Asymmetrical Information

I agree, the union blew it. By calling a strike over fairly minor issues, they not only didn't get what they wanted, but the threat of a strike will carry little weight in negotiations for years to come.

Here's a link to a NYT article on the settlement. I generally have great difficulty agreeing with the Times, but unless they just made this stuff up, I don't see how this was a "humiliating public retreat" for the union.

Oops:http://www.nytimes.com/2005/12/29/nyregion/nyregionspecial3/29mta.html

J,

I think Jane's original strike post explains that matter. The union was going to win this negotiation. By and large the MTA has deep connections to the very politicians that have long-standing obligations to the TWU. At the end of the day, the MTA was going negotiate with the union and meet at least a portion of their demands.

I think the union did pretty well with the settlement. Although the strike inconvenienced me greatly, I would have been happy to suffer further had the MTA had the balls to stick it out.

An important correction...

The union seems to have developed an outsized sense of entitlement due to the fact that without them, the city would not be able to function normally. I get the impression that they expected that the realization of their vital role in the city's life would bring their fellow citizens to a humbling realization of the true worth of transit workers.

The fact is that the Union is not vital to anyone's life. The city would function just fine without the Union.

The transit workers are also not vital. The job they do is vital, but the workers are replaceable. Their worth is not just based on the value of the job they do, but on their replaceability, as well.

If they were to cause enough people to lose their jobs by striking, then they might find that there are suddenly a large number of people who are willing to do their jobs for them...

In another time, and in another political climate, the transit strike as performed here would have worked. For instance, in the brief (but all too long) Dinkins era, this would have resulted in a big win for the transit workers due to collusion by the Mayor's office and an ultimate surrender by the MTA to their demands.

The fact that all three of the officials directly involved (Kalikow, Pataki and Bloomberg) all represent a particular point of view is the only reason this fate was averted.

Jane, there are two vital points here that need to be examined closer.

First, I disagree with you about the union being greedy and that is the capitalist way. The main reason for this is that under true capitalism there would be no such thing as a monopoly of labor, which is what a union is. Under true capitalism the workers would do the best job possible and make themselves vital, something we know is not happening.

Second, and this is related to the power of union, is that we should look to who is responsible for these events. Everyone loves to blame the union, but I don't blame them in the least. Unions are only doing what they are supposed to do, just like you can't blame a shark for attacking something swimming in the water.

In my eyes the fault lies in what makes the union possible, and that quite simply is left wing NYC. Unions are killing the North East, and the one thing all these states have in common is that they are all blue states. These left wing pinkos believe in the power of the worker, but when that power comes back and bites them in the ass they get upset.

Well you have no right to get upset NYC!!! You created this animal and you had better expect it to act like an animal and bite you when it can. NYC's left believes in the power of the worker and the union and this is the result. If you don't like the result then suck it up, admit your belief in creating monopolies of employees are anti-capitalism and fight back. Destroy the union, get rid of it, suck up a strike for a few months until the union breaks, bankrupt them with fines, make the workers quit the union to avoid their penalties. Do what you have to do, but until then, don't complain to me. I loved watching the transit strike from beautiful Reno, glad I left the city years ago.

What people do not understand is that the salaries these people are getting are absolutely crazy. Not becuase they get an enormous dollar figure, but becuase they get a normal dollar figure for one third of a job. A person who cleans a subway car does not work 8 hours a day, he has to clean X cars a day. In our world X is however many cars you can clean in 8 hours, in the union world X is the smallest number they can bargain for. So in the end you have 2 or 3 people doing the job of one person. To top it off, these people work for 30 years and get paid for 60 years with their pension.

Transit workers are greedy and can only be so because of the power the union has, not because of their role in our capitalist structure. They have completely replacable jobs, 99% of the citizens in this country can do what they do. Stating that they are vital is untrue. You can replace any transit worker with an fully mature monkey and get the same result.

> of course they were being greedy. It's their job to be greedy.

Yes! This is what people don't seem to understand about unions -- they are quintessentially self-interested actors. Their very purpose is to extract as much out of employers as possible. Unions don't look out for the public interest -- in cases of public unions, in fact, they are directly opposed to the public interest.

That's why the enduring sympathy for unions on the left has never made sense to me. People see them as somehow noble, when in fact their purpose is to extort from employers or the public.

Henry Stern had the best take on the strike that I've read:

http://www.nycivic.org/articles/051229.html

wallster,

I couldn't agree with you more. Actually, after the first couple of days, things seemed to have started settling down. My personal opinion is that the union was very wise to have gone back when it did, as the city managing without the NYT (only part of the MTA system) would have been devastating for the TWU (it would have taken some emergency measures but nothing outlandish). Am I the only person who noticed even liberal New Yorkers starting to take an increasingly conservative tone regarding the strike?

Jane,
It's not your job, I realize, but it would be nice if you gave some kind of heads up when linking to sites that have prominent "not safe for work" pictures. That said, I'm grateful that you take the time to blog, since I really enjoy reading your posts. Thanks.

The entire purpose of a union is to decrease the output of labor while increasing the cost. This is supposed to balance out the effects of market competition among labor -- increasing the output while lowering the cost.

Yes! This is what people don't seem to understand about unions -- they are quintessentially self-interested actors. Their very purpose is to extract as much out of employers as possible

Yeah, I'm amazed by how many people don't get that. I don't belong to a union -- which means that there isn't a union on the face of the Earth that wouldn't happily screw me out of my job to enrich themselves or increase their membership. Unions aren't in it for "the workers" as a group -- they're in it for themselves, and to a lesser extent for their membership. So why should I be pro-union? They aren't on my side.

Dan,

Ironically, the key issues in the NY Transit strike centered around considerations where the union members themselves had little particular incentive either way. The MTA proposals specifically exempted current members from contractual changes. Current members would have still retired at 55, etc. Only future employees would have been effected. So, strictly speaking, the union wasn't even on its members' side.

Robert A. Heinlein pinpointed that "outsized sense of entitlement" way back in 1940, in his novella "The Roads Must Roll". And it was even about a sort of transit workers strike.

Galt,

"But my sympathy was of the "hey, that really sucks" variety, not the "the bastards have no right" kind."

Which is why you were tempted to endorse an arson campaign against the union?

http://tinyurl.com/7occc

John,

The hypothetical campaign was against supporters of the union in other cities -- i.e., people who had no stake in the fight at all, but who nevertheless sided with the well-off union over the lower-income New Yorkers the union was screwing over. You expect a union to act in its own interests; it doesn't exist to keep small shopkeepers in business, but rather to line the pockets of its officers and members. But what's the excuse for some comfortable middle-class leftie siding with the union and against the needy?

The firefighter strike/arson comment was still intemperate, of course.

Dan,

"The hypothetical campaign was against supporters of the union in other cities -- i.e., people who had no stake in the fight at all, but who nevertheless sided with the well-off union over the lower-income New Yorkers the union was screwing over."

So thus they deserve to *get their buildings burned down*? How does that follow?

John,
Do you even understand the point of using hypotheticals in debates? Do you really think she was advocating arson?

Megan, you write:

The whole magnificent capitalist enterprise performs because everyone is greedy, workers as much as companies. Some stripes of conservatives seem to have forgotten that

That's true -- but public employees are different. There's a self-regulating aspect to unions negotiating with private employers: they can be as greedy as they want, but if they're too greedy, they drive the company out of business and lose their jobs.

But neither side here is playing with its own money. They've got a legal monopoly, and they get heavy subsidies from taxpayers. They just don't have the right to be greedy in the same way as private unions do.

I think that unions are criminal conspiracies in restraint of trade as well as large scale conspiracies to commit assault (i.e. the real threat of physical violence to anyone crossing their picket lines, using the legal distinction between assault and battery that exists in at least some common law countries).

Further, public sector unions are utter bs as they are employees negotiating with bosses that rely on their support to keep their jobs (public sector union endorsements are one of the big things in most municipal and state elections, especially in NYC, as well as forming a large and highly committed voting block that obeys its union leaders).

This strike showed the evil behind 3 things: unions, government owned entreprises, and monopolies. Combine all three and you have very, very bad things happening. See DMV, municipal water, power, garbage collection, AMTRAK, yada, yada, yada.

A real government would have fired all the strikers, thrown the leaders in jail for 5-10 years, and held all members jointly and severally liable for the economic damages they caused in the city. You thus seize all the assets of all the members, and create an insanely massive disincentive to any further communist radical *****holes (look into Toussaint's background) to pursue these tactics.

To answer your question, why yes, atilla the hun does consider me to be scarily right wing!

Jim,

"Do you even understand the point of using hypotheticals in debates?"

Yes, a hypothetical is a fictional situation used to illustrate a point. That's why I'm asking if the point of the hypothetical arson here is that the folks outside NYC who support this strike and who have no stake in the fight at all, (such as myself), deserve to get their buildings burned down.

It seems to me that that's plausible, but I'm not sure, which is why I'm asking.

Jane said:
"The whole magnificent capitalist enterprise performs because everyone is greedy, workers as much as companies. Some stripes of conservatives seem to have forgotten that"

David Nieporent said:
"That's true -- but public employees are different. There's a self-regulating aspect to unions negotiating with private employers: they can be as greedy as they want, but if they're too greedy, they drive the company out of business and lose their jobs."

David is right on the money here. I would give up my right to strike in a heartbeat in exchange for binding arbitration and a legal requirement that the public must buy my employer's product at whatever price they demand, whether they want it or not. Public employees have pretty much no economic risk whatsoever when they go on strike.

Matt Weber's comment is sadly all too true as well - unions still seem to believe their job is to reduce productivity, as though we live in some fantasy world without competitors, rather than obtain for their membership the largest possible share in any productivity gains.

Moral hazard always results in amoral behavior.

When left-wingers tell you about all the good people who will make the world a better place if only the bad, uncaring Republicans were kicked out of office, or how we need to get good judges on the bench to make good decisions, remember, people are people, and it's a rare person, and an even more rare group of people, who won't abuse the system for their benefit. Exhibit 1,000,000,000 above. Checks and balances, folks. Limited, strictly enumerated powers. Those ideas weren't put in the Constitution to keep the government from helping people, they were put there to keep the government from hurting people.

On another note, thanks, Megan, for writing that gets better each year. You've always been a journalist to those of us who have looked forward to each new missive of yours for years now. No matter how nice a gig you wind up with, or how rich and famous you get, please don't stop writing here. Happy New Year to all.

I used to enjoy reading the comments on this blog. However of late they have taken a serious decline. Why all the outrage directed at a union? It's merely negotiating for the best deal for it's workers in much the same way that any corporation negotiates lower costs or better contract terms. It's function is to mazimize the negotiating power of its members in order maximize return. There seems to be strangeness about what true capitalism is Pete's quote is telling,

"Under true capitalism the workers would do the best job possible and make themselves vital, something we know is not happening."

That might be your opinion but it's been my experience that capitalism seeks to maximize profits through minimize costs and effectively managing prices. No where is "doing the best possible job" part of capitalism. While it's often associated with success, it's certainly not the only path to success.

Why do people believe that corporations have every right to negotiate the lowest possible costs and workers cannot negotiate the best possible value for their labor?

Clearly collective bargaining is more effective than each individual worker negotiating. (It has more force anyway).

I love this quote.

"A real government would have fired all the strikers, thrown the leaders in jail for 5-10 years, and held all members jointly and severally liable for the economic damages they caused in the city. You thus seize all the assets of all the members, and create an insanely massive disincentive to any further communist radical *****holes (look into Toussaint's background) to pursue these tactics."

Feel free to move to Singapore or China then. Fire the workers and hold them liable for the damage you cause by firing them? Since clearly you cannot immediately hire and train replacement workers IMMEDIATELY. Novel application of the law.

Jane Why shouldn't people be able to retire at 55? Cause you don't like it? No offense but that's not a good reason. My own father was a pipefitter and he retired at 56 as the union pension fund had done pretty well. Did my father deserve to retire at 56? I think so given the fact his work was so hard (I certainly wouldn't change places with my father in a million years).

Brett's got the best understanding of unions although he clearly has a negative view of them. They work in the interest of their members.

Jane writes:

>>>"I just don't think that anyone is entitled to retire at 55."

Don't police officers in New York City get full pension after 20 years on the job?

--Cobra

Brian:

You say "Why do people believe that corporations have every right to negotiate the lowest possible costs and workers cannot negotiate the best possible value for their labor?"

That has no basis in fact here. Corporations as individuals can negotiate the lowest cost; however, since corporations live with something called COMPETITION they can not do this without a competitor offering the best employees a higher wage, until eventually wages become fair.

What you are talking about is if corporations were to act together in lowering wages, and this is known as collusion and is illegal. Ask Baseball what happened when they tried to collude to limit salaries, it did not go well for them.

Get over it, the days of big, mean corporations opressing their poor little employees is over. Quit living in your utopian Marxian world!

On the other hand, when all the labor gets together to increase salary this is legal, and is called a union. Which leads me to my eternal point that if monopolies are illegal so should unions, because that is what a union is.

Furthermore, as someone else stated, this is not even a union against a private enterprise. This is a union against a government, which is a public enterprise and as an ultra left wing government in NYC (that is the city council, not the Mayor) is highly dependent on union money and votes.

So what happens when a union no longer is in an adversarial role against the government. Party A sets Party B's salary, and Party B in return gives large contributions and votes to Party A. This has been going on for years with the Democrats, it is not that different from vote buying. Democrats buy union votes and contribution with the rest of the taxpayers' money.

Which is perfectly pointed out by Corzine, who had an affair and bought a house for the head of the largest union in NJ. Now she gets to negotiate her unions' next contract with him. In the end the Democrats get the votes and contributions, and the Republicans are the ones who pay for it.

Jane,

Wasn't John Galt's strike a public relations disaster?

Jane,

Any sympathy for those threatened with criminal penalties for striking?

Wow Peter you sure can line up those straw men and ad hominems and knock'em down. Wow!

That has no basis in fact here. Corporations as individuals can negotiate the lowest cost; however, since corporations live with something called COMPETITION they can not do this without a competitor offering the best employees a higher wage, until eventually wages become fair.

Becomes "fair"? You must actually mean reflects the fair market value of the labor correct? Fair is somewhat of a strange word to use. There is no fairness in setting the pay of a worker, it's largely determined by the market.

Get over it, the days of big, mean corporations opressing their poor little employees is over. Quit living in your utopian Marxian world!

What Marxian(sic) world are you talking about? When did you get the idea I was a Marxist? I run an Internet incubator. I was pretty wealthy before I was 30 based on my previous start-ups.

On the other hand, when all the labor gets together to increase salary this is legal, and is called a union. Which leads me to my eternal point that if monopolies are illegal so should unions, because that is what a union is.

First off it's a common misperception that monopolies are illegal. They aren't. When you have been determined monopoly there are certain specific restraints on your behavior. For example Microsoft was found to have a monopoly on desktop computer operating systems. (This is a finding by a court, so let's not debate the MS settlement). Yet this monopoly wasn't illegal, just certain behaviors by MS. Your local RBOC almost certainly has a monopoly on the local frame relay cloud where you live, yet it's not "illegal".

So what happens when a union no longer is in an adversarial role against the government. Party A sets Party B's salary, and Party B in return gives large contributions and votes to Party A. This has been going on for years with the Democrats, it is not that different from vote buying. Democrats buy union votes and contribution with the rest of the taxpayers' money.

You mean that politicians can be bribed with money? It goes both ways. I am sure that the Abramhoff scandal highlights that little problem on the other side of the aisle. Corporations regulary buy votes on issues they feel important and often these conflict with the public good.

BSD

"Becomes "fair"? You must actually mean reflects the fair market value of the labor correct? Fair is somewhat of a strange word to use. There is no fairness in setting the pay of a worker, it's largely determined by the market."

Let's break down what factors tend to go into "determined by the market".

The major factor is of course scarcity of the ability to replace a worker. When a person is difficult to replace, he tends to make more money. When he is easy to replace he makes less.

Factors often correlated with such scarcity are:

High levels of education
Lots of specific training
Difficult tasks which require special talents/intelligence
Undesireability of the job

These are factors which are also in my understanding of 'fair'.

In a slightly different vein, if you provide a rare service which provides a marginally small bit of utility to millions of people, you often get paid very well if lots of other people can't do the same thing. That is one of the key reasons why sports figures get paid quite a bit more than teachers. They provide a small difference in happiness to tens of millions of people and there aren't very many sports figures. Teachers provide a lot of value to a very few people and there are lots and lots of teachers.

There is an element of fairness there too.

I think that unions are criminal conspiracies in restraint of trade as well as large scale conspiracies to commit assault (i.e. the real threat of physical violence to anyone crossing their picket lines, using the legal distinction between assault and battery that exists in at least some common law countries).

The last national strike I recall this making the news was the UPS strike, 8 years ago, which was in part a class conflict between UPS employees. I haven't seen any quantitative data on the effects of the strike, but it is pretty obvious that UPS has lost market share since then.

hi meagan,
"The union seems to have developed an outsized sense of entitlement due to the fact that without them, the city would not be able to function normally"

and this would be different from a ceo type sense of entitlement, or a professional yuppie sense of entitlement, exactly how?

and i like the use of the term: "greed." what a value laden term! one gets to disapprove of their actions even as one can acknowledge how much a part of the economic system they are. after all, an economist might alternatively have used the term--"self-interested" to describe this behaviour (as a yuppie would in getting the highest salary for themselves that they could), rather than a term that is one of the sins that gets you into upper purgatory, or perhaps even an upper circle of hell. it is pretty clear that for all the distinctions about "chiding" and "reporting that others were chiding" that you make, you do "chide" and "disapprove" of them! if this was just your subtle sense of irony playing out in a post, i apologize.

as far as i can tell, the union didn't go down in flames. they got most of what they wanted, showed a willingness to compromise, and the strike was quickly over. after all, if they are self-interested, they recognize that their fate is tied to that of their city. the aim wasn't to crush city hall. it was rather to remind them, the state, and everyone that in fact--THEY ARE IMPORTANT to the running of the city.

just like the container workers in california, a union can be a powerful tool to help get better wages and benefits. in the best of all possible worlds, these wages and benefits would be available for other workers through the simple generosity of their "self-interested" employers. but we don't see that.

i don't think this is an accident.

I don't think anyone is against people being self-interested. The issue is the monopoly power that the union has. We used anti-trust to break up standard oil because they had the ability to gauge the public by raising prices well above the competitive equilibrium.

If a union person gets one more dollar, or gets to retire a day earlier, this compes directly from the public. There's no "evil corporation" that's absorbing this. The guy who works in the bodega for $7 an hour is going to pay more for his metro card.

With labor now comprising 80% of the cost of service, you can imagine how costs of public transportation could be reduce dramatically by switching to market-rate labor.

hi joshk,
thanks for the reply,
"With labor now comprising 80% of the cost of service, you can imagine how costs of public transportation could be reduce dramatically by switching to market-rate labor."

yes, and if ceo's also dropped their wage demands, as did other workers in firms, that too, would lower costs. we find that ok, because a worker with special skills is not a monopoly--just the owner of a special skill set. so michael jordan can be paid what he is worth, because the market will support that. there is only one michael jordan (in his prime). he still functions as a monopoly. now, if that argument doesn't thrill you, and i can understand why, how about this:

of course, a city administration could not be considered a monopsonistic demander of factors either, right?--after all, there are plenty of other employers just dying to hire train operators and inspectors as well to do this kind of work, ... in the location of nyc, of course?

yes, and if ceo's also dropped their wage demands, as did other workers in firms, that too, would lower costs.

Not that long ago, some of United Airlines' unions were toying with putting the corporation under because the tradesmen felt they were entitled to the money the CEO was getting. Funny thing, tho. If you divided the CEO's compensation by the total number of employees, it came to something like $36 per employee per year.

"Jane writes:

>>>"I just don't think that anyone is entitled to retire at 55.""

Oddly, there is a group of federal employees that (depending on when they start working) can retire as early as age 38. Of course, war is a young man's (persons) profession.

Cas,

"and if ceo's also dropped their wage demands, as did other workers in firms, that too, would lower costs. "

At my job, I'm only offered what is demanded by the competitive environment. Even CEO's are in a competitive market. If a company could get a CEO it wanted for less, they would. If my company could save more, they would - and they should. I'm sure you wouldn't go into a coffee shop, order a $2 drink, and then pay $10 for it. It just boggles the mind to do as such. The entire basis of a non-marxist, capatlist system is that price signals are the "thermostats" that regulate the system and bring more resources where they are needed.

"of course, a city administration could not be considered a monopsonistic demander of factors "
Again, you ingore the substitution effect. The MTA is competing for its employees against all types of other businesses. While a toll clerk or a conductor compete against coin machines and automated systems, other, more skill-intensive jobs compete against the private sector.

Now, of course there are firms where CEO's have stacked the boards and it does seem that shareholders are getting screwed. But, two wrongs haven't yet started adding up to make a right.

As it stands today, we have over 30 applicants for each opening in the transit system. We are clearly paying way-above-market wages. Also, the TWU has viciously faught against automation. Would any of us case to go back in time to before the metro card vending machines exist? The TWU fought that as well as any further attempts to modernise the system.

Everyone talks about the 2nd abe line. But, with the TWU's labor rigidity costs and their monopolistic wages, it will be difficult if not impossible to build.

But you ignore my main point - if we pay the TWU more, that will come from the pockets of everyone. And, since they are already in the 2nd quintile or earners, that means from people who are worse off than them. Think about the guy at the bodega you shop at. He probably makes $8/hr. For him, reducing a metro card from $80 to $40 would be great. The unfairness of this situation is galling.

hi joshk,
thanks for the reply.

"As it stands today, we have over 30 applicants for each opening in the transit system."

i am pretty sure that the number of applications for a good paying white collar job will be --what--less than 30, 30, more than 30? or for a spot at harvard? or to be a ceo of a company? does this imply that we have an imbalance? yes, but what kind? why do we assume that this is a problem in the public sector, but not the private sector?

"If a company could get a CEO it wanted for less, they would. If my company could save more, they would - and they should. I'm sure you wouldn't go into a coffee shop, order a $2 drink, and then pay $10 for it."

let us accept the market economic issue you uphold. many companies charge a pretty penny for what they offer, in the way of unique products--and they try to protect their market with lots of little tricks--this is "anti-competitive." microsoft has been pretty good at including these practices. would you claim that these are problems--after all, they are charging what they can--what the market can bear.

"Again, you ingore the substitution effect. The MTA is competing for its employees against all types of other businesses. While a toll clerk or a conductor compete against coin machines and automated systems, other, more skill-intensive jobs compete against the private sector."

please help me here--what is the substitute that is available for train drivers? cars and buses? taxis? walking? i think that the reason for the strikes success is the lack of readily available substitutes of this important skill set.

"But, two wrongs haven't yet started adding up to make a right."

i completely agree with you,joshk. but what should workers do when they see abuse in the system, and they see their wages/benefits squeezed by competition from outside the states and by company mismanagement? just grin and bare it? or should they aim to keep what they can for themselves, in this dog eat dogfood world?

i agree with you that the higher costs of these settlements are passed onto you and i in the form of higher costs of products, but other firms pass on the costs of their rent seeking in the same way. i agree, two wrongs don't make a right, but why is the presumption that "we expect corporations to act like this" enough to absolve them and make unionized labour into a scapegoat?

the bodega guy's goods are higher priced than otherwise, when there is market failure, which is what we have in a non-fully competitive marketplace, which is what we have in this country--i am of the opinion that the mass of the marketplace lies with oligopolistically organized firms and industries. in that world, the paean to capitalism that you offer me looks a lot less inviting and convincing, and the need for unionism much more necessary than it would otherwise be. one does not have to be a marxist to use the tools of neo-classical economics to come to radically different conclusions to the ones you have arrived at.

cas: "i think that the reason for the strikes success is the lack of readily available substitutes of this important skill set."

What skill set is that? Is a ticket clerk doing anything more complicated than a McDonald's cashier does? Does a conductor have to learn more than a movie theater usher? Does driving a train require more training than grilling hamburgers, or less? (OK, the only trains I ever drove said "Lionel" on the side, and I crashed them a lot - but please explain what the train driver's job involves besides adult responsibility and operating some pretty simple controls.)

What's important isn't the skill set, it's the equipment. What made the strike work is not the difficulty of training new workers, but the lack of political will to fire the strikers so permanent jobs could be offered to new people.

cas,

Since you seem such a strong advocate of holding the TWU and CEOs to the same standard, lets consider the fate of CEOs who fail to deliver performance commensurate with their compensation: they are terminated. I'm sure you'll agree with me then, that the appropriate manner in which to deal with the TWU would have been to fire the union and bring in non-union labor. Right?

Cas,

I'll go through your attempts to argue the union's points:

"30 applicants" ... "does this imply that we have an imbalance?"
It implies that we are paying way more than we need to fill these spots. Almost anyone can be a tool booth person or a train conductor.

"they try to protect their market with lots of little tricks--this is 'anti-competitive.' ... would you claim that these are problems?"
Irrelevant. People commit murder too, that is not what we are discussing - we are discussing the wage gouging of the unions.

"please help me here--what is the substitute that is available for train drivers?" You previously said that the people who work for the MTA have no other choice and can only work for the MTA. The MTA therefore is a monoplistic employer. That is patently untrue. A train driver could work as an elevator operator or a night watchman. These people have many opportunities.

"reason for the strikes success is the lack of readily available substitutes of this important skill set." The fact that a mugger succeeds does not imply virtue. The union prevents the hiring of non-union employers, thus leaving the system open to a strike.

"workers do when they see abuse in the system, and they see their wages/benefits squeezed by competition from outside the states and by company mismanagement?"
This is a competitive job environment. The TWU happens to enjoy well above-market compensation. It's only natural that market pressures it to go lower, rather than higher. But again, an individual employee can certainly quit. Moreover, you're being dishonest here; this strike isn't about being unhappy with the management - that wasn't discussed - it's about more money.

"but why is the presumption that 'we expect corporations to act like this' enough to absolve them and make unionized labour into a scapegoat?" I think you are misunderstanding this. What does this have to do with corporations? This is about the TWU mugging the citizens of New York City.

"but other firms pass on the costs of their rent seeking in the same way." Again, you're trying to start up a separate discussing. There are lots of wrongs - but forcing the bodega worker to cough up half a day's salary to supplement the earnings of a subway worker is in no way justified.

"the mass of the marketplace lies with oligopolistically organized firms"
Amongst them there is plenty of competition. But even if you were correct, the solution is to help induce increased competition, not more monopolies.

"one does not have to be a marxist to use the tools of neo-classical economics to come to radically different conclusions to the ones you have arrived at" That's silly. I'm a quantitative researcher who happens to work surrounded by economists all day. Your viewpoint is really only respected in the far-left marxist world, comrade.

Cas,

One thing I don't udnerstand. How is it that you could find oligopolistic competition bad while finding monopoly competition good?

Is this a "workers of the world" sort of thing? Or are corporations inately evil?

hi joshk, markm, and bill,

thank yo for the feedback. bill, i think the union workers have ben doing their job, so the ceo analogy you offer is not the same. but sure, if a worker is incompetent, fire him or her.

markm, the equipment is important. please feel free to bring someone in off the street and have them drive it. my sense is that the person you hire will have to be trained. how long will that take. if the city is at a standstill because no one is trained yet, are you still willing to assert that skills to use the equipment are not important?

i used an example of the hiring of other workers which joshk has not yet addressed yet, concerning whether or not a surfeit of applications for private sector jobs is a sign of imbalance in the private sector or not (but i will come back to that in a moment).

the monopsony-monopoly point is simply this--we are dealing with a bilateral monopoly in this situation. if i want to work as a train driver, my option is to work for the mta, or work flipping burgers, or go to another town and do the work there. the mta is the only employer. the union is a monopoly--and the mta mst deal with it if it wantd drivers for its trains. it is not a lack of political will that stops the city from firing the union--its the fact that doing so, and having the union maintain solidarity causes a breakdown in the transport system for a period considered unacceptable to the people of nyc, people who vote for these politicians. this gets politicians fired at the next election. the question you should be addressing is why citizens of nyc lack the will to accept this level of pain for the incredible gains that you ascribe to breaking the union.

one reason may be that these union members actually live in nyc, something possible to them given their wages. but at the wages you would offer them, this would not be possible. i guess they would live somewhere, but where exactly--these people who run these services for the rest of us. i guess we hire cheap labour that doesn't mind a lower standard of living and living in shared accomadation--the rest of us are better off. what i dislike about this is what i see as a "f-u-jack, i'm alright" attitude of it. you will of course find this ironic, because this is the exact attitude that you ascribe to the union. but i disagree. what do they want? you call it "mugging"--a criminal intention. i find that value laden language interesting. my understanding is that they want to maintain their standard of living, not see it increase by leaps and bounds. they want a rise in pay commensurate with expected inflation, and protection for the benefits that they already have.

out of curiosity, how have wages/benefits gone in your industry over the last few years--have they increased in real terms, or fallen? how have profitability for your firm and industry gone in the same period? what about over the next three years? if someone put your job out for hire, would 30 applicants (or resumes) come to the door? if they did, would this mean that you are overpaid? should the firm cut your pay and benefits. do you work as a part of a bilateral monopoly?

having said that, i will reply to joshk's confident claim that since he hangs with economists he knows that my claim concerning alternative uses to the neo-classical paradigm are at best "respected only by the far left." so, i would be interested by what your colleagues think of this argument:

assume that there are positive externalities to having a mix of income levels and social strata in nyc, and to having lower-middle class workers who live in the city, rather than commute into the city from miles away (as to why, think of the possibility that eco and social diversity of the populace as a social good that positively impacts on social cohesion). if you grant this possibility, there is a case to be made to support such diversity, rather than just have a population of yuppie middle class professionals living in nyc (since they are the only ones who can afford to live there) and urban ghettoized areas made up of the extremely poor. in other words, it may benefit society to have a continuum rather than an extreme like this (less crime, social inrest, urban decay, etc--which all cost society big bucks). might your market solution get you this desirable distribution of income?

well, maybe it will. but, a quick survey of the literature of (neo-classical) welfare economics will show you that capitalist economic systems are GREAT at delivering the maximum sized pie, but are usually pretty poor at ensuring anything approaching an equitable distribution of that pie (neo-classical economics makes no claims as to its ability to do anything about this--it accepts that income inequality is a normal and expected part of the equation--and extreme income inequality is also an acceptable outcome). there are all kinds of reasons for this including the asymmetry of rewards for small differentials in talent (if i am just a tiny bit better than someone else, i get a huge increase in rewards), and the folks you work with can speak much more eloquently to this than i can.

now, your work colleagues might not grant my claim, ok, but i would be interested in their argument as to why not--hollowing out of social starta and deepening pockets of urban poverty are positively correlated with crime and unrest. so, i would appreciate getting a clearer idea of what their vision is of nyc and how to avoid eco and social hollowing out after we reduce working class folks to minimum wages for the vital services they provide the city.

finally, i find oligopolistically organized industries bad, and i find monopolies that are unregulated to be bad as well. but, understand that neo-classical eco shows us quite clearly that faced with a monopsony, a competitive factor market will be underpaid (w

sorry, i must have gone over the word limit.

short version-- {w

I used to enjoy reading the comments on this blog. However of late they have taken a serious decline. Why all the outrage directed at a union? It's merely negotiating for the best deal for it's workers in much the same way that any corporation negotiates lower costs or better contract terms. It's function is to mazimize the negotiating power of its members in order maximize return.

Maximize return for the members, yes, but possibly at the expense of the quality of work and/or financial viability. For an example of the first, check out the teachers' unions. For an example of the first and second, look into the auto workers unions with respect to the present states of GM and Ford.

Speaking from my own education experiences, there are some teachers who truly love what they do, and are making half of what their skills would be worth in a competitive wage market. Contrawise, there are quite a few teachers who may or may not love what they do, but their output shows that they are working in the wrong field. The union, however, will happily represent any who pay union dues and must necessarily strike the best average deal for all, and therefore enforces mediocrity.

These can be rightfully opposed on principle because they actively degrade the quality of an essential public servce.

As for workers unions in the private sector, I am personally ambivalent in terms of right to exist, although I still don't like them. Unions served an important role in the days when Sinclair Lewis was alive and writing, but now they have outgrown their usefulness and mainly exist as a self-propagating legacy service. Unfortunately, that legacy service tends to immolate any company it successfully controls, especially if said company's management is as stupid as the union. Hence, Toyota beats up GM, steals lunch money, and is producing some US-market cars (such as the current-generation Camry) that are entirely domestic in design and final assembly labor, and partially so in composition.

Why do people believe that corporations have every right to negotiate the lowest possible costs and workers cannot negotiate the best possible value for their labor?

If workers had only one corporation available to work for, that would be relevant. Workers often do negotiate the best value for their labor -- by moving to another firm that offers that better value. I've seen it occur, more than once, and I have also seen cases where the current firm learned of the better offer before the resignation was finalized, and valued the employee enough to sweeten his/her current circumstances accordingly.

A worker's union, by contrast, often does not try to negotiate the best value; it tries to negotiate an even better value that the market cannot bear. There are many examples that bear this out. There are also some exceptions.

Becomes "fair"? You must actually mean reflects the fair market value of the labor correct? Fair is somewhat of a strange word to use. There is no fairness in setting the pay of a worker, it's largely determined by the market.

Which in turn is the most fair wage -- the best posible rational balance between the supply of a particular skillset, and the demand for that type of skillset. What other definition of "fair" can there be, except for the greedy definition which equates "fair" to "more than I am getting now"?

sorry, commenst cut me off, for an obscure reason someone else may be able to work out...

Cas,

"used an example of the hiring of other workers which joshk has not yet addressed"
Let's say it takes a month to a month to train enough workers to replace the TWU. Maybe it takes a day, maybe a year. The issue is that by acting as a monopoly they can mug the system and shut it down for that period. This is not an indicator of the value of their skills - that value is indicated by the market place. A person who sits in a toll booth sneering at riders faces a frontier of work choices. What does that range of choises pay? That is what determines the value and the compensation needed to maintain the post. The large number of applicants (assuming that they are qualified) is simply a sign that we are paying well above-market. Try selling IPod's for $5 and see how long it takes to have 30 customers for each iPod. That doesn't mean that the market-clearing price is $5. That means that an out-of-market price is creating a distortion. Absent monoploly powers, that quickly dissappears.

"we are dealing with a bilateral monopoly in this situation. if i want to work as a train driver, my option is to work for the mta, or work flipping burgers"
That's simply not true. Almost all skills used have parallels in other industries. The train driver could transition to being a forklift driver, for example. Are you, in your next job, only going to be able to do exactly the same thing?

"assume that there are positive externalities to having a mix of income levels and social strata in nyc"
That has little to do with economics. That's a social engineering question. Who should live where? Should we have a special quota for one-eyed red-heads in the Upper West Side? Who determines who lives where? What happens if we have too many Asians in an area? Certainly you are not going to argue that the right way to social-engineer is to grant extra privileges to the TWU at the expense of the one-eyed red-heads?

"understand that neo-classical eco shows us quite clearly that faced with a monopsony, a competitive factor market"
Again, there are so many competing employers that your point falls flat. What you are talking about is relevant to "company towns" and the like.

"hollowing out of social starta and deepening pockets of urban poverty are positively correlated with crime and unrest. "
Do you really think that paying the TWU a market wage will cause urban poverty? In any case, urban poverty and unrest are most closely linked with socialist systems that engage in social engineering of the type you advocate.

Again and again, you fail to recognize who pays the extra market wage demands of the TWU. You are taxing very poor people while operating under the delusion of social-engineering a better solution.

"the question you should be addressing is why citizens of nyc lack the will to accept this level of pain for the incredible gains that you ascribe to breaking the union."
I wish I could answer that one.

"capitalist economic systems are GREAT at delivering the maximum sized pie, but are usually pretty poor at ensuring anything approaching an equitable distribution of that pie"
If you focus on who has how many chips, you are right. If you instead focus on standard of living, than you are 100% wrong. For example, agrarian societies have a relatively flat distribution of wealth, as does a county like Zimabwe or Somalia. They are all poor. I think few people from a capatalist society have contemplated emigrating to these places.

"i would appreciate getting a clearer idea of what their vision is of nyc and how to avoid eco and social hollowing out"
I don't think anyone I work with is pretentious enough to claim that they have a vision of NYC.

And BTW, I'm one of the few people who live in NYC in the first place. Most of them have left long ago... My boss, who I assume does fairly well, comes in from Princeton every day. Perhaps he should strike to for better wages?

cas,

You seem to be missing a key portion of the matter I brought up: pay in relation to performance. Specifically, if the CEO in question delivered market level returns to his shareholders (the equivalent of the TWU members "doing their job") but commanded a salary well in excess of that commanded by other CEOs, he would face termination. One is hard pressed, to say the least, to make the claim that the TWU has provided some return in excess of market. So again, should they be fired? And if not, why not?

hi joshk and bill,
""assume that there are positive externalities to having a mix of income levels and social strata in nyc"
That has little to do with economics. That's a social engineering question."

i am sorry joshk. talk with yor colleagues about externalities. it might have "social engineering" implications, but it is an important part of eco theory. as for the distributional implications of neo-classical eco theory of capitalism, though the places you mention are indeed places i wouldn't want to live in, that is not the point i was raising concerning eco theory's treatment/analysis of this topic.

please understand: i accept that we, the taxpayer pay the "burden" of mta wages. i really do understand this point. i just think that having union members with higher wages then min wage is a good thing for the city of nyc. and, as i suggested earlier--the union is trying to maintain what it has gotten in the past, not extend it. i am not certain how things have been in your industry, and whether you have seen real wages/benefits go up or down over the last few years. let me go further--i actually believe in a "living wage/benefit" concept. i think the benefits this would have socially, would outweigh the costs of implementing it (negative income tax anyone?)

as to performance and the presence of monopoly, and a standard of a livable wage. i understand that you are reticent about allowing for this--after all, the market determines the wages. what's the big deal? after all, my guess is that most of the commentators are white collar professionals or entrepreneurs of one shape or another. employed, with benefits. though the mta members could get alternative jobs, i wonder what they are. my guess is that they are lower paying jobs with lousy (if any) benefits). why are there many people after these mta jobs? because blue collar jobs with decent pay and benefits are few and far between.

now all this will be used by you to prove your point: the market determines this. we will be made better off as a society if we allow it. as my alternative model of positive externalities to higher wages suggests, this might be untrue (joshk's objections not withstanding).

why not get the workers to get retraining to higher paying jobs? a worthy long term goal, and are we seriously saying that? what jobs?

hi bill, i don't think that since we often hear stories of ceo's who get normal rates of return but keep their jobs even with high pay, that what you say necessarily follows. however, let us go with the idea that ceo's and others for that matter should be paid in accordance with their marginal productivity. so, rather than fire them, why not pay them what they are worth? i have a feeling this will work for you, since it still supports your underlying claim.

if that feels ok to you, i say, sure; as long as 1. we are not facing a monopsony; in that case we will not be paid what we are worth. just because i can get a job as fork lift driver, at much lower pay, does not make the mta a non-monopsony. if i want to be a train driver, making a decent salary, then the substitution to the other job is an unpalatable option. and, 2. some commentator is not making a claim to the positive externality of a higher wage that really should be considered before it is dismissed out of hand. :)

cas,

Thanks for getting back to me. But again, we're not talking about a "high" rate of pay. We're talking about a rate of pay in excess of market rates. While there are cases of CEOs earning well above the market rates for CEOs (a high income position, admittedly) for market or sub-market performance, this is far from the rule.

As to your alternative of pay reductions, that seems eminently reasonable to me. But that seems to conclude that, in the absence of monopsony, earnings should be commensurate with market levels for the TWU, as well. For the case of a train driver, you probably have a point, as far as it goes. The demand side of the market for train operators in New York is the MTA. But the TWU represents a number of occupations for which the MTA clearly doesn't have monopsony power. The MTA certainly isn't the only employer of construction workers in New York City, the MTA certainly isn't the only employer of custodians in New York City, the MTA certainly isn't the only employer of bus drivers in New York City. and the MTA certainly isn't the only employer of sales clerks (the essential duties of a token booth operator) in New York City. Ultimately, then, your argument leads to the conclusion that these occupations, at least, should see their compensation lowered to market rates.

Now you might try to argue that the MTA is the only market participant offering an above-market salary (aka "decent salary") and thus represents a different market for these positions from non-MTA employment. The problem is, of course, that this is begging the entire question. You're defining the market to constitute the criticism as a given. But, doing this, anyone buying anything can be defined as a monopsony. I somehow doubt that you'd appreciate it if your local grocery store argued that "Well cas has a monopsony on selling to cas. Therefore, I should receive public support in demanding that she pay me $10 for a dozen eggs".

Cas,

"it might have 'social engineering' implications, but it is an important part of eco theory"
You're misunderstanding the use of externalities. An externality can be something like pollution or depletion of a resource. Generally, you have to be able to put a price tag on it. If you arbitrarily value your personal vision of societal order as having a countable worth then you can justify any position. Perhaps the fact that we don't hire more one eyed readheads in the MTA is a huge externality - aesthetically unpleasing - and it's worth spending any amount to hire them? Perhaps the fact that TWU folks can't live on 5th Ave is a huge externality? Then certainly we should pay them 1.m+ a year to be able to correct for your arbitraty externalities.

"i accept that we, the taxpayer pay the 'burden' of mta wages.... i just think that ... higher wages ... is a good thing"
And you feel that it is good to compel all of the riders, most of whom make far *LESS* than the TWU to pay for this? Why not set up a charity and let people like yourself donate to this? You could accomplish the same thing without forcing your views on everyone else, especially the poor. Perhaps this fund, we'll call it the "TWU retire at 50 and live on 5th fund", would raise an incredible amount from people who feel as you.

"after all, my guess is that most of the commentators are white collar professionals or entrepreneurs of one shape or another. "
Certainly anyone who doesn't mind increasing the fares on the MTA to provide for their social engineering goals must be.

"just because i can get a job as fork lift driver, at much lower pay, does not make the mta a non-monopsony. if i want to be a train driver, making a decent salary"
Again, you misunderstand a term. The fact that they pay way above market for a low level skill like this doesn't make them a monopsony. It just means they overpay relative to the market. And, by the way, there are other trains besides the MTA.

"i am not certain how things have been in your industry, and whether you have seen real wages/benefits go up or down over the last few years."
I'm not sure how this is relevant to anything, but our PL has varied over the years and we feel that.

On a separate note, and this hasn't been discussed much, is what is the negative effect of the TWU on higher skilled workers? Much like a physics grad who teaches in a public school makes the same as a kindergarden teacher (and surprisingly we have a shortage of math and sci teachers), how do highly skilled TWU engineers and construction workers fair. I would imagine that they loose out on this deal as a whole. But that's a tangent.

You also have to remember that fundamentally, all you are doing is advocating taking money from the less fortunate (average New Yorker) and giving it to those who are more fortunate (TWU member). The only real way to increase real standards of living is to increase productivity and to create wealth. Few things are as proven to hold back increasing productivity and prosperity as to allow a monopoly (the TWU) to thrive. Remember how the TWU fought against the metro card? Need I say more?

hi joshk,
"You're misunderstanding the use of externalities. An externality can be something like pollution or depletion of a resource. Generally, you have to be able to put a price tag on it."

sorry, i don't really want to review externalities with you, apart from saying that the notion of an externality is a fungible concept that can be applied to more than pollution or resource depletion (and has been in the literature--e.g., vaccination; urban decay). i will point out that economists do put price tags on urban decay, crime, etc. (and there are plenty of studies on that as well) as for favouring red haired individuals... i am at a loss as to what you are saying about that.

as for who pays for the wages of mta drivers--two possibilities--people who use the mta (rich and poor), and tax revenue, which tends to come out of wealthier pockets (though they also benefit from the positive externality of more social cohesion and less crime).

as for drivers getting work on other lines, that is a good point, but i do not believe that that diminishes the market power mta has. lirr is perhaps available, locally (but limited opportunities), but otherwise, a driver will have to move, something that has its own set of issues and costs.

cas,

But again, as I pointed out, the bulk of TWU workers aren't train drivers. The bulk of the TWU workers are employed in occupations for which there are a number of employment alternatives within New York City. The MTA is far from the only employer of custodians, construction workers, sales / customer service clerks, or bus drivers / motor vehicle operators in the city. Unless you're prepared to argue for some kind of bifurcated wage structure, your argument regarding the MTA's market power just doesn't hold.

cas,

"sorry, i don't really want to review externalities with you, .... is a fungible concept ... as for favouring red haired individuals... "
You are using externalities to allow for your personal social desires. You want TWU workers to be able to live in Manhattan as opposed to middle income neighborhoods. If you want to define that as an externality, then you can justify paying any wage you want. Perhaps I think it's a huge externality that TWU workers can't drive really nice cars, say Lotus'. Then, we can justify paying them more.

If you start to price your social agenda into this, you can force anything into the system.

"as for drivers getting work on other lines..."
I'm not just trying to show you that they can get nearly the exact same job elsewhere, but that their skills are fairly transferrable - albeit on a scale - to other areas. A fork lift driver is a higher paid job than a store clerk. A crane operator is a much more highly paid job than a train driver. These are all along a continum. To look at the world through the lens of "if I can't do exactly what I want than I am not happy" is to doom most people to unhappiness and to, if supported by policy, to put the economy into a state of paralysis.

"urban decay, crime..."
You will have to work very hard to prove that paying the TWU a market wage would produce these things. As the TWU is in the 2nd quintile, I presume the vast majority of society are a bunch of criminals.

Also, as you try to wage raises above market for more and more people, you will wind up running out of people to tax. Remember, there are only so many "rich" people out there. The only way to benefit all is to increase the pie, which usually means efficiencies and productivity. Few groups work as hard to fight against these positive changes as do unions.

But I think we all agree that we can hire people for a lot less. You only argue that there are huge social costs to doing so. I argue that there are much better uses for the money that will beneift all much more, perhaps education or medical research, etc. So what about my suggestion: Hire the TWU at market rates and then set up a private charity for paying the TWU more. you would be free to contribute as much as you'd like. If many other people share your vision, they would do quite well. If not, then it does seem like you are trying to foist your vision of what's best for society (TWU paid far more than most people) on to all.

Comments are Closed.