In the past few
days, two friends of mine (Rick and Bill
) exchanged a few emails on then topic of Labour Unions. Here is the content of those exchanges.
Begin forwarded
message:
From: Gene
Date: September
3, 2012
To: Rick
Subject: Re: A different point of view
Good
morning gentlemen! I have found some time to weigh in on this
discussion….
My
arguments against unions are based primarily on a belief that property rights,
and their protection, are an essential feature of a civil society. Without
property rights, the strong can take from the weak with impunity.
The
most fundamental property right the ownership of ourselves [our bodies,
our minds and the things that these can do]. Another fundamental property right
is that we own that which we produce with our minds and bodies - our labour -
unless we give these products up to another through legal contract [see
employment and intellectual property law].
In
Canada, while property rights are not explicitly protected under the Charter of
Rights [ NOTE that these are protected under the US Constitution], we have a
long tradition of property rights protection and we have created the
institutions and laws to protect these under contract. Land ownership is also protected under contract. In addition, accumulated physical and monetary assets are protected under
legal statutes as anyone will know after reading a mortgage contract or a
property deed.
One
type of monetary asset is the ownership of shares in a business. One can
own shares by being the company founder and increase the value of these assets by making the necessary decisions, sacrifices and investments required to see that business succeed. Any way to own
shares in a business is by purchasing them. In addition, shares can be earned
under a formal Employee Compensation Plan designed to incent and reward
specific employees whose positive impact on the company's bottom line is
exemplary.
In
business terms, various ' factors of production' are required to grow a
business. One of the most important factors of production are its Human
Resources - employees who bring with them the skills, experience,
knowledge and motivations to help a business succeed. In most cases, from my
experience in the private sector, the best employees are rewarded financially
and with increases in responsibility [ aka promotions]. My current employer,
for example, rewards top performers by inviting them to participate in a share
ownership program after one year of employment if their contributions merit
this privilege.
An
employee's job is not his personal property. The employer creates and owns the
job in response to new or increasing demands on the enterprise. The only part
of this job that the employee owns is his person, and he employs this
personal property as an instrument to acquire other amenities necessary for
survival [food, clothing, shelter, transportation,etc] and/or to improves the
quality of his living standards ( toys, vacations, etc). In an employment
contract between employee and employer, the employer entrusts the employee with
the use of other company assets [money, equipment, intellectual property, proven
operational procedures, and other employees who have signed similar employment
contracts] in order to conduct profitable business for the company .
When
an individual employee uses his job performance to negotiate better terms of
employment with his employer, he will likely be successful if the job
performance warrants it and unsuccessful if it does not. As a recruiter over
the last 31 years, it is never ceased to amaze me just how specialized our jobs
have become. This is why it is so difficult to find the right talent in
private sector enterprises that must survive in an increasingly competitive,
global business environment. One weak member of a senior management team can
cost a company dearly, and one 'Wayne Gretzky' can significantly raise the
overall performance of the business. This is one reason why some senior
executives get paid like Wayne Gretzky and, unfortunately, the business-bashing
media of organizations like the Toronto Star and CBC will never be able to
appreciate the contributions of these men and women as outside observers of the
enterprise.
When
an individual employee is no longer free to the go shared his/her terms of
employment with the employer on his or her own merits, but instead, is forced
to negotiate as a member of a group all members of the group stand to gain
regardless of merit, then the individual employee has less incentive to be an
exemplary job performer. When the group threatens to remove one of the key
factors of production from the production process, then this threat is an
attack on the property rights of the owners of the business. Remember - a job
carries with it no property rights within the business. Therefore, contests
between unionized workers and employers is not a battle between property owners
- there is only one set of property owners in this equation that being the
company owners. When one employee chooses to remove his or her
"property" ( body and mind) from the employee/employer equation, it
is unfortunate but legally appropriate. However, when a group of employees
choose to remove their collective property from the same equation, the impact
on the business is much greater and is likely to bring long-lasting
consequences to the value of the private property that belongs to the business
owners. Since a strike is a planned action - it does not occur by
accident - it is therefore not insurable and the company owners cannot
buy protection from the damages caused by a strike.
A
strike is described by union leaders as a " negotiation tactic". I
see it for what it really is - blackmail.
Rick.
When you and Janice go shopping, do you "comparison shop"? Do
you seek the best combination of price, utility, quality and/or convenience? Do
you care whether the product originates in Canada or the Philippines or Brazil
or China? You are currently driving a Mini Cooper which was designed in Germany
and assembled with parts that were made by businesses from many countries - is
this an indication that you are like most people who are willing to purchase an
item without 1st investigating whether it was " union made" or
made in Canada? [ BTW. Did you know that Magna International operates in
over 30 countries around the world?]
My
point is, most of us 'vote' carefully with the assets [ salaries, etc] that we
have earned through our labor and the sacrifices that we must make to earn
those assets. We generally do not care about how or where the product of our
desire was made - we only care about whether it meets our criteria for price,
utility, quality and convenience. However, it is strange that we behave so
differently when one of the factors of production -labor- for this product
comes under discussion. The same holds true when we save for our retirements -
most of us hold investment instruments [stocks] in the very same corporations
that we choose to demonize. Oddly, we then dump those stocks when they perform
badly because we as shareholders would never have purchased them in the 1st
place without the expectation for a profitable return. Remember - a profitable
return is only likely when the business attempts to optimize the use of all
factors of production in a way that will reduce costs [ including labour costs
] and increase profitable sales for its owners [including the
shareholders].
As
you know, I work for Canadian company that operates its enterprises in several
countries including the USA, Mexico, Brazil, France and Germany. Since I joined
the company in 2009, business revenues have grown from $33 million to $68
million and we have expanded business operations for our SAP consulting
division to the USA, Mexico and Brazil where none previously existed. To
accomplish this, our management team has taken many risks and made many
investments including establishing legal business entities in each of these
countries and establishing business offices to support these business
entities in countries where he had no previous knowledge of the domestic laws,
customs, labor markets,etc. There is no room for 'deadwood' in a business like
R3D. Also our profit margins are kept in check by the presence of many
competitors.
In
public-sector enterprises, there are no competitors. Because monopoly
operations are the law of the land in government enterprises, there is no way
to contain costs except politically. All funding is obtained through coercion
[try to evade paying you taxes and see how long you remain a free man].
Monopoly operations in government enable and permit monopoly operations in
labour [aka unions]. The "assets" of government operations are
considered to be "publicly owned" but have you ever known a
citizen to have an equity stake in those assets similar to a share in a private
corporation that can be sold on the market for financial return? [ bonds do not
count because they are simply loans with special terms, not a claim on
assets]. When a private-sector union strikes, the company's shareholders
feel the pain due to real losses incurred when production is disrupted.
When a public-sector union strikes, the pain is felt by politicians who fear
the loss of re-election possibilities when government services are disrupted.
If we taxpayers really do "own our government " in the true sense of
ownership, then do we also own the jobs in government? Should we not have a say
as to whether we are prepared to be held hostage by a special-interest group -
ie the labor union that is holding us hostage? Is it truly a democratic society
when one special-interest group can hold so much sway over all citizens?
The
labor union movement is adversarial in nature as it pits its own interests
against the interests of society and the legitimate property rights of many of
its members. Somehow, over time, this movement [ with the help of
snake-oil selling politicians] has negotiated the legal right to do
attack our rights . All laws are not fair laws, or you even ethically sound
laws. Just as I see taxation is theft, I also see union strikes as an attack on
property rights and a form of theft.
As
for the extremely high compensation packages of some executives, I also take
offense as a shareholder when one of my shares performs poorly while the
executives' receive nosebleed paydays. However, as a shareholder, I have a
right to be concerned. If I was not the shareholder, then it would be none of
my business. In any case, if I do not like what an executive is doing to my
investment in the company he runs, I am free to sell my shares and invest
elsewhere.
Like
Wayne Gretzky who earned exceptional paydays by being an exceptional talent who
was a highly profitable draw to private enterprises known as the NHL and
Edmonton Oilers, there are "Wayne Gretzky-like" executives who
bring great value to business enterprises. However, since few
citizens take as much interest in following the "sport of business"
as they do the sport of hockey, then the talents of these executives
often go unsung among the masses.
Rick.
I suspect that you are a fan of protecting property rights as much as I am, but
that you have not given this topic as much thought as I have.
You
have worked within a public-sector institution for over 30 years of your
career. Prior to 1981, while you and I were employed by the [ a physical
fitness company] , we were employees and not owners - as such, we were not
particularly concerned about the business risks and profitability of that enterprise.
Neither of us had a personal stake in the factors of production that determined
whether it succeeded or failed.
It
is an real eye-opener to be an owner of a business enterprise. I am a
shareholder of R3D as well as Hardwood Ski and Bike. While I was employed
as an IT recruiter for 28 years, I never earned a salary - 100% of my personal
income was derived from sales commissions. These facts, I believe, qualify me
as an entrepreneur and a capitalist. These roles have me with a first hand
understanding of the “machinery” of private business enterprises as well as an
appreciation for the value of strong business leadership.
My
point is, Rick, that we all take different paths in life and each path exposes
us to experiences that contribute greatly to shaping our beliefs and our
thinking. My fight for smaller government, the elimination of unions, the
reduction of taxes and the stripping away of tens of thousands of useless
regulations - this fight is clearly a byproduct of my work history and the
personal experiences of their brought me. My truth is my truth. Your are truth
is your truth. We are each entitled to our own truths. However, when one’s
truth leads him to the belief that he is entitled to take the fruits of one
man’s labour [taxation] in order to supply these to another man ‘unearned’,
then this is where I draw the line. In is one thing to help a friend in need of
to voluntarily give to a community charity; it is quite another to give up these
fruits through force and for a cause in which you do not believe.
As a believer property rights, I doubt that I
will ever stop feeling the injustice of government and the special privileges
that they bestow on their political friends such as labor unions.
Concerning the
alleged benefits of unionism to the Canadian middle class.
ð
I agree with Bill - I do not trust statistics published by unions
or their supporters. Selectively chosen and/or interpreted stats can
argue any point of view that one likes, and union leaders and their friends will only promote their
self-serving causes.
ð
The Toronto Star is notoriously a pro-socialist newspaper. Have you
ever read an article in the Star regarding the protection of property
rights?
ð
Socialist “income-sharing” strategies are counter-productive because
they distort labour markets in a way that shifts the labor factor of production
away from their most productive applications to less productive uses. This
results in less wealth production than would otherwise be the case. If we as a
society wish to raise living standards for everyone, increases in productivity
in the wealth-creating enterprises is the only way forward (NOTE: All
government enterprises are wealth-consuming enterprises because they are funded
by coercive taxation to meet political agendas and they do not produce tradable
goods and services except on a monopoly basis – for example, the LCBO. All
private sector enterprises, on the other hand, produce goods and services for
people who freely exchange some of the accumulated assets gained from their
work [ie money] for these goods and services - no coercion required).
ð
No one can legislate productivity. Strikes will not create more
wealth. The so-called "middle class" is an arbitrary and relative
measure defined by statisticians - if Canada's nation wealth declined by 80%,
there would still be a statistical "middle class" as would be the
case if it increased by 500%. The "poor" would still be poor in the eyes
of some members of society even if their living standards were to increase
substantially because the poor would still be defined as the bottom 20% of
income earners. We live in an Era of Envy where the bottom 99% demonize the top
1%. Yet, the bottom 50 % rarely know anything about the richest members
of society and the contributions that they have (or not as the case may be) made
to societal living standards.
If unions were to spend
more time helping business enterprises to be more productive and profitable,
rather than constantly trying to steal a piece of the wealth pie from the
capitalist owners who have legitimate property rights, then more good-paying
jobs would emerge and middle-class prosperity would blossom from merit rather
than coercion.
And if governments
were 1/10 the size that they are today, there will be that many more resources
applied productively to wealth-generating economic activities than exists
today.
Finally, if we
returned to the Gold Standard, then ……….. [ thats a story for another day :-) ]
Gene
On
Sep 2, 2012, Rick wrote:
Good morning.
I just read this morning's Star article on unions and their
impact on our society (which might be taken as "the society in which they
operate"). Interesting piece.
A few items came off the page for me:
1. "When union membership thrives, so does the middle
class." Harvard University and other economic institutes have shown an
incontrovertible correlation between the rate of unionization and the
percentage of the nation's total wealth held by the middle class.
2. "Unions have narrowed the gap between rich and poor
through the first 70 years of the last century." "As unions were
weakened by globalization, free-trade agreements and anti-labour legislation
the gap goes off the charts" (More about this later)
3. "In 1968, when 28 percent of workers were unionized, the
middle class claimed 53.2 percent of the nation's income [on 60% of the
households]. In 2010, union membership had plummeted to 12 percent while the
middle-class share of income dropped to 46.6 percent. Meanwhile, the proverbial
"1 per cent" saw its share more than double from 9 percent in 1974 to
23 percent in 2007." (Canada'a numbers were 37.6% "union
density" in 1981 and 31.5% in 2010 with most of that in the private
sector.)
4. CEO salaries and perquisites: "CEO pay packages swell by
double-digit increases every year - in good times and bad - even while they put
downward on wages, pensions and benefits."
There is a lot more in the article, but I put this forward as a
rebuttal to Gene's point of view about unions being "thieves of
capitalists' profits". Here is my point of view on that: A capitalist
seems to me to be the person who creates the idea, the invention, "the
company" (as in Henry Ford) which produces a product or service for sale.
Just as a musician/artist should receive royalties for his or her work, so
should the originator of the "company". After all, no one would
benefit economically if it wasn't for that person. Now, along comes two groups
of people: "the workers" and "the administrators/managers".
Both are employees of "the company". Both benefit from the
opportunity to work for "the company". The key thing here is that
these two groups are both employees.
So here is the lead-up to my point: If the
"capitalist" benefits from the propagation of his/her idea (etc.),
then part of the wealth should rightly be earned by the two groups which make
that propagation happen: "the worker" and "the administrator/manager"
without whom nothing would happen. In capitalist terminology, this is what is
deemed to be "profit centres" - each type of worker becomes her/his
own profit centre from their involvement in "the company" and are
free to spend their earnings, as is the "capitalist", in their
society thus creating the local/national economy - and creating other
opportunities for "capitalists" to cash in on opportunities where
earnings are being/need to be spent, and so on.
My point: If unions and their workers are nothing but
"profit thieves" (as you called them) then administrators/managers
and, yes, CEO's are nothing but profit-sucking middlemen (and women) between
"the capitalist" and "the workers". To whit: Since the
early 1990's, the wage differential between workers and management has gone
from a factor of 4 to a factor of 10. To quote the Star article: "As for
the top 50 "layoff leaders" - those companies that fired the most
workers - their CEO's averaged almost $12 million a year in salary." My
question is: "Why?" Weren't they just doing their job? Why do they
get obscene amounts of remuneration ("pay for service") in
ever-increasing amounts by demanding more for doing what they should be doing
anyway? It's kind of like what you call "profit-thieving unions and their
workers", isn't it? If CEO's - "the administrators/managers" -
get performance bonuses (even when the company goes bankrupt, it seems) then
why shouldn't "the workers"? If "the capitalist" wants to
improve his/her bottom line in "the company" then perhaps a major
scaling back on "profit-sucking middlemen" and their "culture of
entitlement" should occur?
There is an ever-increasing culture of entitlement in our
society (Western society?) - at all levels. It has been stated that the cost of
labour is the culprit and that such labour should be moved to Third World
countries (Globalization?) to improve the bottom line. Well there are two types
of "labour" in "the company" aren't there? There are
millions of business MBA grads out there who could run a company and not just a
handful who demand ever-obscene levels of "pay for service". So to
use your terminology: "If they don't like the pay [for service] they can
quit and work for another company", can't they? Just as "the workers"
can leave if they don't like their level of pay then so can the other group of
workers in "the company".
As for the "1 per cent": The Star states, "In
fact, the richest 1 per cent of Canadians took a stunning one-third of all
income gains between 1997 and 2007. That compares to 8 per cent in the
1960's." Maybe it's time for the richest citizens - not all of whom are
"capitalists" but the beneficiaries of their society's economy - to
put back into their society. When the French Revolution took place there was an
ever-widening wealthy class, a shrinking middle class, and an ever-widening
poor class and society revolted. In Canada in 2012, there are the same economic
conditions. What must we do to prevent a "French Revolution" of our
own?
Rick
