5 Comments

Baude and Volokh are seriously all wet. First of all, they elide the form/substance issue. That there may be a way to directly fund unions doesn’t mean that the fact that the union members’ salaries (i.e., their property) is freely grabbable.

The other problem is that Abood represents a bargain whereby the unions get the right to the payment stream in exchange for honoring the workers’ First Amendment rights in the future. That’s not how it is supposed to work.

And there is the issue of trust–given some of the tactics of unions in the past, can they be trusted to be even-handed when it comes to upholding those who only pay “fair share” fees?

And what do we do about union corruption? If the state is taking part of my salary to pay the unions, then any corruption on the part of the union is a Constitutional violation. Could unions handle serial civil rights claims? Could the government?

Re: Carlson and Sanders agree
The National Review piece by Ryan Bourne was an unpersuasive counterpoint. Just a few selections:

“An employer’s responsibility is to pay employees for the work they do,” He’s partly right. Walmart as a corporation has an even bigger duty to shareholders to pay only as much as necessary for a satisfactory level of service.
“Firms can’t underpay workers without losing the best to rivals.” In the Walmart environment that’s a low risk. (See generally: “Why g matters: The complexity of everyday life”)

” Means-tested programs . . . explicitly do not subsidize employers as Sanders and Carlson allege. . . . , means-tested federal welfare benefits are more like a ‘tax on employers.’ ”
His theory is that these programs drive wages up because employers have to out-bid the government for employees’ time. The evidence is against him. Means tested programs have been in place for decades, but:
“. . . today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have been have mostly flowed to the highest-paid tier of workers.” (Drew DeSilver, Pew Research)
It looks more like means-tested programs supplement wages. Corporations are either getting a huge subsidy, or the underlying economic model Bourne uses is wrong. Or both.

Bourne’s bit on the perceived comparative value of means-tested programs vis a vis the earned income tax credit is an amusing diversion. It seems like a distinction without much difference; and (See generally: “Why g matters: The complexity of everyday life”). Then he goes on to call the EITC an employer subsidy (Carlson and Sanders main point) and that cutting it would hurt the low-income workers who rely on it. Bit of a muddle really.

I’ll try to help:
“Empirical studies have concluded that, when we aggregate among all workers, the labor supply curve is upward sloping and fairly steep (that is, labor supply decisions are highly wage inelastic . . .). Stronger influences on labor supply come about with changes in population, labor force participation rates and immigration flows.” (Digital Economist)

This indicates that ‘Wages’ is a 4th rate analytical tool. People prefer to work if they can. (Contra to economists’ labor market equilibrium models that use work as an ‘undesirable good’. That’s an oxymoron at least, and possibly condescending.) Walmart and it’s ilk will hire almost anyone who can bag groceries. That is a societal good. The price? I don’t know. I’d rather see people at work.

Sanders and Carlson? Right now we sort of have a public-private co-operation that hires and serves millions of low-income people. I think Walmart manages it better than what those two are suggesting.

Ryan Bourne clearly doesn’t understand economics, or he is counting on most other people not understanding it enough to call him on propagating nonsense.

Are forms of welfare for the employed subsidies for the companies that employ them? Yes. Why? Marginal utility. By externally supplying monetary substitutes, it depresses the value of additional dollars for the employee. As a result, the sale price of labor will be depressed and the supply of labor increased over the income range the benefits cover, assuming no one leaves the market. This is even before taking into consideration threshold factors (making over a certain amount causing complete loss of benefits) which can cause labor price stickiness. His argument for wages being based on marginal revenue is only true if demand for labor is greater than or equal to supply at the marginal revenue price point. Marginal revenue is just the price ceiling of labor; the maximum price the employer should pay, not necessarily what the employer will always pay. This is 1st-year stuff, at least for someone that actually understood the material. A tough question is whether or not these subsidies cause enough people to fall out of the labor market (chasing substitute sustenance) to counteract the labor price suppression effect, (which is an elasticity question) but this isn’t even hinted at in his argument.

In fairness, this welfare isn’t just a subsidy for Wal-mart. It is a subsidy for any place the beneficiary purchases products & services from.

As the saying goes; ask three economists, get five answers.

So: some corporations don’t pay high enough wages, so that some of their employees need public subsidies. If they stopped the public subsidies, would these people now quit these jobs for ones that pay twice as much?

Bob