An Unsustainable Public Worker Gravy Train Bubble
Andrew Biggs (AEI) and Jason Richwine (Heritage) provide evidence in today's WSJ of the "public worker gravy train" in California, where government workers are compensated up to 30% more generously than their private-sector counterparts in large private companies. Reasons for the huge public-sector premium? They point to three sources:1. Public-sector pension programs are more generous than those in the private-sector.
2. Public-sector medical benefits, both while working and during retirement, are more generous for government workers than comparable workers in the private sector.
3. Government employees have much greater job security than workers in the private sector, equivalent to a 15% compensation premium.
MP: Taken together, those additional, and very generous non-wage benefits for government workers in California translate into a whopping 30% compensation premium, i.e. "gravy" (paid for by Golden State taxpayers of course), compared to total compensation at private firms (controlling for age, education, experience, etc.).
The chart above compares jobless rates between private and public sector employees nationally, on an annual basis back to 1976, and shows that private sector workers face an average unemployment rate (6.6%) that is almost twice as high as the average rate for government workers (3.4%). The fact that government workers are 50% less likely to be unemployed in any given year than private sector employees (because they work in a "recession-proof industry") is part of the reason that Biggs and Richwine find a 15% compensation premium for government workers.
Commentator Mike Rosen describes the "public worker gravy train" as "unsustainable bubble" in today's Denver Post:
"Several financial and economic bubbles have popped in recent years. Now, the bubble of unsustainable compensation levels for federal, state and local government employees is bursting.
Once upon a time, those who opted for a career in what used to be called "public service" did so understanding they'd trade off lower pay for more job security and less performance pressure than in the private sector. Nowadays, government employees are not only better paid than the private sector average but also enjoy far better health insurance at lower costs along with lavish retirement benefits, the product of rapidly expanding and aggressive public sector unions that have formed an incestuous relationship with the politicians they fund and elect.
The problem is particularly acute at the state and local level, since those governments have to balance spending against current revenues. They can't run deficits like the feds. And in this economy, the spending gaps are way too large to be closed with tax increases without making the economy even worse, resulting in yet lower revenues."
114 Comments:
This comment is more appropriate here than in the prior posting.
There are studies that show public employees are underpaid. Here's one example:
"It (the study) controls for education, experience, hours of work, organizational size, gender, race, ethnicity and disability and finds that, compared to workers in the private sector, state government employees are undercompensated by 7.55 percent. Local government employees are undercompensated by 1.84 percent. The study also finds that the benefits that state and local government workers receive do not offset the lower wages they are paid."
My comment:
I suspect, the "experience" factor doesn't take into account job security and easier work (along with low job turnover).
Also, the "organizational size" factor doesn't include the low benefit to society for the cost (e.g. $2 in cost for $1 in benefit).
Moreover, the "education" factor doesn't take into account people who cannot succeed in the private sector, but can succeed in the public sector, or at least appear they're succeeding (e.g. Obama's economists returning to teaching).
One of the problems I have with studies of public sector employee compensation is illustrated in the study PeakTrader mentions. It says "controls for education, experience, hours of work, organizational size". Note the credentialist attitude of the statement. It enshrines credentials over productive endeavor and achievement as the measure of proper compensation. In the private sector it's not about hours of work, it's about the value of those hours.
Regarding these alledged studies of public sector workers, what is the possible biases of the supposed studiers?
PT points out: "Also, the "organizational size" factor doesn't include the low benefit to society for the cost (e.g. $2 in cost for $1 in benefit)"...
That's an interesting bit of irony considering the news of the Wisconsin teachers situation...
It seems that Wisconsin taxpayers aren't getting their money's worth...
the real killer is the long tail from these workers due to defined benefit pensions.
in SF, the deputy police chiefs (of which there are something like 6 or 8), retire on 300-400k a year pensions and helthcare for life.
the pay packages for actual officers are not as egregious, but still pay for life, same with muni etc, always based on final pay, a system everyone knows how to game for maximum benefit.
this has led to situations where some agencies are starting to cross over into paying more for their retired employees than those who are working.
as can be imagined, this is devastating to the financials of these organizations.
these defined benefit pensions are going to strangle local governements all over the country. they are vastly under reserved, employees have contributions that are much too low, and the actuarial assumptions (particularly about lifespan) upon which they are based are wildly off. paying for a retiree from 65 to 70 is one thing, but from 60 to 90 is another entirely, especially when you are doing it on peak salary. these pensions alone can double the lifetime cost of an employee.
i think that if the public sector unions want to continue to exist, they should have to manage and pay the pensions themselves.
if they fail, then they must declare bankruptcy and be dissolved.
I am not disagreeing with the idea that net pay for public sector workers maybe higher but I think you cannot just overlay the unemployment rates and say they have more job security. You have to adjust this for educational level.
The unemployment rate for all people with a college degree is only 4.2% and I believe a larger portion of the public sector workers have college degrees. So you have to make that adjustment for a real apples to apples comparison.
rajat-
i think you'll find that the unemployment rate for college grads is actually 5.1%, a bit more that 20% over your figure.
http://www.bls.gov/news.release/empsit.t04.htm
even using schmitt's data, only 27% of public employees have college degrees.
thus, it would seem that they are, in fact, much less likely to become unemployed than their private counterparts as their overall unemployment rate (including the majority who do not have degrees) is still lower than the private sector unemployment rate for those with degrees.
i would also love to see the breakdown of public vs private employees by degree type.
how many public employees have degrees in public policy, gender issues, sociology or "advanced degrees" from some CC in counseling? is that really comparable to an MBA from HBS?
i would be willing to bet that if you controlled for degree quality (a degree from cat but community college is not equivalent to yale) and for the earnings associated with type of degree (counselors make nothing like engineers) you'd get quite a stark picture of public overpayment.
But don't forget how dedicated these public servants are. That dedication is invaluable. Like this heartwarming story from last week here in Pittsburgh:
"City officials promised yesterday to appeal an arbitrator's decision to reinstate a Pittsburgh paramedic they fired after she said she wouldn't be "waiting all day" for a dying 911 caller to walk from his Hazelwood home to her ambulance during last year's blizzard."
"Dispatch recordings revealed that Josie Dimon, whose unit responded to Mitchell's home, said, 'He ain't (expletive) coming down, and I ain't waiting all day for him. I mean, what the (expletive)? This ain't no cab service.'"
It took 30 hours, but the guy finally died.
Public servants.
Rajat, it may be difficult to make a "real apples-to-apples comparison:"
Comparing Private Sector and Government Worker Salaries
May 10, 2010
"Governments hire more educated people not because job duties demand more education, but rather simply because they can...Some fields of study are more rigorous than others, and some universities and colleges are more prestigious than others...Governments typically achieve significant cost savings by outsourcing the provision of services to the private sector."
"...I think you cannot just overlay the unemployment rates and say they have more job security. You have to adjust this for educational level"...
Why not? If the 'college educated government employee' can't get the job done what does it matter what the degree of education is?
Rajat says: "...net pay for public sector workers maybe higher."
According to the BEA:
On average, federal government employees receive higher benefits in the form of pensions and health insurance contributions than private-sector employees:
Average federal government civilian employees: $37,774 in 2006.
Average private-sector employees: $9,544 in 2006.
morganovich,
I think a lot of cash flows were underfunded, and the pay as you go system does not work when more people start taking money out without adjusting for the increase. None of this is a surprise because actuaries are very good at this sort of analysis, and this was predicted. If I take a 20 year mortgage out on my house and I know my cash flow will decrease 50% after the first 10 years and my medical costs will also increase, shouldn't I front load either my savings or my payments so I can pay for my commmtiitements in the future? The money that should have been put aside over the last few years was simply spent in other areas.
We could argue forever on whether people should have asked for the money/benefits or people should have given in to those requests, but the fact is that none of this should be a surprise and the political and accounting system was set up for a funding failure. Any solution will mean balancing revenue and expenses and funding excess future expenses out of current revenue without any excuses. Does this mean less expenses or more revenue? That does not really matter as long as they balance in the present and future.
I am in Michigan, and the governor wants to tax pensions, which will affect me in the near future. When looking at the demographics of our state, I agree with that decision. Hopefully, the widened base will result in a lower rate as past financial commitments are cleared up and better controls on spending are enacted. Everyone should be paying for part of their health care benefits to keep the cost down, and any pensions should be realistic and fully protected and funded.
"The money that should have been put aside over the last few years was simply spent in other areas."
the money that should have been put aside was never put aside at all.
the contributions to these pensions have been woefully inadequate.
no responsible person would ever have negotiated such deals. they were clearly untenable even from the start.
this cone back to the huge problem with public unions - they pay for the campaigns of those who make their compensation decisions (or at least those who hire them) and the guys doing the paying, unlike private sector managers, are paying with money that they have no responsibility for.
private managers get fired when they make losses, public ones get more funding.
Hey Walt G...
Think Social Security...
PARKERSBURG, W.Va. | The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration. (there's more)
I don't see it. Public workers I know have job security, but they don't get paid that great, and their jobs are a pian in the A__.
the "organizational size" factor doesn't include the low benefit to society
Yeah, OK when was the last time that you saw a comapny include its external costs as par of its value statement? $2 in cost for $1 in benefit, implies what, 100% overhead? Plenty of companies are worse than that.
Also, succeeding in the public sector means you need more patience than I have. I'm reasonably intelligent, and educated, but not equipped to succeed in the public sector.
I don't think such denigrating statements are accurate or meaningful.
In the private sector it's not about hours of work, it's about the value of those hours.
Gross generalization. I've seen private companies whose motto was "bill them til they bleed", regardless of the actual value provided. I've seen plenty of consulting companies where the goal was billable hours, not value provided.
And of course, they were working for the government. So, does this kind of "work" drag down government productivity, and who do we blame for it, private industry for unethical profit seeking, or government for lousy management of slopy subs?
Hydra, the $2 in cost for $1 in benefit implies "organizational size" is too big (in the study), because of capital destruction from inefficiencies, unlike the private sector, which creates capital through efficiencies.
Ross Perot was also not "equipped to succeed" at GM before it went bankrupt.
"So, does this kind of "work" drag down government productivity, and who do we blame for it, private industry for unethical profit seeking..."...
What is this supposed 'unethical profit seeking'?
Apparently 'unethical government' isn't a problem to you?
Just asking...
juandos,
I owe my financial independence to two things: 1) realizing at a young age Social Security would not be around in the amount and form when I wanted it, so I worked two or three jobs or the overtime equivalent all my life to save 10-30% of my income every year, and 2) the 1998 General Motors’ strike when I realized GM was going to go bankrupt, and I went back to school to obtain advanced degrees and credentialing for other income streams.
When you realize things cannot possibly be any other way, you either act or kick yourself in the ass later. It’s your choice, and your choice alone.
the $2 in cost for $1 in benefit implies "organizational size" is too big
=================================
What does that say about the (supposed and claimed)efficiency of large urban areas?
which creates capital through efficiencies.
================================
You mean like billing the government till it bleeds?
Walt, haven't we seen these sort of events before? How underfunded was GMs pension plan before the VEBA was created? $51B? Didn't the UAW have to strike before GM finally agreed to fund an additional $30B, but not stock? Didn't GM go bankrupt anyway? And the size of the fund was something on the order of $90B when it was transferred. Think of the things GM could have done without that stone around their neck.
Pensions for mass workforce are a total disaster. Why would governments be any different?
The brutal reality is public pensions are bankrupt. They will never be fully funded, they should have never been allowed in the first place. I say cash them out and distribute the proceeds on a formula basis to the employees or transfer responsibility to the unions and let them worry about it.
Hey Walt G:
Well amigo I hope your pension plans are somewhere that Uncle Sam can't possibly lay hands on them...
Remmber this name? Teresa Ghilarducci
If James Taranto of the WSJ knows what he's about then some politicos might be lusting after your nest egg...
"We have the ability to elect our own boss." -- Victor Gotbaum, head of New York's largest public union in the mid-'70s
Public sector unions do not negotiate contracts, they conspire with Democrats to steal from the taxpayers. That is why the Democrats in Wisconsin and Indiana fled the state. And that is why none of the contracts that they have "negotiated" should be honored.
"I think a lot of cash flows were underfunded, and the pay as you go system does not work when more people start taking money out without adjusting for the increase."
Yes, that's part of the problem. However, you are overlooking and even greater problem - the one way bet that public sector unions have been given in the markets. Union pension funds are most often directed by a committee of former union officials and Democrat political hacks. They routinely channel money through cronies into reckless investments with the full knowledge that if those investments should fail, the taxpayer will be required to fill in the hole. Heads they win, tails we lose.
Further, the unions have been the loudest and most aggressive opponents of rationalizing the structure of programs like Social Security, Medicare and Medicaid. They have spent hundreds of millions of dollars to ensure the election of politicians who demagogue every effort to reform these "entitlements". Their advocacy has helped to bankrupt this country and put the retirement of millions of nonunion taxpayers in jeopardy.
It is time for this corrupt scam to end.
"You mean like billing the government till it bleeds?"
Your anecdotes are not evidence.
Hydra, it's wrong to blame the private sector for wasting tax money.
Next you'll be telling me Wall Street caused the financial crisis.
Jason,
GM had/has a lot of problems that are too complex to simplify. The numbers and categories you are throwing around are too vague to be useful. A lot of the failure was simply due to past circumstances and successes and was inevitable. Things that could be controlled were not. There’s plenty of blame to go around.
You have to separate pensions from health care because one is funded (or at least attempted to fund) and the other is paygo.
The only way to solve the future cash flow problems is to pay employees all in present value cash now and let them purchase their own pensions, health care. . . . There are too many disincentives to the current system (political, moral hazard, adverse selection . . .). People have to have a dog in the fight to take action and care.
juandos, There is no place money can hide from the government. I tried—once.
Che, I agree with the concept of unions as counterbalance to absolute power, but I don't always agree with their policies. I think cops should carry guns, but I don't think they always need to shoot them. There's an inherent power in both’s existence.
"I agree with the concept of unions as counterbalance to absolute power ..."
I do not believe that anyone has the right to organize against the people of the United States, period. As for private sector unions, I think that workers should have the right to organize under rules that provide a level playing field for both the workers and the employer. Unions should also be required to hold regular votes to recertify, allowing more recently hired workers a chance to voice their opinions and cast their votes regarding whether or not to keep the union in place.
However, if the unionization of a company leads to it's bankruptcy, which it inevitably will, then those workers should have absolutely no recourse to the taxpayer and should suffer the fate that they have willfully chosen for themselves.
Walt, not disagreeing with your assertion regarding simplification, but $90B can sure cure a lot of complexity.
I agree that retirement should be up to the individual. However, we will have to contend with those who think government can solve poverty and poor health. Good luck with trying to convince those types...
And in an earlier post you agreed with Snyder raising taxes on retirees. I cannot agree more. I would even support eliminating the income tax completely and raising sales taxes, even on food. I think this is the best way to broaden the base and is the fairest tax there is (if there is such a thing).
Morganovich,
Actually your link also says 4.2%, you mistakenly looked at Jan 2010 instead of 2011
rajat-
right you are. good point.
that said, look at the drop from the prior month.
that drop (like the headline one) was not caused by an increse in employed workers but by a drop in the assumed US population (a ridiculous assumption) and a drop in workforce participation, which is just a statistical manipulation.
given that no net jobs were created in jan, i think that the 4.8% number is likely the better one.
however, even if we use 4.2% as the correct avg for college graduate unemployment, that only applies to 27% of the public workforce. this would seem to imply that they still have a much lower blended avg unemployment rate than the private sector.
Morganvich,
I don't know which schmitt study you are referring to but I have generally seen it to be around 45-50%. I did search on schmitt and came across an Ohio study which showed your 27% number for college but it had another 23% for advanced. So it looks like the total is around 50%.
Looking at the breakdown of their data the 23% is not subset of the 27%. So college+ is around 50%.
Look at this video of the Democrats reaction following the Wisconsin House passage of the current budget bill. Notice that the Dems are all wearing union t-shirts and how they play to their audience. Do you really believe that when these same Democrats are in power, as they have been for most of two generations, that they truly negotiate contracts with their union masters, or do they simply accept the union's demands? The Democrats have been buying power with taxpayer money for more than half a century, now we're broke. Public employees should not be allowed to organize against the people of the United States.
I am surprised no one mentions the best pension of all--full pension, full medical benefits for life at just 20 years of service--federal military employes.
The VA is costing us already $100 billion a year and steeply rising.
After 20 years. federal military employees get a pension-health plans worth well more than $1 million. It would be cheaper to give a guy a $500k bonus at 20 years.
Many police departments complain already that they pay more in pensions than to keep cops on the street. The same thing may happen with our military, unless drastic reforms are taken.
This video by Dan Mitchell of the CATO Institute's Center for Freedom and Prosperity lays out the facts : There Are too Many Bureaucrats and They Are Paid too Much
Che, by most accounts, a GM bankruptcy would have cost more than the loan package cost. A no-action alternative does not mean a no-cost alternative.
A $50 billion dollar loan for a cost savings of $300 (best case scenario) to $500 billion (worst case scenerio) over three to five years seems like a good idea to me even if I was not a GM employee (that does not include any PBGC pension coverage). That's assuming none of the $50 billion would be paid back and over 1/2 of it has, and it looks like most will be.
We could discuss long range impacts all day long, but if you don't make it to the long range it does not matter. The numbers for what was supplied look good compared to GM's liquidation.
If anyone has better analyses with dollar figures than I have after a dilgent search (Bush II, Obama, CBO, OMB, Treasury, CAR, Task Force . . .), please point me to them. I know this is an emotional topic, but the numbers for GM look good--for now. (I have not spent much time on research for Chrysler's 363 bankruptcy other than the Supreme Court case that paved the way for GM's 363).
Benjamin,
My choice out of high school was the military, a scholarship to the University of Michigan, or GM. I picked GM and made the best I could out of it. That sure beats getting shot at or blown up, and I still did the UM thing three times over 35 years later. No regrets here. I made my choice just like the military lifers and government workers after looking at all my options.
r-
fair point.
but even if it's 50% (as opposed to 35% in the private sector), it still does not explain the discrepancy in unemployment.
average 4,2 and the 9.4 for HS grads and 14.2 for less than HS and you get a likely number between 7 and 9 percent predicted unemployment (depending on how many non HS grads there are), number 40-80% higher than the actual figure.
alternately, we could look at it as if 50% have the same 4.2% as their college grad peers in the private sector, the implied unemployment for the other 50% is 5.8%, 38% below the 9.4% experienced by private HS grads even before we blend in the non HS grads.
this still seems like pretty strong evidence that public sector employees are enjoying much greater job security than their private peers.
i can't find any way to slice this data that does not make that seem to be so.
"Unions should also be required to hold regular votes to recertify, allowing more recently hired workers a chance to voice their opinions and cast their votes regarding whether or not to keep the union in place."
Che,
They can do that now the same way they certify--by petition. Would you also extend the certification election in a non-union shop to be regular to allow the recently hired employees a choice of a union election without a petition?
"You mean like billing the government till it bleeds?"
Your anecdotes are not evidence.
==================================
Maybe not, but it is one data point. My experience is more datapoints like that, to the the extent that I am unable to see the argument the government employees are grossly overpaid is true.
It appears to me to be one of those arguments that is emotional more than factual: if you start with the premise that most of government is a waste, then it follows that most government employees are a waste and/or overpaid for what they produce.
Then you go find some nubers to support your conclusion.
The argument may be coorect, but I'm not convinced yet.
Hydra, it's wrong to blame the private sector for wasting tax money.
=================================
Why is it wrong when I've seen it happen? I've been on both sides of this: I've been a contractor who could not succeed because of changing requirements, creeping scope, and generally lusy management by government, And I have seen companies that game the system to make themselves unmanageable by government.
I think there is plenty of blame for both sides.
"They can do that now the same way they certify--by petition. Would you also extend the certification election in a non-union shop to be regular to allow the recently hired employees a choice of a union election without a petition?"
this all becomes irrelevant if you take away the unreasonable coercive powers that unions are granted by law.
if a union cannot force workers to join, accept representation, or pay dues then much of these issues go away.
if they cannot force an employer not to hire employees that are not union and or do not accept union representation and pay union fees, then the rest of the problem goes away.
so, let unions unionize, but if they demand too much, let an employer hire other workers. if workers dislike their representation, let them opt out individually.
why should a union be able to tell employers who they can hire or workers what contracts they can accept or even what employers they can work for?
Che, by most accounts, a GM bankruptcy would have cost more than the loan package cost. A no-action alternative does not mean a no-cost alternative.
Walt makes a good point. I don't see anything wrong wth using the dogma of your choice as a preferred jumping off point for begning a decision process, but dogma and theory makes little sense when evealuating a proposed solution financially.
"I do not believe that anyone has the right to organize against the people of the United States, period."
I think everyone has an equal right to protect their persons and their property: the fruit of their labor. There is no reaon to assume that "the people of the united states" in the person of their government get more rights than "the people of the united states" who are employed by them.
I think we have the right to associate with anyone we choose. and that associations have the ability to create a group opinion, which any one has the right to express. Management can ignore those opnions at its own expense.
Corporations are allowed to organize, so I see no reason why a corporation cannnot organize for the purpose of selling its expertise in labor negotiations.
Morganovich,
I agree the data still shows more job security for public sector employees even when you weigh it with education. My guess is a similar weighted private sector unemployment is probably between 7 and 8%.
let unions unionize, but if they demand too much, let an employer hire other workers.
==================================
Seems to me an employer should have the same right to associate with a anyone he chooses, same as the unions.
And there is nothing to prevent a union from buying up the land next door and starting a competing business (except excess union costs).
"Seems to me an employer should have the same right to associate with a anyone he chooses, same as the unions."
yes, and so should workers. why should a union be allowed to act as a gatekeeper between me and a company i would like to work for, dictate salary and benefit terms to both of us, and demand fees from me to be ALLOWED to work there?
how is that not extortion?
"Corporations are allowed to organize, so I see no reason why a corporation cannnot organize for the purpose of selling its expertise in labor negotiations."
Unions are not corporations, they are cartels. They do not organize for the purpose of selling their expertise in labor. They organize in order to fix the price of labor and to strong-arm employers into purchasing labor from them and no one else. This is why repeal or reform of the Wagner Act is essential. In fact, unions should be limited in what they are allowed to bargain for - wages, rules affecting safety - so as to protect the rights of owners and shareholders. They should not be allowed to impose such control as to effectively confiscate their employers property.
"There is no reaon to assume that "the people of the united states" in the person of their government get more rights than "the people of the united states" who are employed by them."
There is every reason to assume it. Government by definition is entrusted with coercive power that ordinary citizens do not have as individuals. The idea that a small group of people can organize, corrupt the political process and use the coercive power of government for their own purposes and gratification is ludicrous and against every tenet of a free society. It's tyranny.
"And I have seen companies that game the system to make themselves unmanageable by government"...
Thank you hydra for showing us that government workers are over paid and totally useless...
What were those government auditors doing all that time?
"Che, by most accounts, a GM bankruptcy would have cost more than the loan package cost. A no-action alternative does not mean a no-cost alternative."
Cost to whom? The UAW used the influence it had purchased with the Democrat Party to steer billions of taxpayer dollars, legally appropriated for another purpose, into their coffers. The government used it's power to destroy the property rights of GM's bondholders and to gift a large part of the company to the UAW. If GM represented such a wonderful opportunity it should have had no problem finding investors or arriving at a suitable agreement with it's creditors. And if it could not do this it would have gone bankrupt at no cost to me as a taxpayer. The purpose of the governments involvement was not to save GM, it was to bail out the Democrats cronies at the UAW.
"The purpose of the governments involvement was not to save GM, it was to bail out the Democrats cronies at the UAW"...
What a bargain, eh che?
I mean what's a modist average cost of $282,000 per public sector job among friends and fellow citizens, eh?
"Cost to whom?"
The taxpayers, Che. The data are out there. If you have something different, I could use it, and I would appreciate it. Most of the people against the loans are using emotion and a dreamy, long-range, perfect, free-market vision and not a current financial analysis with messy, real-world people, and dollars signs attached. Ten or twenty years from now, a GM liquidation would just be a financial U.S. speed bump, but you have to get to that 10 or 20-year mark in one piece.
Alan Mulally of Ford agrees with the studies, and the need for the GM and supplier loans: "We really believe that if GM goes into bankruptcy, it will take the industry into bankruptcy." (Source: Washington Post, December 3, 2008).
Mulally seems to have current credibility and is a respected authority in the automotive field. Even if the other half dozen studies are questioned, why would the main competitor of GM lie about the expected outcome of a GM liquidation?
I'm not sure if anyone would have found investors, GM or other, in 2008 or 2009. If it could happen, it wasn't happening. EVERYTHING was locked up tight as a drum.
How do you figure the taxpayers were not going to pay up the nose for a GM liquidation? None of the evidence supports that, and you have not shown any. The range of amounts were questioned by many experts, but not the inevitability of huge public costs.
Hydra says: "I think there is plenty of blame for both sides (government and private sector).
What you fail to understand is government creates the conditions, through confiscation and imposition, the private sector responds to.
Why should the private sector be blamed for reacting rationally?
We really believe that if GM goes into bankruptcy, it will take the industry into bankruptcy
That's utterly bizarre. Companies do not cause cascading bankruptcies with their competition, only their suppliers and customers.
randian,
Google the quotation if you don't believe me. I know Mulally received at least 2 business man of the year awards in 2010, and he is considered a hero now. The CAR reports, Bush reports, Obama reports, OMB reports CBO reports, and Treasury reports all state the thing with differing ranges and scenarios. If you have something different, show it.
"The CAR reports, Bush reports, Obama reports, OMB reports CBO reports, and Treasury reports all state the thing with differing ranges and scenarios"...
That by some as yet explained reason EXTORTED tax dollars were necessary to keep the UAW solvent?
Come on Walt G, its still looking like slush fund to keep a certain type of politico in office...
It was like laundering tax dollars for the Democrats...
It was like laundering tax dollars for the Democrats...
Juandos, you have no idea how right you are. You would think those clowns, after taking an entire INDUSTRY to the precipice of disaster, would have learned something.
Google the quotation if you don't believe me.
I have no doubt it was said. That doesn't make it any less ridiculous.
Why should a union be allowed to act as a gatekeeper?
I never said it should. But if that person wants to work for that company, why should he get the salary and benefits the union negotiated, be a free rider?
And, should management elect to hire said person, why shouldn't the union be free to refuse to associate with said employer?
Finally, why should that prospective employee think he can negotiate alone as well as with a group?
What is the ratio between union dues paid and extra benefits gained? (Notice I did not say earned.)
Government creates the conditions....
===================
That is your claim, but I don't believe it.
Before we even had a real working government George Washington was writing letters about contraries providing shoddy uniforms and shoes to the continental army.
It was the beginning of specification creep and corporate chiselling that continues today.
Both sides are at fault. I've seen it close up. Government making unreasoable demands it thinks it can get away with, and corporations acting rationally by trying to chisel, cheat, lobby and otherwise get money for nothing, or as cheaply as possible.
hydra-
he doesn't get them and is not a free rider. he is free to cut his own deal based on what is important to him and without requiring the approval of a union.
what benefit do i get from union bargaining if i don't want their contract?
lots of employees might prefer to negotiate their own deal. perhaps they want more flexible hours or more pay and fewer benefits. perhaps they want a contract based more on pay for performance and with payscale and job security based on efficacy as opposed to seniority.
maybe they are just willing to work for less money.
unions also do a great job of preventing anyone from competing for their jobs by being able to prevent others from working for less.
if an industry did that with its product, they'd be sued for anti-trust.
imagine being told by your local supermarket that you are not allowed to shop at costco because the prices are too low...
I never said it should. But if that person wants to work for that company, why should he get the salary and benefits the union negotiated, be a free rider?
He's not a free rider. That implies unions negotiate higher than free-market compensation, which unions vehemently deny they do. In any case, let him negotiate any salary and benefits he can on his own. Unions never allow this, of course, because of the risk the union bosses will be shown to be worthless parasites. Even if he does worse, after not paying union dues he might net more than a union employee. Win-win all around.
And, should management elect to hire said person, why shouldn't the union be free to refuse to associate with said employer?
They should. I'd bet most unionized companies would be quite happy with that.
Finally, why should that prospective employee think he can negotiate alone as well as with a group?
Because he's a free agent who should be allowed to use the company's union contract against them in wage negotiations.
Hydra, perhaps you can explain why U.S. consumption at 70% of GDP is the highest in the world, given all the "corporate chiselling that continues today."
Have you ever considered government is irresponsible, or more accurately foolish, with your money (along with foreign money, your grandchildren's money, etc.)?
Unions are not corporations but cartels.
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If you are the only game in town, what is the difference?
Would you be opposed to unions if they had the same rules and organization? Would you buy stock in one, if it was profitable?
How is a union substantively different from Booz Allen or head shops that provide labor and take a cut?
Without unions would we have child labor or a 40 hour week?
I believe under current rules he does get them. Otherwise the union has a problem, and management will hear about it.
Easy.
Corporate chiselling counts as part of gdp.
Would you trust a gas pump that was not calibrated and certified by government?
If US consumption is 70% of gdp, and government is the other 30% then I have two questions.
If that is the highest in the world, doesnt that imply we have the best and most efficient government?
How do we justify the idea that real government cost (through regulation) is several times that?
Have you ever considered government is irresponsible....
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I have no children or grandchildren so I am immune to that emotional argument. We can do work that needs to be done and give them the benefits of that work and part of the bill for it, or we can leave them huge deficits in infrastructure, education, and elder care.
Have you considered that government, corporations, non-profits, churches, and families are composed of fallible individuals, and NONE of them are perfect?
Because he is a free agent....
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That is idiotic.
Why do we organize marines in squads and platoons when individuals can negotiate with the enemy as free agents?
Would you trust a gas pump that was not calibrated and certified by government?
Depends on who certified it, but basically yes I would.
"Without unions would we have child labor or a 40 hour week?"
Complete bullshit. In 1922, Ford shortened the workweek from the industrial standard of 50 hours, including half a day on Saturday, to a five-day, 40-hour week." "... auto companies were not fully organized until the late 1930s. The legendary UAW Flint sit-down strike and the “Battle of the Rouge Overpass” both took place in 1937."And we don't have child labor because industrialists like Carnegie and Ford made the entire nation wealthy enough to allow us to end it. Unions are not the saviors of the working man and were not needed to address the excesses of the industrial age. The political system was fully capable of addressing those problems.
We can do work that needs to be done and give them the benefits of that work and part of the bill for it, or we can leave them huge deficits in infrastructure, education, and elder care
Elder care isn't the government's job, and any deficits in infrastructure and education are the government's fault.
Elder care isn't the governments job.........
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I was picking at random.
How about we give them a deficit in national defense.
So if we give them cash debt it is governments fault and if we give them some other kind of deficit it is governments fault.
But we are government, (by proxy) so I guess whatever happens is our fault.
Still don't believe govt workers are hugely better off than the rest of us.
Che,
Give me a break.
Did we have child labor because we were poor, of were we poor because we had child labor?
I get it. When Ford reduced the work week it introduced pressure for others to do the same.
So why didn't it happen sooner? Industrialists were around long before Ford.
The political system was capable, but it worked a lot faster with prodding from the unions.
Or are you claiming the unions had no influence?
Unions are not the Savior of the working man. And they have not destroyed the ultrarich, either.
So what, exactly, is the problem?
Unions are not the Savior of the working man. And they have not destroyed the ultrarich, either.
So what, exactly, is the problem?
Hydra, do you really need this explained? Unions work outside of market forces. Why do you think industrial employment has been falling since the collapse of the soviet union? Global economy, global workforce. Unions could no longer dictate terms of salary and benefits for goods and services we buy. From everything I've seen, and I'm a lifelong Detroiter, unions are possibly the most economically destructive force there is.
The only thing they've done, despite what the libtard press tells us about creating the middle class, is provide a clear way to identify and enforce safety issues. Worthy, I think. But as they make the workplace safer, they hold a preverbal gun to the head of management to force wage increases, worker reduction guarantees, better benefits than white collar professionals...should I keep going?
I saw the auto industry in Detroit implode as Ford, GM and Chrysler couldn't support the costs of its least important workers. They took that cost out of every other area of their business, engineering, supply base and, yes, the cars themselves. Think about it, GM made so much money off of GMAC and they had to sell it - in what insane world does this make sense? And the UAW was happy to keep pulling blood from the stone right up until the very end. They finally gave "concessions" in 2007, where the companies had to provide cash payments into retirement funds...see the union wouldn't take stock because they knew it was worthless. And they didn't want to run these companies, that would be a conflict of interest. They were like addicts, they were consumed with greed and high on absolute power.
So tell me what kind of good entity destroys its host, the very reason it exists, as it lives?
That's the problem.
"I never said it should. But if that person wants to work for that company, why should he get the salary and benefits the union negotiated, be a free rider?"
He shouldn't and wouldn't. He would negotiate as an individual for his own salary and benefits, just as he would in the absence of a union.
"And, should management elect to hire said person, why shouldn't the union be free to refuse to associate with said employer?"
Do you mean, why shouldn't they be free to withhold their labor from the employer? Well, they should. The employer should then be free to hire others to replace them.
"Finally, why should that prospective employee think he can negotiate alone as well as with a group?"
An employer might recognize the value of an employee who is confident enough in their own abilities and worth to negotiate as an individual, rather than depending on a union hack to do it for him.
"What is the ratio between union dues paid and extra benefits gained? (Notice I did not say earned.)"
There is no doubt that unions have been able to negotiate extra pay and benefits. This is the exact problem being discussed. The level of benefits is unsustainable. Private businesses have been driven to bankruptcy, and government at many levels are now on the brink. The goose that lays the golden eggs is being killed as we speak.
The way to verify the overcompensation of government employees (if not the numerical differential) is to look at two factors in public vs. private employment:
1. The number of qualified applicants seeking each job opening.
2. The "quit rate."
I've never seen a good quantitative comparison -- though I imagine they exist (if you have an online source, I'd welcome it).
But one does not have to be a researcher to realize that government usually does the minimum amount legally required to publicize job openings. They don't want a crush of applicants -- because of cost, adverse publicity and the fact that they often hire on an affirmative action basis -- merit is secondary.
And the low govt "quit rate" is one of those pension actuarial factors whose effect has been consistently underestimated, increasing the underfunding.
Perhaps I'll post up a recent example in L.A. that's prompted a prop to limit applicants applying for city jobs.
"If US consumption is 70% of gdp, and government is the other 30% then I have two questions.
If that is the highest in the world, doesnt that imply we have the best and most efficient government?"
No it doesn't. It only implies that 30% of everything consumed, is consumed government. Value or efficiency aren't implied at all.
"How do we justify the idea that real government cost (through regulation) is several times that?"
Who said "several times"? Surely even you can understand that there are an estimated 2 million employees in private businesses whose job it is to ensure compliance with an unimaginable jungle of regulation and tax code. This work doesn't add any value to a product or service, but only increases the price to all of us, as consumers.
"So why didn't it happen sooner? Industrialists were around long before Ford."
Yes, and before the industrialists the majority of people lived and worked on farms, including their children. Industrialists did not create child labor, they ended it by creating enough wealth to pay families well enough so that their children did not have to work. Unions did not do that, nor did politicians.
But if government is wasteful and other governments consume more, they must be worse. Or are you suggesting some other governments are better and more efficient than ours, even if they are more socialistic?
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"Without unions would we have child labor or a 40 hour week?"
No. Yes.
You should be aware that child labor is common when people are desperately poor. As a country becomes wealthier, fewer and fewer children work. It is a luxury we allow ourselves because we can afford it. Union efforts to eliminate child labor was to protect union workers from cheaper competition, not out of any concern for the well-being of children.
The 40hr workweek, or more precisely the 8hr work day, was an innovation by businesses who could run their facilities continually, 24hrs/day in three 8hr shifts.
I agree there was child labor on farms. I did that myself.
But you avoided the question by jumping to pre industrialists times. There were plenty of rich industrialists before Ford. Why did it take a tragic fire in a locked new York garment shop to raise public consciousness about sweat shops?
Not out of any concern for the children?
Give me a break.
Ok, so unions argued against child labor to eliminate competition, and industrialists made us wealthy enough that we could avoid child labor.
Why did we have it then? Who was in favor? Why did it take laws to prevent sweat shop conditions?
I observed child labor in morroco. Is Morocco so poor and backward that they need child labor?
And lets distinguish between a child feeding the goats and a kid in a factory sweatshop.
What was wrong with two twelve hour shifts?
"I agree there was child labor on farms. I did that myself."
As a farmer, you must be aware that most farmers in pre-industrial times had large families, because children were a valuable and necessary labor source.
"But you avoided the question by jumping to pre industrialists times. There were plenty of rich industrialists before Ford.
Ford was a pioneer in using an assembly line, which is most efficient if run continuously.
Carnegie's steel furnaces were only efficient if kept fired and used continually.
Why do you need answers to these easy questions?
"Why did it take a tragic fire in a locked new York garment shop to raise public consciousness about sweat shops?
Well, here we are, moving on to a totally unrelated subject. The discussion had been about child labor and the 40hr workweek.
obert Owen had raised the demand for a ten-hour day in 1810, and instituted it in his socialist enterprise at New Lanark. By 1817 he had formulated the goal of the eight-hour day and coined the slogan Eight hours labour, Eight hours recreation, Eight hours rest. Women and children in England were granted the ten-hour day in 1847. French workers won the 12-hour day after the February revolution of 1848.
Those were very young women who burned to death. Undoubtedly some highly overpaid government workers enacted and enforced the rules needed to stop burning young women to death in search of a fair profit.
A few years before the fire a strike was held to gain a reduction in the work week to 54 hours. The strike was met with brutal management resistance.
"Why did we have it then? Who was in favor? Why did it take laws to prevent sweat shop conditions?
Those who were poor and wanted to have enough to eat were in favor of it, including the children themselves.
Again, the answer is poverty. Sweatshop conditions exist where people are poor. They are willing to work in dangerous or uncomfortable conditions, because they need the work.
I'm in favor of safe working conditions, but you must realize that improving safety costs money, and in some circumstances, the additional expense can lead to businesses failing, or workers getting laid off.
"I observed child labor in morroco. Is Morocco so poor and backward that they need child labor?
Apparently so. Why don't you figure some of these things out for yourself? Are you aware that the per capita GDP of Morocco is only $4900? Poverty, illiteracy, and unemployment are all high. In other words, it's a backward country, so yes, you are likely to encounter child labor there.
"And lets distinguish between a child feeding the goats and a kid in a factory sweatshop."
Yes, let's. A job in a factory sweatshop is a much better and higher paying job than tending goats. When children are old enough, they may seek out a sweatshop job, and turn over goat tending duties to a younger sibling. In some parts of the world, families only survive because children are able to work in these jobs you deplore. They are thrilled to get them, and line up around the block hoping to be hired. These jobs are much better than some of the alternatives, which include rummaging in the dump every day for items that can be sold, or becoming child prostitutes.
You should think about what happens to children who are thrown out of work when you express your outrage at Nike and others, who then discontinue those operations to avoid further bad press.
They had large families because there was little in the way of birth control, because that was the social norm, and because many did not survive. There were also many farmers and landowners who relied on slaves and sharecroppers.
But the conditions for a child working on the family farm were far different from one living in a tenement and working in a sweatshop.
I never expressed outrage at Nike.
"What was wrong with two twelve hour shifts?"
Ford had trouble keeping workers, as the work on a fast moving assembly line was exhausting. Twelve hour days were too much for most workers. Ford was able to correct his turnover problem by shortening the work day and paying workers the astronomical wage of $5/day.
One good outcome from constant union demands for higher pay, shorter hours, better benefits, etc, although unintended, has been to spur innovation in developing technology and machines to replace workers.
Watching video of cars being welded or painted by robots is really something to behold. Just think, not too long ago this was all done much more slowly, by people, at greater cost.
s early as the 1830s, many U.S. states had enacted laws restricting or prohibiting the employment of young children in industrial settings. However, in rural communities where child labor on the farm was common, employment of children in mills and factories did not arouse much concern. Another problem for children was the popular opinion that gainful employment of children of the "lower orders" actually benefited poor families and the community at large. Entire families were hired, the men for heavy labor and the women and children for lighter work. Work days typically ran from dawn to sunset, with longer hours in winter, resulting in a 68-72 hour workweek. Many families also lived in company owned houses in company owned villages and were often paid with overpriced goods from the company store.
By the late 1800s, states and territories had passed over 1,600 laws regulating work conditions and limiting or forbidding child labor. In many cases the laws did not apply to immigrants, thus they were often exploited and wound up living in slums working long hours for little pay. Throughout America, local child labor laws were often ignored.
Now, if a shorter week was so desired by industry, why did it take more than 1600 laws and a half century to bring child labor to an end, only to have some companies pushed the practice overseas?
"But the conditions for a child working on the family farm were far different from one living in a tenement and working in a sweatshop."
It certainly was! The child in the sweatshop had an opportunity to improve his life, whereas the child on the farm was doomed to backbreaking drudgery, from before sunup to after dark, sometimes in cold, wet, miserable conditions, every day, for the rest of his life.
Why do you think young people left the farm and moved to the cities looking for a better life?
You can answer most of these questions yourself before you start typing, if you take the time to think things through. Give it a try.
So, Ford would have kept longer shifts except it was physically impossible.
And robots were the result of union agitation for higher pay.
Nice.
One of the early " robots" was a water driven hammer invented by some monks, to make forging more possible than by hand. It had nothing to do with labor demands for higher wages.
Hydra, 70% of GDP is consumption. The other 30% is investment, government spending, and net exports.
Consumers would save instead of spend, or spend somewhere else, if there was "corporate chiselling."
You seem to have little faith in the free market and individual responsibility.
Government has many functions. However, one of them shouldn't be creating trillion dollar crises, and then spending trillions of dollars to fix them.
Unfortunately, that's what happens when a bunch of lawyers micromanage an economy.
The $5 trillion of added national debt over the past four years could've been better spent.
"[immigrants]... were often exploited and wound up living in slums working long hours for little pay."
Which they STILL found to be a better life than the one they had left in the old country.
"Throughout America, local child labor laws were often ignored."
And why do you suppose that was?
Could it be that it was because such laws were ill advised, and didn't meet the needs of the people? Perhaps the efforts of clueless nannies, just as many are today? Or, as I've explained, the work of unions, discouraging cheap labor competition?
In many cases, it was necessary that children worked, for reasons I've already explained, so of course laws forbidding it would be ignored.
"Now, if a shorter week was so desired by industry, why did it take more than 1600 laws and a half century to bring child labor to an end, only to have some companies pushed the practice overseas?
Read that again to yourself. If there ever was a non sequitur, and I've seen many, this one takes the cake for its brevity. Time to quit hitting the sauce?
As I've explained, child labor exists because there is a need. You've just asked why 1600 laws failed to eliminate it, and the answer, as before, is that laws against something people need can't be effective.
It has more to do with the needs of the children involved than with what others might imagine is desirable.
You have ignored my previous point about the fact that a job in a sweatshop may be the best job available for some, no matter what well-to-do busybodies like you think of it.
"And robots were the result of union agitation for higher pay.
Nice."
You are just talking out of your ass, now that you have no real responses. Business owners must constantly strive to reduce their costs, and labor is often one of the largest. If labor costs go up, it becomes easier to
justify technology.
"One of the early " robots" was a water driven hammer invented by some monks, to make forging more possible than by hand. It had nothing to do with labor demands for higher wages."
That is my point exactly. Thanks for making it for me. The monks wanted to save on labor by using a machine instead. The more the labor cost in time and tedium, the more advantagious the machine became. The monks could now spend their efforts on more important work requiring more skill.
This is also a perfect argument for outsourcing, by the way, thanks for presenting it.
Geez hydra!
Where do you get all this (for want of a better word) weird stuff you come up with?
History books?
"Social Injustice In These Rotten United States"?
If I answer the questions myself I don't get to enjoy your invented fantasies.
No, exactly it isn't your point. Your claim was that robots were invented in order to escape the tyrranny of high union wages. What your example shows is that, if you can't get long hours a low wage, a better solution is longer hours at no wage.
By your argument, eventually the productivity curve goes vertical and we need no workers or production goes infinite and prices collapse. This is reduction ad absurdum, but it shows that your argument that management must always reduce labor costs does not square with your argument that industrialists eliminated long hours and child labor voluntarily out of altruism.
So, if we eliminated the laws against child labor, it would come back because children and their parents need the work?
In partial agreement with your argument one reason I am well to do is that I spent some time in factories. But, I had the advantage of only having to work 40 hours, so I could go to school.
Child labor is a self fulfilling prophecy. If it is allowed, it lowers wages for the parents so much that it becomes necessary.
"If I answer the questions myself I don't get to enjoy your invented fantasies"...
Well hydra so far as this particular topic is concerned you seem to be unenviable font of leftist fantasies...
Still you have acknowledged that government workers tend to be useless with your: "You mean like billing the government till it bleeds?" statement...
Good old Hydra, never met a strawman you didn't like.
You really need to learn to read more carefully and then think about what you've read. An education in economics, history, and logic would also go a long way toward enhancing the quality of your comments on this blog.
It isn't enough to respond to things people haven't written. You must not mind being viewed as a fool. You have offered ridiculous arguments, that have little relation to the points being discussed
You are missing some important concepts, and until you understand them, your comments will have value only as comic relief. That isn't a total waste, but I suspect people want more from reading this blog.
An education in economics, history, and logic would also go a long way toward enhancing the quality of your comments on this blog.
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How would you know what I have studied? And since you will dismiss any of it as leftist hogwash, regardless, why would you care? (for the record, my background is mainly math and chemistry, which require not only logic, but something you don't seem to care for, which is proof. And also graduate level courses in statistics, economics, finance, business law, contracts, and history.)
Strangely enough, in my career, this is the only place my education has ever been called to fault, except for some far left environmentalists who also think I am uneducated.
It isn't the quality of my comments that you don't like, but the contents, which as I pointed out you will dismiss out of hand anyay.
And as for making up responses to questions not asked, where did you come up with the one about me expressing my outrage at Nike?
For you, a straw man is any question you don't have a real answer for, and an idiot is anyone who disagrees with you.
I get your point, I understand your theories. But I believe your faith is overweighted when compared with reality I see outside the window.
Still you have acknowledged that government workers tend to be useless with your: "You mean like billing the government till it bleeds?" statement...
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This is a complete misstatement of what I said, but if that kind of fantasy makes you feel better, knock yourself out.
I agree. First rule, all conservatives and big business supporters are not allowed to withdraw Social Security nor participate in Medicare/Medicaid. Or mail a letter, or utilize the Police or Fire Dept, or check out a book from the local library. Matter of all fact all conservatives and big business supporters should stop paying all taxes now.
Can't support socialism now, can we?
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