George McGovern: Unions Need to Settle for Less

Brian Doherty | May 23, 2006

Nixon goes to China, McGovern goes to slap unions in the face. From an op-ed by the legendarily failed presidential candidate in today's L.A. Times:

I have been reminded of legendary union leader John L. Lewis, who was once asked what his miners were after. His answer? "More."

It was a funny answer, and perhaps it was honest too. But these days, it's not a very effective strategy.....
"More" has, unfortunately, become "too much" in a global and far more competitive economy.

Many of my friends will consider this view heretical. But it is based on stark reality.

It can be galling to hear companies argue that they have to cut wages and benefits for hourly workers--even as they reward top executives with millions of dollars in stock options. The chief executive of Wal-Mart earns $27 million a year, while the company's average worker takes home only about $10 an hour. But let's assume that the chief executive got 27 cents instead of $27 million, and that Wal-Mart distributed the savings to its hourly workers. They would each receive a bonus of less than $20. It's not executive pay that has created this new world.

......many large corporations operate with razor-thin profit margins as competitors, both foreign and domestic, strive to attract consumers by offering lower prices.

The current frenzy over Wal-Mart is instructive. Its size is unprecedented. Yet for all its billions in profit, it still amounts to less than four cents on the dollar. Raise the cost of employing people, and the company will eliminate jobs. Its business model only works on low prices, which require low labor costs. Whether that is fair or not is a debate for another time. It is instructive, however, that consumers continue to enjoy these low prices and that thousands of applicants continue to apply for those jobs.

Our own Nick Gillespie wrote on the War on Wal-Mart presciently back in 1995.

Comments

|5.23.06 @ 12:53PM|#

Funny, conservatives want to go back to the good ol' days, but in the good ol' days there was a 1/3 unionized workforce. Now that we're at 6%, we have broken families, and a downward class momentum. Now, libertarians, of course, are not conservatives, they're just dumb enough to vote for them, but yet they see it basically the same way. So, if WalMart, by the very logic used above, raised it's prices 1 cent on the dollar, the employees would get a 25% raise, no? That would go a long ways. Also, my I point out that WalMart is a particulary poor example of the CEO/hourly-worker pay differential. There are plenty more examples that would better explain the problem rather than just obfusgate it.

JMJ

|5.23.06 @ 1:28PM|#

Hey dumbass... if Walmart raised their prices, they would go out of business. And then the workers would get a 100% reduction in pay.

|5.23.06 @ 1:28PM|#

If "greedy" Walmart could raise its prices and make more money, don't you think they already would have done so?

I also don't see enough info to determine how much of a raise anyone would get if Walmart raised its prices 1% without somehow reducing sales (or reduce employees due to loss of sales), and also chose to pass the increase onto its employees. Where did you pluck 25% from? I'm almost afraid to ask. :x

|5.23.06 @ 1:29PM|#

The chief executive of Wal-Mart earns $27 million a year.

No he doesn't. His 2006 base salary is about $1.2 million, his bonus is under $4 million. Even with his long-term compensation thrown in it is under $10 million. By some measuring sticks this is the biggest company in the world. Amazingly enough not one person is compelled to either shop there or work there.

|5.23.06 @ 1:36PM|#

McGovern isn't speaking the truth, the whole truth and nothing but the truth.
1. wal-mart doesn't have a union, so what does wal-mart's CEO have to do with anything?
2. CEO salaries have nothing to do with how much the company will save, and everything to do with economic fairness. (Google scholar has an awful lot on the "bargaining ultimatum" and related experiments. That's what the CEO salary is for God's sake! The union's natural response is to reject a position if the CEO is making a preposterous salary.)

In the words of Paul Simon:
They say that Richard Cory owns one half of this whole town
with political connections to spread his wealth around.
Born into society, a banker's only child,
He had everything a man could want power, grace and style.
But I work in his factory
And I curse the life I'am living and I curse my poverty
and I wish that I could be
Oh I wish that I could be
Oh I wish that I could be
Richard Cory
[...]
Richard Corey went home last night, and put a bullet through his head.

Dave W.|5.23.06 @ 1:37PM|#

I also don't see enough info to determine how much of a raise anyone would get if Walmart raised its prices 1% without somehow reducing sales (or reduce employees due to loss of sales), and also chose to pass the increase onto its employees.

If you gave me a choice between a store where the prices were 1% higher, but they paid the lowlevel help 25% more, I would choose the higher prices. I think a lot of shoppers would.

That said, Jersey's number is incorrect because employees are paid with pre-profit cents, not post-profit cents.

That said, my gut tells me that McGovern's numbers and economic reasoning are further offbase than Jersey's.

taktix|5.23.06 @ 1:40PM|#

Prediction: Whole Foods will be the next Wal-Mart in the eyes of the Marxist...

|5.23.06 @ 1:42PM|#

I also don't see enough info to determine how much of a raise anyone would get if Walmart raised its prices 1% without somehow reducing sales (or reduce employees due to loss of sales), and also chose to pass the increase onto its employees. Where did you pluck 25% from?

My guess is that the mathematically-challenged troll saw that profits at Wal-Mart were $.04 on the dollar, popped a chubby fantasizing about increasing prices by $.01 (25%) then assumed that somehow these things had something to do with compensation.

In general labor costs in retail are about 20-25% of gross revenue, so a 1% increase in prices only turns out to be a 4-5% increase in pay, assuming it all goes down to the employees.

fyodor|5.23.06 @ 1:44PM|#

Dave W,

Good thing you're a lawyer and not a businessman so you don't have to lose all the money you would lose trying to market to people like yourself.

grylliade|5.23.06 @ 1:48PM|#

Funny, conservatives want to go back to the good ol' days, but in the good ol' days there was a 1/3 unionized workforce. Now that we're at 6%, we have broken families, and a downward class momentum.

Post hoc ergo propter hoc? Really, JMJ, now you're not even trying. Maybe you don't say that broken families and downward class momentum are caused by the decrease in the power of unions, but you're sure as hell implying it, and there's not a shred of support for such a claim.

So, if WalMart, by the very logic used above, raised it's prices 1 cent on the dollar, the employees would get a 25% raise, no?

No. The "four cents on the dollar" figure is Wal-Mart's profit, not its labor costs.

Let me tell you about Wal-Mart. I, unlike many of its critics, have actually worked there. For all the hand-wringing about how cruel Wal-Mart is, it's one of the best places I've ever worked. They pay better than other jobs in the same industry (I got a $1.00 an hour raise by switching to Wal-Mart), I got better benefits than at my old job, and they were fairer about break time than any other place I've worked at (other than my present job).

Don't compare Wal-Mart to an office job. It's low-wage work for generally unskilled people. Which isn't a dig at them; it's just that if you don't have marketable skills (or, in many cases, a piece of paper to say you have them), it's difficult to get good-paying work. Wal-Mart, for all its flaws, is one of the good guys when it comes to employment. If you want to criticize companies who employ low-end workers, go ahead. Just find a better proxy than Wal-Mart. Show some original thought for once.

|5.23.06 @ 1:48PM|#

Happy Juggler and Dumbass Ralph - if WalMart only makes a 4% margin and they raise prices 1% and the cost of raising salaries of the top is negligible, than that 1% increase would equal a 25% raise for the employees, right?

Jeez guys - WAKE UP! ;)

JMJ

|5.23.06 @ 1:51PM|#

Gry, no wonder you worked for WalMart. Miss a lot of points, huh?

JMJ

|5.23.06 @ 1:51PM|#

From Yahoo Finance

Walmart currently has 1.8 million full time Workers

Assume that they each work 1500 hours per year, that means 2.7 billion worker hours per year.

If you distribute that extra $27 million dollars across those worker hours, you get an extr

$27 million ./ 2.7 billion hours = .01$ per hour

Walmart earned in total Net Income (profit) Last Year

$11.23 billion

if they distributed that

$11.23 billion ./ 2.7 billion hours = 4.15$ per hour.

That is if they distributed all profits from the firm (not giving anything back to the holders of the equity capital), they might be able to raise wages around $4.15 per hour.

fyodor|5.23.06 @ 1:51PM|#

I think joe needs to show up and police his own again now that JMJ is going off the deep end again.

|5.23.06 @ 1:52PM|#

If you gave me a choice between a store where the prices were 1% higher, but they paid the lowlevel help 25% more, I would choose the higher prices. I think a lot of shoppers would.

The airline industry shows you are in the minority. People are flying (unionized) Southwest in record numbers despite the fact that they are meanies who don't pay their employees as much as the bankrupt airlines do.

Ditto the auto industry. GM and Ford actually sell their cars for less than made in America Toyota and made in America Honda. You seem to be in the minority there too Dave W.

The Union model of paying radically more than competitive wages is uncompetitive (imagine that!), destroys companies, and destroys jobs in the long run, pure and simple. It also distorts the educational paths of those who think they can get away with a crappy education and still make tons of money via joining a union. Thus unions destroy productivity, not raise it.

|5.23.06 @ 1:57PM|#

Again from Yahoo Finance

Walmart made those profits on $315 billion in sales, so a 1% increase would be

$3.15 billion ./ 2.7 billion hours = $1.16 additional dollars per hour

Assuming no additional costs, and no lost sales, a 1% increase in prices might imply a theoretical maximuim $1.15 raise for workers.

|5.23.06 @ 2:00PM|#

Mac: credit where credit is due, please: Richard Corey, by Edwin Arlington Robinson from: The Children of the Night, 1897

Yes, Paul Simon did adapt the work as you quoted.

Dave W.|5.23.06 @ 2:00PM|#

Good thing you're a lawyer and not a businessman so you don't have to lose all the money you would lose trying to market to people like yourself.

1. Like I said, I don't think Jersey's suggested tradeoff of 1% higher prices for 25% higher wages is neccessarily realistic. I think it is far too favorable to be realistic. that is why I am so sure that shoppers would take this tradeoff -- it is way more favorable than anything they will ever be offered in the real world.

2. How do you know such a store would fail? I have never seem a discount store advertise with a slogan like: -- we charge you a LITTLE more and pay our employees a LOT more.-- Sounds like a pretty shopper-friendly slogan to me.

3. If the next Clinton DoJ breaks WAL*MART into 5 or 50 pieces then maybe we will see what pricing approach shoppers really prefer -- your way or my way. I heart real competition.

|5.23.06 @ 2:02PM|#

Lanny, wouldn't that be nice?

Fyodor, care to refute me or just want to go crying all snitchy to the libertinistas?

JMJ

MP|5.23.06 @ 2:12PM|#

For Pete's sake Dave, if you want to pay higher prices, go to Target.

Dave W.|5.23.06 @ 2:14PM|#

The airline industry . . .

There is not a 1% price increase for 25% wage increase here.

Ditto the auto industry . . .

There is not a 1% price for 25% wage tradeoff here either.

Happyjuggler: I didn't say that shoppers would trade price for lowlevel employee wages at every margin. I did say that they would take this tradeoff if/when a 1% price meant a 25% wage increase. If you are trading off somewhat more of a price increase for something less of a wage increase, then consumers will, at some point, go with the less expensive alternative. Even I know that.

|5.23.06 @ 2:16PM|#

Just as aside,

those calculations were not in any way meant to be reasonable.

If Walmart decided to annually give away all of its profits to its workers, the value of all of its stock would be $0.

This would essentially mean that the owners (shareholders) have decided in essence to give the firm to the employees.

As a partial owner of Walmart, I for one would object to this.

Further, an increase in sales without cost (basically only possible through an increase in price) is also likely impossible for Walmart. No one things they are the high-quality competitor, they are low cost. If they lose their cost advantage, they would almost certainly see a big decline in sales.

Look what happened to Kmart in a similar situation...bankruptcy

|5.23.06 @ 2:24PM|#

Lanny, your stock won't be worth shit once we've WalMarted ourselves out of First World-dome. Ford understood this. Too bad Americans are retarded compared to our ancestors.

JMJ

|5.23.06 @ 2:27PM|#

Lanny, your stock won't be worth shit once we've WalMarted ourselves out of First World-dome. Ford understood this. Too bad Americans are retarded compared to our ancestors.

JMJ

|5.23.06 @ 2:30PM|#

I believe the history of nationalizing industries (essentially taking private propery and giving it to the community) has a very poor history of creating value, or increasing the general welfare of the populace.

Any examples to the contrary would be quite interesting.

As for Ford, their very high wages, pension benefits and associatd costs are driving that firm into bankruptcy. It has enough cash to stick around for awhile, but it is in terrible shape.

Unfortunately I own some Ford through my index funds, but I am not real happy about this.

|5.23.06 @ 2:36PM|#

Jersey,

If you did some research you'd find out that henry Ford raised his wages because of high employee turnover. His accountants figured out that they either needed to raise wages enough to get employees to stay in miserable working conditions, or they needed to improve those miserable working conditions. Improving wages apparantly was cheaper.

Henry Ford then brilliantly "spun" his raise the way it would most impress bleeding hearts so that he might even get the Dave W's of the world to buy Ford instead of the competition.

When the depression came around those wage increases turned into wage decreases, but without any hype of course from Ford.

|5.23.06 @ 2:37PM|#

What a great piece. Why the hell did people pick that criminal Nixon over this guy?

|5.23.06 @ 2:37PM|#

Nationalizing Industry? :O

As for Ford - I was referring to Henry, not the fiasco of today.

JMJ

|5.23.06 @ 2:39PM|#

Gry, no wonder you worked for WalMart. Miss a lot of points, huh?

Once again, JMJ shows his contempt for the unskilled labourer he is claiming to want to help.

Typical "progressive" attitude, eh?

|5.23.06 @ 2:42PM|#

DaveW said Happyjuggler: I didn't say that shoppers would trade price for lowlevel employee wages at every margin. I did say that they would take this tradeoff if/when a 1% price meant a 25% wage increase. If you are trading off somewhat more of a price increase for something less of a wage increase, then consumers will, at some point, go with the less expensive alternative. Even I know that.

Ok, I missed the point in your post about the 1% 25% tradeoff. Good point. This would probably make for a good marketing campaign indeed, a la Whole Foods and their charitable contributions.

|5.23.06 @ 2:44PM|#

What a great piece. Why the hell did people pick that criminal Nixon over this guy?

I was just a kid back then, but didn't McGovern want to surrender to the Soviets or something? Just kidding, but I think the unilateral disarmament talk at the height of the Cold War probably came off as a bit wacky back then. As I recall, he was considered kind of a surprise nominee, even then.

1972 was weird for the Democrats--Teddy had blown his chances in '69, Muskie got zapped for a few tears, etc. Humphrey and McCarthy probably were expected to do better, too.

|5.23.06 @ 2:50PM|#

Juggler, you can juggle it however you want, but it was that philosophy that helped build the great society we had. Too bad the useless leeches of the "investment class" ruined it.

JMJ

|5.23.06 @ 2:52PM|#

Without checking math, lannychiu's 1:57 post looks to be the right method to figure out how much of a price increase without lost sales (ha ha) you would need to give a 25% raise, except this doesn't take into account payroll taxes. But the methodology is basically correct except for that very real omission.

If a 4% profit margin were reduced to 3% and this gave the workers a 33.33% raise, then this implies workers are 4% of costs at present level sales numbers. My point was simply the article gave no indication that this was true.

|5.23.06 @ 2:54PM|#

mac,


Your Richard Cory reference says it all.

I've spent the last twenty-five years working for multi-millionaires (it doesn�t suck) and the old adage is true: The poor are better off than the rich because unlike the poor, the rich can't comfort themselves with the notion that if only they had money, all their troubles would vanish.

|5.23.06 @ 2:57PM|#

Jersey, that most definitely is not why the middle class was created. The middle class was created through radically increased productivity, something the "investment class" of today understands all too well.

The only way to "give America a raise" is to raise American productivity. Unions decrease productivity by misallocating resources, thus unions decrease wages overall, not increase them.

|5.23.06 @ 2:58PM|#

Vote with your wallet. Vote with your wallet. Vote with your wallet. Vote with your wallet. Vote with your wallet.

Now I guess I'm being pig-headed.

R C Dean|5.23.06 @ 3:05PM|#

lanny, a couple of corrections to your calculations.

First, an FTE is 2000 hours per year, not 1500.

Second, even if Walmart were to put all the revenue from its 1% increase in prices toward its employees, only about 75% at most would wash through into wages. The rest would get sucked up into payroll taxes and benefits.

1.8 million FTEs is 3.6B hours.

75% of $3.15B is $2.36B.

So at best you're looking at an increase of 65 cents an hour, or $1300 per year, or $108.33/month (average across all workers).

Woo-hoo. Party at my place.

fyodor|5.23.06 @ 3:08PM|#

Fyodor, care to refute me or just want to go crying all snitchy to the libertinistas?

There's a place for reasoned argument, and there's a place for making funny. FWIW, I wrote a more serious refutation but the squirrels ate it, and by the time I made my funny, others had addressed the same points quite adequately.

So care to refute them or just play the victim card over my making funny at you?

Timothy|5.23.06 @ 3:08PM|#

RC: Hey, that's better than a kick in the teeth, but if that slices the margin even thinner it puts you closer to the edge of a very long, unpaid vacation.

|5.23.06 @ 3:12PM|#

Richard Corey? Blah. I wish I could be like David Watts.

|5.23.06 @ 3:13PM|#

I wrote a more serious refutation but the squirrels ate it

I make posts on all kinds of forums and this is the only one where I regularly hit control a and control c before I hit the post button. I've learned the hard way.

|5.23.06 @ 3:18PM|#

Er, regarding my 2:52 pm post, replace 33.33% with 25% and my logic stands, although once again it lacks the payroll taxes so the raise is smaller than that.

|5.23.06 @ 3:20PM|#

Juggler, you can juggle it however you want, but it was that philosophy that helped build the great society we had. Too bad the useless leeches of the "investment class" ruined it.

JMJ, you should consider moving to France. The country side is beautiful, and the people believe the same shit that you do.

|5.23.06 @ 3:22PM|#

RC Dean,

I used 1500 as an estimate for hours, since that would provide a high estimate (in this conservative in the potential benefit) of the size of the potential raise, and also to account for the fact that some Wal Mart employees might not work 40 hours per week.

Thanks for pointing out the payroll tax issue, I had forgotten to include that.

Although I would like to re-state my aside that this is the theoretically highest possible increase that might be attainable. Given the realities of the world, only something much smaller might actually be achievable.

|5.23.06 @ 3:24PM|#

Lannychiu,

I recently bought the book, 1491: New Revelations of the Americas Before Columbus, that was reviewed a few weeks ago on the Reason site. It discusses a fascinating historical example of nationalization that worked out to boost productivity: the Inca Empire. The short story is roughly that the Inca would expand their peak-to-peak highway network to neighboring tribes, then potlatch them with gifts. The neigbors saw all these cool things that the Inca had access to, and agreed to join the empire, roughly as vassals in the european sense. Then, the central Inca bureacracy took everything the new joining tribe would produce to central warehouses, and serve as a central planning agency, distributing combined regional products back throughout the empire. There were no markets or barter, but it did utilize comparative advantage to boost every region's standard of living. It's a fascinating book.

|5.23.06 @ 3:25PM|#

What about benefits?

Mike Laursen|5.23.06 @ 3:40PM|#

Imagine if all politicians could do basic arithmetic.

|5.23.06 @ 3:42PM|#

"The only way to "give America a raise" is to raise American productivity. Unions decrease productivity by misallocating resources, thus unions decrease wages overall, not increase them."

Juggler, than why does France have higher per capita productivity than we do (and that includes our utterly specious inclusion of service sector "productivity" measurements that we never used in the past)? Does not greater opportunity lead to greater productivity? Or is it just fear and greed - like cockroaches?

JMJ

|5.23.06 @ 3:49PM|#

JMJ,

I am not a labor economist, but let me posit a reason why France might have higher per-person productivity.

Productivity by definition is the ability of the marginal worker to contribute to output. This is primarily a function of the capital (physical and intellectual) that the worker has available to her.

That is a worker with greater resources and knowledge will tend to produce more.

Since France has a highly restrictive policy towrards hiring/firing workers, in order to increase output firms find it difficult to invest in additional workers.

Since they cannot invest in additional workers easily, they invest in capital resources, which will tend to increase output without the problems associated with the rigid French labor market.

This would tend to explain both a higher than US producivity as well as a higher than US unemployment rate.

Given a rational, profit-seeking set of French firms, this would also be a sub-optimal allocation of resources in determining total French output, which would also help explain France's slower than US GDP growth.

|5.23.06 @ 3:52PM|#

Juggler, than why does France have higher per capita productivity than we do (and that includes our utterly specious inclusion of service sector "productivity" measurements that we never used in the past)? Does not greater opportunity lead to greater productivity? Or is it just fear and greed - like cockroaches?

JMJ:

First, that was Carrick not Juggler that posted -- I should have edited your text when I copied it in.

How can any country with maximum 35 hour work week and double digit unemployment amongst it youth have a higher per capita productivity than the US?

Please post a reference if you are going to make that claim.

Carrick

|5.23.06 @ 3:56PM|#

I looked at the OECD's figures from 2004, just for laughs. France's per capita GDP was US $28,992. The United States' per capita GDP was US $39,732. The only number where France was arguably better than the U.S. was productivity per labor hour, but even that was only marginally different. Everything else makes the U.S. look like some kind of crazed economic juggernaut. That must be stopped!

However, all hope is not lost. Luxembourg has an ass-kicking US $60,187 per capita GDP. Rock on!

|5.23.06 @ 4:01PM|#

The only stats I could find quickly are from the OECD for 2004. France has higher gdp per hour. However, the average hours worked annually is lower by 190 hours. Only Luxembourg and Norway have greater gdp per employee.

How productive are the 10% who are not working?

|5.23.06 @ 4:07PM|#

France does have it's problems, as do we. All I'm saying (and of course the earlier point I made about the 1%/25% was hyperbole, folks) is that higher costs do not necessarily lead to cost inflation - but they can lead to better lives for Americans. This lust the FEd and the MArkets have for keeping inflation/unemployemnt/wages incessantly stagnant is not Free Market nor by any stretch libertarians, folks. That's all.

JMJ

grylliade|5.23.06 @ 4:08PM|#

Gry, no wonder you worked for WalMart. Miss a lot of points, huh?

I shouldn't respond to such an obvious troll, but . . . I'm sure that I could get your point if you actually had one. It's been ten years since I worked at Wal-Mart, asshole, and the places people have worked have little to say about their mental acuity anyways. So are you going to explain what I was wrong about in your post, or are you just going to take potshots at my supposed lack of education?

|5.23.06 @ 4:14PM|#

France does have it's problems, as do we. All I'm saying (and of course the earlier point I made about the 1%/25% was hyperbole, folks) is that higher costs do not necessarily lead to cost inflation - but they can lead to better lives for Americans. This lust the FEd and the MArkets have for keeping inflation/unemployemnt/wages incessantly stagnant is not Free Market nor by any stretch libertarians, folks. That's all.

But you also said:

Too bad the useless leeches of the "investment class" ruined it.

I've been to Ireland, England, France, Germany, Russian, China, Hong Kong, Singapore, and Australia.

As far as I can tell, the "useless leeches of the investment class" are running things pretty well here in the U.S.

Carrick

|5.23.06 @ 4:17PM|#

JMJ,

How do higher input prices not lead to inflation?

This, necessarily, could only occur if the higher costs were absorbed by the firm decreasing profit. You don't believe that firms would try and pass on those higher costs to their customers, which as I understand it is definitely inflation?

As for the Fed's role in fighting inflation, that is the job of the Fed. Even died in the wool Keynesians now believe that in the long-run monetary policy (what the fed controls) does not have a real impact on the economy. The job of the Central Banker is to keep price stability.

|5.23.06 @ 4:19PM|#

Ahh, the useless investor class. What have they ever done?

|5.23.06 @ 4:28PM|#

No discussion about the power that is Luxembourg? I fear a new regime of economic hegemony. Fortunately, I think Luxembourg would be easy to beat. Militarily, that is.

|5.23.06 @ 4:28PM|#

"This lust the FEd and the MArkets have for keeping inflation/unemployemnt/wages incessantly stagnant is not Free Market nor by any stretch libertarians, folks."

Trying ... to ... parse ...

So, the Fed engages in practices that are neither libertarian nor promoting of free markets. Okay. These practices include keeping inflation stagnant, unemployment stagnant, and wages stagnant?

Wait, is it that the Market keeps wages low and thereby violates Free Market principles? Hmm.

Oh, I see, higher unemployment and higher inflation help JMJ's case somehow. No? I'm confused ...

|5.23.06 @ 4:37PM|#

I want Jersey to write an economics textbook to immortalize his genius.

Chapter 1: Economic Growth - The Big Lie
Chapter 2: How Rising Costs are Good for You
Chapter 3: Taking from Peter and Giving to Paul - The Road to Nirvana
Chapter 4: The Investment Paradox - How Something Without Value Pays the Bills

R C Dean|5.23.06 @ 4:43PM|#

I'm just curious - can anyone remember JMJ ever posting a link?

|5.23.06 @ 4:49PM|#

not yet

|5.23.06 @ 4:52PM|#

Just a quick question for the "union = good" folks. Why is it that monopoly power over a resource you buy is bad and monopoly power over labor is good? Or is a union seen as a "natural" monopoly?

|5.23.06 @ 4:52PM|#

As a rule, teachers are idiots.

"Hey I'm in the teachers' union - I don't have to do a goddamn thing! C'mon, I've been watching these little snots all week - can't I get more than *two* days off? I wants my VAY-CAY-SHON!"

That could be chapter five, actually.

|5.23.06 @ 4:52PM|#

Jersey must have heard me arguing with my girlfriend, because he is stealing some of my best moves. "Well, that whole thing I said about your friends was just, uh, hyperbole."

|5.23.06 @ 4:59PM|#

the other one I like to us is...

"Uhh...you didn't take what I was saying seriously did you?"

|5.23.06 @ 5:06PM|#

"I'm just curious - can anyone remember JMJ ever posting a link?"

Why should he post a link, when he can look the truth up in the one place his heart tells him is true?

Yeah, that's right. No need for fancy "internets" links to back an argument up when you know it's true because it's in your gut.

Jersey McJones, he's just like Bill O'Reilly. Speaking truthiness to power.

|5.23.06 @ 5:14PM|#

" This lust the FEd and the MArkets..."

Capitalizing four letters to get FEMA?

In what universe is this even remotely funny?

God, Jersey, your sense of humor is about as refined as your understanding of economics.

Which is to say, not at all.

|5.23.06 @ 5:21PM|#

Fortunately, I think Luxembourg would be easy to beat. Militarily, that is.

I don't know. If they take us by surprise they might defeat us just like the Grand Duchy of Fenwick did.

|5.23.06 @ 5:24PM|#

Ouch! These trolls be masochists, sez I...

|5.23.06 @ 5:26PM|#

mediageek, is that what he was doing? A pox on both their houses and everything, but the wacky left is really weird. FEMA has been notoriously inept for how long? I recall Bovard ranting about FEMA back during the 90s. And I'm working hard on this one, but what does FEMA have to do with the market or monetary policy?

This Katrina thing reminds me of the 2000 election--two facts for 10,000 unsupported suppositions. But it should be true, so it is true.

VM|5.23.06 @ 5:27PM|#

"Fortunately, I think Luxembourg would be easy to beat. Militarily, that is.

I don't know. If they take us by surprise they might defeat us just like the Grand Duchy of Fenwick did.

Comment by: Isaac Bartram at May 23, 2006 05:21 PM"

another mouse that roared, hmmmm.

|5.23.06 @ 5:30PM|#

Sphynx, thanks for the pointer. I wouldn't want to give uber cover-singer Paul Simon too much credit.

In any case, the point about the "ultimatum bargain" still stands in reference to relative pay of management vs employees.

|5.23.06 @ 5:31PM|#

Or he was bitter because he wasn't allowed to do the morning pep rally at Wal Mart.

Give Me A Squiggley!!!

|5.23.06 @ 5:31PM|#

The Roaring Mouse policy remains sound. In a way, the insurgents in Iraq missed a great opportunity. If they'd just relaxed and enjoyed it, they'd have Mohammad Mouse Park, a space program, and an offer to join the E.U. by now. Oh, well.

|5.23.06 @ 5:39PM|#

Luxembourg has an ass-kicking US $60,187 per capita GDP

That's what happens when you have great tax rates so tons of companies set up their headquarters in your country. Luxembourgeois, indeed.

|5.23.06 @ 6:05PM|#

"mediageek, is that what he was doing? A pox on both their houses and everything, but the wacky left is really weird. FEMA has been notoriously inept for how long? I recall Bovard ranting about FEMA back during the 90s. And I'm working hard on this one, but what does FEMA have to do with the market or monetary policy?"

PL, I wouldn't analyze it too deeply. People like Joisey are so out there that they are generally incomprehensible and never rational.

|5.23.06 @ 6:20PM|#

Or if a mini France is not economically left enough, we could make them mini Venezuela's instead. Yeah, I like that better. :o

|5.23.06 @ 6:39PM|#

Jersey doesn't need his own city to conduct his social experiments.

After all, he resides is his own universe.

|5.23.06 @ 6:56PM|#

The 'sympathy' for WalMart (they can't afford the benefits unions want) just hides a call for more govt (therefore The State must provide those benefits, like socialized medicine).

|5.23.06 @ 7:50PM|#

If you gave me a choice between a store where the prices were 1% higher, but they paid the lowlevel help 25% more, I would choose the higher prices. I think a lot of shoppers would.

Dave W:

Seeprise, you do have that choice. Now make it.

|5.23.06 @ 7:57PM|#

3. If the next Clinton DoJ breaks WAL*MART into 5 or 50 pieces then maybe we will see what pricing approach shoppers really prefer -- your way or my way. I heart real competition.

Dave W: I'm surprised. Again you imply (please, correct me if I'm wrong) that throngs of shoppers simply have no choice but to shop at Wal-Mart. This is a surprise to this shopper. I've been in a Wal-Mart three or four times over the last decade. And the circumstances were purely... circumstantial. This suggestion being that we don't know what the 'real' market would do because Wal-Mart (aka 1960's AT&T) is the only choice we all have. I don't see the logic, here.

|5.23.06 @ 8:23PM|#

Joe inquired above as to how Nixon ever beat McGovern. If one wishes to speculate on this, one may do well to examine McGovern's mindset in the 70s, such as when, only a couple years after his defeat at the hands of Nixon, McGovern warmly predicted a benign outcome for Cambodians if the Khmer Rouge were to come to power.

In many ways Nixon was a dolt (see wage-price controls), but McGovern was an imbecile of staggeringly titanic proportions.

|5.23.06 @ 9:39PM|#

I prefer Philadelphia to Tampa.

Birthplace of liberty and whatnot.

Beside, we could use a break.

|5.23.06 @ 9:48PM|#

Guy who grew up near Philadelphia and is still waiting on the comeback,

Sorry, you had your chance. Besides, I've been to Philadelphia--you're not ready for freedom anymore.

Sorry about that knocking you off on the way to Super Bowl glory thing, by the way :)

|5.23.06 @ 11:57PM|#

So you would condemn the fair citizens of Philadelphia to the rule of Rizzos, Rendells and Streets. A pox on thee!

As for football, I shall always support the Iggles, even if they don't always beat wussy teams that play in domed stadiums.

I wasn't at Franklin Field when our forefathers pelted Santa with snowballs, but I wish I had been there to take part.

Kevin Carson|5.24.06 @ 1:21AM|#

Actually, executive pay (in the sense of the portion of compensation to labor going to supervisory, non-production workers) did, in part, "create this new world."

According to David M. Gordon (Fat and Mean) management as a proportion of the total labor force actually increased during the '80s and '90s, contrary to the popular myth of management downsizing. And the percentage of total compensation going to management has gone from twenty-something in the '70s to forty-something now.

A lot of it has to do with the separation of ownership from control and other aspects of the corporate form, in which the state has played a major role. Managerialism often leads to outcomes equally harmful to stockholders and workers.

Kevin Carson|5.24.06 @ 1:35AM|#

Let me put my comments above in more specific terms. The hospital where I work has cut the ratio of nursing staff to patients by about a third over the past decade, and didn't even give orderlies a COLA raise this year--all for the sake of "cutting costs," supposedly.

Now, as I figure it, the average patient pays about $30-40 per day for orderly care, out of over $1000 per day total cost for a room. That's about 3 cents on the dollar. And CNA care is the patient's first line of contact with the hospital, and has a powerful influence on his overall impression of quality. If CNA staffing were increased 50% and all CNAs were given a 25% raise, it would add another five to seven cents on the dollar. And in return, it would completely eliminate patient complaints about shitting the bed waiting for a call light to be answered, not getting a bath for five days, waiting forever for something else to get done. It would also substantially reduce turnover and training costs, and costs from waste and sabotage from disgruntled employees who spend an entire shift on the edge of going postal. Most important, it would drastically reduce hospital-acquired infections and falls, the main cause of which is understaffing--and which management currently tries to solve with more tracking forms, more middle management committees, more cheerleading, and everything else but increased staffing.

Besides these cost offsets, there is a shitload of stuff management wastes money on that amounts to more than the cost of increased staffing. Middle management featherbedding, wasteful remodeling jobs that result in floors actually less functional than before, entire new units built at enormous expense that never open because the doctors decide they were badly designed.... Well, you get the idea.

So it's not like there's some 1-1 tradeoff of increased wages and increased consumer prices.

|5.24.06 @ 2:28AM|#

I couldn't see this addressed in the comments.

The French do NOT work 35 hours per week. They work far longer than that. They get extra paid holidays and other forms of compensation so the labour hour per productivity is false. Yes I know that other countries do this, but

Also to get around French labour laws they hire people as "companies", a very specific version of contractors. These people's hours are not included in the productivity hours. Their time is not recorded in any way, only their fees.

Source is our French branch. I was involved in setting up their timesheeting system.

|5.24.06 @ 2:52AM|#

I wonder why Nash theory is left out of from popular economic discourse. There could well be multiple Nash equilibria in a labor market. Stable situations, where were any one actor to change their strategies (like, say, doubling their lowly worker's pay), they'd seriously lose, would seem to agree with what conservatives are saying, that wages must fall and stay fallen. Yet that's not the only stable situation.

If Wal-Mart raised prices across the board by say 5% and gave the increased revenue to their workers, they'd take a real beating! Yet if Wal-Mart's competitors did the same thing, it is likely that the damage would be mitigated or even reversed. After all, they'd all be part of an economy where more wages would be paid out, but spent again, and total volume of goods produced might well even increase. This would be a stable Nash equilibrium also - were any one business to cut wages, they'd find themselves bereft of employees and that's that.

It is not seeing the whole picture, to make all one's economic arguments based on the current Nash equilibrium state. Not while others may well exist.

Although Nash got a Nobel for his work, you never hear an argument based on Nash equilibria in economic discourse. All mainstream popular economists keep pushing Adam Smith and the grain market as if it was all that anyone needed to know (although Smith's original claims were much more modest), just layer Keynes's central banking work on top of it and ignore everything he had to say about why labour is not like wheat - or if they wanna be extra cool they can talk some Austrian mumbojumbo - and meanwhile some scruffy fool will talk about surplus value -

but all those arguments, sound or flawed, still deny the existence of multiple Nash-stable equilibria. More than one way, on the macro scale, for supply to meet demand. Yet this is never admitted by anyone publically, and I for one think it's a shame.

Wal-Mart can't change things alone. But things could change.

|5.24.06 @ 5:30AM|#

Mac,

Have you heard Them's version of Richard Cory? Good stuff.

Dave W.|5.24.06 @ 7:29AM|#

Again you imply (please, correct me if I'm wrong) that throngs of shoppers simply have no choice but to shop at Wal-Mart.

I implied no such thing. I explicitly stated that there would be more choice if WAL*MART was broken in to 5 pieces. Consumer choice is not a binary variable. Rather, it is continuous and multi-dimensional.

|5.24.06 @ 8:31AM|#

Dave W,

I'm confused by your theoretical breakup of Wal-Mart. What criteria would you encourage the breakup to use: 5-50 regions or states? Roughly 5 somewhat-overlapping retail concept brands (Say Wal-Mart, Sam's Club, Wal-Apparel, Wal-Pharmacy, Wal-7-11) or a breakup of operating units (I actually just found out that Wal-Mart sold the McLane grocery distribution company to Berkshire Hathaway in 2003, which was my prime example), perhaps yielding a structure similar to Coca Cola HQ and the independent bottlers and distributors. In these cases, I don't see how a regional breakup or operations breakup would lead to consumer choice. A division by retail concept would work to provide consumer choice and competition for customers, but I don't know if all the resulting brands would be viable unless they share the distribution network; and if they share the distribution network, I don't think anyone would say the company was broken into pieces.

|5.24.06 @ 9:14AM|#

trollumination,

I don't think people hear disregard Nash Equilbria, I believe we are all aware of them, but the outcome you are suggesting would likely require government (or union intervention/collaboration).

The suggestion you are making is that all workers could simultaneously demand higher wages, which the entire retail industry would then pass along to consumers in the form of higher costs.

What Nash also asked is, what would happen in such an instance if one firm cheated. Instead of keeping prices high, it cut them and stole all of their competitors business? Your claim is they would not be able to attract any workers, since they would be no employees willing to fill in at the lower wage.

My experience has been, in a variety of businesses, that it is always customers who are harder to get then employees. Even in my current field, which typically requires a lot of training, we can always find average to good candidates to work for us. Finding exceptional people is tough, but there are plenty of folks who can do the job.

Clients are much harder to come by, even crappy small ones.

I would imagine this would be even more true in a low-skill environment. Low-skill workers could collude to raise wages, but I don't believe that would be a stable equilibrium in the long-run. This is also what game theorists have showed in the famous Prisoner's Dilemma.

Both firms and employees could be better off (with consumers being worse off), if they colluded to raise prices and increase wages. But given the significant risk of cheating such an equilibrium point would likely collapse.

|5.24.06 @ 9:20AM|#

The mistake I think most people make when they discuss monopoly is confusing a potential cause (firm concentration) with the problem (higher prices/lower quality).

It may be true that Wal-Mart has a monopoly concentration in the retail space, but are they using that power to charge excessive prices or offer a bad value?

Whenever I have shopped at Wal-Mart I have been quite happy with the price I paid and the value I received. Perhaps other folks have had a different experience, but I don't think the claim that Wal-Mart is charging monopoly prices or offering a bad value is a reasonable one.

Further, there are many alternatives to Wal-Mart (some of which are upscale and pay higher wages). Even if you don't like the Target's or Sears of the world, nowadays you can purchase a lot of stuff online direct from manufacturers, I can't really think of a market that Wal-Mart is big in (DVD's, clothes, groceries, Jewelry, Books) that doesn't have a plethora of real workd and online competitors.

Dave W.|5.24.06 @ 9:35AM|#

I'm confused by your theoretical breakup of Wal-Mart. What criteria would you encourage the breakup to use: 5-50 regions or states?

I didn't propose the breakup of WAL*MART -- I merely predicted (probably faceticiously) that the next Clinton DoJ would do it. I think the Clintons may have ties to WAL*MART, so I really doubt WAL*MART will be broken up in that way. Even if the Clintons appointed me to head the DoJ, WAL*MART would be nowhere near the top of my list for antitrust enforcement.

So why the upsetting semi-joke?

The pedagogical point is that oligopoly / monopolization is a matter of degree and consumer choices are lost whenever a company has as big a marketshare as WAL*MART does. there are clearly US consumers who take a negative view of the way WAL*MART and/or its foreign suppliers operate. In a robust capitalist system, this would be an opportunity for a competitor. However, WAL*MART has very few competitors and they have chosen not to make this pitch. In a robust capitalism, there is enough competition so that all the plausible sales pitches get tried. I am saying that, if by some horrible miracle, WAL*MART was broken into 5 competing companies, then you would see more alternative strategies tried out and that would be a good thing.

More than anything it is the attitude around here that gets to me. The attitude that assumes if WAL*MART, KMART and TARGET haven't tried it, it must be bad business. It is a failure of imagination and a profoundly bad one at that. I say there should be opportunity for businesses to try out good ideas. Let me put it this way: if Whole Foods didn't exist, but I tried to explain its business plan here as a theoretical business plan, what would the (kneejerk) response be here?

|5.24.06 @ 9:46AM|#

I think robust capitalist systems are precisely those that attempt many forms of commerce, but most of them are found wanting in some way and go out of business. If you look at the history of retailing in America, or even just the history of Wal-Mart's competitors in the last 40 years or so, you will see gigantic tectonic shifts in the way people do business all driven by entrepeneurs searching for ways to to do new things.

After all, retailing in America used to be dominated by mom and pop local stores, which were replaced by regional department stores, which were replaced by large national discount chains, which are currently being threatened by online retailers.

Most everyone form of retailing has been tried, and what remains are the most successful in the current market/economic environment. But that in way implies that this is or should be the way people will shop in 40 years.

If that doesn't describe a dynamic robust capitalist system I don't know what does.

And if someone comes up with an offbeat business plans and is laughed out of the room, the correct response is not to try convince others of the value of your idea. It is to make the idea work and therefore have the ultimate satisfaction.

Most really great ideas were considered foolish in their day, who cares. If you are right, you can prove it with business success. People thought Fred Smith was nuts when he came up with the basic logistics for FedEx.

Not just people on the street but his University professor. Who cares, he developed a terrific firm and who looks foolish now?

Dave W.|5.24.06 @ 10:01AM|#

but most of them are found wanting in some way and go out of business

What company tried to be just like WAL*MART except that they pay lowlevel employees a bit more and advertise* this (sole) distinction from WAL*MART?

Ans: none.

That is why you are wrong here LannyChiu.

FOOTNOTE
* I mean "advertise" broadly. When a town council votes to keep WAL*MART out and the hypothetical competitor comes in to Town Council and lets them know that low salary is less of a problem at CompetitorCo, this I consider to be a form of advertising.

|5.24.06 @ 10:12AM|#

Well I would say that Wal-Mart was not the original discount retailer, KMart was actually the original discount retailer. But while was Wal-Mart was building itself out over the last 40 years lots of other discount retailers were in existence and some may have offered higher wages.

Although wages generally in this industry are low.

But if it is such a great idea why don't you put together some investment capital and go for it. There are a number of these socially responsible funds out there that might be willing to provide some capital. Follow the Whole Foods model and charge a premium for "Fair-Wage" goods. Might work, I don't know.

Dave W.|5.24.06 @ 10:27AM|#

But if it is such a great idea why don't you put together some investment capital and go for it. There are a number of these socially responsible funds out there that might be willing to provide some capital. Follow the Whole Foods model and charge a premium for "Fair-Wage" goods. Might work, I don't know.

A competive, capitalistic market would do this automatically without my help. That is why they say "Invisible Hand" instead of "Dave W.'s Hand."

If you are going to make me do something about this, I will probably just opt to petition my legislature to raise the minimum wage law. A distant second best solution because what I would really rather have is consumer choice in a truly free market.

|5.24.06 @ 10:37AM|#

I believe the quote you are referring to is...

"As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual value of society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. "

As the passage implies the "Invisble Hand" is not some passive force that brings about good results by itself, it is rather the silent collective, uncoordinated effort of every member of society that brings about the outcome.

In this instance it is some person seeing an unfilled market niche and acting to fill it. Which is what Sam Walton and others did when they realized that department stores were neglecting smaller communities and charging higher prices to urban populations. Thus the concept of discounted wares for smaller rural areas.

The market works well without much government interference, but certainly needs significant entrpeneural energy to function at a high level.

|5.24.06 @ 10:49AM|#

Dave W,

Sounds like we don't have enough rich capitalists. I suggest eliminating tha capital gains tax, the dividend tax, and slash the corporate tax to 10%.

While we are at it we should definitely abolish all payroll taxes. In the competitve market for employees we have the bulk of companies will give their employees raises in the amount of the now abolished payroll tax. The exceptions would be those in dire trouble and those with unions, assuming no overlap. :o

R C Dean|5.24.06 @ 12:32PM|#

If CNA staffing were increased 50% and all CNAs were given a 25% raise, it would add another five to seven cents on the dollar.

Except that the hospital's income per patient is locked in by its managed care contracts and Medicare rates. There is no one to pass that extra 5 - 7% increase on to.

Dave W.|5.24.06 @ 12:33PM|#

Sounds like we don't have enough rich capitalists.

Splitting WAL*MART would get us there quicker and cheaper, shill.

|5.24.06 @ 2:11PM|#

A competive, capitalistic market would do this automatically without my help. That is why they say "Invisible Hand" instead of "Dave W.'s Hand."

Two Chicago School economists are walking down the street. One says, "Look! There's a $10 bill on the sidewalk!" The other says, "Don't be silly. If there were, someone would have picked it up by now."

By the way, Dave W., I love your logic:

1. I think that market X should be able to play by rule set Z.
2. Market X does not play by rule set Z.
3. Therefore, market X is not a competive, capitalistic market.

Neither you nor I have any idea how many companies tried your suggestion but died before they even got past the boundaries of their own metaphorical Bentons.

Kevin Carson|5.24.06 @ 2:34PM|#

R.C. Dean,

True, but as I attempted to argue before, it's not like all the other components of per-bed charge are set in stone.

fyodor|5.24.06 @ 3:30PM|#

Dave W,

Is there any big company you don't want to split up?

|5.24.06 @ 5:49PM|#

"A competive, capitalistic market would do this automatically without my help. That is why they say "Invisible Hand" instead of "Dave W.'s Hand."

What makes you say that? The invisible hand doesn't guarantee you every imaginable shopping arrangement you may desire.

By the way, Target is supposed to be similar to what you are shopping for. There is a reason they don't market themselves as "Wal Mart but paying better" - that would be an incoherent brand.