The battle between Starbucks and Workers United trying to barge in may not be sufficient to persuade the company and other large corporations that the woke are not so fun to work with after all. Such is the power of ideological fads. But the event does carry some political and economic lessons. One of Workers United’s organizers said (“Starbucks Prepares to Expand Worker Benefits That Might Exclude Unionized Staff,” Wall Street Journal, April 13, 2022):
We will continue to fight to hold Starbucks accountable to the company we know it could be.
I wonder why Workers United doesn’t acquire Starbucks (tip: SBUX on Nasdaq) or create a competitor in order to have “the company [they] know it could be.” Because the new Starbucks or the new competitor would most likely fail or cost more than it would return? Would that serves the employees’ interests? On the other hand, if the unions and pro-union employees succeeded with their own money or with that of outside investors in such a free-market (that is, voluntary) adventure, glory to them!
READER COMMENTS
Craig
Apr 13 2022 at 11:07pm
“I wonder why Workers United don’t acquire Starbucks”
But that is not their specialty, right? I mean the most pro-union way to look at this is that they aren’t ’employees’ in a broad sense, but they’re vendors with one customer. As business plans go, honestly, its not a very good business plan. But many Americans are actually in that very position. Sure you can say, “Well, just go start your own coffee shop” but that might entail skills beyond running the coffee shop locally. Real estate, global logistics, accounting, etc.
So they may or may not be good at the overall scheme of the business, but they do have a business and their plan is to monopolize the provision of labor to their monopsonistic customer. Not my problem of course.
At the end of the day the basic problem with being in the labor force is that you supply labor typically to an employer who employs many. So again, you have a business with one customer which, at least in the short term, can decide whether or not you eat tomorrow versus your importance to the employer where you are one worker among many and typically can be replaced. That’s changed of late and even so wages aren’t keeping up with inflation.
So I’d suggest urging people to start their own coffee shop (an insanely risky proposition almost assuredly doomed to failure, quick google 74% fail in 5 years) kind’ve misses the point and I’d suggest libertarians should refrain from making such arguments because most people can’t start a business and still have a kid to feed; the second they read that you’ve turned them off. Like I said, they’re in a business and its their business to supply labor to their customer, Starbucks and they should charge as much as they can get away with charging. And don’t be nice about it either, particularly right now. Take it while the taking is good because it won’t be good forever and when its not Starbucks won’t blush at taking it back if they can get away with it.
Matthias
Apr 13 2022 at 11:59pm
To expand on your observation:
Yes, running a labour-supply business with a single customer is not as robust as having multiple customers.
But for many people the savings in transaction costs are usually worth it.
To get something practically out of the metaphor: even if you only have one customer at a time, it’s still useful to make sure that you have many potential customers!
Ie it’s good to have competition for labour between companies, and it’s good for an individual worker to make sure that they stay employable by other companies as well, even if they are currently happy with their current employer.
Mark Z
Apr 14 2022 at 12:33am
The fact that the failure rate of new coffee shops is so high is itself highly suggestive of how competitive the coffee market business is, and that Starbucks doesn’t have much room to raise wages without employing less labor. I may not plausibly be able to start my own coffee shop, but someone probably would take advantage of the opportunity. And many do, and most fail, because it turns out there isn’t much of an opportunity, because Starbucks isn’t really as much of a monopolist as the union thinks. I take that as what “why can’t you start your own coffee shop” is shorthand for.
Pierre Lemieux
Apr 14 2022 at 6:14am
Craig: I agree with your main point and it coincides with what I meant in my succinct (and perhaps not perfectly formulated) argument. Mark Z expanded on my succinctness.
One caveat, though. on what employees are, continuing Matthias’s point. Economically, employees are “long-term” contractors, as opposed to ad hoc contractors, as Ronald Coase explained in his famous 1938 article (I quickly summarize his argument in http://object.cato.org/sites/cato.org/files/serials/files/regulation/2014/1/regulation-v36n4-4-edit.pdf.) This approach illuminates aspects of the phenomenon that may otherwise go unnoticed. Somebody chooses to be an employee instead a business contractor because the security is worth more for him than the risk of losing his only “customer”–or his few “customers,” since he may have more than one job. Even if bimonthly pay checks may last only one year, that may be better than chasing customers all day long. One may prefer to have several customer-employers one at a time over some years. Not everybody has the same risk preference nor (as you point out, faces the same circumstances in life).
Todd K
Apr 14 2022 at 6:48am
“Such is the power of ideological fads.”
A fad?
Pierre Lemieux
Apr 14 2022 at 7:06am
Todd: Good question! Oxford defines fad as “An intense and widely shared enthusiasm for something, especially one that is short-lived; a craze.” I took it in its non-special sense. Perhaps “fashion” would be better. But we don’t know how long the woke ideology will last. Let’s hope it won’t be as long as the beaver-hat fashion, which lasted two or three centuries around the 18th (it made the fur trade in the US and Canada very profitable).
MarkW
Apr 14 2022 at 7:42am
I suspect Starbucks is in some real trouble. Virtually every location that has held an election has voted to unionize. And I doubt that Starbucks has any real pricing power to be able to meet union demands. Also — the newly unionized employees don’t really have to worry that much about their local store staying in business. They haven’t invested in specialized skills, so if their Starbucks closes, oh well — good riddance! They were evil anyway! And there are plenty of other coffee shops, restaurants, and retail places looking for workers.
A couple of years ago, the baristas at a local coffee chain voted to unionize. The company carried on for a few months and then decided to shut down its stores while keeping its wholesale roasting business. Some of their ex-employees are now probably among the Starbucks baristas who will soon vote for a union here…
steve
Apr 14 2022 at 9:19am
Meh. If companies can work to reach a deal that is best for them then I dont see why Workers United (was this some sort of parody name?) cant also strive to reach its best deal. Might they price themselves out of the market? Yup. Would they be the only entity to ever do that? Nope. Seems to me that this is the kind of thing that markets can resolve.
Steve
robc
Apr 14 2022 at 10:47am
I think it would if we had free market labor relations.
I can imagine a world where unions provide so much value that companies want to only hire union members. The full description of what that union would be and it ends up being a modern version of medieval guilds.
I think the only issue with the guilds was laws granting them monopoly powers.
To me a quality union would be one where even an independent contractor would want to be, and advertise himself as, a union member.
steve
Apr 14 2022 at 7:00pm
I sometimes see, and largely agree with people saying that markets dont have to be perfect to work. In this case I am not seeing anything in the rules that have been set up that would keep markets from deciding this. If WU sets their price too high they fail.
Steve
Mark Z
Apr 14 2022 at 9:19pm
By pricing themselves out of the market they also harm consumers by causing stores to close. That new coffee shops will eventually replace them (assuming the current administration doesn’t get its preferred pro-union legislation passed) doesn’t make the union’s poor decision-making costless.
Moreover, labor law is biased in favor of unions. Employers are required to ‘bargain in good faith’ with unions (obviously an asymmetric obligation) and unions are exempt from anti-trust law, so in questions of unionization, it is rarely merely free markets at work.
steve
Apr 15 2022 at 9:03am
I am not understanding the good faith part. That is the norm in business ie when I negotiate a contract both parties are assumed to be acting in good faith. Breaking good faith is generally considered a breach of contract. As CEO of my corporation I and my board must act in good faith to the shareholders. The union is also expected to act in good faith so it is not asymmetric.
The only thing different about the employer-union negotiations is that good faith has been made explicit. It is generally an assumed agreement. Since it is implicit and not explicit the remedies are therefore more vague and subject to the whims of a court, but it is still a breach.
Mark Z
Apr 15 2022 at 1:10pm
In a free market, an employer wouldn’t have to negotiate with unions or intended-unionizers at all. They would be able to just fire anyone who unionizes or tries to unionize. Just like I can quit my job the moment my employer even thinks about reducing my wages or benefits (or for any other reason). I have no obligation to even come to the bargaining table. That’s the asymmetry.
steve
Apr 16 2022 at 8:32am
Which is why, I think, that libertarians always favor actions that result in a slack labor market. Regardless, when labor markets are tight, like they are now, then workers have the leverage to unionize. I am not sure I see a problem with that. If the unions set prices too high they will fail like lots of companies do.
Steve
Pierre Lemieux
Apr 17 2022 at 10:27am
Steve: There is no more reason the government should favor either “tight” or “slack” labor markets than it should favor “tight” or “slack” markets for bolts and clips. In fact, the only reason would be that Leviathan wants to reward or punish the shareholders or workers of the the bolts and clips industry. And this is assuming that “tight” or “slack” market has any ascertainable economic meaning.
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