Why Are Unions So Focused on Fighting Trade Deals? – WSJ
23 Mar 2015 Leave a comment
in applied welfare economics, international economics, poverty and inequality, unions Tags: free trade agreements, middle-class wage stagnation
Half of all U.S. workers represented by unions work for governments, and another 12% are in education or health care. Trade has very little direct impact on them. Another 20% of workers represented by unions are in construction, wholesaling, retailing or transportation doing jobs that are largely immune from import competition.
Less than 10% of all the workers that U.S. unions represent today are in manufacturing or agriculture, the industries most exposed to harm from globalization. Trade creates winners and losers; a small fraction of union workers are among the obvious losers.
The reasons advanced by the American union movement is trade deals enhance the bargaining power of employers over workers and is a major contributor to the wage stagnation over the last 20 years.
I hope the Unions got that analysis of trade and wages growth right because most union members benefit from the lower prices from import competition.
via Why Are Unions So Focused on Fighting Trade Deals? – Washington Wire – WSJ.
Class war warrior @WJRosenbergCTU inadvertently refutes the case for the class struggle
17 Mar 2015 Leave a comment
in applied welfare economics, economic growth, economic history, labour economics, poverty and inequality, unions
Today in the Dominion Post, Bill Rosenberg, a trade union self-described economist, argued that the workers are not getting their fair share of productivity gains in New Zealand over the last 35 years:
I calculate that wages in the 60 per cent of the economy studied by the commission would have been 12 per cent higher on average by March 2011, if they had kept up with productivity since 1978.
He then rounded up the usual Twitter Left suspects:
The commission’s study is important in that it finds that a large part of the fall in the labour share of income in the 1990s was due to high unemployment created by the radical restructuring of the economy that began in the 1980s and the Employment Contracts Act passed in 1991. Australia underwent similar restructuring during the period, but its labour income share fell only slightly. Its labour market is underpinned with an award system and other protections.
12%! 12% is at all that the class struggle is about over a 35 year period in terms of wage losses and labour surplus extract by the greedy bosses?
Figure 1: Real equivalised median household income (before housing costs) by ethnicity, 1988 to 2013 ($2013)
Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014).
As shown in figure 1, between 1994 and 2010, real equivalised median New Zealand household income rose by 47%; for Māori, this rise was 68%; for Pasifika, the rise in real equivalised median household income was 77%. Obviously these losses from the change in shares of GDP are dwarfed by the general increases in living standards over the last 20 years.
As is common with every member of the Left over Left that I run into these days, such as Bill Rosenberg, their analysis has no gender analysis.
The Left over Left invariably fail to mention that New Zealand has the smallest gender wage gap of all the industrialised countries.
Over the last more than two decades in New Zealand, there has been sustained income growth spread across all of New Zealand society contrary to hopes and dreams of the Left over Left. Perry (2014) reviews the poverty and inequality data in New Zealand every year for the Ministry of Social Development. He concluded that:
Overall, there is no evidence of any sustained rise or fall in inequality in the last two decades. The level of household disposable income inequality in New Zealand is a little above the OECD median. The share of total income received by the top 1% of individuals is at the low end of the OECD rankings.
As for Rosenberg’s hypothesis that it’s all the fault of the Employment Contracts Act, that doesn’t stand up. Figure 2 shows that union membership has been in a long slow decline in New Zealand since the mid-1970s. This is been pretty much the pattern all round the world.
Figure 2: Union density, New Zealand, Australia, the UK and USA 1970-2013
Source: OECD Stats Extract
The much hated Employment Contracts Act 1991, much hated by the Left over Left, doesn’t really show up in the union density figures in figure 2. There is no sudden break in trend obvious in figure 2 in the early 1990s when the Employment Contract Act was passed.
Indeed, the passage of the Employment Contracts Act 1991 was followed by a 15 year economic boom in employment and economic growth, as shown in figure 3. This was after the lost decades of 1974 to 1992 when there was next to no growth in real GDP per New Zealander aged 15 to 64. The good old days when the Lost Decades for New Zealand.
Figure 3: Real GDP per New Zealander and Australian aged 15-64, converted to 2013 price level with updated 2005 EKS purchasing power parities, 1956-2013
Source: Computed from OECD Stat Extract and The Conference Board, Total Database, January 2014.
Things are so grim for the class struggle in New Zealand that the leader of the Labour Party has had to redefine the working class because it is withering away so rapidly because so many workers are joining the middle-class:
Andrew Little is looking to update Labour's definition of the 'working class': stuff.co.nz/national/polit… http://t.co/AQ9mJL7CQf—
NZ Stuff Politics (@NZStuffPolitics) November 30, 2014
@greencatherine @PPTAWeb Teachers union concedes that NZ charter schools improve student outcomes?
04 Mar 2015 1 Comment
in economics of education, human capital, politics - New Zealand, politics - USA, unions Tags: charter schools, School choice
The New Zealand teachers union went into a very curious rant against chartered schools in a letter to the Dominion Post today. Instead of saying that they do not improve student outcomes, the usual propaganda, the author of the letter focused on system-wide outcomes after the introduction of charter schools.
It is usual for the teachers union to say that the schools themselves fail rather than argue that adding five or 10 schools to a system of thousands of public schools in New Zealand will through competition from these few schools to lift the entire system. For example, the teachers union sets a very high standard for the charter schools:
The United States has had charter schools for a more than a decade and there has been no measurable improvement in that country’s overall performance in literacy, maths and science. The United States lags far behind New Zealand on recent performance tests in all those areas.
It is unwise to say there is no evidence because that leaves you open to the cheap shot that will find one piece of evidence and then ask why you making things up. For example, the Maxim Institute found that:
The evidence from the small body of research that exists is mixed: some studies have found the presence of charter schools to have had a small negative impact on pupil achievement in regular state schools, while other studies have found charter schools to have had either a negligible or small positive impact…
There my work is done. All I had to show was that there was some evidence showing that charter schools improved the performance of neighbouring schools.
Why is the teachers union pretending that this evidence is not there when it can be found and so easily on the Internet?
Is the reason that the evidence that charter schools improve the outcomes of students that go to them is so strong that they have to move to new reasons for opposing them? The evidence is some chartered schools do very well and in particular for minority students. Their greatest strength is they are closed if they fail. No similar standard applies to failing public schools.
At a minimum, the teachers unions have conceded that the charter schools seem to work and that they do no harm to the rest of the system? If there was evidence of that, they would be quick to put it forward.
The US teaching workforce is disproportionately unionized
03 Mar 2015 Leave a comment
in economics of education, labour economics, unions Tags: charter schools, teachers union, union power, union wage premium, which school choice
HT: Vox
More on union hypocrisy and the living wage
26 Feb 2015 Leave a comment
in labour economics, minimum wage, unions Tags: Left-wing hypocrisy, living wage
Sam Peltzman on Teacher’s Unions
15 Feb 2015 Leave a comment
in economics of education, politics - New Zealand, politics - USA, unions Tags: School choice, teachers unions, union power, union wage premium
The Unappreciated Success Of Charter Schools
10 Feb 2015 Leave a comment
in economics of education, Public Choice, rentseeking, unions Tags: charter schools, School choice
Union density has taken a bit of a battering in US manufacturing and construction
05 Feb 2015 Leave a comment
Some economics of zero hours contracts – part 4: team production as a constraint on working time flexibility
07 Dec 2014 Leave a comment
in labour economics, labour supply, managerial economics, organisational economics, personnel economics, unions Tags: labour economics, zero hours contracts
To continue with my theme in my previous three blogs that zero hours contracts aren’t supposed to exist, a leading explanation for the hesitancy of employers to agree to part-time hours is team production (Hutchens and Grace-Martin 2004, 2006; Hutchens 2010).
Employers may want their employees to work a minimum number of working hours because of rigid production technologies and/or team production. Production technologies vary in the rigidity they impose on the hours worked by employees.
The co-ordination of working times is paramount to effective team production. Once the work time schedule is fixed for team, the worker faces a choice between working at the fixed schedule or working in another team or job.
Two common examples of teams are an assembly line and a football team. Both require a minimum number of workers with rigid starting and finishing times. The absence of a team member could reduce team productivity or safety or even stop production entirely.
When the cost of absence is higher such as for team production, there are more efforts to reduce absences. When a single employee absence is costly to employers, employers take steps to ensure that a minimum number of workers plus a reserve are present. There will be increased spending on monitoring, more cross-training, mutual monitoring by employees and the use of peer pressure. Multiple production lines reduce the risks of absence because spare staff can be hired to fill in across different teams.
Other workers can produce independently of their co-workers. One example is a member of a typing pool. The contribution of each typist depends on their efforts alone. The increment they add to production does not vary with the presence or absence of others, nor is the productivity of others affected by their output. If there is little teamwork, the absence of a worker does not affect other workers.
The Department of Labour (2009) found that about 60 per cent of New Zealand full-time employees did not have flexible hours.
A leading reason for employers hiring part-time workers is to solve scheduling problems that arise when hours of operation and peak periods of daily or weekly production do not easily divide into standard shift lengths.
For example, within the day and within the week variation in customer demand explains the heavy use of part-timers in restaurants, retails stores and many services outlets. Not surprisingly, zero hours contracts arise in industries such as the food services sector where there is already a long history of part-time work.
Different production technologies require their own levels of coordination and supervision. This complicates the use of part-timers. Scheduling problems can arise of workers arrive at different times.
A mix of full and part-time employees could increase supervision costs. There can be repetitions of instructions and different capabilities to perform the same tasks.
Two part-timers could be productive if job is repetitive and does not require much co-ordination. Again, and not surprisingly, zero hours contracts occur in industries where the jobs appear to be relatively simple and the worker can pretty much work out what to do after a little bit of training with little supervision.
A managerial employee is less likely to be allowed to be part-time because they will be absent when employees need direction (Hutchens and Grace-Martin 2004, 2006. Managerial employees have scale effects. Higher level management decisions percolate through the rest of the organisation. The interaction of talent and scale ensures that the impact of any loss of efficiency from having part-time managers compound geometrically into the efforts and productivity of those they lead. Sharing a managerial job has costs because information must be exchanged and a common agenda agreed.
The economics of team production suggests that zero hours contracts will occur in teams with peaks and ebbs in customer demand, where workers are pretty much interchangeable alone can take over with little or no instructional briefing, and the level of task dependency between workers is small.
When extra workers on zero hours contracts are brought on to deal with the spike in demand, they take over the servicing of this demand. There is little need for them to interact with existing workers. For example, in a restaurant situation, they could deal with the extra tables filled by the spike in demand. In a McDonald’s restaurant, for example, they could just take over that the till that was otherwise not in use and serve the extra queues of customers.
To summarise, unless we have a good idea about why firms are moving to zero hours contracts, which we don’t, and why employees sign these contracts rather than work for other employers who offer more regular hours of work, meddling in these still novel arrangements is pretty risky.
Some economics of zero-hours contracts – part 3: the fixed costs of working
02 Dec 2014 Leave a comment
in applied price theory, labour economics, labour supply, managerial economics, Marxist economics, organisational economics, personnel economics, politics - New Zealand, unions Tags: fixed cost of employment, fixed costs of working, inherent inequality of bargaining power between workers and employers, reserve army of the unemployed, The pretence to knowledge, zero hours contracts
The Unite Union, which represents about 7000 workers across New Zealand, has announced a campaign against zero-hours contracts. Zero-hours contracts have no specified hours or times of work so a worker could end up working 40 hours one week and none the next.
Unite national director Mike Treen did not know of the specific numbers of such contracts, but said these contracts were particularly common in the fast food industry, although they also appeared in some other industries.
Unite Union’s national director said that zero hours contracts made workers vulnerable to abuse as they became too nervous to speak out, for fear of having their hours reduced.
There’s no security and it puts enormous power in the hands of managers. People are extremely reluctant to assert their rights for simple things like breaks…
Treen admitted that zero-hours contracts gave employers flexibility, but pretended to know that the amount of flexibility employers actually needed was often exaggerated.
It’s not like they have huge swings or anything. They know how much they are going to sell on any particular day of the week during the year… We don’t expect everybody to have guaranteed hours but 80 per cent of the crew should be able to have it.
Treen said the union was not planning to push for a law change at this stage and would focus on addressing the issue during negotiations with fast food companies early next year.
The new leader of the opposition has promised to outlaw these zero our contracts when he gets into government. I wish him well in drafting a law that outlaws zero-hours contracts without outlawing some part-time and casual jobs as well.
Zero-hours contracts and the class war
As is to be expected, the Guardian is rather hot and bothered about zero hours contracts. One of its columnists referred to those on zero-hours contracts as the new reserve army of the unemployed:
It is a pity Karl Marx was not around last week to comment on the news that 90% of the workers at Sports Direct are on zero-hours contracts.
The author of the Communist Manifesto would also have had plenty to say about the news that the official estimates of those working in this form of casualised labour had shot up by 25%…
It is safe to say Marx would have cavilled with those who see zero-hour contracts as an expression of Britain’s economic strength, a demonstration of flexible labour markets in action.
He would have thought "reserve army of labour" a better description of conditions in which workers were expected to be permanently on call for an employer.
The Guardian went on to admit that the reserve army of unemployed are not as discontented as they should be:
It’s only fair to say that some employees are content to be on zero-hours contracts.
Some students, for example, want to combine work with study and are willing to turn up when summoned. That’s also true of older workers topping up their pensions with a bit of irregular, part-time work.
Despite this, the class war continues as does the immiseration of the proletariat and the long-term decline in profits that will lead to the crisis in capitalism and, with a bit of luck, the inevitable proletarian revolution:
Marx would have seen zero-hours contracts as the continuation of a long historical trend, stretching back to the mid-1960s when the profitability of western manufacturing firms started to fall.
From that moment, he would say, the search was on for measures to boost profits, and this has manifested itself in a number of ways: by direct attacks on organised labour; by the increased financialisation of the economy; by the search for cheap raw materials whatever the environmental cost; and by asset bubbles.
Accordingly, zero-hours contracts are the response to tougher conditions facing firms as a result of the financial crisis.
Reversing that trend will require more than legislation: it will mean tackling one of the root causes of that crisis: the imbalance of power in the labour market.
A more mellow writer in the Guardian brought up the imagery of the interwar depression:
Of course it is difficult for employers to match the demand to work nine to five and yet also to be served on a 24-hour basis, cheaply and effectively by someone, not them.
But there are other ways to solve this conundrum than indenturing workers or making them wait at the metaphorical factory gate for a tap on the shoulder.
The fixed costs of working
I will start my third blog on the economics of zero-hours by reviewing the economic literature on the fixed costs of working. Helpfully, this literature predicts that zero hours contracts really shouldn’t exist much at all.
The literature on the economics of the fixed costs of work arose out of the economics of retirement and the economics of the labour supply of married women, and in particular of young mothers. This literature was attempting to explain why older workers, or young mothers either worked a minimum number of hours, or not at all.
Fixed costs of working constrain the choices that older employees make about how many hours and days that are worthwhile working part-time. For employees, the fixed costs of going to work limit the numbers of days and number of hours per day that a worker is willing to work part-time. The timing costs of working at scheduled times and a fixed number of days per week can make working fewer full-time days, rather than fewer hours per day less disruptive to the leisure and other uses of personal time.
The fixed costs of working induced older workers to retire completely, and young mothers to withdraw from the workforce for extended periods of time, unless these workers worked either full-time or enough hours part-time each day and through the week to justify the costs of commuting and otherwise disrupting their day and week.
In the case of older workers, there were the fixed costs of commuting and other disruptions to their day. In the case of mothers, there are additional fixed costs of working arising from child care and the commuting and other rather rigid time commitments of picking up and dropping off younger children at school and to day care centres.
The fixed costs of going to work
There is a minimum number of hours of work that will be supplied by different workers that is set by the fixed costs of working. These fixed costs of work arise from commuting time and from dressing and other tasks involved in preparing for the trip to work. These costs are fixed because they do not vary with the number of hours to be worked per day and the amount of effort to be exerted while working (Cogan 1981; Hamermesh and Donald 2007).
A worker will not accept a job offer or continue in a particular job unless they work sufficient hours so that these fixed costs of going to work are recovered along with receiving sufficient reward for giving up pursuing other job openings open now and in the future and for forgoing leisure and the option of making other uses of their time (Cogan 1981; Hamermesh and Donald 2007).
Cogan (1981) estimated that the average fixed time and money costs of married women entering the workforce was 28 per cent of their earnings, and also estimated that the minimum number of hours a married woman was willing to supply in the labour market was 1,300 hours per year.
There may be a preference for fewer working days over fewer hours per day to reduce the time and money costs of going to work. Donald and Hamermesh (2009) estimated that fixed costs of going to work are equal to about 8 per cent of income. The fixed costs of working provide an incentive to workers to bunch activities.
The fixed timing costs of labour market entry
A surprisingly large part of the fixed costs of working comes from disruption in the ability to use spare time effectively (Donald and Hamermesh 2009, 2007). Entering or remaining in the workforce for any time at all significantly affects the effective allocation and enjoyment of time outside of working hours. This disruption to the effective use of the time that is left outside of working hours is the fixed timing cost of labour market entry.
One way to reduce this disruption from entering the labour force at all is to seek to reduce the number of days worked per week rather than the number of hours per day.
Leisure and other private uses of time are displaced if the individual takes or stays in even a small part-time job. Workers must use their reduced amount of remaining free time to catch-up on tasks, often at the weekend that they could have done if they were not working.
Leisure time may be the first to go because many personal tasks can be rescheduled but must be done eventually. These range from cooking, eating, and cleaning to personal upkeep, sleep and rest. Tasks must be hurried or done to a lower quality (Donald and Hamermesh 2009).
Routine – having the same schedule from day to day – saves time (Hamermesh 2005). Routine enables people to economise on the set-up costs of consumption, leisure and going to work.
Entering the work-force for any time at all to work even a small number of hours per day or per week calls for new daily and weekly routines and disrupts many existing routines that make better use of leisure, family and other uses of time (Hamermesh 2005).
Entering the workforce constrains the unfettered use of spare time. Working increases the fixed costs of coordinating family and leisure times. Workers must surround working times with buffers to ensure they are not late for work.
One reality of rising incomes is time become more valuable. A rise in wages raises the value of time because time is a finite and irreplaceable resource. Time cannot be stored or bought and sold but people can try and make better use of it.
With only 24 hours still in every day, the cost of time-intensive activities including working will rise as incomes increase. People shift away from time intensive activities and buy more of those products that are time saving or which are less time intensive to consume. Time is money and this maxim applies with greater resonance as incomes and wealth increase.
Another important fixed time costs of labour market entry is its impact on the efficiency of the remaining time devoted to leisure, household production and other activities when even a small amount of market work is undertaken. Spare time is of much less value if part of every day is to be spent at work.
Fixed timing costs arise because of a need to hurry to get to work on time and forego other activities to be rested for work the next morning. The requirement to attend work blocks out certain days from major other uses of that day and reduces the time available in any day of part-day work for leisure, family time and household production.
Household production refers to the goods and services made at home which could be purchased in the market from a third-party. These include food preparation, cooking, carer obligations, and household cleaning. There are also various other household tasks that must perform for one-self which are essentially personal maintenance and leisure.
Working even a few hours can reduce the worker’s efficiency in household production and other non-market activities and may require the worker to buy goods and services that were previously produced at home. This reduces the net financial rewards of working. Fewer full days of work, rather than fewer hours per day is less disruptive to leisure and the other uses of personal time.
The fixed time costs of market work might induce workers to engage in different mixes of other activities. The additional hours of work during the week affect the allocation of time on a non-working weekend day. They reduce leisure time on weekends and increase weekend time devoted to household production by those who do market work on week days. Workers catch up at the weekend on the household production that the rigidities of their market work prevented them from doing during the week.
Stress is an important fixed cost of working. Workers spend non-market time worrying or thinking about work-problems. Even a few hours of market work will place a worker at risk of some stress.
Floors and ceilings on the structure of the working week
The fixed costs of going to work and the fixed time cost of labour market entry both place constraints on the willingness of workers to accept a job offer involving a zero-hours contract. These contracts must offer something extra over competing job options.
The employer must offer something extra to prospective recruits to induce them to sign a zero-hours contract. There must be something substantial to overcome both the fixed costs of work, such as commuting, and the less obvious but still substantial fixed costs of labour market entry.
Any commitment to work, such as working on a zero hours contract, carries with it significant costs in terms of disruption to the rest of the day, the rest of the working week and the amount of the weekend that is spent on leisure versus resting from work and catching up on tasks that otherwise could have been done during the week but for work commitments.
A zero-hours contract must pay enough over the expected life time of the job to make up for the costs of going to work as well as the disruption and loss of leisure time and also the pure disutility of working before the worker breaks even on working.
As the Unite Union official noted, zero hours contracts appear to be most prevalent in the fast food sector. Job turnover rates in the sector can be several hundred per cent per year.
Many of the workers in the fast food sector, as the Unite union official himself noted, are young. Teenagers and young workers changed jobs frequently, particularly those who are studying part-time or full-time work, injuring the summer.
As such, zero-hours contracts in any particular job will have a short expected life over which the teenager or young worker would have to recoup for the fixed cost of working and the fixed cost of any labour market entry. Employers would have to offer some sort of premium or other implicit guarantee of regular work to induce prospective young recruits to sign a zero hours contract.
The type of workers who will profit from signing a zero hours contracts of those workers with few other demands on their time and flexible days. The workers who might find zero hours contract appealing will be those who do have much routine in their day. Workers who have a considerable amount of routine in their day such as because of family commitments will not find the wage offers in zero hours contracts appealing.
There will be job sorting: workers who have low fixed costs of working and low fixed costs of labour market entry will be attracted to zero-hours contracts.
Employers profit from offering zero hours contracts to workers who don’t want to make a regular commitment to come into work every day. Teenagers and students fall into this category, which makes it less surprising that zero hours contracts appear to be most common in the fast food sector.
There are mutual gains in the fast food sector to both employers and workers from zero hours contracts when there are peaks and troughs in product demand, and some teenagers and young workers have a low cost of coming into work at short notice.
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