Tuesday, December 20, 2005

Why they strike, illegally. (Or: The purported Wal-Mart effect in reverse, and for real.)

The transit workers here in New York City have started an illegal strike, closing down a transportation system that seven million people use each day, and paralyzing the highways into and out of the city that are used by a great many more. How come?

Well, the average NYC bus driver makes $63,000 per year -- that's only 50% more than the median household income in NYC of a little over $40,000 ($39,937 in 2003, plus a few percentage points for inflation) and median household income in the entire US of under $45,000.

Two average NYC bus drivers who marry each other have more than $125,000 of wages, which places their household in the top several percentage points of the income distribution, happily among "the rich" whom Democrats and the left so regularly bash.

Of course, they also receive benefits such as comprehensive medical coverage towards which they pay zero, and full pensions at age 55 after only 25 years of service.

Those on other job lines do well too: janitors and bus cleaners for the transit system are paid over $20 an hour -- more than 50% above the $13 an hour private sector rate (which results in each job opening attracting 140 test-passing, qualified applicants).

Being stuck with wage differentials no larger than this along the entire range of union positions versus comparable private sector jobs, well, it's no wonder the transit union felt itself provoked into an illegal strike against the public interest! What else could it possibly do?

Now, just recently I was following some threads of Wal-Mart bashing among various left-leaning commentators. Most amusing was watching purportedly market economists like Paul Krugman and Brad DeLong twist and cavil to sign on to this politically obligatory bashing, while looking for some rationale to keep from looking professionally absurd and hypocritical, even to themselves.

Krugman of course used to ridicule those who claimed that US jobs were destroyed by super-low wage foreign competitors that destroyed US firms outright while employing no one here in the US at all. It was just a matter of hot dogs and buns, he lectured -- if a hot dog maker increased productivity to make more hot dogs with fewer workers, this did not reduce employment but rather freed workers to move into making more buns. The result was both more hot dogs and more buns for the same amount of people -- so everybody became richer! Productivity increases that reduce employment in a particular industry were good. (See "agriculture" for the last 150 years.) The employment level is set not by the hot dog maker who lays off workers, but by the Federal Reserve.

But now he's signed on to the claim that firms located in the US that put out the "hiring sign" right here at home do destroy US jobs -- when they increase productivity and don't pay union-and-Democratic-party approved wages. It seems that in his mind Asian sweatshops that destroy US textile firms outright are better for US employment than a US firm that goes into a low income community, advertises to fill the 525 new jobs it is creating, and gets 8,000 applicants from those who are unemployed or in lesser jobs.

Krugman gives no explanation of this mystery -- but here his friend Brad DeLong has just stepped in.

Professor Delong has come up with the idea that Wal-Mart has a "monopoly" in the labor market(!) Yes, Wal-Mart is a monopolist, a noxious example, he says, of...

"using local monopoly power to sleaze and cheat your own workers"
Now, I don't know where Berkeley professors do their shopping, but the last Wal-Mart I went to was the anchor tenant of a mall that was host to several other retailers, which itself was on a commercial strip with dozens of other employers stretching out of sight in either direction -- retailers of all sorts, car dealerships, restaurants, grocers, gas stations, swimming pool sellers, contractors, you name it. This commericial strip with scores of businesses of all descriptions -- plus the entire surrounding local community with all its other businesses -- is a labor market over which one single Wal-Mart store has monopoly power! It's too amusing to be true. ;-)

I mean, when Wal-Mart first enters a local market to offer jobs there it has zero presence in the market -- and how does a firm that's not even in a local market obtain monopoly power over it to force its new hires to accept sub-par wages?

Yet the "monopoly" claim is made, and we can see the inexorable logic that drives a party-position-first economist to it. (1) Wal-Mart must be abusing its employees, as a matter of dogma, that's unchallengeable. (2) But an employer can't abuse and cheat its employees in a functioning labor market -- not systematically with great success over a long run -- because they will just leave it to go to another employer, that's economics. (3) Therefore, there is no functioning labor market, Wal-Mart has a labor market monopoly.

There is no reason to look at facts (such as one employer's share of total local employment) because the logic is irrefutable. QED.

OK, back to the NYC transit strike. How does the transit workers union obtain compensation, oh, 50% above free market levels and still feel confident in its ability to conduct an illegal strike against the public interest to get more?

Well, the union has a monopoly, a real life monopoly, on employment in a transit system that millions of people -- the great majority of whom are poorer than the transit workers -- rely upon to get to work and for a host of other vital needs. That's monopoly power.

Will Professors Krugman and DeLong consider the effects of a real life (as opposed to fantasized) labor market monopoly here? Will they raise a call in defense of the lower income masses who are being exploited and extorted by this monopolist? After all, Krugman is writing for a New York City newspaper. And this strike is destroying retail jobs and slashing retail workers' income, in what is supposed to be their big season, for real here in his newspaper's home town.

Probably not. And when they don't we'll know why.