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.