Tuesday, February 22, 2011

There is no profit in government

By Littlefish

I used to argue against unions. I used to consider all unions to be little more than criminal organizations, not because of their actual criminal pasts, but because of the very nature of their stated mission, to extort and coerce. But as I grow older and wiser, I realize there is a time and a place for a union. But what I think a strong and successful union would look like would be more like a PTA than a billion dollar political action committee.

If there is some profitable company, and it is run by a successful but shrewd individual, or board, or whatever the case may be, and the employees are unhappy with their conditions, what would be a natural and beneficial process to correct any perceived injustice? The boss is shrewd, doesn’t really feel like spreading some new windfall around the shop, and of course, we all have the right to be shrewd, everyone has the right to act toward their own goals: just as a boss can be shrewd, so can an employee have demands. Of course, anybody who has managed or owned a business of employees will know that employees always have demands: time off, special shifts, or some other variance in your necessarily planned program that was never agreed to up front, but often comes up none the less during the course of business, and you reasonably try to accommodate even though it is an added labor and expense, which of course isn’t always taken into consideration by the employee when it comes time to talk about an improvement of their conditions in some way, but that is what makes managers managers and employees employees, the ability to see a bigger picture. But I digress.

An employee in a situation in which they have somehow improved profitability of the company through improving productivity would have every right to ask for a larger share of the take. Any one can ask for any thing right? A boss would then weigh the cost/benefit of improving the condition or finding a substitution for the employee. And again, anyone who has managed a company will note, if you have a stellar staff, you don’t consider letting them go lightly. If the cost of replacing the quality of the staff outweighed the cost of the improved condition, then the improvement would likely be granted. Too often of course, employees assume that they ‘deserve’ a raise for many reasons, sometimes just because a period of time has passed. There are several reasons a company may become more profitable without increased worker productivity. Better brand acceptance might be the cause. That doesn’t mean that everyone on production deserves a raise, but the department that elevated the brand image might find themselves in a position of being able to demand better conditions.

A natural balance is constantly at work between the conditions under which a person is willing to work, and the conditions an employer is willing to provide to maintain a workforce at a level of quality required to perform the business at hand. Demand for labor is the major factor deciding which side has the upper hand. The more specialized the skill set, the higher the demand for that labor. The higher value of that skill is represented in a higher salary in many cases, but other ‘conditions’ are included in any salary or benefit negotiation so I will stick with ‘conditions’ as the goal.

A person who works for themselves sets their conditions themselves. What will they get out of bed for? What will they fly out of town for? What will they do every day and what for? The negotiation is made between the person and themselves, they then work under those guidelines as they interact with potential counter parties to achieve or acquire whatever business it is that two parties in any situation may aspire to conduct. The agreed outcome represents the value of the transaction to both parties.

If one of those people were so successful that they needed help doing their business at another level, they would then undertake a second negotiation with other people, to acquire their skills to fulfill the processes of said business. To do this they will need to offer conditions that will attract the needed skills, but still leave room for the vast array of other expenses required to maintain the operation, and also, God willing, provide a little scratch off the top in a strong quarter.

If that new person, the new employee, decides that the boss is taking a little too much scratch off the top, and they have a skill set that is in demand, they can demand more money, or threaten to leave. If there is a large group of employees and they all have a skill set that is in demand, and they collectively decide they want to approach the boss and demand better conditions or threaten to leave, the boss would be posed with an even greater problem. Replacing an entire workforce, or a department, could come with severe expense and delay, possibly a reduction in quality of product and a diminished brand. If the employee’s demands were reasonable, they would likely have to be acceptable. But the boss will know where that line is, and a reasonable group of employees would also know where that line was. No reasonable employee would ask for more than the business could support. Killing the goose isn’t the goal, just getting bigger eggs. That’s why unions should be a common and effective tool for solving short term grievances and maintaining a check on unscrupulous managers in profit driven organizations.

The organized unions of today, with their multi million dollar budgets, and their millions in campaign contributions, and their career union bosses earning many times what their constituents earn and pay in from their paychecks; these are not beneficial to employee interests, not beneficial to employer interests, and not beneficial to the interests of society at large. There is no need for permanent standing unions of paid lobbyists. When there are situations where employees are deserving of a larger share and better conditions, and their labor is in such demand that their demands for improvement are outweighed by the cost of their replacement, those employees would likely take it upon themselves to meet on facebook, over coffee, or in the parking lot, appoint a representative or two, and take their statement to management, prepared to prove their point. That is a useful union.

Employees of companies not only have a right, but a responsibility to stand up for them selves and demand their worth. The economy needs each input to be working and earning at the highest potential, therefore, putting out labor for less then the highest market price is an inefficiency in the system, just as paying someone more than their labor is worth is an inefficiency in the system. Therefore, it is imperative that employees unionize for temporary battles against aloof management until a certain wrong is righted. But after that, the union really has no reason to exist. Unions are only needed when a disparity between the success of the company and the input of the laborers grows beyond the point at which both parties will perform as agreed. If there is no greater profit, there is nothing to ask for. Short term, temporary unions, to fight the good fight against unruly profiteers, to help keep the market honest and competitive, those are unions I could get behind. I believe unions have their place, and when properly applied, a collective voice is an important check on potential greed in our system.

But what about when the operation in question hasn’t experienced any increase in profit? In fact, what if the operation in question never shows a profit? What if profit is not the motive of the operation at all? What if the business at hand is the governance of a population? I’ll agree that a group of employees has the right to re-negotiate with an employer if they feel profit has been made on their backs, but if there is no profit, what exactly is the justification behind demanding improved conditions?

Organized labor is a problem. If anything, they give a bad name to what a true union should be. But even in the private sector, an organized, standing union, is under the gun of competition. Their bargaining power is largely limited by the actual profits in the industries they participate in. State worker’s unions, however, are different. They hold complete monopoly over employment in local and regional governments. Their negotiations are not limited by the profit of the industry they participate in, negotiating with a public employee union is simply an exercise in how much money they can extort from constituents to then coerce government managers through continued political and financial support to continually give-in to their demands of every increasing shares of the pie. The irony? A concept designed to help the working person, unions, suddenly becomes a leach on the working population at large. Working people all over the state pay in, so that a select anointed few can receive benefits and conditions that very few, if any, in the private sector receive for similar work in similar conditions. The union leadership skims a share, and a slice is served in the halls of government to harangue a larger share in the next negotiation cycle. Corruption at its most sublime.

Unions are a check against profiteers, but there are no profits in government, therefore there should be no unionization of government workers. Public servants in all positions should be compensated according to what the next best person would do the job for. And changes in that compensation can only come from one place. If wages in the private sector rose, so then would government income, from increased use of services and increased consumption. Those increased private sector wages would entice public sector employees to leave for private sector work. The government would need to maintain a workforce to perform its basic tasks, so with the increased revenue from a more robust private economy, they could afford to compete with the private sector and maintain a workforce at market rates. If wages begin to slide in the private sector, then the wages of public servants could and should come down. That’s all. Wages should not go up just because. Government operates on a budget, not on cash flow, so only a cost savings in one area of government can afford an increased expenditure in another area, there is no profit margin to share in.

When it comes to government workers, there is no negotiation to be had. There is no greedy boss taking an unfair share, the boss is the people. The cost of running the government should only be as high as absolutely necessary for the safety and sanitation of the population. There is nothing a union can do. There is no money to negotiate for. Any increase in government worker’s salaries that a union might be able to negotiate, comes directly from the taxes paid by those workers, along with the rest of the population. The only winners in that senseless arrangement are the union bosses that, of course, take their salary from the margin. Where are the unions to protect us from unscrupulous union bosses?

Every so often, an industry outlives its usefulness; buggy whips, pay phones. It is time for public employee’s unions to stand up for the working man by walking away and shutting down. Combating the corrupting incentives created by public employee unions is in the best interest of every citizen, even those who belong to unions.


  1. recall scott walker

  2. Your argument is flawed on two levels: the first is your claim that there is no profit in public sector work. The country as a whole profits immensely from public education. Without it we'd be a third-world country where there are a few wealthy people and everyone else is dirt poor because they lack the tools they need (education) to make a decent living.
    The second flaw in your argument is that lack of profit is sufficient to deny workers the right to organize. People should be able to organize for whatever cause they wish. No one would ever even consider denying organizations like the Tea Party or NRA the right to raise funds and support specific candidates. Why should public sector employees be any different?
    Regarding your statement that unions should exist only for as long as they're needed, unions are like standing armies: they act as a deterrent. It's one thing to face an opponent who is prepared to act vs. one that would need time and resources to prepare. Interestingly enough, at least some of the people who played major roles in shaping this country, e.g. Thomas Jefferson, opposed standing armies. This is a fact that conservatives either do not appear to know or dismiss for whatever reason, as evidenced by their quasi-worship of anything military. I agree that unions, like standing armies, can be misused, but I don't agree that this is necessarily enough cause to get rid of them altogether.
    I get the sense that you look down on public education. I noticed in your bio information that you mention that you attended Oxford University. If you mean the one in England, I would point out that it is a public institution, so by disparaging public education, you're actually disparaging your own.
    Finally, I would say that paying public teachers less and less money will cause some (most likely the most talented) to leave the public sector and find a more profitable career. This results in the quality of teachers degrading over time. Perhaps the reason public education is not performing as well as we might wish is not because anything done by government is inherently incompetent, but because teachers get paid so little that the good ones quit and the bad ones do just enough to not get fired.
    To any conservative that claims that anything the government does is incompetent, I would point out to them that the "government" includes the military, so by trashing anything government-related, you're also trashing the military. They are all public sector employees.
    All that being said, do I think things are wonderful as they are? No, of course not. I just don't agree with the premises behind the proposed remedies.

  3. I am a member of a public sector union, and unions don't work in the public sector. Both sides of the bargaining table, the pols (and the directors/managers are pols, too) and the unions, benefit - the folks paying the bills aren't there. This is huge - HUGE - and even FDR recognized it. Government grows, because the managers want to feel important. During bad times, I have seen perfectly worthless people with seniority get shuffled into spots they do poorly, good people get let go, needed functions aren't done while stuff that isn't worth a taxpayer's going without are paid for. Unions for government workers are wrong.

  4. Teachers, police, firefighters, and government maintenance employees (janitors, plumbers, electricians, etc) are different from administrative employees, in that they perform jobs that are identical to those in profit-making organizations. They have the same need for collective bargaining on wages, benefits, and work conditions. The problem is that when they negotiate with politicians, there is conflict of interest. What we really need is some sort of arbitration by disinterested third parties to ensure that the union doesn't "roll" a pliant politician or get "rolled" by people like Gov Walker. Honest negotiation, not confrontation or capitulation, is what's needed.

  5. The first anon. commenter that wants Governor Walker recalled isn't all that bright. The people elected Walker because they realize they can no longer afford massive debt by gov't spending. As Ronald Reagan said, "We don't have a trillion dollar deficit because we under tax, we have a trillion dollar deficit because we over spend."

    The second anon. commenter has no comprehension of how and why unions began. Unions were created (for the most part) in the 19th century due to the poor working conditions of the employees working for the "robber barons." I don't like that term because they were neither barons nor were they robbers. But I will use the colloquialism. Workers were being injured and discarded. They unionized to protect themselves.

    So, exactly who are the robber barons to the public employee unions? Yes, the taxpayers. It's always nice to know what the public unions think about you.

    The country may "profit" from public education but because of public unions and the DOE, our national test scores put us in the bottom of developed nations consistently. We could get better education by having freedom of choice in the schools. The right to choose, if you will. In the Netherlands, they were always 20th in the world or lower in academic standings. They changed to a system where the money follows the student; that is, a voucher system. They are now consistently in the top 10 and usually in the top 5. So your comment that the country profits from public education is misguided. It can be done much better and cheaper while achieving higher scores by using a voucher system.

    Teachers are not "paid so little." A study was done that matched the salaries of teachers against other professions. The problem is that while other jobs work 12 months, teacher work about 9.5 months. So the only effective match was by hourly wages. Teachers were better paid than most other professions. And one of the teachers in Wisconsin said she got paid $62,000 per year and that doesn't include about 30% for benefits. She makes about $85,000 per year for 9.5 months of work. Nice if you can get it.

    Yes the military is part of the gov't. But why do liberals go berserk when the military is found to buy $500 hammers or $2000 coffee makers, but they think any condemnation of social security or welfare is unfounded, even though they are rife with fraud? Sorry. All gov't spending is bad. Because it takes away from real jobs and capital investment. However, the trick is to ensure limited gov't. I have no problems with a criminal justice system, fire protection, and public works being solely gov't employees. But unions should be out of the question. Remember, gov't functions are monopolies. If the police go on strike, I have no were else to go for police protection. If a union supermarket goes on strike, I just go to the non-union supermarket. That is why all public employee unions should be disbanded.

    Now, if the public employees want to organize into friendly societies, I have no problem with that. They can pay money toward better health care, retirement, etc. But no unionization, no collective bargining, no striking. If they don't like it, get a job in a private sector union. Like a plumber, who can sometimes be up to his knees in human waste, crawling under houses, or working in the cold when pipes burst. Yeah, I'd like to see a teacher become a plumber.

  6. I have not read more than the first four paragraphs of your comment. What stopped me, and kept stopping me as I tried to read on, is "disagreement in number" (a grammatical flaw), which begins at paragraph five. That is, a person doesn't work for themselves. People might work for themselves (where both the noun and the pronoun are plural). I realize this is a picky thing to pick on in a context of big ideas, but if an idea is worth writing about, then that piece of writing is probably worth a little rechecking from a grammatical standpoint. Flaws do stop many a reader, form an impression, begin to raise doubts in the reader's mind, entirely apart from the subject matter you are attempting to address. Having gotten that off my chest, I may go back and try to read again, starting at paragraph five.

  7. Having read the rest of your posting and the comments that followed, I agree with your reasoning in the main.

    I think it's a shame that people tend to identify one another in terms of "you liberals think thus-and-so" versus "you conservatives think otherwise," as though everyone comes to every issue pre-programmed not to think at all, but only to adopt a "party line." Fortunately, most Americans are independent -- or at least say they are. Maybe we have all been brain-washed, and polarized, to some extent.

    The only constructive suggestion I have to make comes from personal experience with family members who worked in local city government, where city workers were lowest paid in a town long-dominated by private-sector unions. I believe it would be possible and desirable for public-sector bureaucracies to embed a group or committee that represents other public employees with grievance as to salary or benefits, just as there are mechanisms in place to handle other employment problems (e.g., sexual harassment). Rather than union bosses who skim off dues after making political contributions, etc., salaried public employees can well represent others in annual budgeting exercises, researching cost-of-living data, presenting info about comparable performance in private sector, meritorious performance within various departments, etc. I think public employees should feel there is an ombudsman to turn to who does the job of trying to look out for their interests -- for all I know, there is such a designated person or department in some cities where unions haven't performed such function.

  8. Posted: SeattleBruce--

    Thanks for the article and good discussion. Obviously unions have some part to play in the excesses of government that are squarely facing all of us on the debt cliff we're falling off of currently. But let's not forget a major part of the concerns about why we're in this debt based money box belongs squarely with the Federal Reserve Bank, which, from the passage of the flawed and unConstitutional Federal Reserve Act of 1913 has put the monetary system of the United States of America into the hands of a small number of powerful private banks. Neither the US Constitution nor our founding fathers in their writings intended this - and this is causing huge problems for all of us. Look what Thomas Jefferson said about this very topic:
    “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

    - Thomas Jefferson – attributed

  9. Interesting opinions. In my view, unions have just adapted to the same the patterns set by corporations. Why do we allow corporations to contribute millions to political campaigns? Is the government here to serve corporations, or the people? Is it not logical that unions would have to grow to a size comparable to that of the corporate employers in order to be effective when they negotiate? I take issue with the idea that there is no profit in government. A well run government is not simply a cost. A well run government provides an ecosystem in which to do business efficiently and it educates its population so that its citizens are equipped to attract employers and hold the jobs that will exist in the future. The "profits" of good government are shared by all its citizens. Visit a country where government is disinvolved, inneffective, corrupt, or nonexistent, and you can see that everyone profits when "things are working". Unions are no panacea either. Whether the government does work on behalf of the people for itself, or hires the work out to private firms and contractors, someone still has to do the work. Those people aren't going to settle for working conditions that are less attractive than those provided by other jobs. Making government jobs unappealing will simply result in only the least qualified people working in these positions. Soon when you go to a government office, you'll feel like you're living in a third world country where it takes a year to start a business, you can't get public information unless you know someone, bribes and kickbacks are the norm rather than the exception, and kids will be taught by unqualified dolts. The unions serve a purpose. The budget shortfalls in states all across the U.S. are not the fault of government employees or their unions. These budget problems are the result of long-term mismanagement and overspending by past and current state and federal administrations. Placing the blame on teachers unions and the like is a specious argument that distracts from harder choices about what services and programs the government can realistically provide.


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