Matthew Yglesias » Business Leaders Concern Troll About Outsourcing

Dec 31st, 2008 at 3:11 pm

Business Leaders Concern Troll About Outsourcing

Gary Shapiro, President and CEO of the Consumer Electronics Association, warns that card-check legislation and increased unionization could “force jobs overseas.” Elsewhere in the piece he extols the virtues of lowering trade barriers and shares other pearls of wisdom he gleaned while “driving from New Delhi to Agra.” It is, of course, hard to take this concern trolling about jobs shifting overseas all that seriously when one assumes the point of his “recent delegation of world technology leaders to India” was precisely to explore opportunities for shifting jobs overseas.

But credibility aside these concerns are hard to square with the data. Consider this page where you’ll learn that union density is 80 percent in Denmark, 74 percent in Finland, 46 percent in Luxembourg, 35 percent in Ireland, and 25 percent in Switzerland compared to just 12 percent in the United States. These are all very small countries that depend much more highly on foreign trade than does the United States. And yet despite their much larger proportion of union members, none of these countries have seen their employment all drift overseas.

Countries don’t become prosperous by having extremely low wages. Countries have low wages because they’re poor. Countries prosper by having reasonable quality infrastructure and a reasonably healthy and well-educated population. Unions can neither magically create wealth out of thin air, but neither can they magically destroy wealth. What they can do is influence at the margin the way wealth is distributed — a bit more to the workforce and somewhat less to the managers and the shareholders. That’s why people who represent the interests of managers and shareholders don’t like them. It’s a perfectly understandable sentiment, but not one that the broader public should find persuasive.

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42

Filed under: Economy, Unions,

42 Responses to “Business Leaders Concern Troll About Outsourcing”

El Cid Says:
December 31st, 2008 at 3:14 pm
Unions can also alter the direction of national political trends, such that the overall distribution of wealth and resources may be altered more toward, say, the general population than a tiny wealthy elite. That’s another reason why the business class has been on an absolute counter-attack against them and the entire New Deal since the late 1960s and early 1970s.
Jasper Says:
December 31st, 2008 at 3:18 pm
It believe it was Kaus the other day who apparently had a lot of progressives nodding in agreement with his contention that America’s own brand of organized labor outcomes (inflexible work rules) creates lots of undesirable outcomes for the general economy not seen (or at least not seen to the same degree) in high prosperity but heavily unionized northern Europe. I’m all for high wages — and I’m all for unions if that’s what it takes to get them. I’m not so big on adversarial work environments.
shah8 Says:
December 31st, 2008 at 3:20 pm
Well, the union story is important, but what is also critically important were land reforms.

Countries that have had serious land reforms (and tax land) have unions. Countries that have not had serious land reforms tends to have politics so illiberal that (public policy-setting)unions aren’t possible.
Jasper Says:
December 31st, 2008 at 3:21 pm
Unions can also alter the direction of national political trends…

If only that were still the case here in the US. If we simply had a set of national rules insuring everybody (not just union members) a minimum living standard and degree of economic security, we’d, er… we’d be a lot more like northern Europe.
Davis X. Machina Says:
December 31st, 2008 at 3:23 pm
I’m not so big on adversarial work environments.

Everyone who’s not self-employed has an adversarial work environment.

It’s how it’s managed that matters.
Stephen Myles St. George Says:
December 31st, 2008 at 3:31 pm
It is a bit of a misleading comparison, really, because nobody else in the world has 22 pounds of paper in work rules like UAW does.

I am all for higher wages too, but this rigidly defined, command economy-style system of work rules has to be scrapped in its ignominious entirety.
pseudonymous in nc Says:
December 31st, 2008 at 3:39 pm
The Delhi-Agra thing is just a weird Globollocks nonsequitur. What’s his point? Allow card-check and you’ll all be living in straw and dung huts? “The Taj Mahal wasn’t built with union masons, so there?”

One thing he would have seen on the road was a fuck-load of these cars, made by Indians in India. Oh, and they have a union.
tWB Says:
December 31st, 2008 at 3:45 pm
In times of economic crisis, it can be easy to forget how good we have it in this country. We have a working infrastructure and reliable electricity. Our plumbing works and we enjoy clean water. Even our poorest neighbors do not face the fear of starvation or seeing their sick children waste away without proper medical care.

Oddly enough, electricity, plumbing and medical care are all examples of high union/licensure occupations. So what exactly is his point?
Adirondacker Says:
December 31st, 2008 at 3:48 pm
El Cid Said:
..another reason why the business class has been on an absolute counter-attack against them and the entire New Deal since the late 1960s and early 1970s….

The business class has been on the counter attack against the New Deal since 1933….
El Cid Says:
December 31st, 2008 at 4:01 pm
Adirondacker: I won’t really get into it, but many researchers point out the uneasy compromise that was made by much of the business and upper class around the New Deal, and even with labor, for various purposes included the enormous vulnerability from the Great Depression.

Here’s an example of such a type of argument by one of those researchers, sociologist G. William Domhoff:

In particular, the Voting Rights Act of 1965 set in motion a train of events that led to the abandonment of the Democratic Party by the Southern rich because they could no longer use the party to keep African Americans powerless. They then carried a majority of white Southerners into the Republican Party on the basis of appeals to racial resentments, religious fundamentalism, super-patriotism, and social issues like gun control.

The liberal-labor coalition in the North simultaneously fractured, due to white resistance to the integration of neighborhoods, schools, and unions. The two political parties became increasingly different nationwide along liberal-conservative lines, with many white workers now on the conservative side.

The nationwide white turn to the Republicans made it possible for Mills’s sophisticated conservatives to turn right on policy in the 1970s once the inner cities were calm again and the power elite was faced with new economic problems due to spiking oil prices and inflation, along with the challenges to their markets by the German and Japanese corporations they had decided to nurture after World War II in order to create a global capitalism.

We know in detail about this decision to turn right because the issues were debated in think tanks like The Brookings Institution and policy-discussion forums like the Committee for Economic Development, where the majority said no to permanent wage and price controls, increased planning, and related liberal Keynesian policies.

Instead, they advocated monetary policies that would cure inflation through throwing people out of work, cutbacks in the welfare state, deregulation of key business sectors, and continuing attacks on unions.

The newly formed Business Roundtable, which gradually emerged as part of the anti-union offensive of the 1960s, took charge of the right turn. This, of course, brings us to the present moment, an almost unbroken march to the right on economic issues, along with an increasing concentration of the wealth and income distributions.

Not to mention that a great deal of the New Deal programs and advisory committees came out of upper- and business-class supported policy groups (’think tanks’).
Noah Says:
December 31st, 2008 at 4:05 pm
Yeah, I’m with Al. Of course unions can create or destroy wealth. Governments can. Businesses can. Why not unions? Anything that increases or decreases productivity destroys wealth.

Where does Matt get this conviction that unions only redistribute but can’t create or destroy? It seems very obviously wrong.
AB Says:
December 31st, 2008 at 4:10 pm
Unions can neither magically create wealth out of thin air, but neither can they magically destroy wealth.

Anyone who would make such a ridiculous and inaccurate statement really is not qualified to even have this discussion. That is one of the silliest things I’ve ever heard in defense of unions.
DJ Says:
December 31st, 2008 at 4:11 pm
We had a junior engineer sent out to our manufacturing plant to few months ago to try and debug a problem with one of our units. After some cursory debug, he started to open the case up so he could attach some debug equipment but was told he had to wait for a trained technician due to union rules. He’d preformed that task dozens of times at our design facility and tried explaining that to no avail. He basically had to stand around for half an hour.

There are a lot of different points that can be made here but one is we’ve got a smart largely apolitical guy who now has a pretty active dislike of unions.

Oh and another vote for Al’s point… of course they can create/destroy wealth.
El Cid Says:
December 31st, 2008 at 4:14 pm
In fairness, MattY did say “magically”, and all of you are giving specifically non-magic examples of how unions could or could not create wealth. In order to disprove Matt, you must show that unions can not only create or destroy wealth, but can do so “magically”.
El Cid Says:
December 31st, 2008 at 4:17 pm
A small business owner I know used to always reel off all the typical sorts of cute anecdotes on how he came to hate unions, until this year, when watching Wall Street and the financial system blow itself up and take our economy with it, and he declared he wouldn’t bitch about unions again.
David Says:
December 31st, 2008 at 4:37 pm
I heard about this story on the radio this morning. I am sympathetic to the desire to shift the balance of profits to workers, but this sort of behavior is no different that a monopolistic companies pushing around their customers. And it’s the sort of thing that gives non-union people (i.e. most people in the US) negative impressions of unions.
wiley Says:
December 31st, 2008 at 4:49 pm
I’ve heard plenty of working people complain about unions, saying that they’d love to be building cars for nine dollars an hour. Next time I hear it I’ll ask them what they think they’d get paid for their current job if auto workers got nine dollars an hour.
gregor Says:
December 31st, 2008 at 5:36 pm
Actually most of the people he saw working during his New-Delhi-Agra trip are NOT unionized, and even for those who are, there is very little in the employer-union agreement on many of the things that are paramount here: work safety, over time etc.

So the case can easily be made by the unions here that if you want to live like the people in a shit-hole like Uttar Pradesh, India, by all means oppose labor unions to the hilt.
Brian Says:
December 31st, 2008 at 5:48 pm
The ability to pay lower wages in another country is what creates the outsourcing. The ability not to have to pay for health care. The ability to create a hazardous work environment because of a lack of work place protections. The ability to poison the people in the areas surrounding areas because of a lack of developed environmental regulation.

Outsourcing will generally happen regardless of whether or not a union is involved.
Brian Says:
December 31st, 2008 at 5:51 pm
Self correction: Outsourcing will occur regardless of whether or not card check passes.
SPURIOUS Says:
December 31st, 2008 at 5:57 pm
if you want to live like the people in a shit-hole like Uttar Pradesh, India

Well, the other side of the coin is West Bengal (”Waste Bengal”), where the unions are fairly strong, and the population fairly literate, but the business environment is so hostile that no industry can take root there.
David Says:
December 31st, 2008 at 6:20 pm
I’d like to see some framework where we can get the benefits of unionization (more equitable distribution of profits between workers and upper management) without the really unproductive aspects (cataloged above). Perhaps making within company union formation very easy but making across industry union formation illegal?
jack lecou Says:
December 31st, 2008 at 7:01 pm
Is Matthew drunk already? Of course unions can create or destroy wealth. Unions affect productivity, and productivity affects how much wealth is created.

While this is technically possible, AFAIK there’s no strong evidence that unions do in fact systematically raise or lower productivity much. Their primary effect is redistributive.

Of course, a particularly good union can still increase productivity, and a bad one can lower it. (Just as good or bad management can.) The effect isn’t very large though, or at least at present, it all seems to more or less cancel out.
jack lecou Says:
December 31st, 2008 at 7:07 pm
I should add that, if anything, the effect of unions on productivity seems to lean to the opposite of what people here seem to be assuming – unions seem to increase productivity. Slightly.

This shouldn’t really be so surprising. Contra stereotypes, the goal of most unions isn’t actually to protect lazy workers. It’s to raise wages, get better health care, get better, safer working conditions. All of which tend to help workers work better…
David Says:
December 31st, 2008 at 7:26 pm
unions seem to increase productivity. Slightly.

I’d be interested to see the support for this. I wouldn’t be surprised if union workers are more productive that non-union workers. But my guess is that the majority of the productivity loss due to unions impacts people outside the union (and even outside the corporation they work for). Making a particular type of labor more scarce or more expensive due to unionization should draw better and more qualified people. But it also makes that type of labor more scarce and more expensive for everyone else. That is the unproductive part.
Stephen Myles St. George Says:
December 31st, 2008 at 7:34 pm
The assumption is that the “redistribution” happens upon the same cash: it does not. Shareholder equity is “redistributed” to increased wages for workers, and as equity is Investment (and potentially industrial and commercial capital) whereas wages will results in (and this is empirically proven) Consumption with a tiny bit of Savings, which eventually translates into Investments.

So, cash gets converted from Investment to Consumption. That is not good in the long run.
jack lecou Says:
December 31st, 2008 at 8:53 pm
I’d be interested to see the support for this. I wouldn’t be surprised if union workers are more productive that non-union workers. But my guess is that the majority of the productivity loss due to unions impacts people outside the union (and even outside the corporation they work for). Making a particular type of labor more scarce or more expensive due to unionization should draw better and more qualified people. But it also makes that type of labor more scarce and more expensive for everyone else. That is the unproductive part.

I believe most studies on this are probably about the productivity of union workers vs. non-union workers. Which has all the problems you’d expect.

However, I’m not sure that unionization in a workplace or industry can really negatively affect the rest of the economy.

I mean, suppose that unionization does increase productivity by, say, about 5%. Now employers may still oppose it, because it would decrease profit by 10%. But, ceteris paribus that’s a social gain – the 5% increase in productivity is new, but the 10% is just a transfer from employers to workers.

Obviously this type of unionization isn’t restricting the supply of a particular type of union. We’re not talking a labor syndicate or a guild or something, the employer determines the number of employees they need, they just have to pay them more.

And as for some kind of talent drain from the rest of the economy toward the new high paid jobs… Well, I’d have to think about that more, but my feeling is that if this is a significant effect, the result would probably be simply be to force OTHER employers to increase wages in order to maintain their workforce. That may have a multiplier effect on the productivity gain, as it echoes through the economy. Or if it results in some losses, I’d expect them to be slightly smaller than the gains from the initial union.

Then of course there’s the fact that you only get a decrease in productivity if the worker who transfers from one industry to another would be more productively employed in the first. But I think it’s equally likely that she would be more productively employed in the second – although the monopsonistic non-union wages were previously holding her back.

Also, this all obviously supposing that only a small portion of the workforce is unionized. If a substantial percentage of the economy is unionized, wages would simply be that much higher across the board, and there wouldn’t necessarily be any talent flow.
Reality Man Says:
December 31st, 2008 at 9:05 pm
Firing workers is notoriously hard in legal factories in India. Firing workers who don’t work in India has at times required court cases that take nearly a decade to complete. This op-ed is just argued in bad faith.
David Says:
December 31st, 2008 at 9:16 pm
I’m not concerned with the marginal effects of reallocating workers between industries. Nor do I think workers getting a bigger slice of the total wage pie is bad or unproductive. But I am concerned with the restrictions on labor supply imposed by unions and think this causes significant productivity loss. Because unions frequently force a monopoly on the service they perform, we have a skilled engineer sitting around waiting for a union tech to do something he could easily do himself (above) or skilled construction workers waiting days for the longshoreman’s union to let them unload steel sitting in a port (my link above). These things are incredibly unproductive and frustrating and no different than a monopolistic firm.

This is why I’d like to see a unionization model that can get labor a relatively larger share of wages without giving them monopolistic power. Perhaps if employees of firms were independently unionized they could force higher wages but without collusion across an industry they couldn’t gouge everyone. Just a thought.
speaking of monopolistic Says:
January 1st, 2009 at 9:18 am
I assume David is also opposed to state bars and medical boards on the same grounds
David Says:
January 1st, 2009 at 12:50 pm
Credentialed professionals compete in a labor market shaped significantly by government. There are productivity losses here as well, but the scarcity power is given by government in exchange for a degree of control over the industry (and ostensibly approved by citizens). It’s more akin to firms competing in a heavily regulated industry than a monopoly.

Not that I wouldn’t like to see some changes, but it isn’t the same thing.
foo Says:
January 1st, 2009 at 9:27 pm
Interesting. Every post against outsourcing was
gleefully written on an entirely outsourced computer, on a
taiwanese motherboard, using chinese/malay made
pentiums (since all pentiums etc., are made abroad),
using a korean or japanese LCD or CRT monitor (all of
them are) and japanese CD-ROM drive or even a DVD
drive.

Like most traitors, you gleefully support outsourcing
by buying hi-tech outsourced products yet complain
about others getting a good deal when overpriced
low/unskilled IT jobs are outsourced (you don’t even
have to have a degree to be an excellent computer
programmer, some of the world’s best have no formal
training in computer “science” at all, and even 8 year
old (literally) can get MCSE certified).
Stephen Myles St. George Says:
January 2nd, 2009 at 1:48 am
No worries. Card check probably won’t happen anyways. Well, unless the Democrats want to hand the Republicans a big easy majority in Congress for 2010.

I can just imagine the demagogic potential now. “Remember Detroit 3, prostrate, begging Congress for bailouts? The Democrats, in bed with Big Labour, want to make America suffer the same. With card check, unions will be foisted upon your workplace, without with the most fundamental of your democratic rights, the right to a secret vote. Without your choice and your say. Support card check if you want Big Labour running your life.”

Just imagine the demagogic potential. Frankly, I cannot believe that the Democrats are so dumb as to lock themselves in this corner in the first place. The Republicans could potentially just call their bluff and force the Dems into a humiliating climb-down.
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Matt Yglesias

Business Leaders Concern Troll About Outsourcing

42 Responses to “Business Leaders Concern Troll About Outsourcing”

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