The year 2012 was circled and penciled, for the Davis City Council, as the year to fix the looming fiscal crisis in the city of Davis. The process actually began back in June of 2011 when the council, facing down 150 city employees, made a 3-2 vote to reduce city employee compensation by $2.5 million.
That set up 2012 as the critical year, despite the fact that the new city manager, through reorganization and other cuts, managed to find $1.5 million of that $2.5 million in savings.
In June 2012, the outgoing city council voted unanimously to push through a budget that included $8 million in cuts, half of which were to be accomplished through attrition and reorganization and the other half were to be accomplished through savings gained through the new labor contracts, that would be agreed to after the previous contracts expired on June 30, 2012.
After months of stalled progress, last week three major bargaining units agreed to the concessions – that may have fallen short of the original savings goals, but moved the city considerably down the path toward sustainability in dealing with current employee compensation. This included dealing with PERS (Public Employees’ Retirement System), OPEB (Other Post-Employment Benefits), and cafeteria cash outs, and set up a two-tiered system that would enable the city to meet statewide reform goals on pensions, as well.
But we are far from “mission accomplished.” As we reported, there are two critical groups holding out, and the belief is that ultimately the city may need to go the impasse route on both fire and DCEA (Davis City Employees Association).
This really represents two different problems for the city. The showdown with the Davis Professional Firefighters has been brewing for some time. The Vanguard has utilized much space pointing out the amount of power that this group once possessed, the benefits and salary increases they received due to that power, and then in the last two election cycles, their loss of power.
Not only does fire face concessions similar to the other bargaining units, but at last week’s council meeting, the interim chief laid out a plan to reduce personnel on the fire engines, one of their key victories in the last 15 years. Davis is one of the few cities that remains with four on an engine, but that seems likely to change.
The bigger problem is not just a political problem, whereby the firefighters over a stretch of time endorsed seven of the last nine council members (and some like Stephen Souza, Don Saylor and Ruth Asmundson won more than one election) from 2002 until 2008 – only Sue Greenwald (2004 and 2008) and Lamar Heystek (2006) won without the backing of fire.
But in 2010 and 2012, no candidate accepted the firefighters’ endorsement, which has created an opening that has allowed both the kind of structural reform that the council majority opposed in 2009 and reform to fire staffing (that they also opposed consistently) to become a possibility.
As we laid out last Saturday, the situation with DCEA is quite different. The firefighters average $170,000 in total compensation and rank as the highest paid bargaining unit in the city. DCEA’s members average between $50,000 and $60,000 in salary, and rank as the lowest paid bargaining unit in the city.
As bargaining unit president Dave Owen told the Vanguard again on Saturday, the employees in DCEA would be disproportionately hit by some of the concessions – particularly the cafeteria cash out that pays employees up to $1500 per month in cash in lieu of health insurance. The city has been pressing all bargaining units to reduce that take-home amount to $500 – hoping to save money while still providing enough incentive to convince employees to cash out rather than take their full health insurance allotment.
In addition to the cost of the benefit, one of the biggest concerns is the unevenness of it. Some employees get the full cash out for $1500 to $1700 while others get no benefit at all. It depends largely on the status of the spouse and whether they work and have their own health plan.
By implementing the full savings for cafeteria cash out, the city manager back in June project a citywide savings of $1.7 million.
The Vanguard‘s analysis in June showed that, while the benefit itself is distributed unevenly, the burden of the reduction would be borne heavily by a select number of employees.
The Vanguard‘s analysis further demonstrated that those earning the maximum cash out account for just 13% of all city employees, yet would account for 32% of the city’s savings.
Overall, nearly 39% of the employees will have to give up between $1000 and $1200 a month. Those 147 employees will bear 82% of the burden for cost savings.
Going one step lower, 53% of the employees will have their benefits reduced by $500 or more, accounting for 96% of the city’s savings.
In other words, the city can save a substantial amount of money by capping the cafeteria cash out, but the impact of that savings is borne disproportionately by a small group of employees.
Dave Owen believes that his employees bear a disproportionate portion of this blow. He told the Vanguard that they would prefer a longer phase-in, taking a $100 reduction over a ten-year period. The other bargaining units have taken a three-year phase-in.
When we asked him about the fact that PASEA (Program, Administrative and Support Employees Association), also a bargaining unit near the bottom in salary, had taken the deal, he argued that PASEA is probably not as heavily impacted by the cash out as his bargaining group.
He is partly right here. Last June, the Vanguard figured out that 57 DCEA employees would face $1000 in monthly cuts as the result of the concession. But PASEA also had a sizable number, with 36 of their employees taking the cut.
Moreover, as we noted on Saturday, PASEA accepted the concession back in the last round of MOUs back in 2009-2010. DCEA held out, then had impasse imposed upon them, but last year had that impasse overturned.
The result was that the city was forced to pay back these cuts to employees. The city then laid off nine employees.
Mr. Owen believes that the layoff of those nine employees is their concession, and also noted that, as of yet, the employees have not received the compensation that they were supposed to get under the PERB ruling.
Nevertheless, the Vanguard argues that, while more than 250 of the city’s 375 employees have agreed to the 2012 round of concessions (that includes the slashing of cafeteria cash-out pay to $500 per months, cut backs to retiree medical coverage and taking up a larger percentage of PERS), DCEA employees are still working on their terms set back in 2005.
The bigger picture is that the city in the past offered wages and benefits that were not sustainable into the future.
It is critical that the city finish the reform process and agree to new contracts with fire and DCEA that are fair both to employees and also to the taxpayers of the city. If that does not happen through collective bargaining, the city has other options. Hopefully, they will not have to go there.
—David M. Greenwald reporting
[quote]as of yet, the employees have not received the compensation that they were supposed to get under the PERB ruling.[/quote]What’s up with that?
[quote]The bigger picture is that the city in the past offered wages and benefits that were not sustainable into the future.[/quote]Is this not also true of DJUSD, UC, and State workers?
[i]Is this not also true of DJUSD, UC, and State workers?”[/i]
I certainly believe so.
Frankly, I cannot find one example where any industry dominated by organized labor is in good fiscal shape. The historical arguments in support of unionized labor have long been made irrelevant as US labor laws have progressed to enable workers equal or greater rights and powers over employers.
Especially for the public-sector, unions have become a tyranny of the minority; where a relatively small group of people can legally extort and plunder greater and greater sums from the public treasury.
The cost of labor should be regulated by the free market. Compensation should ONLY be set based on the supply of worker knowledge, skills and capabilities relative to the demand. Competition for higher-paying positions is healthy for the industry or organization as a whole, because it tends to increase overall performance and results. Unionized labor tends to do exactly the opposite… lowering the performance bar, increasing the cost of labor, and dooming the host… or dooming those that fund the host.
More than 30 years ago, Virginia banned government sector unions from collective bargaining and entering into collectively bargained contracts. Virginia consistently sets year after year examples for having a budget surplus.
We need California state and local right to work laws. We need a statewide ban on collective bargaining. Until we get this we will be heading toward the local and state fiscal cliff. The CA and local public employee unions will not stop until the entire state and city resembles Hostess Corporation.
[i]”Frankly, I cannot find one example where any industry dominated by organized labor is in good fiscal shape.”[/i]
Most pro sports leagues are good examples. This is especially true in baseball. The union is very powerful, salaries and benefits are way, way up, and yet the teams are worth more (by a long way) than they ever were.
In related news … the rats are jumping ship ([url]http://lexicondaily.blogspot.com/2012/12/high-ranking-syrian-general-defects-in.html[/url]). … It looks to me like that craft will sink in 3-6 months. What follows, more chaos or a peaceful transition to some sort of representative government, depends a lot on what foreign countries do, particularly Iran.
[i]Most pro sports leagues are good examples.[/i]
I don’t think many of the small market franchise owners would agree with that. However, I do accept this as a reasonable point. You could also say that the movie industry controlled by the actors union is in reasonably good shape.
I wonder though, if we are just too early in the lifecycle of these industries. It seems that the professional sports business is pricing itself out of consumer reach. Also, it seems that the American entertainment industry is also losing a lot of Hollywood business to foreign countries where labor is cheaper. For example, I read that a lot of filming and production has moved to Canada. Even Dixon California will get a new studio… a place where the powerful Hollywood actors and screen workers unions will have less control.
Syria – the Arab Spring is turning into a big win for Muslim extremists in their misguided crusade to remedy their collective economic failures by comparison to the West. Except for their oil revenue which will dwindle with global conversion to natural gas and other greener and sustainable alternative energy, I see a future for these countries to look more and more like Palestine (inability to self-govern)… and this plus the loss of their major viable industry other than oil… tourism… will result in a future coordinated multi-state attack of Israel (because failed, weak leaders tend to blame others and Israel is the perpetual Arab equivalent of the Obama “Bush” scapegoat)… with support from Russia and China. And then there will be typical useless Europe and the Democrat-weakened US military left to figure out how to save the free world… again. But this time we won’t.
Syria is waaaaaay off topic.
RR: “Most pro sports leagues are good examples.”
JB: “I don’t think many of the small market franchise owners would agree with that.”
Actually, most would.
Forget about the NFL, where, due to revenue sharing and the salary cap, there is no such thing as a small market franchise. The Green Bay Packers have no more trouble paying their star players than do the New York Giants or Dallas Cowboys. But a sport like baseball is more favorable to the large market teams.
Consider, say, the Milwaukee Brewers or the Cincinnati Reds. They are both in smallish metropolitain areas with small radio and TV markets. And since most baseball revenues are derived by the local team, they are at a disadvantage in relation to the New York Yankees, the Boston Red Sox, the L.A. Dodgers, etc.
The Brewers were sold in 2005 for $223 million. In March 2012, Forbes listed them at a value of $448 million. The Reds were sold in 2006 for $270 million. In March 2012, Forbes listed them at a value of $424 million.
Big market baseball teams are all worth more than a billion dollars, today. The Dodgers, for example, were sold last year for $2.15 billion. Their previous owner had bought the L.A. franchise for $371 million in 2004.
[i]”I wonder though, if we are just too early in the lifecycle of these industries.”[/i]
The unions have been in business for about 40 years now. The franchise values have only gone up and up since they became unionized. I don’t think the unions increased the incentives for searching out new revenues. However, the fact that owners of these teams, and their league’s commissioners have done that–some of it due to screwing over taxpayers to build their new stadiums–has greatly increased the marginal value of the players in these unions.
[i]”It seems that the professional sports business is pricing itself out of consumer reach.”[/i]
That is illogical and incorrect.
The pro sports franchises price their tickets and other merchandise at a profit-maximizing level, same as any other industry which has a trademarked product.
What is very different from say 50 or 75 years ago, especially in baseball, is that the product they are selling at their stadiums is no longer designed to please the middle-income consumer. It is a high-end product in a high-end facility. It is the difference between old Candlestick Park, which is a piece of pooo, and AT&T Park in San Francisco (a gem, which almost uniquely today, was built without government money).
Back when the Giants played at Candlestick, very few corporations were buying tickts to Giants games. It was low or middle-end. But now, at AT&T, thousands of companies buy up most of the tickets for high prices. They give them to their employees or their customers or their vendors. They use them to entertain clients or prospective clients. Or they give them away for charitable purposes to advertise themselves.
It is because of all the high-end customers filling ballparks (save, of course, Oakland, the last of the old dumps) that baseball draws far larger crowds today (in smaller parks) than it ever did 20, 30 or 50 years ago. Just look at the attendance figures for the Giants over the decades ([url]http://www.baseball-reference.com/teams/SFG/attend.shtml[/url]): [quote] 2012 – 3,377,371
1992 – 1,560,998
1972 – 647,744
1952 – 984,940
1932 – 484,868
1912 – 638,000
1892- 130,566 [/quote]
[i]”Also, it seems that the American entertainment industry is also losing a lot of Hollywood business to foreign countries where labor is cheaper.”[/i]
This is partly true. The trade unions in Hollywood have helped push films out of Los Angeles. But there are some other important factors, especially tax considerations.
It’s also not so much the case that “Hollywood” has lost out by moving production to other states, to Canada, and less commonly to more distant countries. The big Hollywood-based companies are still making good profits. The big loser is Los Angeles and California. There is much less work being done here and as a result less tax money generated. And the unions are a good part of that failing.
David, you have advocated for sustainable city employee compensation. You have also advocated for implementing and paying for a sustainable city roads maintenance program. Yet you take a polar opposite approach for the city’s water delivery infrastructure. Why is it critical for the city to have a sustainable work force and roads maintenance program, but not sustainable water delivery infrastructure?
-Michael Bisch
Rich – Small market teams get lucky every now and then and win a championship, but look back over the history of winners for MLB and the NBA and it is clear that small market teams struggle. They have to keep their salary cap down to stay economically viable. You can blame it on management and coaching, but the story of the 1980s Oakland Athletics is a story because it was/is amazing that a small market team with a small player salary was able to compete and win at the championship level.
I agree that professional sports have remained profitable even with the player’s union-negotiated compensation increases. That has been due to good league strategic management and successful marketing of the brands and entertainment value. However, I do see a day of reckoning coming. With the changes in TV broadcasting and with so much video entertainment content available for free or cheap on the Internet… and with the drop in consumers’ discretionary income… I don’t see the lucrative broadcast contracts and high ticket prices continuing. The question will be if the players unions will respond to these changes in a way that allows professional sports to better compete in the growing entertainment market… or will it take the Hostess stance.
JB: [i]”Rich – Small market teams get lucky every now and then and win a championship, but look back over the history of winners for MLB and the NBA and it is clear that small market teams struggle.”[/i]
Rather than look at market size, look instead at relative revenue disparity. In the NFL, there is none.* In the NBA there is some, but not a whole lot. In baseball, the disparity is quite great from top to bottom.
Your contention that small market teams in the NBA have not fared well is really not true. The San Antonio Spurs have been one of the winningest franchises for the last 25 years. Same with the Utah Jazz. No team but Miami is better today than Oklahoma City. Memphis is a small city with a great team. Portland was the best team in the Western Conference for a decade and a half.
It’s true that the two best franchises historically, the Lakers and the Celtics, are from big cities. But their success did not depend mostly on money. They have simply been well run. When Chicago, a big city, had Michael Jordan, they were great. But for the 20 years before and after, they have hardly won at all. Since the mid-1970s, the biggest city team of them all, the Knicks, have rarely won, and have no championships. Same with Philadelphia. The Clippers and the Nets have been two of the worst teams over the last 40 years, despite playing in the two biggest markets.
Baseball, however, is different. Money is not everything. But it is obviously true that the teams with the most money have the best chance over the long term to compete and win. This was true before there was a players’ association and has been true since. The Yankees dominated in the days of Babe Ruth by paying more (to attract amateur prospects) than other clubs could pay; and they have dominated most years ever since.
Lower revenue teams need to be managed much more efficiently to compete in baseball. And, as you say, they can sometimes do this for a few years. But it is impossible for clubs like Oakland, Tampa Bay or Minnesota to put together a great team and retain all of their best players for more than a few years. Despite that, even small market baseball teams are worth a lot more today than they were worth 5, 10 and 20 years ago.
*That is not entirely true in the NFL. A team like the Dallas Cowboys, due to its awesome new stadium and great Texas fan-base, makes much more in local revenues than a team like the Oakland Raiders, a club which cannot fill its antiquated stadium. But because of the salary cap, the Cowboys cannot bury the Raiders or other lower-revenue teams by spending more. More importantly, all NFL franchises evenly share their number one source of revenue, the national TV money.
JB: [i]”I do see a day of reckoning coming. With the changes in TV broadcasting and with so much video entertainment content available for free or cheap on the Internet… and with the drop in consumers’ discretionary income… I don’t see the lucrative broadcast contracts and high ticket prices continuing.”[/i]
The people who keep paying more and more to own these franchises seem to disagree with you. It’s possible you are right. It may be a bubble.
But, again, keep in mind that most of the stadium-generated revenues are not coming from middle or lower income fans. The big money which all teams make their fortunes on comes from rich people and from corporations who are buying a high-end product. So even if the average working stiff has less discretionary income, these founts of wealth are doing just fine.
[i]”The question will be if the players unions will respond to these changes in a way that allows professional sports to better compete in the growing entertainment market… or will it take the Hostess stance.”[/i]
Hockey, which is again suffering a lost season, after doing that just about 5 years ago, is perhaps the test case for your question.
Look here [url]http://www.nba.com/history/finals/champions.html[/url] and it is clear that large market NBA teams dominate for winning championships. And winning is one of the best ways to increase the value of the franchise.
But I accept your general point that players unions have not (yet?) had any measurable adverse impact on success of their employers.
I forgot about the salary cap (NHL, NBA, NFL). Without it, the disparity between small and large market teams would be much greater. I admit that MLB is an argument against this since there is no cap and most of the teams are profitable. Again though, I see trouble brewing on the horizon. Also, I know the players unions for NBA, NHL and NFL have fought to increase or eliminate the salary cap in almost every negotiation. So, in this it would appear the Hostess tendency is alive and well.
You make a great point about the shift to upper-income consumers for professional sports. About 15 years ago I developed software for a friend of mine starting and growing a business to provide mystery shopping services [url]http://www.servicescouts.com/[/url]. This was his brainchild in response to this very change. The thought was that with ticket prices escalating and the leagues needing to attract a higher-income consumer, the venues needed to ramp up their service quality to match expectations. His business model is as follows… he engages independent contractors “Scouts” that get free game tickets in consideration for the work they do while attending to assess the stadium employees on a list of expected behaviors that are recognized as best-practice to great customer service. The software creates reports that list employee “success” and the teams reward those employees with higher success. It was my friend’s business that got all the Arco arena employees to start smiling and say “enjoy the game” with each transaction.
His business has exploded (another one of my poor investment decisions since I opted to get paid for my work rather than accept stock options). However, he has recently told me that he sees some of the same problems brewing that I anticipate… attendance is down for many of his customers… especially the small market teams. Many teams have cut his service for budget reasons.
Don… if Syria is way off topic, a close second would be professional sports… except for the fact that it appears that denigrating public employees seems to be a professional sport du jour.
[i]”I admit that MLB is an argument against this since there is no cap and most of the teams are profitable.”[/i]
It’s also important to understand that baseball does have some revenue sharing, just not as much as the other sports. All of its national TV, radio, internet* and satellite broadcast revenues are evenly split. On top of that, the higher-revenue teams (like the Yankees) are required to share some of their local radio and TV money with the lower-revenue clubs. I recall reading that the A’s in 2011 received $30 million in this latter category, and that the team’s profit in 2011 was about $20 million. In other words, the A’s franchise’s value is largely due to getting some Yankee money.
——————
*I don’t know exactly why this is the case, but MLB makes far more money from its internet operations than either the NFL or NBA makes.
HP: [i]”Don… if Syria is way off topic, a close second would be …”[/i]
Russia is arguably even further afield than Syria. But Russia is always interesting ([url]http://lexicondaily.blogspot.com/2012/12/russia-fires-back-at-itself.html[/url]) … in a crazy sort of way.
[i]except for the fact that it appears that denigrating public employees seems to be a professional sport du jour[/i]
hpierce, I went back and cannot find much evidence of people denigrating public employees. Do you have any examples?
Syria is off topic, but the professional sports discussion is related to the impact of unions on the fiscal health of the employer. Rich makes a case that players unions have not hurt the profitability of professional sports. If you are a union man/woman, that should make you happy to read.
MLB is lucrative because it is exempt from antitrust laws and can reduce competition.
Jeff… was not remarking about the discussion on this thread, nor specifically to vanguard… my referent was based on many articles, opinion pieces, etc. that I’ve read, not necessarily on the Vanguard pages…
[i]”MLB is lucrative because it is exempt from antitrust laws and can reduce competition.”[/i]
This is a widely held view. But there is actually no truth to it. Yes, leagues–in contrast to having independent barnstorming teams–do reduce competition. They effectively act as a cartel. However, the profits in baseball are not nearly what the profits are in football, and football lacks any exemption from the antitrust laws. Basketball and hockey, which at times have been more profitable than baseball (now is not one of those times) also lack an antitrust exemption.
Just as the AFL (and more, but failed competitor leagues) came along to compete with the NFL (eventually merging), competitor leagues have likewise arisen in hockey, basketball and baseball. Anyone with enough money to do so could create a rival league to today’s MLB or NBA or NFL or NHL. That baseball has its historic exemption from antitrust makes it no different from any other pro sports league.
Another way to look at this is to ask [i]what would happen if baseball’s antitrust exemption were rescinded?[/i] Knowing how the NFL and NBA work as leagues (with actually more of a cartel, and less of a competitive arrangement than in MLB), the answer is there would be no difference.
Or say a crusading attorney general came along and decided to break up Major League Baseball and the National Football League. Teams then would be individually owned but would have no formal ties to other teams. Anyone could form a new team. It would be illegal for them to adopt a set of rules, because that surely takes anticompetitive collusion. They could not have a regular season or playoffs or a championship game. All for the same anticompetitive reasons. The teams would all be essentially barnstormers.
We had barnstorming in professional baseball for a long time before the major leagues formed in 1876. It was not popular. In the offseason, a lot of baseball greats (including Babe Ruth and Lou Gehrig, see photo) would barnstorm against Negro Leauge teams. But even those games, relying on the fame of players whose names were made in league-organized baseball, never generated great money or fan interest, except when they went overseas (particularly trips to Japan).
[img]http://www.bendbulletin.com/apps/pbcsi.dll/bilde?Site=BB&Date=20110323&Category=NEWS0107&ArtNo=103230366&Ref=AR&MaxW=570 [/img]
So what good would be accomplished by pushing an antitrust agenda? It would hurt the owners of the teams. It would hurt the players. It would hurt the fans. It would hurt the games. In the end, every interest is best served by having cartel arrangements, because they inherently add value due to the schedules, the playoffs, the championships, the rules, the fame, etc. That is true in all team sports, in all countries.
[i]Jeff… was not remarking about the discussion on this thread, nor specifically to vanguard… my referent was based on many articles, opinion pieces, etc. that I’ve read, not necessarily on the Vanguard pages…[/i]
hpierce, thanks for that clarification. I wanted to make sure that I wasn’t misstating my positions on the topic. I don’t blame public sector workers for the fiscal situation. Long ago in my school of hard knocks management training I figured out that there are very few bad employees. There are only some employees in the wrong job, and then the rest of the problems with poor performance are attributable to poor management.
I do blame the unions to a large degree (and I consider the union bosses as just another arm of management); because I think it sets up a dysfunctional system of incentives and motivations. It corrupts the worker mindset toward job entitlement and away from job performance.
I understand that the auto workers union gave up pay and benefits in exchange for some profit sharing. And this year workers might get as much as $8000 in profit-sharing bonus from Ford, and a bit less from GM. I think that is the type of thing we need to be doing more of. For the public sector, we should set up cost savings goals and other service performance goals and a bonus pool structure to reward employees for meeting or exceeding those goals.
Unions have never supported these types of approaches in the past. If they had, I might be more union-friendly. But as a manager experienced dealing with the requirements and challenges for getting employees to perform a peak levels and high efficiency, I would never accept a management job if the labor was unionized… because it would be next to impossible to get peak performance and high efficiency. Employees generally do not like change and criticism when it comes to their performance. Give them the power to resist, and they will. Unions give them that power. It was needed once upon a time when we lacked labor laws and enforcement and labor was exploited. But today there is no need for unions. They are a destructive force… just ask all the people associated with Hostess corporation.
Jeff: Your information on profit sharing and unions is not correct. Unions embraced profit sharing. I grew up in a family with a union busting father who worked in the blast furnace, coke oven steel industry. He cursed profit sharing and the unions that supporting it. In the end, it was the low wages abroad that killed these companies in the US. Had there been no unions, wages would have been fractionally lower, but certainly not lower than those in Brazil and China, where his company went in the early 1980s. The wages won by unions built pretty decent places in what is now known as the Rust Belt, not to mention Fontana, California (Kaiser Steel’s site). Those places are now, well, the Rust Belt. You can fulminate against unions, but they did a tremendous job for America in the 1950s, 1960s, and 1970s.. Although I have never belonged to a union and know the down side of unions by rote and verse, learned over the dinner table, it is very clear that they gave the working person much that would not have been there during mid century times in the US. Now it is a different game.
[i]”You can fulminate against unions, but they did a tremendous job for America in the 1950s, 1960s, and 1970s …”[/i]
There is an unfortunate timing issue with your claim. The decades you credit unions for doing “a tremendous job” was the period which began their great decline.
[img]http://dailydish.typepad.com/.a/6a00d83451c45669e20167672c50ea970b-550wi[/img]
The economic truth is that the great rise in American prosperity and the growth of the middle classes did not begin with unions, did not rise with the rise of unions, and did not fall with the fall of unions.
Rather, the rise in prosperity and the decline in the percentage of our population which lived in poverty correlates instead with the growth of labor productivity, whether unionized or not*.
And what caused labor to be so much more productive? Mostly, it was widespread basic education. Also, the development of various new labor-saving technologies (especially those which made farming more mechanized) added value to labor and hence drove up wages. Another significant factor was a great improvement in basic infrastructure, including widespread electricity, interstate highways and waterways, new and better ports, etc.
———————–
*Note: I am not arguing against the incontrovertible fact that all else held equal a worker in most industries was better off in a union due to the union. But that gain for workers in unions has never pushed up general wages or the standard of living of the country as a whole.
It’s also interesting to look at how little the rise of unions in the first half of the 20th C. correlated with the rise of real wages:
[img]http://dailydish.typepad.com/.a/6a00d83451c45669e20167672c50ea970b-550wi[/img]
Sorry, my graph for real wage growth is failing me. What it shows is a gradual increase in each decade (surprisingly not much different in the 1930s), but no real spikes.
What is quite interesting to ask now is why have real wages paid to middle income Americans stayed quite flat for the last 20 years or so, despite continued rises in productivity?
Part of it must be global competition and ubiquitous technology, which have made non-American workers as productive or nearly as productive as Americans. That has elevated their wages and deflated ours. However, we have had national real income growth. But that has been concentrated at the top of the income scale. That suggests that most of the productivity gains (as far as the market sees them) have been made mostly by those folks–that is, those capable of running international companies, capable of financing global projects, or able to make a product or service which is sold all over the world.
[img]http://www.ilsr.org/wp-content/uploads/2011/03/Percent-of-Labor-Force-in-Unions2.png[/img]
My previous post’s intended graphs all failed. This one will hopefully works. My only point in posting it is to show that the period of great increases in union membership took place when national income was at its worst, the 1930s. Despite that, real wages (probably due to negative price inflation) rose about the same in that decade as in any other decade, at least for those who had jobs.
[i]Jeff: Your information on profit sharing and unions is not correct. Unions embraced profit sharing.[/i]
GreenandGolden: That is not my understanding. I think union labor profit sharing has been relatively rare. One of the great recent exceptions to this has been Southwest Airlines… a unionized labor company where labor has a stake in the success of the company and works to ensure ongoing profitability and to maintain a competitive edge rather than fight with management and undermine the company success.
The UAW workers are not very satisfied with the two-tier deal the union struck with the big three US automakers. But the average hourly all-in compensation is still higher than Toyota’s US operations. Even so, there is talk of strike in the upcoming contract renewal. So, there is that Hostess approach again… keep demanding more until the host company collapses.
Unions tend to gain power in recessionary times, but in an era of hyper global competition it is not going to end up benefiting the US worker. They will all end up like Hostess employees. There is no reason that they need to exist today. Labor laws have advanced to the point that each worker can be their own individual contractor with the company and all will be better off in the long run.
Jeff… I feel a need to be clear on this… I do not like “unions”… however, in the public sector, “the man” will not treat individual employees individually… they [b]have[/b] to have bargaining groups, and we could argue forever as to whether they are “unions” or not… in Davis, I believe that only the “fire” employees are the only group that has affiliations beyond the local employees…I actually was the spearhead to form an employee association to AVOID unionization in the 70’s… public employment, right after Prop 13.
The ‘public sector’ is not “allowed” (currently) to compensate individual employees according to their ‘value added’. More is the pity.
Yet, there are many high-performing, high value public employees… who get compensated the same as their less productive counterparts.
But it appears that you and others want to go to the ‘least common denominator’ for compensation, in the public sector.
I suspect you’d like to see a system where every public employee gets FEDERAL minimum wage [State minimum is too high], no benefits other than [u]maybe[/u] SS and maybe Medicare.
I will say that there are many City employees, classified as “management” who supervise no-one, just because that is what it seems to take to fill positions at a competent level.
Yet, there are several positions, filled by “management” employees that may be unneeded, or occupied by those who are marginally (at best) qualified.
“Yet you take a polar opposite approach for the city’s water delivery infrastructure. Why is it critical for the city to have a sustainable work force and roads maintenance program, but not sustainable water delivery infrastructure?”
Michael: I suggest you re-read my water articles, nowhere have I argued against the water project. The only positions I have taken are: (1) fair process and (2) in favor of Loge-Williams as the rate structure.
hpierce, I have a lot of experience working in both blue and white collar jobs early in my career where I was a worker, and then later as a white collar manager. I don’t have any experience in either role working for or with unions. So, certainly I don’t have a full perspective based on union experience. However, all of my experience brings me to this point that unions are relics of the past that do more harm than good for the actual workers. Unions reduce the number of jobs available, promote a general performance mediocrity… and they tend to destroy the financial health of employer.
With all our labor laws, and a wealth of best-practices for effective employee performance management compensation systems, there is simply no reason that any labor group needs to organize and negotiate compensation and working conditions.
I do not want the least common denominator for any job compensation… I want everyone to be paid fair compensation commensurate with their role, experience and demonstrated skillset in a free open labor market. I want labor prices to be based on how the market values specific talent and capabilities. As you point out, unions pay everyone the same regardless of demonstrated talent and/or capability and/or actual performance. That is a bigger problem than we are acknowledging.
One thing I really like about the tech fields… you are forced to take the market approach. This is because the skills are so specialized that there is this constant supply and demand challenge. In the tech boom 1990s I was hiring senior experienced Oracle BDAs at significantly more than I made as their manager at the time. It wasn’t just the tech experience that was a factor… the soft skills mattered a great deal. An Oracle BDA that could communicate, plan and collaborate effectively demanded top compensation. Those that wanted top compensation had to ramp up their game to do the same.
However, speaking of lowest common denominator, if the Oracle DBAs were unionized, I would have to pay them the same based on some scale of seniority only. The DBA that worked the least hard and that did the poorest job communicating, planning and collaborating would be the performance benchmark for the rest.
Now, in a lower skilled labor pool, or one where the job skill requirements are more ubiquitous, I can see where collective bargaining might have a stronger attraction. However, even in these cases, I still think unions cause more harm than good in the long run. Employees have a lot of power these days. The labor laws are generally in their favor. Also, they can always quit if they don’t like the working conditions and/or pay. The best employees will be attracted to the best employers and those employers should reap the benefits in greater productivity and efficiency. If the enough of the best employees quit, the company will have to improve management or eventually fail.
It is interesting… in a poor job market there are fewer options for employees to leave a job that they don’t like. So, they are more prone to want to unionize to help them win improvements through collective bargaining. However, by forming a union they also put the employer at greater risk of failure from too high labor costs combined with falling productivity and excellence. So, there are even fewer jobs as companies like Hostess go away. Hence a spiral downward in worker prosperity. So, how do you break that spiral? Get rid of unions and implement economic policies that help grow more jobs.
David G: “[i]Michael: I suggest you re-read my water articles, nowhere have I argued against the water project.[/i]”
That is like Fox News saying they weren’t in favor of the republican ticket because they never said so on the air. I have read most everything you have written on the water topic over the past few years and while there has recently been a shift in your tone indicating a more favorable stance, there is no doubt that for much of the last year you have actively opposed the project. Your written position is not as nuanced as you may think.
Mark, I appreciate your post. For a moment there I thought I had fallen down the rabbit hole where 18 months of ginning up opposition to the surface water project, threatening to actively oppose the project every time some kind of process failing arose, confusing/distracting the voters with secondary and tertiary concerns, and generally nitpicking the project to death didn’t amount to arguing against the project.
-Michael Bisch
David, in your last article about DCEA you state that they are not bargaining in good faith. Do you have proof of that? And, would PERB not have ruled against them if they were not? Wrap your head around this. Maybe they are just standing up to a bully. Maybe the city is just trying to ride public sentiment propagated by “journalists” to cover the tracks of they’re own fiscal ineptness. DCEA never bought a council member, never threatened a strike, work stoppage, or sick out. Without full knowledge of the negotiations, we cannot assume that DCEA has not bargained in good faith. Maybe it is the other way around. Maybe you, and others, are being duped by your sources. Have you seen the contract that was offered to DCEA? Were they last best and finaled before the other groups were offered a contract. Maybe impasse is what us tax payers need. I for one would love to see what fact finding turns up. This city has felt the fiscal crunch much less than most others, but seems intent on reducing it’s employee’s pay and benefits more than these other municipalities. Is it that Davis is more superior, and smarter, than these other cities? This thinking can only lead to more lost tax dollars. In fact, it already has. (Hello Water Project) Maybe the city can hire another consultant to review if we are actually better than the rest.
“David, in your last article about DCEA you state that they are not bargaining in good faith. Do you have proof of that? And, would PERB not have ruled against them if they were not?”
I don’t have proof of it. I have been told that by several people I trust.
Would PERB have ruled against them? Well, we have not gotten to that point. This is in the current round of negotiations. PERB ruled against the city in the last round because the city did not adhere to the process.
“DCEA never bought a council member, never threatened a strike, work stoppage, or sick out.”
I agree, it is unfortunate we have now come to this, because in my mind the real “bad guys” are fire not DCEA. But DCEA is now in that boat.
“Maybe you, and others, are being duped by your sources.”
I think it’s unlikely.
“Have you seen the contract that was offered to DCEA?”
Not the specific contract, but we all know about what they have been offered because it’s about what the other groups signed.
I have seen the offer DCEA received. It is not about the same as the other groups. Be more careful of who you trust. That trust has you close to committing libel, if you haven’t already.
I have seen the offer DCEA received. It is not about the same as the other groups. Be more careful of who you trust. That trust has you close to committing libel, if you haven’t already.