(The title doesn’t go all that well with the post; it’s just what popped to mind, and I felt compelled to use it.)
I am one of those who complains about a return to a new Gilded Age. Our economic policy is set up to return more to people as a reward for having money than it is to reward working. But, still, there is a problem — it may or may not be new. What do you do with a work force that is, in some respects, calcified?
When I say calcified, I’m thinking of the sort of worker that has worked for the same company for decades; has come to earn a decent wage with benefits — health benefits being of paramount importance these days — and has organized his life around these facts. His mortgage requires something like his current level of income; he is too old to be easily insurable on the private market but too young for Medicare. Perhaps his kids are ready to go to college. He’s good at his job, and he works hard; but he hasn’t done much else in a long time, and – here is the catch – there is diminishing demand for his company’s product.
Unions are of some use here — they can make sure that it’s really and truly a diminishing demand causing the problem and not simply a desire on the part of management to keep a greater part of the pie for itself.
But, let’s assume that times have changed and the company’s business model is no longer viable. What to do with that worker? Do we worry about “what’s fair?” Do we harden our hearts because, tough shit, he should have known better than to put his eggs in one basket?
I don’t really have good answers. Just some cheerful questions for Labor Day.
This country and the Congress were willing to bail out the banks when their bad business judgments nearly destroyed our economy. We’re still suffering the consequences of their bad decisions. But workers and unions? Who cares about them? We all better, or we’re doomed as a nation. Lincoln and FDR understood this. But too many in this country no longer understand the role unions must play in a capitalistic system to temper its natural excesses. Happy Labor Day!
I think I prefer to look at it as workforce entropy rather than workforce calcification. Every time I take up the “Evil Corporate Goons v. Angelic, Downtrodden Workers” debate, I feel like I’m beating my head into a brick wall because so many in the latter group seem to view our modern marketplace as some sort of fixed point in time that they can continually fleece until a state of equilibrium-ish bliss exists in which CEOs and janitors both punch the same time clock and compare pay stubs over a pitcher of Michelob at the whistle every Friday afternoon.
Let’s face it, our modern levels of industrialization just don’t require the strong-backed. low-skilled “lifers” that used to be the commonplace in the rust belt and elsewhere. So let’s say, just for fun, that this is 100 years ago and the guy you’re talking about in your anecdote is a farrier. Obviously, the advent of automobiles (and even trains, prior to that) is going to have a devastating effect on the horseshoeing industry, so our guy is basically screwed, having dropped out of school and pursued his dream of providing high quality footwear for our equine engines of transportation and agriculture. Certainly, he is a hard worker. We can also fairly well surmise that he has obligations that need to be met financially.
Now, plugging our new data into your anecdote, let’s use a little whimsy and forecast the reaction from Organized Labor and Government and others toward the situation.
First, the International Brotherhood of Farriers and Barrel Hoopers will take their (significant) financial influence (derived, of course, from a weekly pillaging of their members’ pay) and put it to work to install “Hoof and Hoop” friendly legislators, if not just “persuade” a few that are already in office.
Next, the legislators decide that the best way to solve this perceived “injustice” is to mandate that every “financially viable family” (an arbitrary target, to be sure) is to own at least one horse and purchase at least one wooden barrel every year (hey, collective bargaining and politics make strange bedfellows) whereby creating a nice, steady flow of work for the farriers and hoopers.
Now, detecting an unfair abuse of the commerce clause, Constitutionally-minded thinkers & activists (we can call them Tea Partiers, if you wish) suggest in the newspapers and anywhere else they can garner an audience that perhaps this is an unnecessary (and unconstitutional) burden on the people who are being forced to own these unnecessary horses and wooden barrels, just to keep an obsolete industry on life support.
Smelling the makings of a revolt at the ballot boxes, the legislators get hard to work trying to pacify the more successful economic earners, who, let’s face it, are actually the engines driving this whole little game, and who ultimately will fund the next round of elections. So what do they come up with? A tax deduction for those who are forced to purchase the horses and barrels necessary to keep the farriers hard at work.
So horses are now a tax shelter! More people decide to dump money in them.
Now, this sudden spike in demand for horses creates a rise in the prices of the animals, creating a boon for breeders and ranchers, so more individuals begin raising horses to sell into this guaranteed revenue stream. Thanks to absurd modern farm subsidies designed to strip competition out of the ag markets and the availability of CRP funds, the ranchers opt to ignore other animal-based profit centers and focus on horses. They let the horses graze the CRP, so the food for the horses just became Federally subsidized. This causes supply deficiencies in beef, pork and other markets, as “horses are the new cash cows.”
About this time, local governments start to grow weary of cleaning up after horses that metro-dwellers are forced to purchase, so they lobby the government for an exemption from the requirement to own a horse. Obviously, the request is granted because shining a light on the situation reveals the true idiocy of a man who lives in a New York high rise owning and maintaining a horse that is of no use to him.
The labor unions catch wind of this exemption and naturally know this will be viewed as a chink in their armor (it is) so they begin to rally around the farriers and hoopers, trying to paint those metropolitan socialite scoundrels as the purveyors of the worst sort of evil: The kind that would kick a poor, working class guy when he’s down. That’s right, these evil scum-suckers are so rotten at their core, that they would rather see a farrier’s family starve and turn to all forms of crime than to simply own and maintain a simple horse. I mean, is that too much to ask? A simple horse. People have been doing it for thousands of years. Jesus had a donkey, so you can own a horse to save the farriers. The media sees this human interest bonanza and runs with it….making it sound ridiculous that anyone would want to be exempt from what is so clearly a law that betters everyone.
Now the ranchers, having been the beneficiaries of one of the biggest windfalls in economic history, suddenly find themselves in a position where they have breached the tax bracket necessary so that they themselves are now under a government requirement to own and shoe their horses just like the social elites….so they start trading horses among one another to vary breeding stocks and maximize the value of each and every horse sold. Savvy investors begin trading horses as a commodity on the open market, pre-selling large quantities of horses, guaranteed to be profitable by clearing houses that have been watching the meteoric rise of horse values.
Enter Uncle Sam again. The spike in horse prices suddenly makes horses look like a good investment for everybody. Even the lower-class blue collar types that don’t have the financial means to actually own or care for a horse. So the Government, through one of its fringe consumer benefit arms, begins to subsidize and guarantee loans for low-income Americans to own horses. Because let’s face it, owning a horse is the new American dream, right?
The farriers and Organized Laborers rejoice. Because, this is, after all, intended to help them keep their jobs.
Meanwhile, the ranchers have begun their own political movement to entrench this system into a permanent institution. And who can blame them? They have become fabulously rich without taking any actual government/taxpayer money. Sweet! So more ugly bought-and-paid-for roots begin to work their way into the halls of Congress.
Well, about now is when automobiles start becoming mass manufactured, and Americans are becoming sick of the work of maintaining horses and living surrounded by the smell of defecation. Cars become cheaper than horses, and people decide they like them better anyway. So one day the bottom drops out of the horse market.
A few investors jump out of the windows of their lofty offices, but mostly their firms persevere because they were diversified.
The ranchers sell their overstock to Alpo by the pound and then retire on a mattress stuffed with money. Conveniently, since they’ve already bought a collection of legislators, they can now easily lobby for extended ag subsidies that benefit their other endeavors.
The poor are no longer smitten with the idea of horse ownership, so now they set their sights once again on the grass on the other side of the fence, which is not only greener, but has a shiny automobile parked on it.
The government (and thus taxpayers) are stuck holding a bag of worthless horse loans, most of which aren’t worth the paper they are printed on.
The auto manufacturers become the new ranchers, with a revenue stream that rivals the Vatican.
The farriers are screwed, right back where they began. Unemployed, no benefits, no skills, and no real future to speak of. Naturally, they take up a noisy and semi-violent vigil against the Ranchers, because they clearly got rich off the backs of the working class. Right? The media agrees.
The bubble was full of vapor and it burst. The entire thing collapsed into a rotting puddle for the people at the low-end of the spectrum. This is the entropy I was talking about initially. There is only one way to fight it, and that is for the entropic debris (low-skill/no-skill workers) to elevate themselves out of it. And I don’t mean that in the “well, I only know how to push the green button, so you should train me how to push the red button…..or I’ll strike” way. If the government tries to do it for them, it almost universally ends in the type of shenanigans that I (admittedly clumsily) outlined above.
The only reproducible result that I can see in scenarios like this is simply the effect of taking one massive shit after another in our economic engine. We haven’t yet pushed it to the point of failure, but we get closer with every idiotic socioeconomic experiment.
I am a skilled laborer and a business owner. I have chosen to be non-union because I do not wish my rate of pay be dictated by those less capable and less intelligent that I am. Conversely, I would be skeptical of an organization that wanted me as a member if I was dumber and less skilled than the bulk of its ranks. In that scenario, what would they want from me? Money? Money. I am suspicious of anyone whose only interest in me is relieving me of my money.
Happy Labor Day.
You need to read Arnold Kling’s “Patterns of Sustainable Specialization and Trade”, which is his ongoing attempt to replace modern macroeconomics with something that takes into account the difficulty of your older worker to find new lines of work.
This all ties back into globalization, and how our real economic problems stem from rapid industrialization in the third world. We will have these problems until China, India, and elsewhere have all converged upon a western standard of living.