Editore"s Note
Tilting at Windmills

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January 10, 2008
By: Kevin Drum

UNIONS....Mark Thoma ponders the future of unions in the United States:

The union question is a hard one for me. I don't believe that the degree of market power workers and firms bring to the bargaining table is in balance. "Superstars" at the upper end of the income distribution have too much market power, and firms have too much market power at the lower end of the income distribution, where the lower end starts at fairly high levels of income.

Unions are one potential answer for workers at the lower end of the income distribution, but is a return to unions the best solution to the market power imbalance? Should we return to the past, or should we try to use the changing political landscape as an opportunity to build better institutions for both workers and firms, institutions that offer workers the same degree of bargaining power that unions provide, and the the same degree of income, health, and retirement security, but do so more efficiently? We already know how unions work, pretty much, but can we do better?

"Better institutions" would be great. Unions are obviously a mixed blessing, and in any case the political obstacles to increased union power seem pretty insurmountable these days. But what's the alternative? What better institutions for workers might we construct?

Kevin Drum 6:37 PM Permalink | Trackbacks | Comments (65)

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What better institutions for workers might we construct?

A federal government that's not, like our current one, disproportionally biased towards the interests of employers, large corporations, and the wealthy.

Posted by: phleabo on January 10, 2008 at 6:45 PM | PERMALINK

CEO's use knowledge of other CEO's compensation as a way to gain leverage when demanding more money.

If regular employees knew what peers were making, they could use that knowledge when negotiating their own salaries, much like CEO's do.

Posted by: eightnine2718281828mu5 on January 10, 2008 at 6:45 PM | PERMALINK

Oh, phleabo, you slay me!

Posted by: Gore/Edwards 08 on January 10, 2008 at 6:49 PM | PERMALINK

Universal healthcare would be a major institutional change to benefit workers, especially low-wage ones.

Posted by: j.s. on January 10, 2008 at 6:50 PM | PERMALINK

Corporations have always maximized their control to maximize profits for management and shareholders. They have done so in numerous ways, from buying legislative influence to eviscerating organized labor. To expect them to do anything less ...ever...is naive. We can theorize about a corporate utopia, but it will NEVER happen.

The only realistic alternative is a system of checks an balances. Unions are essentially required to offset the power of management/shareholders. Only when these groups have equal power will anything approaching fair dealing ever occur.

I believe legislation increasing the power of Labor is possible (stepwise of course). Legislation directly decreasing power of corps?...impossible.

Posted by: mezon on January 10, 2008 at 6:56 PM | PERMALINK

I guess we would need an institution with an ideology that told the poor that hard work and sober living were valuable for their own sake, that told the rich that storing up treasure on earth was not the best use of their time and that the poor were their responsibility, that told rich and poor that we are all brothers and sisters, equal in the most important respects. I'm trying to think now: Darwinism? Marxism? Critical race theory? I'm not coming up with it.

Posted by: y81 on January 10, 2008 at 7:00 PM | PERMALINK

mezon is right, of course. There's WAY too much hand-wringing on the left about how unions sometimes use their influence in selfish ways, or even -- gulp -- become corrupt.

Meanwhile, one notices no similar hand-wringing on the right about corporations who by charter have only selfish interests and in whom the line between corruption and "proper" behavior is a very blurry one indeed.

Labor has been routinely, systematically screwed for decades, as even a glance at real income figures demonstrates convincingly. Unions are the only organization that labor has to fight the (very well organized) influence of owners. Of course they should have more power.

Posted by: bleh on January 10, 2008 at 7:02 PM | PERMALINK

I think the answer he's looking for is "We can't build anything better until we completely destroy the unions." Or at best, "Let's not do anything until a Burning Bush hands down a perfect new institution that the plutocrats can love."

Posted by: jussumbody on January 10, 2008 at 7:05 PM | PERMALINK

y81: I guess we would need an institution with an ideology that told the poor that hard work and sober living were valuable for their own sake, that told the rich that storing up treasure on earth was not the best use of their time and that the poor were their responsibility, that told rich and poor that we are all brothers and sisters ...

Christianity, or at least the peculiar variant of it described in the New Testament. Actual implementations vary widely.

Posted by: alex on January 10, 2008 at 7:10 PM | PERMALINK

"But what's the alternative? What better institutions for workers might we construct?"

Ninja dojos.
Pirate guilds.
Giant robot engineering firms.

Maybe all three.

Posted by: Tlaloc on January 10, 2008 at 7:10 PM | PERMALINK

Unions will revive when the bargining power of the american worker increases.

Unions are both a symptom and a cause of strong american workers.


Unions are also independent power centers in american politics. As such, they bolster civil society.

Posted by: Adam on January 10, 2008 at 7:11 PM | PERMALINK

we do need a system of checks on corporate power. in the current political, economic, and ideological landscape unions are the best bet. the market won't regulate itself and our reps seem to lack the political will to protect workers, so it's the self-help of organized labor---just like in the old days.

I haven't read the article, so this is likely an unfair criticism but I see as utter horseshit any analysis that surreptiously advances the notion that organized labor has either been a failure or whose day has passed.

Thoma's quote smells suspiciously like left-of-center angst over "fixing social security."

Posted by: mencken on January 10, 2008 at 7:14 PM | PERMALINK

Revoking corporate charters for unsociable behavior is one way.Hanging corrupt legislators on the capitol steps.Then again,the playoffs are starting....

Posted by: pol pot on January 10, 2008 at 7:23 PM | PERMALINK

One place to look for ideas is Germany and probably other Northern European countries. I'm no expert and would love to read input from anyone who is, but my impression is their workers are organized differently. They're not in quite the same adversarial (to management) position yet have good ability to negotiate collectively, and also provide a stable workforce to companies. Just a thought.

Posted by: dennisS on January 10, 2008 at 7:28 PM | PERMALINK

i am a small specialty manufacturer in the USA. i employ about 65 people. non-union.

i manufacture a product that is, in the main, manufactured by very large conglomerates with a unionized work force.

since the ronnie raygun era, large amerikan manufacturers began to energetically target their unionized workforce. the expanding maquilladora entities on the mexican side of the border was illustrative of that program.

the efforts to eradicate the trade union movement were not confined to north america. the principal thrust of operation condor, usaid, school of the assassins has been to terminate with extreme prejudice trade union activists throught this western hemisphere.

and this effort has had/has bipartisan sponsorship. demtillians as well as reptillians have countenanced these trade union "search and destroy" missions. the most prominent example of bipartisan targeting of the worker was bill clinton's passage of nafta.

since then, it has only gotten worse. more and more us manufacturing has been moved offshore. in most instances in the pursuit of virtual slave labor. in addition, so as to take advantage of virtually zero regulations. china and india look good at this brief juncture, but the pollution will end up killing more people than you could ever fathom. beijing, shanghai today remind me of pittsburg in the early 1950's. it will only be getting worse. it is my guess that when the athletes show up for the olympics they will all want to wear mask/filters - and that will not be allowed. and there better be a surfeit of bottled water, because what comes out of any tap is poisonous.

all of this is as true of india.

esentially, all these new hells are the creation of us/european multinational corporations.

finally, the revenues created by this rapacity do not become passed to the stockholders. they become the property of the raptors managing the enterprise.

eventually, the tumbrils will have to roll. and dr guillotine will have to be taken out of storage.

c'est le temps pour la revolution, citoyens.

Posted by: albertchampion on January 10, 2008 at 7:44 PM | PERMALINK

Challenging. Because the most abusive always rise to the top in situations. Several years ago I worked for a performing arts center that was one of the tougher union houses in the country. Legendary in fact. The union guys were jerks on a regular basis over the most petty of issues. The only guys worse were the owners of the facility who did everything they possibly could to screw the union. The situation had been foul long before I got there and I always wondered who was the asshole first, since it was clear that both parties had an acrimonious relationship that had been brewing for a long time.

In my experience, unions do protect too many incompetent members just because they are "brothers." However, the other side is usually equally corrupt. We wouldn't need unions if employers weren't shit bags on a regular basis.

Posted by: arteclectic on January 10, 2008 at 7:46 PM | PERMALINK

"What better institutions for workers might we construct?"

What a dumbass question.

It doesn't matter what we might be able to construct. Whatever hypothetical institutions besides unions that can "offer workers the same degree of bargaining power that unions provide" will be functionally equivalent to unions from the perspective of business managers, and they will go to the mattresses in opposing them.

An adversarial relationship with management is a feature of unions, not a bug. I am really goddamn tired of explaining to people why collective bargaining is the only way to balance the power between labor and management.

When will this fscking war end? Only when one of three terminal conditions arrives: a) everyone is labor, b) everyone is management, or c) everyone is dead.

Pick one, and let's go there.

Posted by: s9 on January 10, 2008 at 7:55 PM | PERMALINK

Why re-invent the wheel?

Posted by: dr sardonicus on January 10, 2008 at 7:59 PM | PERMALINK

IF you eliminate our subsidies of overseas jobs, and make retirement and health benefits transferable, that will go along long way to giving employees the power they need to negotiate fairly.

Support for FAIR not FREE Trade will increase living conditions and wages while not attack American employees.

As noted above: specific information about what peers are making.

Universal Health Care.

Transferable Defined Benefits Plans and
Transferable Defined Contributions Plans

Much more linkage of CxO salaries to ACTUAL performance, as well as long term stock price AND to employee satisfaction. Executive pay committees to include representative stock holders AND representative employees.

Windfall profits tax for golden parachutes and outrageous salaries.

An END to Federal laws that allow you are "EXEMPT WE DON'T NEED TO PAY YOU OVERTIME" Employment.

Posted by: jerry on January 10, 2008 at 8:09 PM | PERMALINK

One thing most Americans need to do is simply develop better skills. It's hard to take on the powerful forces of commerce when your essential skill cleaning a toilet or putting screw A on bolt B. I think Americans need to be more skilled, more adaptive and more flexible so that when their Boss craps on them, they can simply move up and out. I have been very fortunate, so I don't want to be careful that I don't underestimate the plight of people who get crapped on from the moment they are born, but at some point, all of us need to stop looking at leaders for salvation and make our own contribution to individual revolution. If you are cleaning toilets, your problem isn't the Man. Your problem is you. Hopefully, a soon to be Democratic government can assist you so that your first steps are more likely to succeed, but at the end of the day, it has to be every single person, individually, fixing this problem. Not unions, governments or businesses.

Posted by: BombIranForChrist on January 10, 2008 at 8:12 PM | PERMALINK

BombIranForChrist: One thing most Americans need to do is simply develop better skills.

Would you care to be more specific about what skills Americans should develop, or are you content to spout pabulum?

Here is an even better explanation of the myth you spout, courtesy of the ComIntern publication "Business Week": The Science Education Myth

Posted by: alex on January 10, 2008 at 8:20 PM | PERMALINK

Deep in their heart management regards the union employee as a liability. Management will not change this attitude because they don’t have to; it works to their advantage, etc.

Most if not all corporations have been fraudulently padding their efficiency numbers for years to attract the investor.

When this bad news eventually reaches the investor they will no longer invest.

Management will then be forced to change their attitude toward the union employee or the corporation will cease to exist.

Oh, by the way, the United States of America is already in recession. Don’t let the corporate forked tongues fool you.

And yes, my walled is closed for business.

Posted by: MEG on January 10, 2008 at 8:38 PM | PERMALINK

a few modest proposals:

Worker-owned companies.

Restore the power of state governments to revoke corporate charters - i.e., the corporate death penalty.

Ekaterinburg

Posted by: fabius on January 10, 2008 at 8:44 PM | PERMALINK

As a long time Union Carpenter, let me point out a simple observation: The climate has changed.

Once upon a time, it was Union against CONtractor. No more (not that the dynamic is irradicated) In todays construction world, it is quite often Union WITH contractor against... others (those who hire illegal labor among other sins)(this is NOT an illegal immigrant bash... I know of americans who work in the same way). We are beset on all sides by pressures we have great difficulty battling (they don't get overtime, healthcare, or pensions, they don't pay taxes, unemployment etc, all the things a LEGAL contractor pays.

I do not even know how I am still working. I make 31.40 an hour,with overtime pay, with healthcare, and pension, my employer is on the gig for half my SS, my unemployment, workmens comp, and the costs of keeping up with my taxes (and other costs I am sure). Some of the companies I compete with pay $10/hr, no overtime, no healthcare, no pension, no SS, no taxes, no unemployment, no workmens comp...

Get the picture?

We could start by enforcing the EXISTING laws. That would be a start at least.

tom p

ps: I have no idea how all this relates to manufacturing, and when it comes to the Wal-mart factor... don't get me started... I don't shop there. And I live in small town America.

Posted by: tom p on January 10, 2008 at 8:51 PM | PERMALINK

what would really help american labor would be democratic presidents who appointed labor-friendly (or even labor-neutral) members to the national labor relations board instead of the bitterly anti-union members of the past 28 years. get a grip kevin, the problem is too few and too weak unions, not the other way round.

Posted by: navarro on January 10, 2008 at 8:51 PM | PERMALINK

As long as unions are democratically run, I'm not sure how you could improve on them, in terms of what they are supposed to do, but you can certainly review the questionable legal and regulatory framework that has crippled unions.

That would seem like the most honest, sensible, and courageous thing to do, not try and imagine new institutional replacements for unions that will never happen (and doesn't really make sense because unions are democratically organized).

Posted by: Jimm on January 10, 2008 at 8:58 PM | PERMALINK

True, unions have run their course. Instead, I propose the following:

Since corporations have an enormous imbalance of power on their side, both in political strength and in negotiations with individual workers, an organization of workers should be formed, thus giving workers the power to collectively negotiate with employers.

These new organizations should have the power to negotiate such work-related matters as wages, health benefits, worker safety, hiring and firing procedures, among others.

To prevent employers from going around these organizations, it should be made illegal to intimidate or fire workers who belong to them. The federal government should take a strong role in protecting these rights. Possibly, every worker who works for the employer must belong to one of these organizations.

If negotiations over working conditions reach an impasse, a union might try some sort of collective action, such as refusing to report to work.

To further the cause of workers generally, these organizations might engage in political action, such as working on behalf of certain candidates or advocating for or against relevant legislation.

The only I can't think of is a name for these organizations. Does anyone have any ideas?

Posted by: Steve on January 10, 2008 at 9:04 PM | PERMALINK

tom p: this is NOT an illegal immigrant bash

I don't take it as one. Even if the immigrants were legal, it's pretty easy to figure out what happens if you flood a particular labor market.

Same thing happens with the H-1B visa program, which is a legal, if crooked, guest worker program that mostly affects programmers and engineers.

Some of the companies I compete with pay ... no overtime ... no SS, no taxes, no unemployment, no workmens comp ... We could start by enforcing the EXISTING laws.

Hear, hear! And while we're at it let's get rid of crooked programs like H-1B.

I have no idea how all this relates to manufacturing

A good fix there would be to do more about the trade deficit, and our tolerance of foreign subsidies and trade barriers.

Posted by: alex on January 10, 2008 at 9:12 PM | PERMALINK

Globalization and the import of low-cost workers have made labor a fungible commodity. This means that labor has been left with no negotiating power.

In those few situations where the labor needed has to be local, legal, and long term (police, teachers) unions are still doing OK. In the situations described above by albertchampion and tom p, businesses have alternatives -- and they use them.

So -- as others have said above, you cannot address this problem unless you address the issue of the international fungibility of labor.

Posted by: JS on January 10, 2008 at 9:29 PM | PERMALINK

Organized labor before the Supreme Court Trilogy cases provided some semblence of order and predicability in the large organized workplace. As such, there was something to sell or be useful to the enterprise. Subsequent to the Trilogy cases the unions stopped making decisions and grievances started to clog the relationship. The relationship was no longer beneficial to the enterprise.

The organized workplace has been superceded by the legalized workplace. If unions were given legislative authority to co-opt the legalized workplace, enterprises would see value in the relationship. For instance, disputes related to workplace harassment and discrimination, eligibility for legal mandates for family medical leave, workers compensation, unemployment compensation would be given over to the collective bargaining agreement. Prompt, decisive decision making through grievance procedure mechanisms only subject to oversight that basic due process and procedural standards are met would be something welcome by the enterprise.

Posted by: Samuel Walker on January 10, 2008 at 9:32 PM | PERMALINK

Kevin wants an alternative to unions. So here it is: workers' power, both in politics (a party that does more than mouth concern for the rights of working people, but actually delivers on those concerns, rather than tying itself in knots, for example, over the unfairness of taxing hedge fund managers' earnings as if they were earnings) and at work (worker control through their elected representatives, both on the shop floor and in the boardroom). This can come in all sorts of varieties: pale pink social democracy, reddish collective, or deep red statism.
We're a long way from any of those solutions comrades. But pardon me for my presumption in suggesting that Kevin will not embrace any of them because he thinks that they tilt the balance too far in favor of workers. He doesn't want to change the basic rules but just be nicer to workers--without unions--somehow--without actually giving them any more real power.

Posted by: Henry on January 10, 2008 at 9:35 PM | PERMALINK

American workers are in competition with world labor nowadays, so the notion that they can make more money through unions is sort of silly (in general).

You can slow down the trend to global wage equilibrium by ending immigration and illegal migration, but these are about the only easily controllable factors. There are other ways, but space does not permit....

Posted by: Luther on January 10, 2008 at 9:51 PM | PERMALINK

Hm. Fraternal orders. More than just hats and parades and charming third-gen white-ethnic drinking, they used to be the venue for a lot of working-class-oriented services: insurance (health, disability, life), job-worker matching, education both "uplifting" and vocational, mediation with political machines, etc., etc.

Posted by: Senescent on January 10, 2008 at 10:18 PM | PERMALINK

I guess there's something to be learned from the Grange and midwestern farm syndicalism, too, but I don't actually remember much about that in detail, so I'll just gesture in its general direction.

Posted by: Senescent on January 10, 2008 at 10:20 PM | PERMALINK

Unions have not run their course, and "you cannot address this problem unless you address the issue of the international fungibility of labor" (hat tip JS and others).

Posted by: Jimm on January 10, 2008 at 10:44 PM | PERMALINK

Gee kevin, you're right. What about democratically run organizations that workers were free to join which would allow them to bargain collectively with management? We could call these new instituions...Unions!

(which doesn't mean that i think that most large modern unions are problem free, but the problems aren't in their conception, so why are you looking for a conceptual solution?)

Even better, what about just one big union? You know, an international one?

Posted by: URK on January 10, 2008 at 11:54 PM | PERMALINK

Lately, I've been thinking about that whole concept of "return to the past" or "move forward." The article here seems to revolve around that either-or. Obviously, in the context of the coming elections, this type of question is recurring. It is one of those rhetorical niceties. Yet, it may also pose a superficial dichotomy. Sometimes when I think about how to restructure organizations or anything that I'd like to see changed, I find that the doo-loop can be cut through by turning first to what I would keep. What works (or worked)? Then, what needs to change--and to what degree. Why that works for me is that it allows for a check on a momentary frustration/anger/upset. Unless something never worked, usually building on the good components may be more promising than jettisoning everything and spending lots of time, energy, money to reinvent what we once had. Re: Unions--whether it be hours of work, decent wages, safe working conditions, once plentiful pension and health plans, unions demonstrably bettered the lives of millions of people in this country for much of the twentieth century. (Although my career was predominantly that of lawyer and manager, a number of the relatives who went before worked in the mines in Pennsylvania. I learned my respect and appreciation for the work of unions from them. Reading a bit about working conditions pre and post unions can also help in this regard.) Maybe there is a reason for those aphorisms "don't throw the baby out with the bathwater" and "don't burn down the barn to kill the rat???" Maybe the lessons of working men and women and American history can suggest to us how to evaluate what works and build on that? Oftentimes, as we move forward, we advance more fully and completely if we recoup the value of the past and carry it with us to shape the future.

Posted by: christinep on January 11, 2008 at 12:33 AM | PERMALINK

Even better, what about just one big union? You know, an international one?

Joe Hill would be proud of you, URK. Wobblies forever.

As for Kevin's question: Wouldn't the Magical Market Forces have already provided an answer. If it walks like a duck, if it swims like a duck, if it quacks like a duck... it might as well be a duck.

Posted by: natural cynic on January 11, 2008 at 3:24 AM | PERMALINK

If regular employees knew what peers were making, they could use that knowledge when negotiating their own salaries, much like CEO's do.

I'm sure knowing what other fry-cooks make would be a huge help in giving the fry cook at your local McDonalds the bargaining power to extract a living wage from that multi-billion dollar corporation. After all, McDonalds can hardly afford to lose a fry cook . . .

Posted by: rea on January 11, 2008 at 7:08 AM | PERMALINK

Many European countries legally require that corporate boards of directors contain labor representation.

As union representation has decreased in this country, so has the average worker's compensation.

Universal health care is good for workers and decreases costs for manufacturing.

NAFTA has enabled us to enjoy cheaper goods here, but it has disproportionately undercut our average worker's salary.

Publicly financed elections would diminish the excessive power that our (non-national) corporations now enjoy.

There are practical steps to ensure transparency and equal treatment that would eliminate many historical abuses by unions.

MSM will never report this.

Posted by: c-bo on January 11, 2008 at 9:00 AM | PERMALINK

Unions are obviously a mixed blessing

Have you or anyone you know ever worked in a non-union factory?

Didn't think so.

Posted by: Laney on January 11, 2008 at 9:15 AM | PERMALINK

Unions are obviously a mixed blessing ... What better institutions for workers might we construct?

—Kevin Drum

I think ultimately it will comedown to militias.

Posted by: Econobuzz on January 11, 2008 at 9:24 AM | PERMALINK

"Corporations have always maximized their control to maximize profits for management and shareholders." - mezon
Nah. They're organized for the mgmnt. The beginnings of a corporation, when it still has family ties and oversight, may have a conscience and a sense of responsibility to the stakeholders.
After the family is gone, the actions of the executive suite quickly degenerate to those of sharks and hyenas.
The inside word on T.J. Watson's grave is they've had to upgrade the bearings seven times so the coffin could spin fast enough. The current version has air bearings and a magnetic bearing-less suspension in a vacuum chamber is in the works.

Posted by: Stewart Dean on January 11, 2008 at 9:56 AM | PERMALINK

I second the idea mentioned upthread about looking to European examples of unions as something we might use as at least an inspiration for union-like structures in the US.

It makes no sense to re-invent the wheel, though it makes perfect sense to customize it to particular circumstances. Maybe in the US we need, say, snow tires.

But I think that the examples we want to copy are likely to be found in countries that have done a much better job than we have in controlling the sort of problems we see in the US economy -- worker instability and disempowerment being prominent among them.

Posted by: frankly0 on January 11, 2008 at 10:22 AM | PERMALINK

Forgive me if I don't give a flying fuck what a conservative, corporate Democrat thinks about Unions.

Hell, I bet Kevin Drum would still defend NAFTA if it came up.

Posted by: Soullite on January 11, 2008 at 10:45 AM | PERMALINK

tom p, interesting - looks like the rates for non-union carpenters and computer programmers are now much the same. This is Ricardo's interpretation of the Iron Law of Wages in action - wages can be higher than subsistence only if the supply of labor is not infinite and not mobile. Given current globalization and immigration policies, all wages tend to subsistence.

By way of substantiation, check out http://www.odesk.com
which supplies 'contract' programmers.
Note the 'average' rate shown for programmers shows actual cost, which includes $3-4/hour payment to odesk.
Real average rates for programmers are about $10/hour, too.

Alternative to unions ? How about professional associations for all ? The lawyers and doctors have done a good job of protecting their interests. Of course this is just another name for unions, but perhaps it would be more palatable to our corporate rulers.

Posted by: Doug K on January 11, 2008 at 10:51 AM | PERMALINK

A friend of mine was a negotiator between unions and companies. He really isn't a fan of either side. He would often point out that Japan had a pretty good thing going between workers and the employers. The Japanese have a different mindset on workers and companies. Instead of Them versus Us (the management versus the workers), it is just Us. The funny thing is the US actually helped Japan establish this way and it fit well into their way of group thinking. Today American workers are actually more over-worked than their Japanese counterparts. In fact the Japanese have more holiday and vacation time and actually treat their workers better. American workers have the least amount of vacation/holidays and work the most amount of hours compared to all the other industrialized nations.

Posted by: aka on January 11, 2008 at 10:57 AM | PERMALINK

As an impotent member of the Democratic Party, I think my political and economic impotence would only be enhanced by membership in a union. Like my political party leadership, the union leadership will do what is in their best interests and not what I think are in the best interests of the union and its members. Becoming subservient to an institution is not in the best interest of most individuals, whether that institution is a union, political party or religion.

How to regulate and counter power, especially economic power, in our society is an important issue. I do not think the workers, and their unions, have enough economic clout to successfully counter the huge accumulations of wealth that the corporations have. We need a new political economy that does not value capital more than humans, but unions have already proven they cannot move the country in that direction.

Posted by: Brojo on January 11, 2008 at 11:41 AM | PERMALINK

maximize profits for management and shareholders

One thing my political party could do to reign in the power of corporations is to change the laws of incorporation. A huge misconception of public corporations is that they send profits to shareholders. They do not. Most profits are kept by management, who have gamed the incorporation regime to keep control of a majority of stock in order to control the profits for themselves and not the other shareholders. Most shareholders only return on their investment comes from selling those shares at a price higher than they bought them, not from dividends. This gaming of the incorporation by management gives the corporation too much power, which it uses to not only to screw its shareholders, but also its employees.

I propose changing how net profits are distributed in corporations. In the heyday of Reaganism, one prominent propaganda theme was that corporations' primary goal was to enhance the wealth of its shareholders. This was a blatant lie used to gather even more power to management, since very little profits are ever returned to shareholders as dividends.

One way to reduce the econmic power of corporate management would be to require at least 50% of net profits be distributed as dividends. (That is a compromise of my original idea to distribute 100% of the profits as dividends.) Some pundits might argue this will reduce market capitalization, but the hardly regulated power of this market capitalization is in the hands of corporate management. This is the power that needs to be reduced, and the only way to do it is reduce the amount of capital, which is not actually theirs, that corporate managers are able to utilize in their quest for ecomomic and political domination.

Posted by: Brojo on January 11, 2008 at 12:09 PM | PERMALINK

Incomprehensible jibber-jabber. Sorry about your ED, though.

Posted by: Patty on January 11, 2008 at 12:11 PM | PERMALINK
What better institutions for workers might we construct?

Firms that are democratically-governed labor cooperatives on something like the Mondragon model. They, of course, exist in the US now, but more could be done in terms of tax incentives, government contract preference (of the type women-owned, minority-owned, veteran-owned, disabled-person-owned, etc., businesses receive), etc. could be done to foster their development.


Posted by: cmdicely on January 11, 2008 at 12:25 PM | PERMALINK

The problem is, individual shareholders have minimal or no power over the senior management of any corporation that is not considered small. So in practice, large corporation is run for the benefit of the board. With the exception of customers, the only thing the board is really affected by is wall street and the press.

Customers generally care only about stability of product offering and cheaper prices, and wall street only cares about how the company is perceived by shareholders in order to drive up the shareprice. Neither of these really drive long term growth. Only large pension funds look for that, and they're still partially driven by the share price.

What is needed is the acceptance that the company should really run for the benefit of the workers and the customers. The workers (including the board) are, after all, fully committed. There needs to be a balancing of what is good for the customer versus what is good for the employees, rather than squeezing the workers and the customers for the good of the board (it's not like the squeeze is for additional dividend for the "shareholders").

How to achieve this is giving the employees, as a whole, a way to influence the strategic goals set by the board, for the executive officers.

Posted by: royalblue_tom on January 11, 2008 at 12:30 PM | PERMALINK

In terms of alternate institutions to consider, I'd nominate the Danish 'Flexicurity' model:

http://en.wikipedia.org/wiki/Flexicurity

The idea is to combine a highly-flexible labor market combined with a robust safety net.

IMHO, the best way to even out the employer-employee power balance is a solid safety net, a low unemployment rate, and a flexible labor market such that a worker who leaves a company (or is let go) will have a high probability of finding a new job quickly and won't starve in the interim.

Posted by: Slocum on January 11, 2008 at 1:03 PM | PERMALINK

I think that Unions are one means to an end, which is to grant employees some power over corporate decision making. Another path would be to provide employees with voting influence over management equal to shareholder voting power. Esentially, this would democratize the workplace.

The government (we the people) can adjust corporate charter could put the profit motive in better perspective against environmental and working conditions concerns.

Posted by: Mozilo on January 11, 2008 at 1:22 PM | PERMALINK

Patty is a cult.

Posted by: Hostile on January 11, 2008 at 2:08 PM | PERMALINK

all of us need to stop looking at leaders for salvation and make our own contribution to individual revolution

Somebody's drank the kool-aid.

Posted by: Vicente Fox on January 11, 2008 at 3:19 PM | PERMALINK

albertchampion,

it is my guess that when the athletes show up for the olympics they will all want to wear mask/filters - and that will not be allowed.

That is what I thought, too, but I have come to believe that instead there will be an enforced "holiday" on the use of cars, manufacturing plants, and coal burning electric plants. This has been done, at least for a few days, when important political meetings take place.

Posted by: Tripp on January 11, 2008 at 3:25 PM | PERMALINK

Workers could buy or start their own companies, then they can give themselves whatever benefits they want. Of course, nothing actually prevents this today.

To give a concrete example, Walmart has a market cap of $191 billion and 1.9 million full time employees. To buy the company 100% outright at today's price would come to $100 K/employee. To buy a controlling share would be half that.

As for American unionization, get used to the fact that the union movement is a dying entity. Unions will virtually disappear in every segment of the economy except for government employment.

Posted by: Yancey Ward on January 11, 2008 at 4:40 PM | PERMALINK
Workers could buy or start their own companies, then they can give themselves whatever benefits they want. Of course, nothing actually prevents this today.

Well, except that the people that control the capital that enables anyone, worker or not, to buy a business or expand one aren't too keen on that idea. (And, of course, structural preferences for other forms of business also are an impediment.)

This doesn't actually "stop" it in the sense of making it impossible (and, in fact, there are worker-coops in the US now), but it does create substantial barriers.

To give a concrete example, Walmart has a market cap of $191 billion and 1.9 million full time employees. To buy the company 100% outright at today's price would come to $100 K/employee. To buy a controlling share would be half that.

This is presuming that the narrow group of people who already hold a controlling share of Wal*Mart would be willing to sell it at current market prices. Which seems rather unlikely. You can't just buy a controlling share of even a publicly traded company the same way you buy a handful of shares.


(Not to mention the presumption that it would be possible for the average Wal*Mart employee to pull $100,000 out of the air.)

Posted by: cmdicely on January 11, 2008 at 5:20 PM | PERMALINK

What proportion of "Union pay is strangling us!" is actually spiraling-out-of-control-healthcare-costs?

Is it REALLY the Unions that are killing American business?

I mean, they don't even want to hire legal citizens anymore - so do you really believe the BS that Unions are the problem?

Posted by: osama_been_forgotten on January 11, 2008 at 7:54 PM | PERMALINK

Well, obviously we need onions.

Sort of like unions, but without the "u."

And THAT makes all of the difference.

Posted by: Cal Gal on January 11, 2008 at 10:33 PM | PERMALINK
Unions are obviously a mixed blessing

Um...WTF? No, seriously, WTF?

Unions are a "mixed blessing" insofar as they've been hammered on for almost 30 years straight now, and thus are a "liability" the way any target of the Right Wing Noise Machine is a "liability." As for the rest -- the rest being, you know, 40 hour work weeks, the health coverage we do have, retirement benefits, safety regulations, etc. et. al. -- can pretty much be traced back to unions fighting for them. The erosion of one set can, likewise, be traced to the erosion of the other.

This is not exactly rocket science, as many previous commenters have noted.

Posted by: Roland X on January 12, 2008 at 1:15 AM | PERMALINK

What better institutions for workers might we construct?

Soviets?

Posted by: bobbyp on January 12, 2008 at 10:31 AM | PERMALINK

Our political economy has been set up to value capital and to belittle the value of labor. Goods and capital can cross borders freely and people cannot. Corporate charters are regulated so that investors' return on investment is maximized. Labor regulation is considered interference in the contracts between individuals. It does not have to be that way, and the political economy can be changed to provide a better deal for individuals and greater regulation of the collectivization of capital. That the collectivization of capital is considered a market force and the collectivization of labor is not, demonstrates how the debate in our society has been controlled by one side of the debate over the other.

Posted by: Brojo on January 12, 2008 at 12:58 PM | PERMALINK

ON LONG ISLAND they are biased towards the claimant, and you will never see any claimant happy at the hearing office, everyone is getting shafted. They evern go as far to pay witnese(es)to testify to what they want to hear, and provide videos with people that look just like you, but aren't. Isn't that some ^*$#.

Posted by: James on July 13, 2009 at 1:09 PM | PERMALINK
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