Seems decent:
http://hanseconomics.com/published-pieces/
very.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
I agree with all of these points except one: his bit about unions. Unions do not necessarily inflate wages above what they should be on the market because in many instances, there isn't a compitive market for labor. The model that is used in this argument to describe the union effect on wages is the perfect competition model, which assumes there are many buyers of labor and many suppliers of labor (workers). It also assumes that these suppliers of labor (workers) are all exactly a like, offering the same product to the buyers of labor. It also assumes fluidity. If there is anything we know about the labor market, we know it is not fluid and not homogenous. Most people go to college for a specific career, and when you include previous experience, no two workers are alike.
Now you may be thinking, "well isn't this true for all markets? If you argument were true, we couldn't us eht eperfect competition structure for anything". To a certain extent this is true. However, there are many markets that are a lot closer to perfect competition and can be analyzed under this struxture, such as the market for blank CDs and DVDs. Pretty much all of these products are the same, and firms are price-takers, meaning that market pretty much decides the price and the price is the same throughout.
However, the market for labor is different, in that companies demand the product (labor), they don't supply it. Individuals supply labor. Because individuals are not homogeneous, and there are frictional reasons for unemployment, this market should be viewed foremost as a monopsony, or a single-buyer market. Companies do compete on wages to a certain extent, but there are far fewer buyers of labors than sellers. People are also less likely to shop around for the best wage. Let's face it, when you need a job and need to pay the bills, you don't have the time to apply everywhere and get the best wage possible. It simply isn't feasible for most people. Under the monopsony framework, one firm faces the entire supply curve and can demand a much lower price than what is market-optimal. For example, if you lived in a world where you were the only person that would buy ice-cream, and there were several ice-cream companies, you could bid the price of that ice cream down to the bare minimum. In fact, whoever you buy the ice cream from ultimately might even sell the product to you at a loss, earning from you less money than the cost of producing the ice cream. This is an extreme example, but relate workers, who supply labor, to the ice cream producers. They can really only apply to a few places before accepting a job, so while there isn't one pruchaser, there are relatively few. The purchasers of labor, or the companies that hire workers, can bid the price of labor down to the bare minimum, nearly to the cost of production. In this case the cost of the production of labor is essentially the money someone needs to survive and remain healthy enough to supply that labor.
Unions help this situation by allowing workers to form a unified force to contract for the market-appropriate wage. Now, unions are not perfect, but in general I believe they are economically better. I do not favor excessive regulation of companies in order to aid unions. My argument says that unions are an economic weapon. I believe that all companies should be able to unilaterally fire strikers if they are bargaining for too high a wage (this is currently the case). I would not favor union law that forces companies to keep their unionized workers that are on strike because such laws would indeed artificially increase the union wage.
All in all, I do not support most legal protection of unions that many modern-liberals do, but I do believe that they are fundamentally good for the economy.
I understand that perfect competition fails in many ways (the model, that is). You should bring up your concerns about the explanation with the authors of the page. They respond quite quickly.
And yes, I am not against voluntary unions. Just ones that have extra positive rights.
1. First of all, in which industry do you think there is a monopsony, or has ever been one? Every single one? Is is the rule rather than the exception?
2. Have you ever worked for a living? Did you only apply for a job at one place?
3. Why does reality contradict your strange thesis? How do you explain the rise in standards of living before there were unions? And for non union workers? Why do workers in silicon valley make so much money, and not survival wages? They are not unionized, and never were.
4. The theoretical flaw in your whole monopsony thesis is that you assume once a person has a job, he is chained to it for life. You think he never looks at want ads while during his lunch break, and you think other companies never look to raid the one that is underpaying. All those assumptions are absurd and only true in bizarro world, not planet Earth.
5. Unions are not a "unifying force". That is a gross misunderstanding of their essence. The whole point of a union is to keep non union members [=the vast majority of mankind] out of the factory, i.e. unemployed.
6. Once we accept that competition exists among employers, as explained in point 4, it follows that workers will wind up getting paid the max that the employer can profitably pay them. If a union manages to squeeze out more by violence and threats of violence, as is their wont, and as the law and the courts and the police currently allow them, then there can be only one possible outcome. The company will go bankrupt. And sure enough, every company that had a strong union went bankrupt. We need look no further than the 50 states for the latest in a long list of examples, who are all going bankrupt paying their union workers their inflated pensions.
1. I'm talking about the market for labor. I state this several times in my explanation. It particularly exists in the market for unskilled labor. There are a lot of examples of real-life monopsony, but in my explanation I used an extreme example. Of course the real market for labor is not that extreme, but it is much closer to this than it is to perfect competition.
2. I'm a full time student and work 31 hours per week to pay my way through college. When I'm on break from college, I generally work 45-50 hours per week.
3. There were always unions, so I'm not sure what specific time period you are talking about. I didn't say unions are solely responsible for increases in standard of living. There are many factors that influence this. Workers in silicon valley make a lot of money because they are highly specialized and experts in their field. You can't tell me every worker is an expert in their field.
4. I'm not at all assuming people are fixed in one job, but I am saying that there are frictional factors to unemployment and the job search. I'm sure some people do look at want ads during lunch. However, switching jobs is not the same as switching shampoos. Different jobs have different hours, they are located in different places and regions, they have different management schemes, they vary in how easy it is to establish a long term career or move up the job ladder, they are in different school districts. People can't just uproot their families, sell their houses, and move every time the prospect of a higher paying job appears. For unskilled labor it might be easy. Yes I can switch from the Wal-Mart in my town to the Target that is also in my town. What if your experience is in one industry and your career requires you stay in it? Silicon valley might have a pleathura of computer programming firms, but most markets are spread across the country. Companies rarely "raid" companies that are underpaying. It happens, but it is not common enough to merit the removal of unions.
5.I think YOU have a gross misunderstanding of unions. They don't want to keep non-union workers unemployed, they want to unionize them. THe point of unions is to form one body that can act together in order to gain leverage in reaching a collective bargaining agreement. This is a losing argument for you. Not only have a read over the NLRA several times in my studies of labor law, I have an expertise in this area. Its not really by choice I have this expertise, but it is there.
6. I would be interested in you showing me these laws that allow unions to use threats of violence and these specific court cases that have determined it is legal. NLRA Section 8(c) is pretty clear in not allowing unions to use threats of force or promises of benefit in unionization efforts. If you read news articles and watch televisised newscasts from sources that aren't owned by Rupert Murdoch, you would know our states are not going bankrupt solely because of public sector unions. States face more costs than labor, like bloated welfare programs that maybe would'n't exist if companies paid higher wages. Does it surprise you to know that the majority of public sector workers in NYC are homeless? Even managers have a hard time finding places to live because they are grossly underpaid. NYPD officers make almost nothing (in terms of the costs of living in NYC) and usually have to work a second and third job. Am I opposed to having to work two jobs? No. I work 3. My point is that although they are unionized by "evil" public sector unions, they still have to work upwards of 60 hours per week just to survive, and they have far more dangerous jobs than you and I. Also, I think it's a bit of a stretch to say "all" companies went out of business that had strong unions. Some unions forced companies out of business, but this taught other unions not to do this. You see, it's not in the union's interest to make unemployed all of their members by forcing companies out of business. In fact, many unions have to do something called "concessionary bargaining" meaning they give up wages to stay employed. You think unions don't have access to company data during negotiations?
Overall, your argument tells me your knowledge of unions and how they operate is limited to what political pundits tell you. It's not sensational to broadcast over the news when unions are successful. When unions aren't successful, you hear about it. If a union does force a company out of business, it is their own fault and they have to deal with the consequences. In my view, it's not very different from a company making a bad investment and being forced to lay off several workers in part of downsizing.
I in no way would like to suggest that workers have "rights", other than they have the right to negotiate fairly the terms of their employment. Workers do not "own" the company simply because they work there. I am not one of those people. I also admit that there is corruption in large unions, and while this is a problem, I would urge you to look at how much corruption there is in big business. You hear of that DAILY but unions are only mentioned once in awhile. Overall, smaller is better for both companies and unions, but, I digress.
I will debate you endlessly on this topic so I look forward to your response if you have one.
I had a long reply, truly. But bottom line, I suggest you do a google search here for unions, [ site:mises.org unions ], that the scales may fall from thine eyes.
I find it laughable that you think a google search can replace years of studying unions at an ivy-league institution. What a cop-out argument.
not the search itself, silly. reading the content that the search reveals.
did you study logic at your ivy league institution? because you have made errors of logic in your posts.
for one, in your first post you argue that a specialized field makes a worker less able to get a high wage. In your next post you say silicon valley workers get a high wage because they have a specialization.
good luck to you.
My conclusion is neither intellectual nor stimulating, but obvious.
I said silicon valley workers are highly paid because they are experts. Specialization is good in that specialized suppliers of labor can create higher demand for their services and higher wages, but also limits suppliers in their career options. Also, some firms do pay competitive wages and do not need to be unionized (see Delta Airlines' notorious union substitution strategy). However, unions are a useful economic tool elsewhere.
cornellguy64:Because individuals are not homogeneous, and there are frictional reasons for unemployment, this market should be viewed foremost as a monopsony, or a single-buyer market.
Who is the single buyer in this alleged monopsony?
cornellguy64:Companies do compete on wages to a certain extent, but there are far fewer buyers of labors than sellers.
I see. So you're implicitly using a different definition of "monopsony" from the traditional definition, which is "a market in which there is more than one seller and only one buyer". Instead you seem to be defining "monopsony" as "a market in which there are far fewer buyers than sellers". Where do you draw the line with respect to "far fewer" - that is, how do you quantify that?
cornellguy64:People are also less likely to shop around for the best wage.
Have you measured this likelihood? If so, what methodology did you use?
cornellguy64:Let's face it, when you need a job and need to pay the bills, you don't have the time to apply everywhere and get the best wage possible.
Are you saying here that, when one doesn't have a job but he does have bills, he literally has no choice whatosever but to find a job, any job, as soon as possible?
cornellguy64:Under the monopsony framework, one firm faces the entire supply curve and can demand a much lower price than what is market-optimal.
This embodies an equivocation. Multiple buyers in a market is not the same as only one buyer. Which definition of "monopsony" are you going to hold to?
cornellguy64:In this case the cost of the production of labor is essentially the money someone needs to survive and remain healthy enough to supply that labor.
This sounds decidedly Marxian - except that Marx called it "the cost of reproduction" instead.
However, it's certainly possible for a person to work and not get paid enough money from that job alone to survive and remain healthy enough to keep working. So I fail to see how the going wage rate for any kind of work has anything necessarily to do with "the cost of (re)production of labor".
cornellguy64:Unions help this situation by allowing workers to form a unified force to contract for the market-appropriate wage. Now, unions are not perfect, but in general I believe they are economically better. I do not favor excessive regulation of companies in order to aid unions. My argument says that unions are an economic weapon. I believe that all companies should be able to unilaterally fire strikers if they are bargaining for too high a wage (this is currently the case). I would not favor union law that forces companies to keep their unionized workers that are on strike because such laws would indeed artificially increase the union wage. All in all, I do not support most legal protection of unions that many modern-liberals do, but I do believe that they are fundamentally good for the economy.
Just so I'm clear - with that last sentence, you mean that you believe unions themselves are fundamentally good for the economy, not (most) legal protection of unions?
As a libertarian, I have no problem with people voluntarily forming workers' organizations such as unions. By the same token, I do have a problem with people trespassing. I also have a problem with people attacking others when those others are trying to go to work.
The keyboard is mightier than the gun.
Non parit potestas ipsius auctoritatem.
Voluntaryism Forum
claudius:My conclusion is neither intellectual nor stimulating, but obvious.
Humor me, then - consider me tragically blind to the obviousness of that "fact".
I completely agree with you here.
I had a long thing typed up but I tried to quote you and it deleted everything I said, but I just want to point you to my other posts. I don't mean to suggest the labor market is a monopsony outright, but it is closer to this than perfect competition. Perhaps a more correct term is oligopsony. I also don't mean to argue that every market for labor is oligopsony. There are competitive labor markets, but ther are also many markets that aren't competitive. For this we have unions. I would also argue that there are in fact time constraints to a job search, not all the time, but much of the time, that lead to this oligopsony, especially when workers are unemployed.
I have to concede my point surrounding the "cost of reproduction". The argument assumes that hours worked are fixed. However, people can work as many hours as it takes to pay for themselves. However, there is a point where hours worked can get so high where health deteriorates and continued labor is not possible, we simply haven't gotten that far and never will. So here, you are right.
Relevant: http://mises.org/daily/1604
This was another of Tom's greats. From just a week ago at the Mises Circle in Houston...
The one fallacy I disagree with is immigration contributing to unemployment. I think it depends on the region or country that the immigration is affected by. I also think that the immigration is a broad term that can be interpreted differently. On the one hand we have reasonable amounts of skilled immigration that would not necessarily increase unemployment for the domestic population. On the other hand we have mass immigration of low skilled individuals. This will obviously contribute to unemployment within certain low skilled sectors, for one immigrants generally bring with them a lower standard of living, thus why they are emigrating and this means that they would generally work for a lower wage and would get jobs before domestic workers. This can be seen in parts of the UK that has not see a net increase in employment due to increases in the division of labour as suggest by the article.
But the immigration topic is quite complicated and is made worse by incentives of the socialist system of free stuff for everyone. Take india for example with a population of 1 billion people. UK population density is already quite high with london being very high. If they opened the borders completely to indians and 10% emigrated to enjoy the socialist benefits of the UK, this would definitely cause an increase in unemployment for domestic workers. If not for direct reasons, indirect negative consequences on the economy would contribute to unemployment of domestic individuals.
Which might not be the case in countries like the USA which has a low population density and many more large cities.