The L.A. Times has a big expose about the union founded by Cesar Chavez:
Today, a Times investigation has found, Chavez’s heirs run a web of tax-exempt organizations that exploit his legacy and invoke the harsh lives of farmworkers to raise millions of dollars in public and private money.
The money does little to improve the lives of California farmworkers, who still struggle with the most basic health and housing needs and try to get by on seasonal, minimum-wage jobs.
Most of the funds go to burnish the Chavez image and expand the family business, a multimillion-dollar enterprise with an annual payroll of $12 million that includes a dozen Chavez relatives.
The article has a lot of lurid details. But what makes it truly interesting to me is that it helps illustrate the contrast between two different families of complaints about unions.
Mainstream media and the man in the street give you the “normal” complaints: unions are corrupt, and aren’t fighting hard enough for the workers they represent. (Another normal complaint, which doesn’t figure into this article for obvious reasons, is that unions have pushed wages up so high that jobs are going overseas).
These normal complaints hardly surprise economists. We expect nominally altruistic causes to have a self-interested under-belly: “I am shocked, shocked, to see that union officials put their own interests above those of the common worker!” But for economists, the failures of unionism go much deeper. Unions are a bad idea for reasons that the L.A. Times is unlikely to consider, much less put on the front page:
Journalists see corrupt unions living off donations from guilty liberals and think “If only unions would fulfill their promises.” Economists see the same thing and think “If you think that’s bad, take a look at places where unions DO fulfill their promises. It’s a windfall for the lucky few, and a wasteful burden on everyone else.”
READER COMMENTS
François/phnk
Jan 8 2006 at 5:07pm
Steve Sailer
Jan 8 2006 at 8:14pm
What journalists and economists have in common is that they both try to ignore the enormous impact of immigration policy. In my 2000 article “La Causa or La Raza?” I explained the transformation of the United Farm Workers from a successful union under the anti-illegal immigration Cesar Chavez into a failed union and pro-illegal immigration ethnic activist outfit:
A third-generation American citizen from Yuma, Arizona, he was first and foremost a labor leader, as crafty and sometimes ruthless as any effective union boss must be. Today, Mexican-American educators and politicians have one simple priority: more immigration. Every warm body with a brown skin increases their clout. But, then and now, union leaders have the opposite need. The UFW’s essential problem was the same as all other unions’, straight out of Econ 101. Chavez needed to limit the supply of labor in order to drive up wages.
From this grew the fundamental conflict of his life. Was he an American class warrior or a Mexican mestizo racial activist? What came first: La Causa or La Raza? This irresolvable dual identity culminated in the terrible irony of his tragic last dozen years.
Chavez’s success at bringing better wages to stoop laborers in the early Seventies stemmed from the long-term decline in the pool of available migrant farm workers. According to agricultural economist Philip L. Martin of UC Davis, migrant farm workers in the U.S. numbered 2,000,000 in the Twenties. But the U.S. government started to crack down on Mexican illegal immigrants, most notably during 1954’s “Operation Wetback,” when a million were loaded onto railroad cars and shipped home. By Chavez’s heyday in the early Seventies, there were only 200,000 migrant farm workers left. Which made his triumphs feasible.
In his prime, Chavez fought constantly against illegal immigration. He frequently complained that the Immigration & Naturalization Service wasn’t tough enough. When Chavez would lead a strike, the grower would send trucks across the Mexican border, load them up with scabs, and race back to the Central Valley in the dead of night. Chavez even offered his UFW staffers to the INS to serve as volunteer border guards to keep Mexicans from sneaking into California.
(http://www.vdare.com/sailer/la_causa_or_la_raza.htm) (http://www.vdare.com/sailer/la_causa_or_la_raza.htm)
mjrmjr
Jan 8 2006 at 10:01pm
What percentage of US workers are unionized, 10-15%? I don’t think that unions are a significant factor in today’s labor market. On the subject of outsourcing I wonder what % of jobs offshored were unionized? If we’re only starting with 10-15% of jobs in the first place, it’s hard to imagine that union jobs make up anywhere close to a majority of jobs offshored. A lot of union jobs are in the service sector and by definition can’t be offshored.
Just like firms, workers act in their own self-interest and with little regard to how their actions will affect others(this isn’t a value judgement, just an observation). If workers view a union as a way to higher wages/benefits, why should they not join up? Who cares about the guy who doesn’t have a job that you don’t know, you need to pay YOUR bills and feed your own family. Ultimately unions are a market force like anything else. Workers will do whatever they can to get higher wages. Some will decide to obtain additional training/skills, some might decide to switch to a higher paying industry, and some will decide to join a union. Whether the decision was correct for the worker or not is pretty easy to determine-what’s the number on the paycheck that you get at the end of the week? Do your higher wages cause the guy next door to be out of work? Who cares. What is so “special” about the case of unionization that workers should go completely against human nature and stop to think about externalities that they’re imposing on others? The firms they’re working for certainly don’t refrain from making smart decisions due to negative externalities.
On the other side of the coin, the “threat” of unionization can act as an incentive to businesses to provide a decent(as defined by the market) level of wages/benefits/working conditions. How many employers on Fortune’s list of “best places to work” are worried about their employees forming a union? Probably none. The owner of the grocery store Wegman’s has said that he’d rather go out of business than have his employees unionize. But he doesn’t have to worry about it because his firm pays above average wages and treats its employees well. Incidentally, Wegman’s stores in the DC Metro area beat the pants off of their unionized(UFCW) competition. Wal Mart, on the other hand, is very much worried about their employees unionizing. It’s the “price” they pay for the level of wages/benefits/working conditions they’ve decided to provide. They’re certainly very successful, but it shouldn’t come as a shock to anyone that low wage workers might like the idea of forming a union to get higher wages. Wal Mart’s competitor Costco, on the other hand, pays higher wages and has no fears of a union forming.
Increased productivity usually does lead to higher wages, but in the last 5 yrs median wages in the U.S. have gone down despite larger than ever gains in worker productivity.
T.R. Elliott
Jan 8 2006 at 10:25pm
I concur with mjrmjr’s opinion. Very well put.
I do get tired of the “Economists see the same thing and think” in this post, probably one of the reasons for my attitude in many responses. It would be more accurate to say “conservative libertarian economists” or “neo-classical economists” or some such phrase.
As soon as I see the phrase “Economists see the…” I know ideology is most likely to follow.
I believe unions have played an important role historically, and it’s true they’ve become self-defeating, though no more self-defeating than unregulated financial markets.
The confusion, of course, is that we live in a political system consisting of humans. The authors of this blog, and Friedman as expressed in a previous post, believe we live in purely economic system. I guess if you’ve studied economics, one might start to think that economics is everything. They have a word for that. It could be called egomania. Efficiency is not defined only in simple monetary terms, as much as some economists would like to think it is.
Bernard Yomtov
Jan 9 2006 at 12:41am
As soon as I see the phrase “Economists see the…” I know ideology is most likely to follow.
Absolutely correct. And the worst of it is that Caplan doesn’t seem to know that he is a total ideologue, as much a genuine true believer as a dedicated Marxist.
rakehell
Jan 9 2006 at 12:49am
When are economists going to start attacking executives at public companies for responding to exactly the incentives as unions? Oh, I guess they already have: Jensen and Meckling “Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure.” Journal of Financial Economics, 3 (1976).
Mainstream economists and the man in the street give you the “normal” complaints: businessmen are corrupt, and aren’t working hard enough for the shareholders they represent. (Another normal complaint, which doesn’t figure into this comment for obvious reasons, is that corporations have pushed executive salaries and benefits up so high that foreign firms are gaining greater market share).
These normal complaints hardly surprise economists. We expect the officers of public companies to have a self-interested under-belly: “I am shocked, shocked, to see that executives put their own interests above those of their shareholders and employees!” But for economists, the failures of public companies go much deeper. Public companies are a bad idea for reasons that the L.A. Times is unlikely to consider, much less put on the front page:
• Pushing up executive salaries creates unemployment by making employers less eager to hire more management. This might unemploy executives, but the more likely victims are the people who don’t bother entering the industry in the first place because they know they won’t be able to find work.
• The way to improve conditions for businessmen in general, and not just lucky members of public companies, is to raise managerial productivity. Instead of burning up energy fighting with unions, most executives would be better off getting more job skills. Compare the living standards of executives in agriculture versus IT.
• In the best-case scenario, executives at public companies engineer a transfer from shareholders to themselves, with considerable deadweight cost in the process.
Journalists see corrupt executives living off the residual from the soft budget constraints that the agency costs of the public firm create and think “If only public companies would fulfill their promises.” Economists see the same thing and think “If you think that’s bad, take a look at places where public companies DO fulfill their promises. It’s a windfall for the lucky few, and a wasteful burden on everyone else.”
Also, one thing that I rarely see mentioned is that both public companies and even the corporate form are forms of rent-seeking, in that the managers of companies seek the state’s protection in protecting their personal fortunes from the vicissitudes of the market. A true libertarian would want to see a greater assumption of personal responsibility. Can there be such a thing as an illegal corporation? Of course not. Can there be such a thing as an illegal union? It has happened many times.
Ramon
Jan 9 2006 at 6:23am
what’s going on here?
The quality of the commentators is particularly bad today. I am going to sleep.
Andy
Jan 9 2006 at 9:17am
Increasing productivity sounds like a very nice solution, and maybe the best from an Academic standpoint. In reality however, how does that apply to a transient farmworker who is spending all day working hard just to pick enough produce to keep his job, and then spend his few remaining waking hours with his equally tired family? What is the cost of this increased productivity? Certainly in the long run it’s positive, but it’s hard to buy bread with future earnings
Randy
Jan 9 2006 at 10:14am
Andy,
That’s a good question. I think the answer is that it is not the responsibility of the market to resolve such problems. It is the responsibility of the market to create as much wealth as possible so that the socio-political systems have the resources with which to solve such problems.
Solving social problems by freezing the market in place, will also freeze the social problems in place. An alternative approach is to let the market do its job and continue to create wealth. Rely on the socio-political systems to apply temporary solutions to temporary problems such as the one you mention, until such time as the market creates enough wealth to create a permanent solution.
Yes, there is a utopian element to the latter approach. The difference between this brand of utopianism and other brands, is that the historical record seems to indicate that growth really does work.
Jody
Jan 9 2006 at 11:27am
Andy, if you recall the definition of productivity and assume constant output, you answered your own question.
Bernard Yomtov
Jan 9 2006 at 12:56pm
It is the responsibility of the market to create as much wealth as possible so that the socio-political systems have the resources with which to solve such problems.
Except that those who are the most devout market-worshippers don’t want the “socio-political” system to address these problems. They want “the market” to do so, as if the transient worker is going to use his copious spare time and cash to earn a degree in electrical engineering or something.
spencer
Jan 9 2006 at 1:55pm
Do not forget that Caplan is an employee of GMU.
So he is just another public sector bureaucrat
feeding at the tax payers expense.
Maybe the reason he is so down on public education is he realizes the disinformation he is teaching his students at a tax supported institution of public education.
Randy
Jan 9 2006 at 2:13pm
Bernard,
Re; “Except that those who are the most devout market-worshippers don’t want the “socio-political” system to address these problems. They want “the market” to do so…”
Agreed. I think time is the key element. When people see a problem, they want it solved immediately. They call on government because it has access to the massive resources required to solve many problems quickly. But they forget the opportunity costs. The resources that could have been used in time to develop permanent solutions, have now been used to quickly create band-aids. And once the band-aids have been applied, people become dependant on them. Not to mention that the government has little motivation to use resources efficiently.
I was thinking about different utopian visions while hiking the other day.
The anti-market utopia looks pretty much like today, except nearly everyone has a factory or office job to go to with reasonable pay and full benefits. A world frozen in time.
The market utopia is a world where a very few people are able to produce all of the goods and services necessary for an upper middle class existance for everyone. For this, they are very well rewarded. The rest occupy their time doing pretty much whatever they choose to do. Work and leisure have become indistinguishable. A golden age.
Personally, I prefer the latter.
john pertz
Jan 9 2006 at 5:04pm
I dont see how unions can some how help the plight of migrant workers. In fact I can see a rather nasty scenario where they can actualy make things much worse.
A strong union for migrant workers can raise wages which will then reduce the supply of workers needed for the job. Or wages will be raised and employment stays the same but the price of fruit becomes greatrt. In both cases the migrants lose. A complaint of a different variety is that the union makes the job marginaly better and therefore reduces migrants incentives to look for cleary superior alternatives.
The best course of action that I can offer to migrants is to look away from farming all together. There are many other more attractive low skilled jobs that offer far greater benifits. The service industry and construction are two glaring examples and both industries are soaring right now.
Also, I was wondering about the relevancy of complaining about the falling median wage. Is this issue problematic when median TOTAL compensation has been on the rise for the last thirty years? Also, would a large increase in lower skilled workers have a depressing effect on the median wage? What is the relationship of productivity growth and the introduction of new lower skilled workers into an econmy in regards to the median wage?
mjrmjr
Jan 9 2006 at 6:11pm
john pertz said:
“Also, I was wondering about the relevancy of complaining about the falling median wage. Is this issue problematic when median TOTAL compensation has been on the rise for the last thirty years? Also, would a large increase in lower skilled workers have a depressing effect on the median wage? What is the relationship of productivity growth and the introduction of new lower skilled workers into an econmy in regards to the median wage?”
john, if you’re saying this in response to my comment above, let me be clear-I’m not complaining, I’m stating facts. I can provide any number of citations for the fact that the median wage has decreased in real dollar terms since 2000.
Why is this fact relevant? Because it explains the disconnect between economists, talking heads, and Bush admin officials who say “Look at GDP growth and productivity increases, the economy is doing great” vs. the way that the average person feels about the economy. The “chattering classes” seem surprised that people don’t feel better about how the economy is doing when it shouldn’t be hard to figure out at all. If median wages are falling people will be pessimistic on the economy. Period.
I can’t tell you if this is problematic or not. It probably depends on who you are. For a person who’s heavily invested in the stock market it may be a good thing. A greater share of productivity gains going to corporate profits should make shares perform better. If, however, you’re a guy in his forties with a mortgage and kids to feed who doesn’t have an advanced degree or a specialized skillset, it’s probably not a good thing. Falling wages are one of the reasons people feel insecure about the economy. Gains over thirty years don’t pay the bills if you’ve been losing ground for the last five.
John Pertz
Jan 9 2006 at 6:46pm
mjrmjr,
I was asking if the fall in the median wage is a relevant point of discussion when total median compensation has been going up for the past twenty years. You’re response to this question in your post is not there. I also asked what is the relationship between the introduction of low skilled immigrants to productivity growth in relation to the median wage? I dont know and that is a question that is open for answer to anyone on this forum? My take about the median wage falling is that I dont care because people dont earn money just through wages. Companies haven been diversifing their pay packages into a number of other areas that go beyond wages. Therefore when I see that median TOTAL compensation has been on the rise for thirty years I deem the wage data to be irrelevant.
Also lets say for the point of disscusion that that both the median wage and total compensation are falling. Does this automaticaly mean that people are becoming less well off? In an unstatic economy that is an INCREDIBLY difficult point to prove. If we were all living in a vacum holding all factors constant then we should be absolutely troubled by falling wage and compensation data. However, what would the median wage and compensation data look like if the U.S naturalized fifty million South Saharan Africans? Those people would all find jobs and they would certainly be extremely low paying jobs due to their skills. This would have a depressing effect on both the median and the average and would make things look much worse than they actualy are. Do you see where I am going with this? Trying to judge the living standards of 300 MILLION people in an unstatic environment is an almost worthless endeavor through macro stats.
mjrmjr
Jan 9 2006 at 9:54pm
John Pertz:
Let me try to address your question more directly, as I think it is a good one. Yes, I think that the fall in median wages is a relevant point for discussion. There has traditionally been a correlation between worker productivity and wage increases. This has not been the case for the last five years. I think it would be interesting to try to find out why. Is a five year period as significant as the twenty year period that you cite? Certainly not. Maybe the trend will reverse tomorrow. But what if it doesn’t? What if there’s no wage growth for another five years? Another ten years? What’s the time threshold that has to be passed for it to capture your interest? Companies have diversified compensation in other ways, but the price of a house, a car, a textbook at a university booksotre is hard to diversify. The seller will always want US Dollars. I can grant that five years isn’t too significant overall, but in the *long term* if wages don’t keep up with inflation I think that will lead to a a lower standard of living.
That is a very good point that you raise, that firms compensate their workers in ways other than wages. I would hazard a guess that for 90%+ of employees, the largest non-wage compensation that they receive is health care benefits. While firms have increased their spending on health care, what workers are actually getting has been reduced due to inflation. An employer spending more on health care doesn’t actually give them employee any addtional compensation if that extra money is being eaten up(and then some) by inflation. Health care costs have gone up about 10% a year for the last five years. Workers are paying more out of pocket and less people in the U.S. have health care insurance than five years ago. It’s easy to find stats that verify this. http://www.kff.org/about/marketplace.cfm
Aside from health care, is there any other form of compensation that makes up any significant percentage of the average workers total compensation?
You may be right that overall compensation is more important than wages. Considering wages + health benefits, I think that overall compensation has gone down. Are there any other areas of compensation you think are important to consider or is there any other data, information, etc, that would lead to the conclusion that overall compensation is not going down?
It is hard to analyze the living standards of 300 million people in a dynamic economy, I totally agree on that. There’s a lot that macro stats can’t tell or, or that macro stats omit. I’d rank macro stats as at least a small step up, however, from “almost worthless” in how they can help economists understand what’s happening.
I don’t have the answer to the question you pose re:effects of immigration on median wages. I think it’s certainly an important point to consider as part of an honest debate over immigration.
Bernard Yomtov
Jan 10 2006 at 12:32am
Randy,
I think your comment illustrates a couple of my objections to what I see as the blind libertarianism so often on display here.
First of all, I don’t think it makes sense to talk of “market” and “anti-market” utopias, or people. Few people are “anti-market.” I am certainly not. To describe someone like myself, who thinks markets are a powerful and highly useful mechanism, but also thinks that there are times when market results can be improved upon, as “anti-market” is unthinking ideology.
Second, there is hardly anyone who would not prefer your second utopia to your first. However, I see nothing in your comment to explain why you assign the terms “market” and “anti-market” to them, or even what you intend to convey by these terms. More ideology, perhaps?
Randy
Jan 10 2006 at 9:24am
You’re right Bernard. There is a reason I used the word “utopian”. The reality is a compromise between those who say, “Look at all this wealth we’ve created, let’s divvy it up”, and those who say, “No, let’s invest it and see how much more we can accomplish”. What sites like this one accomplish is to remind us of the source of our wealth, show us the possibility of progress, and remind us of the dangers of stagnation.
Mathias Bolton
Jan 10 2006 at 7:33pm
Someone above said Costco is not unionized. In fact 18% of their retail workforce is represented by the Teamsters
MjrMjr
Jan 10 2006 at 7:58pm
Mathais:
That was me. I didn’t know that Costco had workers represented by the Teamsters. Does this change any of the underlying arguments in this discussion thread? I’m really not sure. I tend to shop at the stores I like best regardless of whether they’re union or not. I suspect I’d still prefer Costco over Wal Mart whether or not their drivers or warehouse workers were union.
I just read a piece by Stephen Roach that makes some of the arguments I was attempting to convey in a much better fashion than I ever could, and with lots of data points to back up his views.
http://www.morganstanley.com/GEFdata/digests/20060109-mon.html#anchor0
Is falling median compensation a good thing or a bad thing? Is global labor arbitrage a good thing or a bad thing? Even if the answer on net is yes there are still lots of losers in the process. The lack of acknowledgement of this fact and the opposition to anything that might even minimally mitigate the problem and/or spread the benefits of globalization around a bit is the main problem I have with free trade/laissez faire/libertarian/right winger arguments.
John Pertz
Jan 10 2006 at 10:19pm
The laissez faire argument for free trade is a good one. When we libertarians argue for free trade we dont mean NAFTA or any other “FREE TRADE AGREEMENT”. If anything those phrases and acronyms are nothing more than meaningless rhetoric which unfortunately give more amunition to the socialists who will stop at nothing to make sure that all future human advancement is contextualized by bureaucracy. If there truly was free trade then governments wouldnt need to create trade agreements. The very existence of a free trade agreement automaticaly means that trade is not free.
Libertarians scoul at rhetoric that calls for making trade fairer because that is fantasy. Public choice arguments probably poke the most holes in that idea. Sure the U.S government could spend millions compensating everyone who loses out due to free trade but if that is the tact that government should take then why make trade free? We’d be better offer going mercantilist because once we deem that regulating trade is on the whole the most benificial policy then we will inevitably eat into every positive outcome that is created by free trade. Once the regulation is created it will become open to capture and only the most powerful will be able to create regulations which will ultimately be to their benifit and not societies.
Bernard Yomtov
Jan 10 2006 at 10:39pm
The reality is a compromise between those who say, “Look at all this wealth we’ve created, let’s divvy it up”, and those who say, “No, let’s invest it and see how much more we can accomplish”.
But this simply echoes a critical financial decision we all make in our own lives: how much to spend now vs how much to save for later.
There is no simple universally correct answer to this, for individuals or societies.
(To be a touch technical, by “save” I of course mean “make available to the financial markets for productive investment in exchange for some return”).
Randy
Jan 11 2006 at 8:26am
Bernard,
Agreed that there is no universally correct answer. My goal was just to show that there is value in libertarian ideals.
Chris Bolts
Jan 11 2006 at 3:33pm
Based on this argument, the union is an exploiter of labor because as you said, if all the worker cares about is their own self-interest then they can withold their services until an employer comes along and pays their market-clearing wage. The union acts as a middleman which takes an indeterminant cut of the profits that the employee could’ve successfully done had he went to management directly and threatened to quit. Granted, this won’t work in every case, but as union members are slowly finding out in today’s global economy, the unions can’t guarantee better pay and benefits either.
First of all, Wal-Mart’s not worried about their employees unionizing, but they are worried about the negative publicity that their brand is receiving from selfish union leaders who would love nothing but to get their grubby hands on one million+ workers. Talk about a boost to the union effort in this country if that were to happen. Second, whenever people talk about Wal-Mart paying low wages, I believe they are always referring to the jobs that are visible to them, such as the stocker or the cashier or the loader, etc., etc. Those are low paying jobs at any store and the fact that they are NOT mentioned by union groups or other leftist advocacy groups who are anti-Wal-Mart tells me that they are more interested in invecting their own agenda on a company that is efficiently ran than on attaining better benefits for these workers (after all, many grocers are unionized, but somehow baggers, cartboys and stockers are mysteriously left out).
Also, you might want to look at that Fortune list again. Of the top 100 employers to work for, nothing is mentioned about Wegman’s being a good place to work because of its “above average pay”. Nor is there any mention made about Wegman’s benefit packages. Granted, it might pay a slightly above average wage, but it’s closest competitor, Whole Foods Markets, pays more for predominantly the same work.
Ironically, the list also confirms something else about unions: the declining clout upon the American workforce. The vast majority of them are non-union. The only ones that jump out immediately as being unionized are the Publix stores and FedEx.
Bernard Yomtov
Jan 11 2006 at 10:03pm
Randy,
I agree that there is value in libertarian ideals.
John B. Chilton
Jan 18 2006 at 10:32am
Much of economics does not make for good drama and journalims thrives on drama. Whether it is market success or market failure neither makes for a lively story except to folks like Caplan and me. But throw in some murder, mayhem, sex, or corruption and you’ve got something that sells newspapers.
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