Saturday, June 13, 2009

Employment Law For Fair Wages

Argument to replace traditional unionism with a better function:

By Andrew D Atkin

What I am effectively proposing is the replacement of the function (idealised) of unions by the national government. I assert that if this is done right, then it should be a winner in terms of both economic development and wage-protection for the most exploitable workers:

I find the claim of the right of workers to form a union abstract, as I believe that a union has no more right to form than an employer has the right to demand no union presence as a prior condition to employment. A far more substantial right, I believe, is simply the right of workers to win a fair wage and reasonable working conditions.

If the latter can be agreed upon, then I think it can be seen as a contradiction to uphold workers "rights" to form a union (at the expense of the economy), when at the same time we accept letting people do often unpleasant yet important jobs for a very low minimum wage. This is why I believe we would be much better off (and more "righteous") to empower employers to demand no union presence as a prior condition to employment, and instead progressively boost minimum wages (economic development permitting) on a flexible job-specific basis.

Eg: $13.00/hr minimum for work done between 8am-5pm Monday-Friday, and $16/hr for all work outside these hours. Higher minimums could be legislated for distinctly strenuous and unpleasant work, and lower minimums could be temporarily allowed in exchange for training (the latter would be much fairer than youth rates, and would provide more bargaining opportunity for adults who are finding it hard to get work). Legal minimums could also be temporarily dropped in response to significant short-term falls in international prices for given products, to protect industry and jobs from large but temporary market fluctuations. Higher minimums could be legislated for work that is very temporary or on-call.

At the end of the day, whatever extra monies a militant (or potentially) union forces from their employer it ultimately takes from everybody else, and there is nothing particularly "right" about that. Where unions are successful in forcing their employers to meet higher wage demands, the difference will in time come back to the consumer, and that also means consumers earning often much less than the profiting unionised workforce.

My personal conclusion is that unions should not be seen as a right, but as a means to a right. In turn, they should be judged directly in terms of their functionality.

Unions appear to me to be the wrong tool for a fairness-objective job. They achieve unbalanced results (giving us over-paid 'winners' at the ultimate expense of comparatively under-paid 'losers'), and disincentive capital investment that could have otherwise led to more substantial wage growth. By my reasoning, getting rid of unionism in New Zealand (as we know it) would help significantly to reduce the cost of consumer goods for everyone, and also help to give us the productivity growth that supports higher minimum wages and other more essential objectives.

You could argue that what I am ultimately proposing is simply the nationalisation of unionism. There should be a single governing organisation, directly answerable to the government, that has the sole responsibility of providing effective protection for all workers. Workers should not have to "go to war" with their employers to win a fair deal, and employers should not have to feel threatened by union monopolies prepared to abuse their power*. We can achieve much fairer and more effective social results with a singular regulatory body.

*I do not believe that unions should ever be in a position where they can put a gun to an employers head, so to speak, because a union monopoly must otherwise seriously erode an employers incentive to invest in efficiency gains (other than what is required to merely survive). To clarify; what is the point in an employer investing in more capital for greater returns if their potentially militant unionised workforce will almost certainly take the profit-difference for itself? Unions are no more inherently fair than employers - they will and do take more than their fair share when they can get away with it.

Note 1:

There is another complimentary system that needs to be applied here. We should have employee references for employers, to improve work-place transparency:

Once an employee leaves his work place he should have to fill out a confidential survey relating to his previous employer, where he ranks them on various measures. People could then view average rankings on given measures for any prospective employer on the Internet. If an employer has an excessively bad ranking, then his employees should be legally entitled to walk off the job and go onto a benefit without a stand-down. And likewise, beneficiaries should be entitled to refuse to work for someone with an excessively bad ranking. This would prove a powerful tool for optimising good working conditions, and in turn substitute the function of unions on this level.

The former system would also provide some natural protection against the threat of an employer providing an unfair reference for an ex-employee. A bad reference from an employer with a low ranking and/or high staff turn-over would be more defensible than a bad reference from a high-ranking employer.

Note 2:

Wages in a market-based economy have little to do with the inherent value of the work that people do. Wages are governed by supply to demand. In a market-based economy we do not pay people what they are worth as such, but only what we have to pay them to get what we want. This means that if there is an under-supply of cleaners, for example, then their wages will go up, and if there is an over-supply they will go down. The government controls wages by controlling worker-supply through subsidised training and immigration regulation.

I sometimes find it frustrating to hear people describe the 'productivity' of workers in relation to their earnings, because the idea that earnings are proportional to productivity is simply not true. Worse, it masks the issue for the need for fairer wage-regulation (when that need exists) by suggesting that easy-to-replace and therefore easily-to-exploit workers are not worth that much, and therefore should not be paid all that much.

To clarify the falsity of the former argument I will make an example. Say New Zealand invested in a great deal of advanced automation to support large production-volumes of manufactured goods, and therefore greatly increased its internationally tradable productivity per-capita. In this scenario you would still need an army of truck-drivers, cleaners, food-preparers, administrators, builders, plumbers and retailers etc, etc. And if you didn't have them your economy would collapse because in any circumstance these so-called low-skill jobs are still essential. So, to describe people who do arguably easier jobs of which do not require special training as 'not worth that much' is nothing more than a rationalisation to justify exploiting the exploitable, and as I believe I have shown that rationalisation is plainly wrong. Putting it metaphorically: just because the sail is easier to replace than the hull, that does not mean that the sail is less important - both components are essential to make the boat go.

Of course we need to ensure that there is greater reward for people who are prepared to do the extra training to fill highly skilled jobs, but this function must be kept in check. Wage ratios between highly skilled and unskilled labour should not be allowed to become unreasonably extreme, at least if we can do anything about it (impacts from the global economy can and in part do override national regulation).

Note 3:

Sometimes commercial interests lobby governments with the claim that they need more immigration because of a claimed shortage of low-paid workers. For example, a restaurant owner could claim that they can't get enough waitresses (at current wage-prices) and so the government should therefore import more of them. However, you could just as easily argue that the service industry is too large in proportion to the rest of the economy, too underpaid for the staff, and too cheap for the consumer. Whether or not there is a "shortage" in any given industry is, within reason, a subjective question - it's all about balance and perspective. Likewise it is the role of the government to make a decision as to whether an industry is too large and underpaid etc, and make immigration (supply) decisions from there.

My point is the government is not and realistically never can be an impartial observer to a market-based economy. The government controls wages and the structure of the economy through immigration, whether it wants to or not. It must therefore take responsibility for its position and in turn ask itself whether or not it is running a reasonably fair economy.

Note 4:

If the government disempowers employers to reject a union presence, then I believe the government should be fundamentally responsible for the performance and functionality of unions.

To make my point clearer, take the scenario of a union unjustly bankrupting their employer (due to either greed and/or ignorance) because their employer had no effective power to resist or dismiss their union. Should the government be responsible for this outcome? In principle the government should be I believe, because it is the government that removed the employers power to defend himself against union-monopoly abuse. It is simply not just to force someone into a situation where they have no choice but to receive injustice. Unionised workforces should not be able to abuse their power.

At the very least, I believe the government should analyse the function of unionism and consider how a fairer and more effective system/s can be developed - that is, if they agree with me that there are real problems with and inequalities created by traditional unionism. I think that to simply believe that workers have a right (apparent) to form a union is much too simplistic.

At the end of the day, there is nothing fair about a union winning an unfair (exaggerated) wage. This should be respected if nothing else.

Note 5:

Appreciating that the government controls wages by controlling worker supply, I believe we can model the ideal society as universal high-wage, high user-pays and low tax. The circuit between high-tax and beneficiary pay-outs can be dramatically minimised with proper and reasonable wage-corrections. This would naturally promote economic growth as incomes become more closely correlated to work-done, and higher wage costs incentivise employers to invest in structural efficiency improvements (again, so long as that incentive is not undermined by union monopolies). So, we would all get richer faster, and also have a reduction in government micro-management and associated regulatory expenses.

I believe the mistake of the traditional political-right (which has promoted higher user-pays and lower tax) has been their lack of appreciation for the need for fair and balanced wages - user-pays society must be complimented with effective fair-wage protection.

Note 6:

We can also appreciate that education in itself is not the answer to higher incomes. Low-wages are instituted via deliberate worker over-supplies, so the existence of these low-paid jobs has nothing to do with education as such. The thing is, the country will always need workers to do low-skilled jobs, so if low-skilled jobs are heavily under-paid then a low-paid class must always still exist. Again it's an issue of worker-supply - not education.

Indeed, I think a great deal of our education-investment has become nothing more than a system of barrier-to-access for certain jobs, which supports professionally-irrational wage-inflation for those certain jobs i.e. education can and does become its own justification by controlling worker-supply by restricting access to jobs, and therefore supporting wage-inflation's that justify (apparently) the original education-investment. How else do you explain the need (as an instituted prerequisite) to attend say 4 years of university to do an essentially systematic job that really only requires some on-the-job training?

This is why I believe that we have chronic waste and over-investment in formal education. Rather than creating some kind of social-equality (which it is often promoted as doing) it in part does the very opposite by creating a dead-weight tax on society and facilitating artificial income-disparities. The way to avoid this problem is to invest in education (relating to tertiary-education especially) only where it is truly needed, and that would mostly only be for the small number of highly technical and scientifically-orientated jobs.

Though our economies are becoming ever more complicated on the 'macro' scale, the individual jobs that we do are, if anything, getting ever more systematised and basic. I believe that the need for greater educational investment is a myth, naturally promoted by those who would gain from the myth. Relating to economic objectives I believe we need less formal education, not more.


  1. Andrew, interesting and sincere observations but one fundamental issue not addressed. The Labour Parties around the world are the political arms of the Union movement. When in Government they make laws to encourage and strengthen the Union movement, who in turn increase their membership and hence income streams. Larger incomes for the Unions mean more political funding, hence better able to influence the election outcome.

    Have a look at the incomes of just 3 unions; EPMU (Andrew Little, President of the Labour Party), Teachers Union (NZEI) and the PSA (Civil Servants who are unionised, even when their polictical arm is in government)
    On your comment about the cost burden of "unnecessary" education. Labour scrapped student loan interest, just to when their vote. The actual negative of the cost to the country is known but totally ignored. Maintaining power is more important than the larger common good.

  2. Thanks Watchdog,

    I appreciate your comments and I agree with them. You might like to also look at my related post "New Zealand Immigration".

    I would say that just about every establishment has the primary purpose of just keeping itself established, regardless of what moral high-ground it claims to represent. Personal interest pretty much rules the world, sadly or not.

    I'm ranting a bit but...I am a union delegate with the EPMU myself, and I already seem to be turning myself into what feels like a bit of an enemy, because, in short, I am doing my best to make sure that the EPMU does what's best for the workers, and not just what's best for themselves. Of course the EPMU ultimately has an agenda which is not exactly the same as the workers that they (supposedly) represent, so there probably has to be some level of conflict.

    In my view, unions have largely become an outdated [and pseudo] solution to the very real problem of excessive income disparities, and I think the unions are not in the business of bringing attention to the core problem because they are personally feeding off it.

    Think of a doctor who never wants people to stop getting sick - same thing.

  3. The problem as I see it is that prices are set by market demand, apart from any other consideration. And as long as your competition is willing to cheat labor, you will have to cheat it. A truly moral system would demand proper pay and work conditions, restrict competition, and limit profits and limit how much any organization can own or control.

    And who is going to do the controlling? The people? No way. They are not bright enough, being students of government schooling. Once someone has control, they will corrupt it. Ultimately, we would have to reform human nature and from what I hear, Hell has not frozen over yet so we can rule that out.

    How to fix things means assuming it can be fixed. Is it possible it can not be fixed with a moral and far more powerful force than what is present on earth right now and outside of human control and nature.

    This is the big problem I have with the Janov Solution. His solution is drop everything and come to California, get a job, make money so you can afford therapy that will likely take 3-5 years if not more, and you may not be able to even get down to your birth experience. Really, it is not much of a solution at all. Very impractical and not very likely. Its great if you can do it but most can’t. So the Janov solution is no solution at all.

    It does well at explaining human nature but not enough to solve it. Way more publicity, money, therapists, etc, is needed. And the powers that be do not want it. Are these obstacles too many? I think they may be.

    It would take an all powerful god to fix it or otherwise, I would have to conclude that it is not fixable or possible. The obstacles are far too overwhelming for we with too little power. This is what Janov has failed to address or admit to. And no matter what subject, it does come back to these impossible odds.