Chapel Hill Supports Collective Bargaining for Public Employees

Great news! Excellent work, council members Strom and Greene, and also kudos to the International Worker Justice Campaign. Next up--how about the Town of Chapel Hill declares that, in contrast to the current US legal system, it does not recognize corporations as 'persons'. Much like this vote, it wouldn't actually change the law, but it ups the ante, in a way more powerful than grumbling in a graduate seminar or on a blog. Let's do it.

Two more ideas for stimulating resolutions:

Chapel Hill considers health care to be a human right, and believes the state of North Carolina should take steps to guarantee that all residents needs in this regard are met.

Chapel Hill does not regard the occupation of Iraq by US troops to be legitimate, and calls for ending the use of North Carolina National Guard troops for this purpose.

Vermont towns are passing resolutions like the second one, with a powerful effect on the national debate.

As an economics student I feel the need to speak up about this issue. While I freely admit that I have no love for labor unions, most people do not understand the economic impacts of collective bargaining and other aspects of unionization. Some food for thought:

Collective bargaining usually leads to higher wages. HOWEVER, this is due to employees being able to get higher-than-market-value wages for their work. In the private sector, this would cut into profits, and layoffs would ensue, leaving fewer, but better paid workers. In the public sector, one needs to remember that these are public funds -- they come from the taxpayer. Given all the deficits our government accrues now, perhaps paying more (to workers) for the *exact same service* is not a good idea.

This is all not to say that poor insurance or working conditions or pay are to be desired, but simply that to artificially place a burden on the system creates what is known as a "deadweight loss" in economics -- when the monetary value of gains to society are outweighed by the monetary value of the cost.

Whether or not the social cost is worth it is a political decision, not an economic one, but the general disruptions caused by collective bargaining inefficiencies are important to consider.

Well Chris, that's one perspective.

Personally, I think peple are worth more than the lowest common denominator. Just because the "free market" will bear treating workers like crap doesn't mean it's the best thing for the community or for the economy.

Chris, I find your economic explanation of dead weight loss to be flawless. Unfortunately, if you want to consider those effects, why don't you count the societal costs, and just as importantly, the fiscal costs of having people uninsured in the first place?

We are a humane society, and we don't turn away people who are ailing as they enter the emergency room if they don't have insurance.

Therefore, hospitals spend a lot of money treating the uninsured, and those costs are usually passed on to the taxpayer via government support payments or in the form of higher fees for those who DO pay for medical services via premiums, co-payments, etc.

Now consider the costs of preventing something like diabetes versus the cost of treating it. Anyone with health insurance is more likely to receive preventative care, and thus avoid later, more costly treatments.

Are we really saving money if we take away collective bargaining and thereby, lower salaries to market rate and probably eliminate insurance for many employees?

To see this in greater relief, visit a small town where Wal-Mart has pretty much gutted the local retail economy. Count the number of people who had health insurance in the area before and after Wal-Mart arrived, and then count the cost of human services expenditures in these areas before and after. (On another point, count the number of police calls before and after Wal-mart)

Deadweight loss is most easily counted in they way you describe it, but it exists elsewhere, too.

Chris,

Collective bargaining entails more than just salaries. The two groups in this town that have been most vocal about job conditions haven't complained about salaries. Their complaints are lack of opportunity for promotion (racism), use of dangerous chemicals, lack of respect from their supervisors. Collective bargaining rights will give people who have no status a collective power that they will never attain as individuals.

In financial terms, removing barriers to collective bargaining, may improve working conditions through reduced turnover, lowered accidents/illness rates, etc. and thus provide a total cost savings to employers.

You might also want to remember that unions have frequently accepted pay cuts in order to preserve the health of the companies they work for (airline employees most recently). Organizational psychology studies have shown that respect and feelings of affiliation are much stronger measures of job satisfaction than income.

The market? The market cannot provide a just wage. The market holds no concept of justice. The market cannot provide healthcare for all who need it. The market holds no concept of health.

"Collective bargaining inefficiencies"? The market cannot efficiently meet the needs of workers. It can only efficiently meet the needs of capital.

Disruptions? Collective bargaining may disrupt profit-maximization (and rest assured, the state of North Carolina is a major engine of profit-maximization). The market will disrupt workers' lives, their communities, their health, and their biosphere. Collective bargaining gives workers a fighting chance.

Terri- racism and unessecarily dangerous working conditions are illegal, and should be addressed through the court system. I will grant you the point about lack of respect, though, but when it comes down to it, these are already good jobs, or at least better than the alternatives. Otherwise people simply wouldn't take them.

Dan- At the risk of sounding cold-blooded, the market exists in order to give consumers (in this case the government is the consumer of services) the most volume of a required quality at the cheapest cost. Economic study is not about job creation at its roots. That will naturally follow economic growth.

It really does come down to whether or not *you* as a taxpayer want to pay more for *the same* services. Correct me if I'm wrong, but Chapel Hill is already looking down the barrels of a 20% tax increase, no?

We do live in a democracy, though, and if Chapel Hill values equality over efficiency, I'm not about to argue with them. I grew up out in the county and am a student on campus and do not pay Chapel Hill taxes. I just thought that people should take a step back and consider what they're advocating. Helping people is fine, just be aware that I can promise you that there will be more money collected in taxes than the monetary value of any benefits gained by the workers. That's where the deadweight loss comes in. If I could post graphs you'd see that due to the nature of government any kind of market intervention results in some resources just disappearing.

Anyways, I think I've let this run long enough. Feel free to post again. I'm happy to address individual points, though arguments about social justice do not concern me personally. That's a judgement call and it's unlikely that I'll change my mind in this particular instance.

Chris--I too was an economics major and like you fell for the graphs/charts kind of technical logic many economists adhere to. The problem is that graphs and charts, along with the type of 2 dimensional theory they represent, don't capture the complexity of the workplace OR the marketplace. Social justice entails costs and benefits that are not adequately represented by the theories I learned in economics. Charts are useful as a starting point, but they are not sufficient.

If you want to look at this from a purely monetary perspective, I suggest you look at the costs we, as a society or Town, pay for individuals who are unhappy in their jobs. The turnover costs alone should convince anyone with an open mind that it pays to keep employees happy. There's also a greater cost associated with missed work when people are unhappy. The medical costs for the underinsured, for people who are working in unsafe conditions (the complaint of the UNC housekeepers), with poorly maintained equipment, etc. all mount up.

If your economics courses/faculty are not covering this type of analysis, you should complain.

Chris,

As a fellow student of economics, I appreciate your attempts to try to introduce some basic economic principals to this discussion. Sadly, I think your arguments will fall on deaf ears. "Social justice" seems to be the "cure-all" answer at this site.

The societal costs of unhappy employees is just another example of social justice trumping economic reason. If an employee is unhappy pushing a broom, certainly he would be happy if he was being paid $50,000 a year? But if everyone is overpaid for their job with no corresponding increase in output, you have more dollars floating around chasing the same amount of goods and services. Over time, the benefit seen by the broom pushing employee will evaporate as he sees that he is paying more for everything he purchases.

As for unions, I don't think they provide any benefit to the workers they represent, to the industries the workers are employed in or for the consumer. For the employee, the union creates a barrier to entry ("you mean if i want to be a plumber, i gotta join a union?"). Industry is forced by the union to over-pay for the labor it employs. That cost is then passed on to consumers in the form of higher prices. So while the member of the union may enjoy higher wages in the short term, those benefits are lost over time as prices rise and employers look for lower cost solutions. I'm sure that unionized employees of the steel and auto industry thought they were sitting pretty in the 70's when they were making $25/hour for low skilled jobs. I wonder how many members of the now-decimated American steel and auto industries would now have traded those inflated wages in exchange for continued employment?

Chris, as a side note: two books I would highly recommend for any enthusiast of economics are "Free to Choose" by Milton Freidman and "The Road to Serfdom" by FA Hayek. These two books, written 30 years ago and 60 years ago respectively, are so accurate in their predictions of the future that you would think the authors had access to a time machine. But they really didn't need a time machine, they simply followed basic economic principles to their logical outcome...