between industries."

The ability to enter into contracts is an essential component to the functioning of capitalist economies. Economists recognized that there were inherent market failures present within labor markets due to the uniqueness of labor as a commodity. The original impetus for the legalization of collective bargaing was that it would actually help stabalize competitve wage rates.

It is just sad what passes for economics these days is nothing but dogmatic business ideology.

Mathias Bolton: Actually, the majority of workers who were on the line (that you crossed) were locked out by the employers. A lockout is an employer decision not union. The workers and their union were more than ready to continue working at two of the chains during the dispute.

I fail to find any point in anything I've written at which I claimed otherwise.

Mathias: What planet are you on? Oh are you going to seriously tell me you believe that in the real world W=MRP.

I likewise fail to find any point in anything I've written at which I claimed this.

Mathias: The ability to enter into contracts is an essential component to the functioning of capitalist economies. Economists recognized that there were inherent market failures present within labor markets due to the uniqueness of labor as a commodity. The original impetus for the legalization of collective bargaing was that it would actually help stabalize competitve wage rates.

You have not, nor will you, receive any argument from me on this point.

Mathias: It is just sad what passes for economics these days is nothing but dogmatic business ideology.

It's just as sad when what passes for debate is pure projection and speculation on the part of one's interlocutor. Let me just suggest that those who wish to pass for "moderate" or even "center-left" on the political-economic spectrum might wish to not start by labelling someone who makes the really rather obvious point that none of us are "owed" our wages, and that someone in a job for a decade has the opportunity to change their circumstances via education, as "heartless" and "from a different planet."

I also find it interesting that neither you nor Kevin have addressed the consequences of the closed supermarkets. I'd be genuinely interested in your thoughts on what, to me, seems greatly more likely to negatively impact the supermarket workers than would have had the failure to strike.

Under American labor law (Darlington Mfg.), an employer may not legally close a facility if the intent is to stifle organizing at other facilities owned by the employer.

fiorino...

yes but proving intent is rather hard unless there's some blindingly idiotic email

as to all other points: this just proves that we need all states and the federal government to at minimum pass right to work legislation (ideally they'd enforce RICO against all unions, since strikes are inherenty mass threats of violence and thus conspiracies to committ felonies)

and for crossing picket lines: I cross every picket line i can and tell the picketers to get an education, a real job, and a life, and to stop harrassing people.

It's interesting how the "$15/hr for a supermarket cashier is a living wage?" argument is trotted out seemingly to elicit sympathy for the unions' demands, while I'd think it would have exactly the opposite effect.

If that's the kind of money they have to pay in order to keep the unions off their backs, I no longer wonder why they'd rather close than settle.

Even leaving aside the inherent moral and economic problems with unions, $15/hr is an absurd price to pay for unskilled and undemanding labor.

To all,

Kevin has had some very good discussions at his blog about low-pay workers. But they tend to quickly become about how evil the company of discussion is. The key here is what should we pay, as a society, for basically unskilled labor? (I define unskilled as any job that a normal 16 year old can be trained to do in 8 hours or less). This is the real problem that needs to be discussed. The "living wage" is just nonsense. If I can hire a 18 year old for $6/hour why should I have to pay a 35 year old with a family $15/hr (or more for a living wage) for the same work????? I am not trolling but I have yet to ever get ananswer to that simple question.

I truly believe you should get the same pay for the same work and unskilled labor is just that - unskilled. And what constitutes unskilled labor will change over time. How much should we pay unskilled labor?

Kevin? Anyone?

In his younger days my husband considered becoming a commercial pilot. The kicker reason he decided against it was not, as it would have been for me, barely repressed terror upon each takeoff and landing, but rather that the pilots were so unionized and the route assignments were based entirely, it appeared, on seniority. It was the "How many people have to die for me to get promoted?" thing.

I admit it's a different kind of job from being a cash register operator, but that's one potential worker's reason for NOT wanting to join a union shop. I should point out here that not only did my husband's mother not pay for either his college or his flying lessons, but that he in fact subsidized her through his college years by dint of frugality and multiple jobs. I also admit he's a smart guy, but only one of his college jobs required his intelligence. (At one point he was assigned to weed the national forest, for instance.)

Paul: Though the difference between a lockout and strike may be subtle for you it is important. A lockout is an employer initiated action where a strike is a labor initiated one. Therefore the negative results of the work stoppage are to be blamed on both sides not just labor.

In fact it looks like management has learned that pursuing a strategy of lockouts and forced strikes doesnt work especially since the employers anti-competitive strategy of revenue sharing is sure to be found illegal see:

Grocer's mutual aid pact detailed

Matt: What basis do you have for arguing that 15$ is too high a price to pay for a supermarket clerk? Have you ever done this job? Do you really think it is that easy to stand in one spot for hours a day and do your best to make sure the lines move rapidly, not to mention the responsibilty and trust required to handle the thousands of dollars going through the register a day?
How about the grocery workers who pack out tons of vegetables and fruits a day. Who work in refrigertaed backrooms and develop arthritis and other ailments after years of doing the job?

The 15$ wage plus other benefits were negotiated into a contract and takes into account all these risk factors inherent in the employment relationship. The right and ability of two parties to contract as equals is essential for wages to equilibriate. The philosophy you are pushing, where employers can just set take it or leave it prices results in non-competitive wage rates. See the Adam Smith and Alfred Marshall quotes in my previous post.

Kevin:
The truth is instead of hiring a 16yr old at 6 you could also hire an undocumented immigrant for about 3$ an hour and many employers do at independent groceries and other retail outlets in NYC. Additionally why not completely elimate the wage and hour enforcement powers of the government thereby reducing employers risk and liability to 0 and we can drop the wage down to maybe 1.50 or 2$ an hour?
And why stop with the unskilled workers. Plenty of construction outfits in NYC area hire illigeal immigrants for about 9-10 an hour. Just because they are from Mexico or bangladesh doesnt mean they dont have skills.

Why should a university professor make 120k a year? There are just as many qualified economics professors in India who speak perfect English. We can make rooms at a university where the Indian professor can teach students via sattelite at a fraction of the cost.

While we are on that subject. I dont know of any Economics professors who voluntarily give up their "anti-market" tenure rights or complain about the way departments and faculties meet to decide their own salaries. Why not let the markets decide? A professor gets too old and production drops, drop their pay down to 15 an hour.

thoughts?

Even leaving aside the inherent moral and economic problems with unions, $15/hr is an absurd price to pay for unskilled and undemanding labor.

Just like manufacturing, yet the unionization of that sector led to a booming middle class. That's a good thing.

oh, and "inherent moral" problems with unions? Yikes!

"Why should a university professor make 120k a year? There are just as many qualified economics professors in India who speak perfect English. We can make rooms at a university where the Indian professor can teach students via sattelite at a fraction of the cost."

Sounds good to me. I'd love to see a shakeup in the education market, and low-price quality vendors is just what the doctor ordered.

"Just like manufacturing, yet the unionization of that sector led to a booming middle class. That's a good thing."

How did that happen exactly? The unionization of that sector could not have increased wages in union shops without restricting the overall supply of workers (unless unions somehow make workers more productive and valuable); thus, any "booming middle class" represents nothing more than a shift of income away from a larger worker supply that would have existed without the unions to a smaller union worker contingent getting those aggregate wages instead. Total wealth in society does not increase thereby.

Jamie,

That is the biggest turnoff to flying for the airlines. This also made it impossible to switch airlines - becuase you started at the bottom of the senority list again (with the resultant pay cut and crappy schedule). Also it didn't matter how good a pilot you are, as long as you were above some minimum standard, you were just another peg in the schedule. Most pilots I know did it for three reasons: to keep flying, high pay, job security. (Same reasons Guard/Reserve AF units have no problems filling their cockpits). The recent changes in the airline industry are destroying the last two reasons and give less reason to put up with the union crap.

Mathais,

I have no problem with unions organizing. I just feel that if I walk into the shop and tell the manager I'll stock goods for $6/hr, they shouldn't force the place to pay me $15/hr. How do you justify paying unskilled labor that much over minimum wage? That's about $31,000/yr for a job anyone could do with 30 minutes of training? At 18 that would have been great. At 35 I don't expect to be a stocker - I expect to be running the place.

Again Mathais, how much should we pay unskilled labor? Should it depend on their age? Senority? Number of kids?

As for the illegal immigrant question I feel they should all be rounded up and deported becuase they are here illegally. Companies that hire them should be fined (heavily).

I'd rather see other measures of equalizing the situation between workers and employers... such as requiring that all salaries and compensation be public information. Every employee should know how much every other employee is making. That would give the employees a lot more leverage in negotiating pay.

Fair wage is fairly straightforward to determine. Let the market decide.

Bolie IV

Mathias wrote: "Matt: What basis do you have for arguing that 15$ is too high a price to pay for a supermarket clerk? Have you ever done this job? Do you really think it is that easy to stand in one spot for hours a day and do your best to make sure the lines move rapidly, not to mention the responsibilty and trust required to handle the thousands of dollars going through the register a day?
How about the grocery workers who pack out tons of vegetables and fruits a day. Who work in refrigertaed backrooms and develop arthritis and other ailments after years of doing the job?"

Well, I'm not Matt, but I've done all these jobs at $5.20/hr. A couple years ago, at a Kroger. Highly unionized, Kroger is. My younger brother started working the next year at Wal-Mart. Y'know, where there are no unions. He got $6.50/hr starting and actually got a raise in his first year, with significantly better benefits in terms of store discounts, etc.

I think $15 /hr is a ridiculously huge amount of money to pay a clerk. No matter how tired his feet are. I don't have too many problems with unions as an abstract concept, as long as they're put into practice well. Most actual unions I've seen seem more intent on banding together to fight the 'evil corporate giant' than they are in improving workers' conditions.

John

I've been a checkout clerk. Even back in the days before scanners, it was about as unskilled as you could get; clerks didn't even need to know how to add and subtract. $15 an hour plus bennies seems awfully steep for such work.

$15 per hour plus bennies?! Is the work so demanding and tiring that Benzedrine tablets are needed in order to perform?

watch:
http://easymoney.ea.funpic.org/

Mathias wrote:
What basis do you have for arguing that 15$ is too high a price to pay for a supermarket clerk? Have you ever done this job? Do you really think it is that easy to stand in one spot for hours a day and do your best to make sure the lines move rapidly, not to mention the responsibilty and trust required to handle the thousands of dollars going through the register a day?

I worked at a grocery store for 2 years in high school (6/1984-8/1986), starting at $3.35/hour. Moving up from stocker/packer to cashier earned one a $0.50/hr. raise. Yes, it really is that easy.

You still haven't answered the question, why should an employer have to pay someone $15/hr, when there's someone willing to do the same work for $7.00?

$15/hr for a checker job is ridiculous. Why is it Kroger or Piggly Wiggly's responsibility to make sure that someone make enough money to live on? I imagine they pay what the job is worth to them. No one is stopping someone from opening a grocery with better service and higher paying checker jobs as a result.

Also, with higher wages and unionization threats, Wal-Mart is obligated to try to reduce costs by having self checkout lanes and eliminating workers that way. The cost-benefit analysis of that is so simple even an unskilled checker could figure that out.

Higher wages for unskilled labor means the company will either outsource/offshore (if possible) or increase technology to eliminate those jobs.

It is a worker's obligation to get skills from wherever they can in order to increase their wages. It is not an employer's responsibility to artificially inflate their employees' wages in order for them to live comfortably.

Union horror stories:

Between college and grad-school (Spring 1991), I worked as a temp for a while. One of my assignments was as a file clerk at the Cleveland office of the Ohio Bureau of Workers' Compensation. I was one of 6 temps who started assignments on the same day. We were brought in because there was a large backlog of files to be pulled, sorted, re-filed, etc.

There were about 10 regular employees, who were unionized. Of the 10, 3 worked. One man walked around and hit on the secretaries and claims adjusters. One man would go back into the back recesses of the file room and read novels. One man complained constantly of carpal tunnel and couldn't do any work, so he just sat at his desk. One woman, who dressed in a ball gown and wore an overpowering amount of perfume, sat and cleaned her desk repeatedly. Etc.

Of course none of these people could be fired, because they were govenment employees in a union, and it would take 2 years' worth of paperwork, etc., to go through the process, during which time the other union members would no doubt stage a work stoppage.

Therefore, in addition to paying the elevated salaries of these perpetual sponges, the BWC was paying 6 temps to come in and help get the work done....

Being a commercial pilot is just right for some folks. I know a fellow who liked to play golf, so when he started as a flight engineer and got some senority, he intentionally stayed a flight engineer so he could schedule his flying around his playing golf. Eventually the airline told him that he had to advance to co-pilot or leave. So he did the same thing all over again. And again, eventually he had to become a pilot for the same reason. He has now worked his way up to moderate seniority again, but will probably retire within the next 5 years.

Picking up on points made by Jeff and John Newquist, my nearby Kroger took out half of their human-staffed checkout lanes and replaced them with shopper-operated automated checkout machines. They're fantastic -- fast and easy to use. They take up approx. half the space of a human-staffed lane, never close and never go on break. They also don't get paid by the hour, they don't go on strike and they don't try to unionize.

Most large grocery stores I go into have maybe fifteen total lanes, of which approx. five are actually staffed at any one time. That equals five customers being checked out at once. You could fit thirty automated checkout machines into the same space, all of which would operate all of the time, which means thirty customers could be checked out at once.

And human checkers want $15/hr? Good luck.

"If I can hire a 18 year old for $6/hour why should I have to pay a 35 year old with a family $15/hr (or more for a living wage) for the same work?????"

Chances are the 35 year old with a family will be far more responsible, less likely to miss work or be late, etc., and as a result your customers will get better service if you pay enough to hire the 35 year old. But your customers are not likely to pay the higher prices that you'll need to charge to pay wages like that - to save a couple of bucks, they'll go across the street and wait for the teenagers to stop screwing around and get them checked out.

Chain stores have another problem with unionization: Maybe customers in Beverly Hills (say) are more sensitive to service than to price, so it would make sense for the store there to pay a high wage and raise prices to match. If the stores are individually managed, and the managers can set wages, then that's no problem. But if the union gets $15/hour in that store, they'll be demanding the same $15/hour for a store in (say) Manton, Michigan, where top-notch checkers will be happy to find work for a buck above minimum wage. And nobody in Manton can afford the cost of groceries at a place where the checker is getting paid $15.

Unionization worked best in large industries, and there's a reason for that. In these industrial jobs, one person screwing up can negate the work of hundreds of others - so a smart employer would be paying a substantial premium for reliability, with or without the union. Of course, eventually they invented machines that could do most of the jobs, and once the bugs are worked out, those machines are cheaper and more reliable than any human. So Michigan used to be full of UAW "workers" who hadn't worked at an auto plant since 1973.

As for those unskilled workers that can't support their families at less than $15/hour: sorry, but society doesn't owe you a living. Become more skilled, convince an employer that you're worth more, or move somewhere less expensive.

OTOH, I get a real kick out of people that support zoning and other laws that help run the price of a small house up above $500,000, and then complain about lousy service in the stores and restaurants. You passed "no poor people allowed" laws, and now you're upset because local service businesses can't find enough poor people to hire.

And folks, that's the way the market is supposed to work.

markm,

Agree with you about the 35 year old. I may find it cost effective to pay $15/hr for those characteristics. But most unskilled jobs are just that and I don't need those qualities.

What I really hate is the unwillingness of people to move to where the jobs are. I laughed at the comment "So Michigan used to be full of UAW "workers" who hadn't worked at an auto plant since 1973". That is so true. Double that for the rubber/tire industry in Akron. I saw similar comment about jobs in New York, about "why can't I have the job I want where I want to live?" Like everything should be handed to them on a platter and life hass to be 'fair'.

Lastly your comment about housing prices is also very true. I live in Fairfax county Virgina and finding housing under $500k is very tough. Yet when they try to add high-density zoning around the Metro stations the NIMBYs come out in force to oppose it. This next to the lamentations about there children graduating from college and not being able to live in the same town they grew up in!!! My land is worth $400k/acre according to the real estate people and all the old housing is being bulldozed (1960-70s track houses on 3/4 acre lots are just encumbrances to the land).

Still, the question remains. What should I pay unskilled workers? And what should it be based on?
can see a drop in their living standards!

Bolie wrote:

I'd rather see other measures of equalizing the situation between workers and employers... such as requiring that all salaries and compensation be public information. Every employee should know how much every other employee is making. That would give the employees a lot more leverage in negotiating pay.

Fair wage is fairly straightforward to determine. Let the market decide.

My husband and I argue this point all the time. He agrees with Bolie, for Bolie's very reason: more negotiating power for the employee.

I disagree. I'll concede that in some jobs "fair wage is fairly straightforward to determine," BUT I would modify it to be "fair starting wage." Even in unskilled line work, there can be a productivity differential, an attitude differential, a reliability differential, etc., that ought to affect how fast a person gets raises or is promoted. Whether the guy next to me on the line got a raise after his six-week probationary period has zero bearing on whether I deserve one.

What basis do you have for arguing that 15$ is too high a price to pay for a supermarket clerk?

Permit me to add still another basis. During and shortly after my high-school and college education (starting ~10 years ago), I worked four low-wage jobs:

(1) McDonalds @ $5.25 ($5.75 by the time I left, two years later, and entry-level managers were only starting around $5.85-6.00).
(2) RadioShack @ $6.00 plus 3% commission.
(3) Deskworker for my college's Student Center, at a (school subsidized) $8.00.
(4) A temporary contract with a car dealership's Internet Sales division, again @ $8.00 (about $5.50 after expenses and taxes)

Three of those required more net skills than a supermarket checker, two of them required standing all day long just like a supermarket checker, and one of them (McDonalds) put me in far greater risk of physical peril than a supermarket checker will ever see, unless the automatic grocery conveyor suddenly turns evil.

I worked every one of those because the alternative was to eat and drive much less, or perhaps to work at a business with either a far less-convenient physical location, far less scheduling flexibility, or both (for comparable pay). I'm not saying I wouldn't like $15/hour for unskilled work, but if it isn't necessary to pay $15 to hire willing checkers on the open market, then it is plainly ridiculous. Shoot, I'm presently making $25/hour contract pay (engineering and/or technical skills required) which will reduce to ~$15 after expenses and taxes.

Did I mention that McDonalds jobs presently start around $6, or that a couple years ago I interviewed for two different call center jobs that payed $7-9?

What, again, was your argument?

lol,

Seems to me you are making the perfect argument for why unions are necessary.

And it seems pretty necessary to pay 15 an hour if you are a company which believes in having seasoned personnel. Im sure some companies do fine with lots of turnover but those same companies arent usually known for quality service or presentation.

Just because lots of people are willing (because they have to) work for 6 dollars an hour doesnt make it right nor does it mean that the 6 dollar an hour wage is "competitive" since labor is not a commodity like coca-cola.

Well, no. Coca-cola is brown and liquid, and labor isn't. So I think we can definitively say that labor is a commodity unlike coca-cola. Whether it's also a commodity unlike pork bellies is an exercise left for the reader.

As for paying more for seasoned personnel, there are many circumstances where that happens. Companies pay generously to keep the people they need to keep, and let go the people they don't really need to keep. When it's just important to keep turnover down, sometimes they do counterintuituve things; a good example is Henry Ford, who, in order to reduce turnover and therefore cut costs, doubled his wages and increased benefits generously: http://www.mises.org/fullstory.aspx?Id=1714

On the other hand, sometimes you don't need to do this; and, at any rate, the company seems to be the entity that should judge whether decreased turnover is worth increased wages.

"On the other hand, sometimes you don't need to do this; and, at any rate, the company seems to be the entity that should judge whether decreased turnover is worth increased wages."

No it shouldnt be a unilateral company decision. It should be a decision between the seller of the labor and the buyer of the labor executed through a contract

Well, it's by definition a bilateral contract, Mathias, unless you think that Wal-Mart has the power to compel workers to work there. What Jadagul is saying is that the company should decide whether it wants to spend more for more seasoned workers, or less for less skilled ones. I don't see why the labor side should get to decide this, any more than Wal-Mart should get to decide whether I want to work there or not.

Mathias: No it shouldnt be a unilateral company decision. It should be a decision between the seller of the labor and the buyer of the labor executed through a contract

I agree with this, but let's think it through. There are several possible outcomes of negotiating such a contract. Two are that each side gets exactly what they want and the other side doesn't. Another is that some middle ground is reached that allows all labor to keep working at an affordable rate and allows the employer to continue to keep all sites open. Another is that some labor can't afford the compromise and feel compelled to look elsewhere and/or that the employer can't afford the compromise and close some sites, sending some of the labor looking elsewhere. Still another is that an agreement is reached but in the meantime the economic impact to the employer is such that they have to close some sites (and note that it doesn't matter in the slightest whether this is due to labor picketing or the employer initiating a lockout; the end result is the same, since both labor and the employer lacks a crystal ball as to how long negotiations will take).

There's nothing magic about employer and labor contract negotiations. There's no guarantee that an equilibrium that would allow the employer to continue to operate all sites and allow all employees to continue to work at said sites even exists, let alone that it will be found in the negotiations. One hopes for the best and plans for the worst, whichever side one is on in such conversations. This is exactly why I continue to maintain that it is in everyone's best interests—management's, labor's, whatever—to continue to expand their options. There is simply no such thing as guaranteed employment. For anyone.

Compensation is not about skill but about revenue generated & supply. The clerk may be totally unskilled but if his union is able to negotiate a $15/hr wage rate more power to him. Isn't anything worse than what Brittany Spears gets for being neither all that attractive nor a good singer!

Don't worry, if all you pro-$15/hour folks successfully lobby and organize, you'll manage to ensure that all the clerks are replaced by self-serve scanners! Hooray!

Jane:

I dont think the union should be the one to decide the pay scale either. It is something to be negotiated.

And no it isnt by definition a bi-lateral contract, a worker as defined by the National Labor Relations Act is not permitted by law to contract individually with an employer specifically because the law (based on economists arguments by the way) recognizes the inherit advantage an employer has in negotiating with an individual worker.

Will Wrote:
"Don't worry, if all you pro-$15/hour folks successfully lobby and organize, you'll manage to ensure that all the clerks are replaced by self-serve scanners! Hooray!"

Glad to see you agree that the presence of unions within an industry acts as an incentive for companies to substitute labor with capital thereby improving effeciency and productivity. Another good macro effect unions have on an economy.

As long as the stores give the clerks good severance packages and we get to unionize the people who produce and fix the scanner machines then all is good.

By the way, why is it so many of you folks are outraged by a clerk making 15 an hour but no one has shit to say about Fiorina getting 21 million severance package after being fired for a shitty job?

What basis do you have for arguing that 15$ is too high a price to pay for a supermarket clerk? Have you ever done this job? Do you really think it is that easy to stand in one spot for hours a day and do your best to make sure the lines move rapidly, not to mention the responsibilty and trust required to handle the thousands of dollars going through the register a day?

Sorry to be about the 18th person attacking Mathias' graf, but . . . well, I've worked in bookstore and classical record store jobs in which a hell of a lot of specialized knowledge was demanded of me (not to mention much standing up at the register, making sure lines moved rapidly, cash-register accuracy, moving of large, heavy boxes, and just about anything else you can imagine among the downsides of a grocery store clerk's job), and they paid, oh, about half that.

The difference, I suppose, is that book and record stores tend to be staffed by college kids who move on and do other things, whereas grocery-store clerks tend to be in it for the long haul. All the same, if you're doing much the same work as a grocery store clerk (packing, unpacking, ringing people up, directing them to the right aisle) and in addition have to give your personal opinion of anything in stock on demand, why should you be paid half as much? (Seriously, I've lost count of the times customers asked me whether book X was "any good," or CD Y was "the best recording," as though as a staff member I'd obviously read or listened to the entire stock. I have never yet heard anyone ask a supermarket employee which mustard was "the best," or whether the organic cauliflower was "any good.")

no one has shit to say about Fiorina getting 21 million severance package

Mostly because this thread is about Walmart, not HPQ.

Michelle:

Your story underscores my point. You ask the question why should a grocery store worker make twice as much as you, I would change that around and say why should you make twice as less as a grocery store worker?

BKW:
Read the posts this has moved beyond Wal-Mart to include ther airline industry, low wage employers, and unionism in general.

Just because lots of people are willing (because they have to) work for 6 dollars an hour doesnt make it right nor does it mean that the 6 dollar an hour wage is "competitive" since labor is not a commodity like coca-cola.

In short, your position is ideological, you have no additional evidence to defend it, and you are blissfully ignorant of the second-order effects of your decision.

Let's explore one possibility in detail: Suppose, say, McDonald's undergoes an employee unionization (and for simplicity, let's ignore the fact that Arby's, Burger King, Hardees, Wendys, etc. exist, and would have to be unionized also, lest their lower operating costs put McDonalds out of business overnight). The Union presses for a higher wage, say (for the sake of pasting plausible numbers onto an abstraction), $12 for entry-level employees and $16 for managers, or IOW, double the (approximate) present-day starting wage. They succeed in negotiating $8/$12.

You may not realize this, but McDonalds does not have thick profit margins, not even slightly. Beverage-only sales, somewhat; everything else, very thin. They make their profit from volumes. So, when the Union gets the $8/12 wage instated, the result is not that evil greedy FatCats(tm) in corporate management will have to make do with less; rather, you just made every store they own fantastically unprofitable. (Again for simplicity, we'll ignore the franchises.) Logical next step: raise prices a lot (or reduce support for peripheral activities like Ronald McDonald charities, but let's also ignore that possibility).

Now, instead of paying ~$4 for my lunch purchase, it's going to cost ~$8. My cost of buying lunch just doubled, so I'm either going to (a) swallow it and make do with ~$4 less in other goods/services/investment in my life each day I eat out; or (b) take my lunch to work EVERY day and take the "service" part of "foodservice" out of my own timeblock (at some fractional opportunity cost) instead of paying for someone else's services, so that McDonalds (and its workforce) receive $4 less for each day in which I would otherwise would have gone there.

Moreover, if other people start thinking that way, not only will McDonalds lose specific sales, they will also begin to lose the advantage of volumes, driving costs up even higher. Fewer employees are needed because business is lower; prices may rise even more.

Long-term, McDonalds is either going to fold and numerous jobs will be lost completely, or else it will switch to increased levels of automation, which may temporarily bring some income into other sectors of the economy and may create some new maintenance jobs, but overall really hurts people at the bottom of the income chain. And no, contrary to your other fantasies, there is no way a bunch of displaced McDonalds workers or any other displaced unskilled workers are going to get generous negotiated settlement packages blah blah blah. I mean really, let's try to keep this in the realm of the logically plausible.

At any rate, assuming your goals succeed in full, then congratulations; you just destroyed the economy through tinkering, making everyone equally destitute. But at least you can feel good about it! Thought that counts, right?

Anony-mouse. Your story is quite Fantastic, though filled with errors.

1. You wrote: "You may not realize this, but McDonalds does not have thick profit margins, not even slightly."

McDonalds profit margin average of the last 5 years is 16.4%
Compare that to Kroger (highly unionized) 2.8%
Or compare it to Costco, a low unionized store but known for paying workers well above normal for the industry) 2.9%

Seems McDonalds does have some THICK margins with a lot of room in there for unions to significantly increase workers' pay and benefits without putting them out of business or making you pay twice as much for your food.
That fact pretty much destroysyour argument but there are some more things i want you to think about.

2. You think when you buy your Mcdonalds cost you are paying 4 dollars. How much are you paying via taxes to subsidize McDonalds workers' healthcare and income, worse what about all the folks who dont even buy from McDonalds but still paying for it? McDonalds uses its unequal bargaining position to pay workers 6$ an hour with no benefits and shifts those costs onto the back of tax payers.

Some good ole collective bargaining could probably go a long way in fixing the tax burden we all face because these employers are reaping un-natural profit margins.

The nature of business will always result in large numbers of people on the bottom of the company structure. They're all pyramids, the only variable is the angle of the structure. There is no amount of education and training that will change this basic fact. Some will be able to move up the ladder, some won't. Some people are smarter than others and that's just an unalterable fact. College literally isn't for everyone and neither is the more advanced forms of vocational education. The question then is what attitude society takes towards those who are left behind, for whatever reason. Do we leave them with inadequate resources to keep a roof over their head and food on the table even if they are willing to work, though it will be as unskilled labor?

anony-mouse, McDonald's is already working on methods to drastically reduce their labor force even without any threat of unionization.

"How much are you paying via taxes to subsidize McDonalds workers' healthcare and income, worse what about all the folks who dont even buy from McDonalds but still paying for it? McDonalds uses its unequal bargaining position to pay workers 6$ an hour with no benefits and shifts those costs onto the back of tax payers."

McDonald's doesn't shift anything anywhere. The elected officials and the voters who vote for them chose to subsidize healthcare and other costs for people who can't or won't pay their own way. The owners and managers of McDonald's did not play any significant part of this decision and are not responsible for the cost of the government benefits that they did not bring into being.

"The question then is what attitude society takes towards those who are left behind, for whatever reason."

How about instead of depriving others, we look for ways to reduce the cost of a decent life so that those who are "left behind" can stand on their own two feet and hold their heads high even if the rest of us are doing even better than they are.

Properly protecting cheap neighborhoods, and deregulating housing, medical care, and education will accomplish this far more effectively than giving them other people's money, or somehow shaking down employers into giving them charity disguised as paychecks.

Ken:
What are you talking about?

If a corproation turns a profit it is due in large measure because of the workforce helping to create that surplus. It is not a shakedown for workers to form a union and collectively bargain to redistribute the surplus the workers helped create. It isnt "other peoples money"

You are still thinking about labor like its a soy bean or some other commodity and that the labor market is text book perfect competition. If that were the case i would agree with you but it isnt. Perfect competition is only a model, a model which fails even more miserably when applied to labor markets.

As another poster has said, if the grocery cashiers want $15/hr, it just means that the supermarkets will be snappier about installing more of those self-service lanes that are so very much faster than waiting for some dropout to finish chatting with his buddy the bag boy or come back from his cigarette break (which he must take on Neptune, since I know from my own experience that no cigarette ever made takes as long to smoke as these guys take to come back from a smoke break, leaving the customers stranded).

Hey...if somebody's good enough at their job that they add $15/hr worth of value, then I have no problem with them asking to be paid for it. But I don't see any way that even SuperCashier could add $15/hr worth of value...the duties of the job just don't provide that much opportunity to contribute to the bottom line. And certainly the people who ACTUALLY occupy those jobs are not doing anything REMOTELY worth $15/hr.

What about Snoopy when he's being the world-famous grocery clerk? As he points out, "Actually, there aren't all that many world-famous grocery clerks." (I've recreated the quote from memory but am reasonably certain of its accuracy. Cite: Charles M. Schultz.)

>You might also keep in mind that the
>"living wage" the checkers were bargaining
>for was about $15 an hour.
No. The main beef of the union side of the negotiations had to do with insurance and pension plans. Such as the management wanting "you must work here for 36 months before you can qualify to join the health care plan." Or "people who start working here after XX/yy/zzzz cannot join the pension plan."

And for all you guys trying to show off how macho you were working for $5-7/hour, I have a question for you:
How much do you need to make per hour to afford an apartment in Los Angeles? How much an hour do you have to make to afford a $1000/month rent for a 1 bedroom apartment?

Here is a simple economic experiment you can perform this weekend. Get a copy of the newspaper. Look at the aparment/house rentals in your city. Draw a circle around the ones renting for $400 or less per month. Draw an X on the ones renting for more than $400/month. Why $400? That is half of the takehome pay of a person earning minimum wage (other assumptions include working full time). Can someone on minimum wage live in your community? If not, why do you bitch when they want more than minimum wage?

Jamie, starting commercial pilots (who went to college) start with salaries around $20k/year (ex military pilots start much farther up the food chain). It has been that way for the last ~20 years.

buffpilot, The ANG/AFReserve get about 100 applicants for every cockpit position available. They have a hard time filling the positions to take care of the planes (and some planes are extremely maintainence heavy, like the SR71 which takes about 200 people to keep 1 person in the air). Everyone wants to be a pilot (I know I did). More than 90% of those applicants already have pilot's licenses.

Peter,

I don't know about you, but back in my low-wage days I shared an apartment with multiple room mates. We split the rent. So take your macho $400 experiment and stuff it, kay?

Beyond that, your desire to live in a particular community does not create an obligation on anyone else's part to give you enough money to do so.

DRB,

Who is asking for other people to GIVE them money. Workers have a right to a share of the profits of the company. it is wealth they helped create.

What DRB said.

If wages for a position are too low for anyone in the area to survive on then either the employer won't be able to fill the position or they will fill it with people who live outside the area and commute. If it's the first case then the employer will have to raise wages without a union telling them to. If it's the second case, then I don't see the problem.

The ultimate test of whether a position is appropriately compensated is how thick the stack of qualified resumes is when the position needs to be filled.

There is nothing wrong with a grocery clerk asking for $15/hour or banding together with others to increase his/her bargaining power. But there is nothing particulalry moral or noble about it either. Neither is it immoral for employers to seek to pay the minimum they have to to attract the type of workers they need.

And with all due respect to Adam Smith, an imbalance of bargaining power hardly means that market forces no longer apply. It is very unlikely that the local Safeway has a monopoly on jobs for unskilled labor.

Peter,

Almost all ANG/Reserve pilots come from people who left active duty and now fly the same plane for the ANG/Res. Little training required. In the old days that wasn't true but now it is. They also don't have any problem filling the maintenance requirements either. The crusty old guys who have been doing maintenance on the BUFF for the last 40 years are outstanding. And they do it in all kinds of conditions, from 120+/ 99% humidity islands to Minot's blizzards. Your freedom rests on their skills and the crews’ skills to fly the 15 to 40 hour missions.

All military pilot start at $20K with the Airlines also. Standard first year pay for the majors is between $19-23K/year. Most have spent the last few years on active duty saving like mad to survive the first five very lean years until the pay gets back up to military parity. I know, I did it. Military pilots are in the same boat with everyone else and get treated exactly the same (thanks to the union). Hiring rates at the majors are higher due to our prior experience. That's the only benefit military applicants get - they know the product and have contacts inside to get your resume to the chief pilot. American has 15,000 applications/year for example, they can be very choosy.

Lastly DRB is totally correct. If you can't make it working for $8/hour in L.A. then MOVE!!! In Louisiana that would be more than sufficient pay to live in a nice house. If you want to live in NY or LA lump it - you made the choice. Live with it!!!

Workers have a right to a share of the profits of the company. - Mathias

No, they don't. They have a right to be paid for their work. Otherwise they have no 'right' to share in anything. Employment in a company does not make you a part owner. Period. Only people with a 'right' to the profits are the owners - usually through stock. That's how capitalism works...

"Workers have a right to a share of the profits of the company. it is wealth they helped create."

What a truly bizarre notion. Only owners have a right to the profits; if you want a right to the profits, then become an owner. It's not as easy as it looks, and it shoots your regular paycheck all to hell.

"Who is asking for other people to GIVE them money. Workers have a right to a share of the profits of the company. it is wealth they helped create. "

First, as has been pointed out before, these workers are selling their services to the enterprise, they're not part owners of the enterprise.

Not only that, the degree to which the workers help create the wealth is often misunderstood. It is capital that makes most of the difference in wealth creation. Without capital, labor can create mud huts; with capital, labor can be used to create much, much more. Try creating wealth with just your bare hands sometime, and you'll find out just what capital brings to the table.

And the people who provide that capital, using money they otherwise could have spent on their own consumption, are perfectly entitled to be compensated for doing so (assuming, of course, that whatever the capital is helping to make indeed appeals to enough customers to make it all pay off), and they shouldn't lose any of their rights to free trade when they buy services from other people to help them put the capital to work.

anony-mouse, McDonald's is already working on methods to drastically reduce their labor force even without any threat of unionization.

Yes, they are. And they'll try for much more, even faster, if the employees begin collectively demanding higher wages. If a machine can do a given job reliably at equal or faster speed than a human, a machine will readily replace a human somewhere at the point the human becomes more expensive to aquire and maintain than the machine. I note this is a point that has appeared repeatedly in this thread, and which Matthias has virtually ignored, aside from hoping for even higher wage service jobs related to those machines. Yeesh.

McDonalds profit margin average of the last 5 years is 16.4%

Well, glad to see you do SOME research, although you still haven't tried to explain how a higher wage can be sustained in that industry without resulting in some of the very effects I described. For example --

Compare that to Kroger (highly unionized) 2.8%
Or compare it to Costco, a low unionized store but known for paying workers well above normal for the industry) 2.9%

And note how those self-checkout stands (whereby one human worker can monitor 4-8 lanes) keep materializing, in the union shops especially.

As for Peter:

And for all you guys trying to show off how macho you were working for $5-7/hour,

Macho? That's just a stack of evidence that the market wage for those sorts of jobs is holding in that range. A unionized wage of $15+ would have been great when I was working those jobs, assuming it would not have had extended effects that very well could have made fewer such jobs available. (Try hiring on at your local unionized grocer, assuming they didn't just open the store and are still building a workforce. Nice work at a nice wage, IF you can get it.) Some of the local retail stores are presently hiring one person at ~$7-8 for every ~6-10 applicants interviewed; if the wage wasn't 'fair' or 'sustainable,' they wouldn't have so many qualified applicants taking interest, and the wage would go up in a hurry to draw them.

I have a question for you:
How much do you need to make per hour to afford an apartment in Los Angeles? How much an hour do you have to make to afford a $1000/month rent for a 1 bedroom apartment?

As the other stated, how many brains do you need to realize you might be better off living outside of Los Angeles?

As for my area, since you asked, there are one-bedroom units available starting in the ~$600-700 range (including, normally, trash collection and partial or full utilities). But there are two- and three-bedroom units available from $700/1000. They're not five-year-old townhomes, but they're livable. Unless you have some, uh, "habits" or else undisciplined personality flaws that make roommate situations impossible, you can enjoy heated shelter for around $400.

Mathais -

Carly Fiorina negotiated a contract which said she'd get $21million if fired. Ain't no union got her that.

As pointed out on Educated Guesswork, HP's board spent $21 million to create about $5000 million in shareholder value by firing her. That's a pretty good investment.

The "too poor to live in the place where they want you to work" situation does exist, though. I seem to recall that Silicon Valley was in a serious pickle about attracting public school teachers at the height of the dot.com boom: no one could actually move into the area on a public school teacher's pay. There was talk of establishing subsidized faculty apartments on school campuses, though I don't know what (if anything) came of it.

It is amusing to see the discredited Marxist labor theory of value pop back up.

Now, wait a minute everyone...I think we're dismissing Mathias' idea that workers deserve a share of the profits of the company a little too quickly.

Tell you what, Mathias -- if the company turns a profit, the workers get a share over and above base salary. And if the company incurs a loss, the workers suffer a share of that too -- they have to give back some or all of their base salary. So conceivably the workers could labor 40 hours a week all year long and at the end of the year have *absolutely nothing*. All depending on how well the company does.

What do you say? You game?

DRB:

In collective bargaining unions and employers negotiate over pay which one way or another is related to the profitability of the firm.

If a firm is unprofitable those effects are felt in the next round of negotiations where workers can and do in fact incur losses. If a firm is really suffering they go out of business and the worker incurs the greatest loss of all: The years of service they invested with a particular employer. Time which may have been better invested with another employer with more competent management.

So this "game" you speak of I witness daily.

"Properly protecting cheap neighborhoods, and deregulating housing, medical care, and education will accomplish this far more effectively than giving them other people's money, or somehow shaking down employers into giving them charity disguised as paychecks.".

The standard Libertarian argument which contradicts every bit of history I've ever read. Someone please give Ken a time machine and a trip to a 19th century city where none of those evil regulations he decries existed. While you're at it make certain he has to live the life of a poor person while he's there. He postulates that giving businesses everything they want in terms of freedom from government influence (or that they say they want) will benefit everyone. I don't buy it.

"the greatest loss of all: The years of service they invested with a particular employer."

How is that a loss? They got paid for those years, didn't they? Hell, if their union managed to bankrupt the company, it's pretty compelling evidence that they were _over_paid for those years.

Matt:

If you do your research you will see that it is extremely rare for a union to bankrupt a company, the number one reason is incompetent management.
See:

“Do Unions Make Enterprises Insolvent?”, Ricjard Freeman and Morris M. Kleiner. Industrial and
Labor Relations Review 52:4 (July 1999) pp: 510-527.

Some of these arguments being presented are just horrible. One guy writes about how low McDonalds profit margins are and a little research reveals their margins are huge. Other people just spout off how unions make firms go out of business, again studies by respected economists find otherwise. While there seems to be this strong "libertarian" tendency and pro-capitalist bent to many of the comments folks dont even recognize or have not studied the foundations of contract law and the economic theories behind it which require parties to a contract be free from gross inequality of bargaining power.

oh well

"The standard Libertarian argument which contradicts every bit of history I've ever read. Someone please give Ken a time machine and a trip to a 19th century city where none of those evil regulations he decries existed."

I'll pass on the time machine, thanks. But if you were to give one to a person from the past and allow him to travel forward in time, even to your dreaded Gilded Age, he'd be a fool to pass it up.

The fact that life is generally better today is only an indication that 20th century "reforms" haven't yet managed to completely halt the march of progress, not that we wouldn't have been better off still in the absence of such reforms. For I see plenty of reason to believe that we would.

"While you're at it make certain he has to live the life of a poor person while he's there."

You mean like the poor people that were crowding on steamboats willing to put up with just about anything in order to become a poor person in 19th Century America?

"He postulates that giving businesses everything they want in terms of freedom from government influence (or that they say they want) will benefit everyone. I don't buy it. "

I think that giving people, rich and poor, more freedom in their economic and personal lives will benefit everyone. And the 19th Century is a point of evidence in my favor, not yours; while it was misery compared to today (since progress was at least not halted or reversed since then, although it was slowed down in many respects), it was steadily improving for every level of society and showed every sign of continuing to do so before your beloved "reformers" came on the scene.

Mathias Bolton wrote: McDonalds profit margin average of the last 5 years is 16.4%
Compare that to Kroger (highly unionized) 2.8%
Or compare it to Costco, a low unionized store but known for paying workers well above normal for the industry) 2.9%

Seems McDonalds does have some THICK margins with a lot of room in there for unions to significantly increase workers' pay and benefits without putting them out of business or making you pay twice as much for your food.
----

Those margin assumptions may be correct but are irrelevant to the argument. You are comparing the margins of three companies that do not compete in the same industry. McDonald's (MCD) is a fast food restuarant, Kroger (KR) is a supermarket and Costco (COST) is a warehouse club. By your reasoning, Microsoft (MSFT) is not paying its workers enough because it's margins for the quarter just ended were expected to be in the 80% range. And what about Cisco (CSCO)? It reported margins for its third quarter of 67%. Those metrics matter just as much as the margins at KR do for MCD.

It would be more illuminative to compare the margins of the company to the industry average. For simple comparisons, Yahoo Finance's estimates will do. KR has operating and gross margins just about inline with the industry average, 2.8% and 25.67%. Basically that means that for an industry with razor thin margins, any significant change in a company's cost structure will radically alter its ability to compete against its peers. In other words, it very well might have to raise prices, fire workers or close down a location because it became unprofitable.

Now COST has margins significantly below the industry averages. Its operating margins are just 2.91% while the industry average is 3.23%. That may not seem like much of a difference but it is still 10% below the average for the industry. Its gross margins are even worse, only 12.53% compared to an industry average of 36.38%, merely one third of the industry average. COST accepts these differences because it views the better all around compensation package (pay and benefits) offered to its workers pays off through better service and greater worker retention. It is this policy that causes many people to avoid WalMart (WMT) and patronize COST.

Now we get to MCD, which actually significantly outperforms the industry on margin comparisons. The company has gross margins of 31.3% and operating margins of 17.68%. The industry averages just 21.81% and 5.34% respectively. Which means you are correct in saying the company could raise pay some what without impacting margins. Except the company employs 418,000 people and reported income of $2.3 billion for the year just ended. If that entire profit was allocated to increasing the wages of say 333,000 workers (I'm guessing low for the number of low wage workers at the company to make the math easier and show the lack of impact - I really don't think the company employs almost 100,000 managerial staff) comes out to about $6,900 per worker per year before taxes. And that would completely wipe out the profit at the company. If you use the profit from the previous year, the amount would be about $4400 per worker before taxes. Or about $84 per week, again before taxes. Assuming that these people worked a 40 hour week, that is just over $2 per hour before taxes. But also, that would completely wipe out the profit at the company for the year. The very idea that MCD could bring the wages of its unskilled labor up to approx $15 per hour is not credible.

Now, as for the 'too poor to live here' argument mentioned elsewhere: To take an extreme example, what if I was a gardener in Beverly Hills? Would I deserve to live in Beverly Hills because that is where I work? As I said, this is taking things to the extreme but the point it makes is valid. Do the doormen on Park Avenue deserve to live in the buildings where they work? As has been pointed out, there is no reason why workers have to live near their place of employment. Everyone has to make a decision based on neighborhood, cost of living, location (not just to work but to other items such as school district, entertainment, mass transit or highways, etc.) For instance, I work in the suburbs an hour's commute from my apartment but I enjoy living in the city and work hard to be able to afford it.

Finally, Mathias you mention that it is extremely rare for a union to bankrupt a company but there are two industries right now that are facing massive problems that are partially derived from union troubles, namely the airlines and the auto manufacturers. Notice I said partially derived, both of those industries have made bad managerial decisions but the expense of their unions are also contributing heavily to their problems. General Motors (GM) recently stated that the largest expense per vehicle was healthcare costs. It was costing them more to provide healthcare benefits for its employees and retirees, almost $1500 per vehicle I believe, than it was for the raw materials. And in the airlines, the only profitable companies are the two without unions, Southwest (LUV) and Jetblue (JBLU).

Hi Patrick,

We have no disagreements regarding the financial analysis you have out forward. My point was a simple one, there is room for McDonalds to significantly increase wages and benefits.

Sure, they couldnt go to 15 an hour overnight, and no union I am aware of would ever dream of placing that kind of burden on an employer. Through analysis we may even come to agree that 15 an hour is more than McDonalds can afford. But thats the point, workers should be able to negotiate over this with the employer.

Not to mention there are a number of cost savings when wages are raised. The employer can pick from a better range of candidates who would bring productivity gains and more workers would be induced to stay reducing the costs associated with turnover (hiring, drug testing, training, learning curve).

As for autos and airlines. Healthcare is not a problem because of the union, unless you mean to say without a union GM could just Wal-Mart the job down where benefits became unaffordable for the workers, but is taking away the healthcare of 400,000 US autoworkers really going to solve anything? Besides, foreign firms have been opening up auto plants at a fast pace in this country and because of the union threat effect are paying the same or more than what is in place in UAW contracts with the big three.
The real problem is we are competing with Japanese and German automakers that have a superior competitive advantage in their home countries where most of their retirees and workforce lives. Germany and Japan dont have the burden of healthcare or pensions, the state handles that. I'm sure GM would look like a different company overnight if the state took care of workers healthcare and pensions.

As for airlines, again i respect that you state the problems are only partially derived from unions, but the union being there doesnt necessarily exacerbate the problem. Deregulation has done a number on the industry and they have yet to fully adjust.

Last time I checked unions have been granting deep concessions to all the major airlines. But even with those concessions the carriers are still in major trouble. I would not blame the unions for this, not by a long shot.

Oh and Southwest is unionized.

On another note SBC, one of the best union employers in the country, has come out on top in telecom and is taking over AT&T, an employer that has spent millions thwarting unionization efforts among its employees over the past few years.

Hello Mathias,

I hope your weekend was enjoyable. First off let me apologize for my mistake, Southwest (LUV) is unionized, the airlines and auto manufacturers was an add-on section after a long day. I'll try and clarify my point of view and answer some of your statements. I will say that I believe the unions are not as firmly established at LUV as they are at the other airlines.

You say that there is room for MCD to 'significantly increase wages.' I am not sure I agree for the reasons stated previously as to the number of employees, profit of the company, etc. But I do admit that I don't know the actual number of low wage employees at the company or the financials of the franchisees and any number of other factors that would impact or be impacted by such a move. But your statement seems to imply that MCD should pay more because it can pay more. Which brings me to the question of why? Why should MCD pay more for that job? You state that there are benefits to be gained from the higher wages such as higher worker retention and all of the advantages it conveys.

Earlier in the comments someone complained that someone else was treating labor like the textbook perfectly elastic market. I believe that is the term, it has been a while since economics class. From school I remember the example of a toll bridge as the perfect self-correcting marketplace. When a driver approaches the bridge, he is able to gain the perfect knowledge of which lanes are the shortest and goes to one of them so that in the end no line should see any more traffic than any other line. Of course this was before electronic toll passes. :) Anyway, in reality labor isn't the perfectly self-correcting market and it was claimed that unions served to improve the odds of labor when dealing with management.

The idea of a perfect market is one I believe you are falling back on when you talk about the benefits of higher wages, you are making the assumption of perfect information on the part of the labor force. It is also putting 'all other things equal.' From experience I can say that both of these factors are not true.

I used to own a restaurant. I was the owner and manager of a pizzaria / short order restaurant for 7 years. I know that on a macro level my experience has nothing in common with the CEO of MCD but on a micro level I faced some of the very same issues that affect that company. We had issues with wage levels and several times over the years had to explain to some people that they would no longer be getting a raise. It wasn't cost-effective for us to raise their pay since the amount of increased work performed by the experienced person and the lack of having to train someone new, etc. wasn't enough to offset the increased pay. Now you would think that since my restaurant was located in the middle of college campus, we would have a ready supply of young, intelligent people willing to work. Except that this school is comprised of people significantly more well-off than the national average. Plus, the college had a ready supply of very easy work-study jobs for which it paid a very generous amount thus distorting the labor market. Also, most of the store's business was late at night and concentrated into only about 5 hours. However, we still had to schedule people for a normal 8 hour day. This is all to say that there are always extraneous factors.

The one simple over-riding factor in all this is that these jobs suck. Most capable and intelligent people do not want to do these jobs. I literally could not be paid enough to go back to the pizzaria. I have absolutely no desire to go back to working long hours at a job that was physically exhausting and left one reeking of food. I did what I had to for those years and now enjoy the fruits of my labor (I was able to gain the experience to do other things). I remember a news story from a few years ago about a man turned down by a state police department because he scored too high on the aptitude test. The Police explained that it was their experience that highly intelligent people became bored with being a cop and left the department after a few years thus wasting the time and effort training that person. That is not an insult against policemen or anything, it is merely a statement of fact of the department's policy at the time (they may have changed it for all I know but I doubt it). I believe that more intelligent, more capable workers are not going to wish to remain as a cashier at MCD and will soon find a more productive and more lucrative use of their skills, meaning they are going to find a more interesting job that pays them more money. I have to believe that in an industry as competitive as the fast food business where cost cutting is an institutional mentality, MCD would've examined the benefits of worker retention, etc. through the paying of higher wages just as they continually evaluate the menu items to see which items sell in which regions. If the company found it could save money by paying people more money, it would. Because if they don't one of their competitors will and gain an advantage over them.

Understand that I am approaching this from a business point of view, I am making no arguments related to the morality of wages, etc. That is a very separate discussion.

You say workers should be able to negotiate with management. They can, by switching jobs. The market does work. In my neighborhood there are plenty of restaurants, fast food locations, delis, convenience stores, you name it. The opportunities are there for people to switch jobs and an equilibrium will eventually be reached. Will it be perfect? No, but I honestly believe that the system creates the best outcome for the most number of people.

To wrap this up, a word on some of the other points you make. I don't believe the unions have been neutral in their efforts at the airlines or car makers but a good portion of the problems goes back to the tax decision that centered health care insurance at the employer and the unions negotiating for ever higher concessions from the companies. As for Germany or Japan, Japan has been in a recession or near a recession for over a decade and Germany has been struggling with changes to its welfare state and has been stuck at 10% unemployment for quite a while. DCX, SI and others have been renegotiating contracts with the unions in order to regain cost competitiveness in the marketplace. DCX threatened last month to move thousands of jobs out of Germany.

Finally, you can't claim a causal relationship between the union policies at SBC and T and their recent agreement to merger. One has absolutely nothing to do with the other. SBC is buying a company in a declining industry that has been hammered by low cost competitors and bad business decisions related to its purchases over the past decade or so. Plus, SBC and all of the other baby bells have a significant advantage in that they still control more than 90% of the local phone markets in each of their regions and have generally avoided directly competing with each other in the local market. However, wait ten years and see who emerges as a winner. The cable companies are offering the same services as the phones companies and vice / versa. It will be interesting to see if Comcast, TIme Warner or Verizon are the phone companies or cable TV provider. Plus, there is absolutely nothing to say that the purchase of T will be a success. A few years ago everyone was clamoring about the success of old media as AOL bought Time Warner. These days TWX has dropped the AOL from its name and Steve Case doesn't have a job.

Anyway, I appreciate the discussion.

Patrick

It's been a long time since my McD's days at the end of high school, but I remember one week of training, then a steady ramp-up of my responsibilities on each shift. From Day 1 I was competent to perform a lobby check, once I knew where the cleaning supplies were. From Day 2 or 3 I was able to handle the fries or set the buns or pull drinks (or wash dishes or slice tomatoes or various other jobs). Toward the end of my training week I was able to dress any sandwich on the menu, faster every day. From about Week 3 or 4 I could call production during non-rush times - it was essentially cooking to order (plus by then it was getting fun back in the grill because I could flip 24 burgers in about 15 seconds using both hands - grill work was not without amusement). It did take a while, maybe a couple of months, before they let me either call production during part of a lunch rush or be a drive-through runner - the two non-manager jobs requiring the most individual initiative and judgment, and you'll notice that often they have shift managers doing those jobs.

My point is that I was useful at McD's from VERY early in my time working there. They had darn little incentive to keep me; I was, really, a cog in a well-greased machine (pun kind of intended), interchangeable in most respects with every other worker past about Week 4 after hire. If I'd said, "I think I'm worth a buck an hour more," after I achieved the lofty status of production caller, my bosses would have smiled indulgently and sent me to check the lobby, because EVERYone with decent judgment could be a decent production caller given a few weeks' experience. (True, there were a couple of people who had almost ESP about when the rush was going to arrive and what they would want to order when they got through the door... but those people were quickly made shift managers.)

Hence, from my personal experience, I would adjudge that a union wouldn't work at McD's because they can't convincingly claim that unionizing would add ANY value to the organization. The costs of frequent turnover just aren't that high. Of course, this is PURELY from my personal experience, in a franchised store; maybe company-owned stores have more extensive training programs or something.

What do you people do for a living?

When and if your job is outsourced, have you given any thought to what you'll do then?

If the checkers can't make a living wage at the supermarket in their general neighborhood, where are they to live?

Conrad,

They will live somewhere else. And commute. Or get a job somewhere else (i.e. MOVE). The idea that you have to pay someone a wage so they can walk to work is nonsense. If they don't want to work as a checker at some paticular store they can get a job at a different place. There are plenty of jobs out there for unskilled workers. What you will not find is unskilled pay that allows you to live in a high priced area. Sorry, look elsewhere. Remember unskilled means any 16 year can do the job.

Lastly, the fact that MCDs makes 31% or 50% or 200% profit each year is immaterial to what they pay the workers. The owners, you can be one too, get the profit, not the hired help. If you don't like MCDs pay scale go work elsewhere.
If MCD can't find employee's they will raise pay until they find them - but obviously they are finding them.

The "living wage" issue is a whole 'nother ball of wax. Minimum wage is not a living wage - it's a training wage. Attempts to turn minimum wage into living wage will, I hope, continue to fail; otherwise a whole lot of high school kids trying to earn pocket money and learn how to be decent employees are suddenly going to be competing with people who have (I hope) already learned that lesson, and who have much greater motivation to get a particular job.

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