As an economist, I have a hard time explaining "featherbedding." Unions would not want to undertake wasteful featherbedding if the benefit to their members were less than the increased wages that they could negotiate in their absence. Perhaps one could devise a coherent model where the majority of union workers (or their leaders) prefer stupid work rules to higher wages and corporations prefer the stupid work rules to higher wages as well. If so, I would like to see it.

wd40
my parents, both very junior union members far more productive than their seniors, were victimized by union work rules. Senior union members, who are often less productive, prefer work rules, as they limit who can do what and who gets fired first. Essentially, increased work rules mean higher job security for some, and those are the ones who are most likely to lose their jobs. These people would prefer lower wages + job security, rather than higher wages until they're inevitably let go for younger, more productive workers.

wd40
my parents, both very junior union members far more productive than their seniors, were victimized by union work rules. Senior union members, who are often less productive, prefer work rules, as they limit who can do what and who gets fired first. Essentially, increased work rules mean higher job security for some, and those are the ones who are most likely to lose their jobs. These people would prefer lower wages + job security, rather than higher wages until they're inevitably let go for younger, more productive workers.

Автор, ну ты блин даёшь) вчера аж в пять утра заснула)

An optimal contract would not have built-in inefficiencies. Instead of the scenario outlined by HH, older workers could be given a higher base salary and thereby get higher pay even if they are less productive than newer workers. So even if older workers run the union, it is not clear why they would impose inefficient work rules on everyone. In the end it is not an adequate answer to say that some set of people benefit from featherbedding. One must also show that this same set of people would not gain at least as much from an efficiently designed contract [possibly including side payments to those gaining rents from their position of power).

Richard, this is really a high class rant against collective action.

High class because of the apparent reliance on economic concepts, such as competitive wages, cartels, and agency problems.

But in the end it is a rant because of the reliance on a dubious source for your thesis of featherbedding, and no serious analysis of the beneficial tradeoffs necessary to achieve a sophisticated industrial dispute resolution device, one that no longer relies upon the courts.

The better view to take would have been to compare the union's dispute resolution services with the auto dealers mediation dispute services, as I am sure than a serious examination of the two would have showed exactly what was wrong with the UAW as industrial dispute settler.

Richard, this is really a high class rant against collective action.

High class because of the apparent reliance on economic concepts, such as competitive wages, cartels, and agency problems.

But in the end it is a rant because of the reliance on a dubious source for your thesis of featherbedding, and no serious analysis of the beneficial tradeoffs necessary to achieve a sophisticated industrial dispute resolution device, one that no longer relies upon the courts.

The better view to take would have been to compare the union's dispute resolution services with the auto dealers mediation dispute services, as I am sure than a serious examination of the two would have showed exactly what was wrong with the UAW as industrial dispute settler.

Perhaps Posner is better in the courtroom than trying to run some one else's business.

After admitting that UAW workers share of the cost of a car is but 10% he goes on to make a big issue of what may be a 20% difference in pay between the union shops and those of the lower wage southern states most of whom paid heavily in tax breaks and other benefits to attract auto mfgs to their regions. Ah! so assuming that there are no advantages of union labor the "Big Three" may be suffering a $400 disadvantage in labor costs by comparison to the "transplants?"

I just "luvved" this pap too:

As is common in unionized firms, the United Auto Workers has successfully negotiated not only for wages and benefits for the workers they represent but also for rules governing what tasks the workers can and cannot perform, how many workers must be assigned to a particular task,

........... Indeed they have and one of the returns the company reaps is that of an excellent safety record and far fewer injury or wrongful death lawsuits.

the order in which workers are to be laid off (usually it is in reverse order of seniority, because older workers tend to be stronger supporters of unionization than younger ones because the latter have better alternative employment prospects and so don't worry as much about job security) in the event of a reduction in demand for the firm's products, methods of discipline, and so forth.

............ Ha! and does the aging judge think seniority ought to be ignored such that a sharp 40 year old attorney might bump him off the bench? And the "younger have better alternative employment??" How so? or does he mean they're young, naive and more willing to take whatever they can get? After all our great logician has just established that UAW wages are well above what could be garnered were there not union protection.

Perhaps Posner is better in the courtroom than trying to run some one else's business.

After admitting that UAW workers share of the cost of a car is but 10% he goes on to make a big issue of what may be a 20% difference in pay between the union shops and those of the lower wage southern states most of whom paid heavily in tax breaks and other benefits to attract auto mfgs to their regions. Ah! so assuming that there are no advantages of union labor the "Big Three" may be suffering a $400 disadvantage in labor costs by comparison to the "transplants?"

I just "luvved" this pap too:

As is common in unionized firms, the United Auto Workers has successfully negotiated not only for wages and benefits for the workers they represent but also for rules governing what tasks the workers can and cannot perform, how many workers must be assigned to a particular task,

........... Indeed they have and one of the returns the company reaps is that of an excellent safety record and far fewer injury or wrongful death lawsuits.

the order in which workers are to be laid off (usually it is in reverse order of seniority, because older workers tend to be stronger supporters of unionization than younger ones because the latter have better alternative employment prospects and so don't worry as much about job security) in the event of a reduction in demand for the firm's products, methods of discipline, and so forth.

............ Ha! and does the aging judge think seniority ought to be ignored such that a sharp 40 year old attorney might bump him off the bench? And the "younger have better alternative employment??" How so? or does he mean they're young, naive and more willing to take whatever they can get? After all our great logician has just established that UAW wages are well above what could be garnered were there not union protection.

WD40 as you must know "featherbedding" and "stupid work rules" may be in the eyes of the sidewalk superintendent and in the case of assembly line work it might not be the case at all that older workers are less productive, but in any case, all too soon younger workers become older workers and what would you do? Throw them away?

Also once you zoom in close, you'll find that union work rules are based upon reason or as you intuit, they'd not have been fought for and won; indeed union guys are in favor of taking home the cash instead of impeding work flow.

"Featherbedding?" perhaps, after all as pointed out there are 30% fewer UAW guys than at an earlier time with more layoffs coming; truth is the industry is "suffering" from making too many productivity gains and vehicles that last many more miles in such a short time that natural attrition isn't fast enough for the necessary downsizing. This may be a "disease" that leaves 20% of our work force unemployed in years just ahead.

HH or his parents may not have attended enough union meetings to understand why they often resist turning up the speed of the assembly line but the answers are typically higher injury rates, stress problems and higher absentee rates. And again, it may be worth while to note that assembly is but 10% of the cost of the vehicle so there is little to be gained by cranking up the line speed another 10% for a theoretical gain of 1%.

Posner suggests that the union did not accede to the demand that it cut wages and benefits in order for the automaker bailout. This is incorrect. They agreed to reduce wages over a one year period to the level of foreign competitors. They did not agree to do it immediately. A fair analysis would note this.

I agree with Judge Posner’s analysis. Another way of looking at the economic impact of unions is to consider the effect of setting wages according to supply and demand in a free labor market.

Under those conditions, market forces will result in a worker being compensated in line with his or her productivity. An employer cannot consistently in the long run pay compensation that is either above or below a worker’s productivity.

If wages are above productivity, the enterprise will go out of business after a while. On the other hand, if an employer offers wages below workers’ productivity level, those workers will leave. Another employer will have an economic incentive to hire those workers at a wage level higher than the other employer was offering.

As Posner points out, union leaders need to negotiate compensation that is higher than supply and demand would otherwise produce for the workers, in order to justify their existence. To the extent they succeed, that compensation will be higher than those workers’ productivity. In other words, to the extent they are successful, unions necessarily price themselves out of the market. And in the auto industry they are doing so, as evidenced by the data cited by Posner.

I hear a lot about union jobs making American cars less competative. So why is it that Japanese cars are MORE expensive than domestic cars?

You would think with the wages being lower in non union shops, their cars would be cheaper but that isn't the case. A subcompact GM car costs less than an Asian subcompact.

I hear a lot about union jobs making American cars less competitive. So why is it that Japanese cars are MORE expensive than domestic cars?

You would think with the wages being lower in non union shops, their cars would be cheaper but that isn't the case. A subcompact GM car costs less than an Asian subcompact.

Ãäå-òî ÿ óæå ïîõîæåå ÷èòàëà, ïðè÷¸ì ñëîâî â ñëîâî.

Privatize the profits and socialize the losses. Socialism for the rich, Capitalism for the rest. Blah blah blah blah blah.

Enough with the ivory tower BS definition of what the "goals" of unions are. Unionization was a political and economic phenomenon and should always be analyzed as such. Anything else is either disingenuous or suggests that U Chicago economics is the U.S. answer to fundamentalist madrassas in tribal Pakistan.

There is but one god, Milton Friedman, and Alan Greenspan is his prophet. Friedman akbar!!!

Stella: Do you mean that Japanese cars cost more at the dealership, or that the cost to produce Japanese cars is higher. Japanese cars cost more at the dealership because, on average, consumers want them more. The question is how much the manufacturer is making (or losing) on each car they sell.

On the other hand, if you mean that it costs Honda more to make a Civic than it costs GM to make its closest equivalent, then you may have a good point, but I think that Honda's costs per car are significantly lower.

WD40:

I haven't broken it down to economic jargon, but here is the story I would tell to explain featherbedding.

1) It reduces risk. The grievance procedure makes it difficult to fire employees, including unproductive employees. I might prefer to get paid slightly more to be more productive, but I don't want to take the risk that I might turn out to be an unproductive employee down the road.

On a related note, in an industry with *expanding* demand for union-produced goods, increased per capita productivity could lead to increased per capita compensation with no reduction in existing employment levels. In an industry with declining demand, an increase in per capita productivity would be likely to result in a decline in total employment. Unless a given worker was confident that the job losses wouldn't affect him/her, that worker might prefer the current situation to the risk of losing a job.

2) The job is sufficiently mind-numbing that employees really don't want to be more productive per hour, even if it would result in more income. (See the Rand Simberg piece that Judge Posner links for a good description of this).

3) Many of the featherbedding rules, like the job bank or the rules that prevent non-electicians from changing light bulbs, are designed to prevent management from "cheating" on the agreement by substituting foriegn or salaried labor for union labor.

4) As a cartel, the union needs to discourage "cheating" by its members. (See OPEC for a good example of this). Work rules that discourage undue productivity avoid a "race to the top" that would reduce total employment from current numbers. By contrast, the more the union can *lower* per capita productivity, the more jobs open up, which allow union bosses to collect appropriate rents for allowing people into the jobs and increase total dues, at least in the short run.

5) Finally, at some level, if Posner is right and the whole concept of a union that doesn't domninate its industry is self-defeating, then maybe the union voters are misinformed about the relative benefits to them of featherbedding versus additional salary.

It seems to me that the UAW is making a Huge mistake regarding public perception...The Democratic Party is in control in the White House, Senate and house and in position to implement far reaching pro union agendas. The UAW by "killing" the Unionized Auto manufacturing business in America is likely to give Unionization a very bad name and hinder the very agenda they represent. Why not figure out a Way to preserve the very jobs and production they are choking right now by working with the Big Three to Preserve the production aka jobs of all. To kill the Golden Goose is never a profitable strategy. Eating feathers is not very satisfying and why be the reason America turns against unionisim.

Íó òåìà âîîáùå ðóëüíàÿ, äàâíî âîëíóþùàÿ ìàññû òàê ñêàçàòü!

Reply to J. Mann:

(1) Risk reduction can be accomplished in other ways than stupid work rules.
(2) it is possible that workers prefer lower wages over more mind-numbing work. Certainly, professors do. But then "featherbedding" is the wrong term as both management (through lower wages that compensate for any reduced productivity) and workers (through improved work conditions that compensate for lower wages) are better off. If unions are able to accomplish this, then unions make the industry more profitable, not less.
(3) If it is indeed true that inflexible work rules reduce management cheating, then again featherbedding is the wrong term as featherbedding implies that unions are being unreasonable.
(4) Cartels want to extract as much wealth as possible for their members (rather than maximizing the number of members). Union members would prefer higher wages over rules that bring little value to themselves (featherbedding) or more workers. When unions bring greater rewards through their bargaining power, they can charge higher union dues. So more membership is not the goal of the union, but rather higher wages for the existing members and higher salaries for the union bosses.
(5) Economists have a hard time accepting the idea that workers and union leaders don't understand the tradeoffs regarding their own jobs.
In a nutshell: the burden of proof is on those who argue against optimal (efficient) contracts.

@Stella: Japanese subcompacts cost more than American brand subcompacts because people are willing to pay more for them. Prices are set by what people are willing to pay.

Why? Because the word on the street for the last 25 years is that Japanese brands are BETTER than American brands. Better made, better gas mileage, better customer service, fewer mechanical problems -- better value. The fact that the Japanese companies can make a better product at lower cost means higher profits, and good for them.

The designers, engineers, and senior managers at Ford, Chrysler, and GM are not members of the UAW. The UAW does not decide which product lines to produce. The UAW does not decide to make gas-guzzling vehicles. The UAW members' job is to perform tasks on the production line to spec, period. The UAW did not run GMAC Finance into the ground.

Show us the balance sheet numbers, Judge Posner, that prove that union wages and benefits made it IMPOSSIBLE for the Big Three to be managed properly and compete effectively.

@wd40: optimal/efficient is in the eye of the beholder. Please get out of the ivory tower and get a real job. What is optimal/efficient outside of the UofC madrassa is whatever actual, real-life conditions permit. If the economics cannot properly account for labor unions, then economics needs to adapt. It is the height of arrogance for the "scientist" to demand that reality conform to theory.

The deeper reality, as everyone outside of UofC knows, is that the Chicago School (RIP) is a screen for a hateful classist ideology.

@Stella: Japanese subcompacts cost more than American brand subcompacts because people are willing to pay more for them. Prices are set by what people are willing to pay.

Why? Because the word on the street for the last 25 years is that Japanese brands are BETTER than American brands. Better made, better gas mileage, better customer service, fewer mechanical problems -- better value. The fact that the Japanese companies can make a better product at lower cost means higher profits, and good for them.

The designers, engineers, and senior managers at Ford, Chrysler, and GM are not members of the UAW. The UAW does not decide which product lines to produce. The UAW does not decide to make gas-guzzling vehicles. The UAW members' job is to perform tasks on the production line to spec, period. The UAW did not run GMAC Finance into the ground.

Show us the balance sheet numbers, Judge Posner, that prove that union wages and benefits made it IMPOSSIBLE for the Big Three to be managed properly and compete effectively.

@wd40: optimal/efficient is in the eye of the beholder. Please get out of the ivory tower and get a real job. What is optimal/efficient outside of the UofC madrassa is whatever actual, real-life conditions permit. If the economics cannot properly account for labor unions, then economics needs to adapt. It is the height of arrogance for the "scientist" to demand that reality conform to theory.

The deeper reality, as everyone outside of UofC knows, is that the Chicago School (RIP) is a screen for a hateful classist ideology.

WD40: Thanks, that's a good explanation of your point.

Why is "featherbedding" a bad or inaccurate term? Featherbeds are good for the people in them, presumably - they're just not good if you want the person in the featherbed to be productive.

Posner's point, presumably, is that comparing $55/hr for GM labor to $45/hour for Honda labor because the GM worker cartel has also negotiated for itself an amount of leisure per hour that means a GM hour is not worth a Honda hour, even if purchased at the same cost.

If I use cartel tactics to negotiate a contract that literally grants workers the right to spend 30 minutes of each hour in a feather bed and 30 minutes at work, that may well be rational for the union, given workers' relative tastes for leisure and income. However, as Posner states, it is going to come at the expense of consumers, workers who would prefer to work harder, and, if non-union competition is permitted, at the expense of the unionized company itself.

(Sorry for not being clearer - I should take more time to write a shorter, more concise post, but I am lazy. I appreciate you sticking with me.)

As to my specific points:

(1) I thought the second paragraph to my point 1 (about maximizing employment when the unionized share of the industry is contracting faster than the natural rate of worker attrition) was nice. Did you like it?

(2) As I said, Posner's argument doesn't require featherbedding to be irrational from the union's perspective. He just argues that the total cost of featherbedding + wage increases comes at the expense of consumers, many of whom do not work in industries with the natural advantages to unions of large scale manufacturing, and and the expense of the unionized company overall when faced with nonunion competition.

As to point (4), I am going to stand behind it and label it "agency costs." The interests of the union membership are not exactly the same as the interests of its leadership.

Øî-òî íå ñâîñåì ïîíÿòíî îòêóäà ýòî è ãäå ?

Всегда читаю ваши посты с наслаждением. Всегда интересно, что напишите на этот раз

The unions in America have ground themselves to powder over the course of my lifetime, and I've enjoyed watching the suffering.

The unions in America have ground themselves to powder over the course of my lifetime, and I've enjoyed watching the suffering.

The unions in America have ground themselves to powder over the course of my lifetime, and I've enjoyed watching the suffering.

Хм… забавненько

@Kralizec:

Maybe you should stick to crackpot analysis of the Dune series. Get a life.

Somebody above was accusing Posner of a rant here. Not even close! Pay attention, dude, THIS is a rant:

I'm surprised none of you pro-union types argue that without the potential of unionization all workers everywhere would be worse off since, given the enormous power disparity and prevailing "labor is a cost" attitude, without its threat hanging over them, all employers would revert (as far as the law allows) to Robber Baron exploitation models.

It's a whole lot more sensible than trying to claim "featherbedding" is a safety issue. What? And we're all supposed to believe in the Easter Bunny, too, eh? It's pure and simple a maximize jobs, maximize membership issue, nothing else.

And others are looking for internal rationality in collective bargaining agreements? They are products of duress. There's nothing logical about them, except that failure to agree is a sure and quick death while agreeing to a bad term or three is only potentially fatal and even then looks like slow death. If you were management, which would you chose?

Anywhere unions have a true monopoly, they will act like every other monopoly.... with the same ruinous effect. Unions killed much of American trucking, railroads (until the recent dramatic increase in fuel costs), and will soon make public education, and public services untenable as well.

Even as the scorpion is carried to safety over the flooded stream, he stings the frog. Sure they both die, but it's in his nature. Unions always need to get more. Once to reasonable, there's no place to go except beyond reasonable. Once there, the host dies.

Judge Posner is right here (as is Professor Becker), just limited in scope.

Отлично!!! Вместо книги на ночь.

Richard sez:

"Under those conditions, market forces will result in a worker being compensated in line with his or her productivity. An employer cannot consistently in the long run pay compensation that is either above or below a worker’s productivity."

........ or so goes the simplistic theory of those who didn't quite get through Econ 101..... but! easily available stats confirm that the above is NOT the case and IS among the top reasons unions and collective bargaining were developed.

Item #1. WERE the above to be true, then over the last 20 years as productivity has more than doubled median wages too would have nearly doubled. But! median wages are virtually the same as they were 20 years ago, and of course, it's that number that is playing a major role in holding back our economy.

Item #2. Twenty-five years ago CEO "compensation" was about 60 times the wages of working folk and even that was a higher ratio than in most other nations, but today the ratio has soared to 400 times worker pay. What happened? Have CEO's become more scarce? Or the demand higher? Do the huge salaries indicate that they are paid in accordance with their "productivity?" While the productivity of those they lead remains stagnant as indicated by flat median wages?

Stella's question might not be answered as simplistically as "Japanese cars can command a quality...... or other premium".

Consider the execs choice of a spot to occupy on a supply and demand graph. Big, old, GM with hefty legacy costs and a declining share of the market may opt to accept thin or no margins in order to cover their hefty "legacy" or fixed costs.

The "transplants" having come in later with a host of benefits from southern states and a lower cost structure might opt to sell fewer units at a higher and more profitable point on the supply/demand graph. In short, the newer entrants to our market; backed by their own old established parent companies have the latitude to choose their rate of growth and the trade off between unit sales and price, while the older leviathans must have the highest possible unit sales over which to spread their unavoidable fixed costs.

Lastly........ looking over the posts by those who are apparently union haters, would it be worthwhile to remind them, again, that UAW assembly labor is but 10% of the cost of the product, thus, IF, the wage disparity is the 20% as reported here that amounts to 2% of the total vehicle cost. Surely 2% is not an insurmountable disadvantage, and of course it isn't as the "Big Three" still sell one of every two vehicles sold.

Stella's question might not be answered as simplistically as "Japanese cars can command a quality...... or other premium".

Consider the execs choice of a spot to occupy on a supply and demand graph. Big, old, GM with hefty legacy costs and a declining share of the market may opt to accept thin or no margins in order to cover their hefty "legacy" or fixed costs.

The "transplants" having come in later with a host of benefits from southern states and a lower cost structure might opt to sell fewer units at a higher and more profitable point on the supply/demand graph. In short, the newer entrants to our market; backed by their own old established parent companies have the latitude to choose their rate of growth and the trade off between unit sales and price, while the older leviathans must have the highest possible unit sales over which to spread their unavoidable fixed costs.

Lastly........ looking over the posts by those who are apparently union haters, would it be worthwhile to remind them, again, that UAW assembly labor is but 10% of the cost of the product, thus, IF, the wage disparity is the 20% as reported here that amounts to 2% of the total vehicle cost. Surely 2% is not an insurmountable disadvantage, and of course it isn't as the "Big Three" still sell one of every two vehicles sold.

Jack, one of Posner's points was that you can't just compare GM's $55/hr with Honda's $45 -- you also have to factor in the effect of UAW work rules (featherbedding) on GM productivity and quality.

Questions?
1. How many of these "overpaid and undermining" auto workers do you think have more than one vacation home in lucrative areas throughout the the world as compared to the CEO, board members,share holders, etc.?
2. How much of the wages earned by said auto workers go back into supporting the communities in which they live. Be it through,purchases of homes, daily needs,automobiles, etc. as opposed to those high dollar guys mentioned above?
3. Once the unionization is gone, how long do you think it will be before those workers at the "better" manufactoring plants see a reduction in their wages?
I guess the answers to these questions would give further explanation to your reference of "redistribution of wealth". Since I live in a city that has two car plants, I am very familiar as to where the workers live and where the executives live, as well as the circuits in which they travel. There doesn't seem to be much redistribution of the "wealth". Now I beleive that a lot of this is due to an underlying bias in our society today of how the "educated" and "uneducated" should be compensated,but this is obviously not the forum to debate this. As a former member of a union, I am well aware of the "shortcomings" of their leaderships. But I ask are they of more harm to this economy than say... Bernie Madoff?

I've never seen so many fallicies at work in my life in trying to explain something: "Post hoc ergo propter hoc, glittering generalities, stacking the deck, shell games, non-sequitors, antecedent-consequent confusions, etc., etc., etc.". No wonder the issues and problems cannot be identified and quantified.

Problems? No, just challenges.

Jack, I did get through Economics 101 (they called it Economics 10 at my college), and a few more courses.

median wages are virtually the same as they were 20 years ago

The studies that have produced those data overstate inflation, and therefore understate real growth. For a discussion of that, and other distortions in the data, see http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4049

Twenty-five years ago CEO "compensation" was about 60 times the wages of working folk and even that was a higher ratio than in most other nations, but today the ratio has soared to 400 times worker pay. What happened? Have CEO's become more scarce? Or the demand higher? Do the huge salaries indicate that they are paid in accordance with their "productivity?" While the productivity of those they lead remains stagnant as indicated by flat median wages?

Market forces do not automatically result in everyone's compensation matching with his or her productivity. But they do push things in that direction. My opinion is that some CEOs are worth their compensation, and others are not. Those who are not usually get fired sooner or later. They still collect large compensation, because that tends to be guaranteed in an employment contract they enter into when they take the job. In part, their compensation is shielded from market forces because of the separation between ownership and management in publicly-held corporations.

That's an issue that perhaps ought to be dealt with, but it is, in economic terms, largely a separate issue from that of unions pricing themselves out of a labor market. The effect on union jobs that I described in my earlier comment would apply, regardless of what is done or not done about CEO compensation.

As I said earlier, unionization must be analyzed as a political phenomenon. Not only does unionization consolidate employee bargaining power, but in today's environment it helps pay for LOBBYING and CAMPAIGN CONTRIBUTIONS. Gasp.

As long as this is how business is conducted in this country, de-unionizing makes as much sense as unilateral disarmament did back in the Cold War. Take away Big Labor and Big Business will have a political monopoly in setting the legislative and regulatory agenda.

We just saw what happens when radical deregulation of an industry (banking) occurs. How's your 401(k) working for ya?

Enjoy irrelevancy, Chicago.

Can the Chicago School of Economic Survive?

“The Chicago School bears the blame for providing a seeming intellectual foundation for the idea that markets are self-adjusting and the best role for government is to do nothing,” - Joseph Stiglitz, Nobel Laureate

“The inability of Friedman’s successors to say anything useful about what’s happening in financial markets today means their influence is finished." - John Galbraith

Big manufacturing in the US is finished therefore unions are finished and if you can believe Professor Panarin's predictions and computer models, the USA is finished. Let's see if Obama's WPA program will use union workers? If federal spending could rescue an economy, it would not need to be rescued in the first place.

The total wage and benefit bill for the Detroit automakers is about $55 per hour, compared to $45 for workers in the foreign-owned plants,...

Sounds like I should have been an auto worker rather than a scientist. In my last full time job as a computational biologist I only made about $30 per hour in total compensation.

Stella is correct that the Hondas and Toyotas are generally more expensive to purchase than their "Big Three" counterparts. The reason Honda and Toyota can charge more is not part of some nefarious plot--it's because Detroit's products are inferior and therefore less valuable. No one should bother wasting time arguing that some "objective" reviewer assesses the quality differently--if the value of the "Big Three" products was comparable, they'd quickly drive the Asian cars out of the market until the Asian cars were reduced in price to match.

The UAW represents the people with the largest share of responsibility for the perception of poor quality, and they've had decades to use their influence to assure the quality gap would close. Their failure to do so is being punished appropriately by the consumers, and we owe them no sympathy and certainly not one dime of tax money.

According to Judge Posner: "Unless those competitors are too few or too small to be able to expand output at a cost no higher than the cost to the unionized firms, unionization will gradually drive the unionized firms out of business."

That is true if we can keep the Feds from bailing out these politically connected firms with taxpayer $$$.

Happy New Year to all. I hope everyone had a Merry Christmas and Happy Hanukkah.

According to Judge Posner: "Unless those competitors are too few or too small to be able to expand output at a cost no higher than the cost to the unionized firms, unionization will gradually drive the unionized firms out of business."

That is true if we can keep the Feds from bailing out these politically connected firms with taxpayer $$$.

Happy New Year to all. I hope everyone had a Merry Christmas and Happy Hanukkah.

According to Chicago School RIP: “The Chicago School bears the blame for providing a seeming intellectual foundation for the idea that markets are self-adjusting and the best role for government is to do nothing,” - Joseph Stiglitz, Nobel Laureate

“The inability of Friedman’s successors to say anything useful about what’s happening in financial markets today means their influence is finished." - John Galbraith

My Reply: Interesting quotes that show these fellows do not understand the position that they are attacking. Of course, this crisis was brought on by government by an overexpansion of the money supply and a failure to prevent fraud on a massive scale. Shenanigans at Fannie Mae and Freddie Mac added to the mess.

Now it is true that monetarism has serious short-comings in adopting too much of the Keynesian model. Monetarists have misunderstood the inflationary process that creates an overinvestment in certain segments of the economy leading to an inevitable bust after a temporary boom.

According to Chicago School RIP: “The Chicago School bears the blame for providing a seeming intellectual foundation for the idea that markets are self-adjusting and the best role for government is to do nothing,” - Joseph Stiglitz, Nobel Laureate

“The inability of Friedman’s successors to say anything useful about what’s happening in financial markets today means their influence is finished." - John Galbraith

My Reply: Interesting quotes that show these fellows do not understand the position that they are attacking. Of course, this crisis was brought on by government by an overexpansion of the money supply and a failure to prevent fraud on a massive scale. Shenanigans at Fannie Mae and Freddie Mac added to the mess.

Now it is true that monetarism has serious short-comings in adopting too much of the Keynesian model. Monetarists have misunderstood the inflationary process that creates an overinvestment in certain segments of the economy leading to an inevitable bust after a temporary boom.

Chris, I hold greater confidence in Stiglitz and Galbraith and greater credibility, than I do in you. Uncle Miltie and the "Fresh Water" School as the end all of Economic analysis is laughable. Even Uncle Miltie would get a good chuckle out of it. You might want to expand your horizons and check out the "Salt Water" Schools.

One thing I am certain of; with so many opinions, it is unlikely that any one of them is correct. It would be interesting to have an opinion pool into which each opinionate would put $1000.00 units multiplied by a self assigned "certainty" factor, the winner to be determined at some agreed upon future date. The professors would of course be included.

Jim, Just one question, "Who's going to hold the money and for how long"? :)

Neilehat,

Because I believe in success, Bernie Madoff could hold the money for the duration of his prison term.

Since there would probably be no winners, I suggest Bernie Madoff.

Since there would probably be no winners, I suggest Bernie Madoff.

It's not accurate to equate plant work rules in the auto industry with featherbedding although many do result in increased production costs.

In my experience (34 years in labor relations at GM), some plant level work rules embodied in locally negotiated agreements, grievance settlements and practices can accurately be characterized as featherbedding but not all are attributable to the UAW. Other work rules define simple fair treatment in the workplace.

Many of the less justifiable practices' origins came long before the UAW--from the industrial engineering theories of Frederick Taylor most of which have been discredited (e.g. piece rates and a proliferation of narrow job classifications) and superceded long ago by behavioral scientists like Elton Mayo and quality gurus like W. Edwards Deming. These practices are hard to change. They are embedded in the plant culture of managers and union representatives alike. GM and the UAW have been working together to change these practices and improve productivity for a long time. Some UAW-represented plants are more productive than comparable non-union transplants. Others are not. It is a huge mistake in my opinion, to make a blanket comdemnation collective bargaining because of work rule issues or because of generous health care and retirement benefits negotiated in good faith many years ago. Many work rules do need to be changed and national health care reform may be the best answer to the health care cost issue at GM, Ford and Chrysler.

Many if not most of the work rules grew out of management abuses and unfair practices that preceded the union--nepotism and favoritism in pay and promotions, overtime, layoffs and recalls, disciplinary action and the like. There was good reason for the UAW's demand for "justice on the job."

Sometimes the "justice" was overdone in over-elaborated work rules, however, in plant level negotiations against a strike deadline at a key parts plant or at an assembly plant whose models were in short supply. The people at UAW headquarters can be fairly criticized for authorizing local strikes to pressing demands which should never have been granted. UAW president Leonard Woodcock and VP Irving Bluestone, along with GM managers who gave in too readily out of short-term sales considerations, allowed the local negotiations process to get out of control. This undermined the grievance arbitration procedure as grievances were saved up for local negotiations rather than being resolved on their merits in the grievance procedure. This impaired efficiency at many plants in the industry.

In recent weeks we have seen a lot of uninformed commentary blaming the UAW and GM management for problems that were many years in the making. Much of the bloviating reminds me of when our labor relations VP, George Morris, used to quote St. Thomas Aquinas "Seldom affirm. Never deny. Always distinguish." when one of his staff produced a broad brush, simplistic proposal to an issue that required additional facts and complex analysis and answers. Messrs. Becker and Posner would do well to consider Aquinas's maxim and avoid exaggerated generalizations beyond their expertise about collective bargaining and "adversarial" labor relations in the auto industry, based on gadfly comments from individuals who probably have never set foot in an auto plant.

It's not accurate to equate plant work rules in the auto industry with featherbedding although many do result in increased production costs.

In my experience (34 years in labor relations at GM), some plant level work rules embodied in locally negotiated agreements, grievance settlements and practices can accurately be characterized as featherbedding but not all are attributable to the UAW. Other work rules define simple fair treatment in the workplace.

Many of the less justifiable practices' origins came long before the UAW--from the industrial engineering theories of Frederick Taylor most of which have been discredited (e.g. piece rates and a proliferation of narrow job classifications) and superceded long ago by behavioral scientists like Elton Mayo and quality gurus like W. Edwards Deming. These practices are hard to change. They are embedded in the plant culture of managers and union representatives alike. GM and the UAW have been working together to change these practices and improve productivity for a long time. Some UAW-represented plants are more productive than comparable non-union transplants. Others are not. It is a huge mistake in my opinion, to make a blanket comdemnation collective bargaining because of work rule issues or because of generous health care and retirement benefits negotiated in good faith many years ago. Many work rules do need to be changed and national health care reform may be the best answer to the health care cost issue at GM, Ford and Chrysler.

Many if not most of the work rules grew out of management abuses and unfair practices that preceded the union--nepotism and favoritism in pay and promotions, overtime, layoffs and recalls, disciplinary action and the like. There was good reason for the UAW's demand for "justice on the job."

Sometimes the "justice" was overdone in over-elaborated work rules, however, in plant level negotiations against a strike deadline at a key parts plant or at an assembly plant whose models were in short supply. The people at UAW headquarters can be fairly criticized for authorizing local strikes to pressing demands which should never have been granted. UAW president Leonard Woodcock and VP Irving Bluestone, along with GM managers who gave in too readily out of short-term sales considerations, allowed the local negotiations process to get out of control. This undermined the grievance arbitration procedure as grievances were saved up for local negotiations rather than being resolved on their merits in the grievance procedure. This impaired efficiency at many plants in the industry.

In recent weeks we have seen a lot of uninformed commentary blaming the UAW and GM management for problems that were many years in the making. Much of the bloviating reminds me of when our labor relations VP, George Morris, used to quote St. Thomas Aquinas "Seldom affirm. Never deny. Always distinguish." when one of his staff produced a broad brush, simplistic proposal to an issue that required additional facts and complex analysis and answers. Messrs. Becker and Posner would do well to consider Aquinas's maxim and avoid exaggerated generalizations beyond their expertise about collective bargaining and "adversarial" labor relations in the auto industry, based on gadfly comments from individuals who probably have never set foot in an auto plant.

It's not accurate to equate plant work rules in the auto industry with featherbedding although many do result in increased production costs.

In my experience (34 years in labor relations at GM), some plant level work rules embodied in locally negotiated agreements, grievance settlements and practices can accurately be characterized as featherbedding but not all are attributable to the UAW. Other work rules define simple fair treatment in the workplace.

Many of the less justifiable practices' origins came long before the UAW--from the industrial engineering theories of Frederick Taylor most of which have been discredited (e.g. piece rates and a proliferation of narrow job classifications) and superceded long ago by behavioral scientists like Elton Mayo and quality gurus like W. Edwards Deming. These practices are hard to change. They are embedded in the plant culture of managers and union representatives alike. GM and the UAW have been working together to change these practices and improve productivity for a long time. Some UAW-represented plants are more productive than comparable non-union transplants. Others are not. It is a huge mistake in my opinion, to make a blanket comdemnation collective bargaining because of work rule issues or because of generous health care and retirement benefits negotiated in good faith many years ago. Many work rules do need to be changed and national health care reform may be the best answer to the health care cost issue at GM, Ford and Chrysler.

Many if not most of the work rules grew out of management abuses and unfair practices that preceded the union--nepotism and favoritism in pay and promotions, overtime, layoffs and recalls, disciplinary action and the like. There was good reason for the UAW's demand for "justice on the job."

Sometimes the "justice" was overdone in over-elaborated work rules, however, in plant level negotiations against a strike deadline at a key parts plant or at an assembly plant whose models were in short supply. The people at UAW headquarters can be fairly criticized for authorizing local strikes to pressing demands which should never have been granted. UAW president Leonard Woodcock and VP Irving Bluestone, along with GM managers who gave in too readily out of short-term sales considerations, allowed the local negotiations process to get out of control. This undermined the grievance arbitration procedure as grievances were saved up for local negotiations rather than being resolved on their merits in the grievance procedure. This impaired efficiency at many plants in the industry.

In recent weeks we have seen a lot of uninformed commentary blaming the UAW and GM management for problems that were many years in the making. Much of the bloviating reminds me of when our labor relations VP, George Morris, used to quote St. Thomas Aquinas "Seldom affirm. Never deny. Always distinguish." when one of his staff produced a broad brush, simplistic proposal to an issue that required additional facts and complex analysis and answers. Messrs. Becker and Posner would do well to consider Aquinas's maxim and avoid exaggerated generalizations beyond their expertise about collective bargaining and "adversarial" labor relations in the auto industry, based on gadfly comments from individuals who probably have never set foot in an auto plant.

"I don't think there's much to be said on behalf of unions"
But we already knew that!

Since there would probably be no winners, I suggest Bernie Madoff.

The Becker-Posner blog has presented a most accurate portrayal of the problems facing U.S. Auto firms. However, their analysis can be augmented with insights from the works of other Illustrious Hoover Fellows.

In particular the work of Douglas North in Institutions, Institutional Change and Economic Performance is most compelling for the problem we are seeking to explain. I do not necessarily seek to elaborate any of North’s finer points concerning the limits of economic actors to rationally maximize. However, I do wish to suggest that the U.S. auto firms rationally maximize within a specific institutional context. U.S. auto firms like their foreign competitors will seek to minimize the marginal cost of producing automobiles. If U.S. firms wished to invest in the capital necessary to radically alter their product line to meet market demand for more fuel-efficient products the marginal cost of production would be of enormous magnitude, especially in the short term. However, over the long term these short-term losses could possibly be recouped by increased sales. The question then becomes; why have foreign firms been better able to calculate their inter-temporal utility functions?

The answer lies in the specific institutional context that U.S. automakers reside in. The United States, especially at the congressional level is much more penetrable by private pressures vis-à-vis other industrialized countries. As Hoover fellow Stephen Krasner noted in his work Defending the National Interest, congress has multiple points of entry for interested U.S. corporations. Moreover, congressional representation is regionally specific, thus regionally concentrated industries such as U.S. auto firms are better able to promote their interests compared to firms in foreign countries where political power is less fragmented.

The counterfactual variable to be analyzed (see Hoover fellow James Fearon’s work on counterfactual variables) then becomes divergent marginal cost functions for U.S. auto firms vis-à-vis their foreign competitors. For U.S. firms the marginal cost of capital investment required for altering output to fit market demand is always going to be more costly than political investment. Put more simply, it is much cheaper for U.S. firms to subvert the market with tariffs, subsidies, and possibly soon a bailout, than it is to operate within the market.

Unfortunately, the solution to the problem defined as such is going to be a very difficult change of the institutional structure in the United States. As Krasner has noted the state department is much better insulated from private pressures, and thus better able to make decisions regarding long term national welfare. A possible solution could be a law that precludes congress from political dealings involving firms that possess marginal cost functions similar to those of U.S. Auto firms. Such political dealings could be re-allocated to a new branch of the state department.

However, it should be noted that the aforementioned marginal cost functions are not necessarily coterminous with firm size. While Microsoft generates enough revenue to be of similar size to a large U.S. automaker, the marginal cost of market subversion for Microsoft is much larger compared to that of simply retooling production to create products that better fit market demand. Thus the solution to market subversion is not always going to be further market subversion. For the most part free markets will lead to efficient outcomes; antitrust laws vastly oversimplify situations when they purport to only deal with firms over a certain size or in a certain dominant position with respect to market share.
.

The disproportionate direct labor costs and so-called legacy costs burdening the U.S. auto makers developed over the course of 60 years. Simply put, the UAW was a business that gave their stakeholders value in exchange for their dues, while auto company management put self-interest ahead of that of their shareholders. The management of these companies was woefully inadequate in performing even fundamental tasks on nearly every front: human resources, finance, product design and marketing, R&D and manufacturing. Not six months ago, GM was touting its plan to put $500M into a new plant to manufacture a small car that would get 45 MPG. What more could GM's management have done to prove that they were completely oblivious to the demands of the market and totally ignorant of the fact that they had insufficient capital even to keep their current operations underway?

The disproportionate direct labor costs and so-called legacy costs burdening the U.S. auto makers developed over the course of 60 years. Simply put, the UAW was a business that gave their stakeholders value in exchange for their dues, while auto company management put self-interest ahead of that of their shareholders. The management of these companies was woefully inadequate in performing even fundamental tasks on nearly every front: human resources, finance, product design and marketing, R&D and manufacturing. Not six months ago, GM was touting its plan to put $500M into a new plant to manufacture a small car that would get 45 MPG. What more could GM's management have done to prove that they were completely oblivious to the demands of the market and totally ignorant of the fact that they had insufficient capital even to keep their current operations underway?

The disproportionate direct labor costs and so-called legacy costs burdening the U.S. auto makers developed over the course of 60 years. Simply put, the UAW was a business that gave their stakeholders value in exchange for their dues, while auto company management put self-interest ahead of that of their shareholders. The management of these companies was woefully inadequate in performing even fundamental tasks on nearly every front: human resources, finance, product design and marketing, R&D and manufacturing. Not six months ago, GM was touting its plan to put $500M into a new plant to manufacture a small car that would get 45 MPG. What more could GM's management have done to prove that they were completely oblivious to the demands of the market and totally ignorant of the fact that they had insufficient capital even to keep their current operations underway?

Just look at what the unions did to Bear Stearns, Lehman, WaMu, Wachovia, GMAC, Countrywide, and the other paragons of management expertise that sadly could no longer compete with low-wage foreign competitors.

A 620 FICO score is not subprime.
- Mark LaNeve, VP GM Sales & Marketing

GMAC was just lent $5 billion at 8% as part of the bailout. They just announced a 0% APR financing option. Not sure how you stay solvent borrowing at 8% and lending at 0%.

Those damned UAW assembly line workers have failed to teach basic finance/business to senior managers yet again! They also failed to teach GM managers the definition of a subprime FICO score. Those unions really suck.

A further comment: I was not aware the Mickey Kaus is an expert on the auto industry. I suspect it would be more accurate if you
added the words "self anointed" or "self-appointed." He strikes me as a gadfly who, after some superficial research, portrays himself as an expert on whatever is the topic of the day.

Ralph, Kaus is symbolic of what's wrong. Instead of hard factual analysis of issues and problems at hand, resulting in positive action (Praxis) we get "Talking Heads" and Analysis ad Nauseum. Resulting in more of the same and the issues and problems continue to exist unsolved.

"I'm right your wrong, Nah-Nah, Blah-blah" ;)

Ralph, Kaus is symbolic of what's wrong. Instead of hard factual analysis of issues and problems at hand, resulting in positive action (Praxis) we get "Talking Heads" and Analysis ad Nauseum. Resulting in more of the same and the issues and problems continue to exist unsolved.

"I'm right your wrong, Nah-Nah, Blah-blah" ;)

It is a fact of global economics that wages will align. The vast globalization of the industrial complex makes for some real and fast adjustments. Needs vs wants will tend towards the needs for the middle class. The Auto Industry is just 1 more of a long line of industries that has been forced into making their workers concede. The reason behind this has been a spending orgy and a lack of regulation. But the inevitability of these realities is parked out there in the empty wallets of the vast but dwindling middle class.

It is a fact of global economics that wages will align. The vast globalization of the industrial complex makes for some real and fast adjustments. Needs vs wants will tend towards the needs for the middle class. The Auto Industry is just 1 more of a long line of industries that has been forced into making their workers concede. The reason behind this has been a spending orgy and a lack of regulation. But the inevitability of these realities is parked out there in the empty wallets of the vast but dwindling middle class.

It is a fact of global economics that wages will align. The vast globalization of the industrial complex makes for some real and fast adjustments. Needs vs wants will tend towards the needs for the middle class. The Auto Industry is just 1 more of a long line of industries that has been forced into making their workers concede. The reason behind this has been a spending orgy and a lack of regulation. But the inevitability of these realities is parked out there in the empty wallets of the vast but dwindling middle class.

I appreciate Alan Pies' comments above relying on the insights of Douglass North. Culture matters more than many economists realize. North is right to point to its importance in economic development. Such insights can be applicable to understanding problems in the automobile industry too. For example, many of the Honda, Toyota, and BMW plants are in the South. There is a big cultural difference between the South and the Midwest. Southerners are typically more cooperative and deferential to legitimate authority. The German and Japanese cultures that these car companies come from also may influence the attitudes of upper management of these companies.

The organizational culture of these firms that channel the energies of its individual members is also a factor that needs to be considered. As Edgar Schein of MIT has pointed out, there are different levels of awareness of the structure of an organization. The first is the level on which the casual observer can easily witness the organization's expectations of dress and comportment as well as how people are rewarded for their contributions. The second involves the explicit knowledge that the members of the organization can articulate in terms of their goals and basic beliefs about their responsibilities within the company as a "creed" and its mission statements. Most importantly, there is the third implicit level where the daily routines and interactions of members become habitual and fall into the fringe of their consciousness. Here people may act in ways that they are not fully aware of that may be crucial to contributing to the success of the organization or may undermine its basic mission. The implicit beliefs and habitual actions may be greatly at odds with the explicit beliefs of the employees, management, board of directors, and stockholders. The main action in any group or for any individual is the implicit level where actions take place day to day, minute by minute without overt awareness.

The centrality of the implicit level in any web of relations in a social, political, or economic institution should make it clear why the government is intrinsically ineffective in regulating business or any social structure since government officials can never be fully aware of the complexity and subtlety of what is transpiring in each moment even if they are there on the scene, which they usually are not. Statistical analysis will never reveal the nuances of these patterns although such analysis might reveal that there is a problem in general. Only the market can reveal the extent of the problem and offer incentives for firms to change from the ground up over time through trial and error and actors on the spot making gradual changes as they adjust to each other and their customers and suppliers. There is no formula that could be imposed from on high that could make these changes effectively since they can only be made continuously and with precision.

One last factor that demonstrates that government and unions can get in the way of necessary change is the focus they bring on issues of "social justice." The fact of the matter is that some people work together better than do others. Homogeneity can very well facilitate greater harmony in organizations. Union efforts to ban nepotism and government efforts to ban discrimination can very well get the way of a more harmonious and cooperative work environment.

Based on personal experience, I agree with Judge Posner that: "some union activity ... is extortionate: the union and the employer tacitly agree that as long as the employer gives the workers a wage increase slightly above the union dues, the union will leave the employer alone."

However, not only does the law give union members who are victimized by such employer-union conspiracies no opportunity for redress, but it is the law that makes such behavior possible in the first place. This is because, under labor-relations law, union members have no standing to bring most kinds of work grievances against the employer on their own behalf.

Rather, only the union can do so, much the way that a public prosecutor has discretion over whether or not to file charges against a criminal perpetrator and the victim has no say in this decision. Thus, union leaders are able to bargain away an employee's rights in order to obtain something of benefit to the union or its leaders, leaving the employee with no recourse.

Accordingly, what is needed is a change in the law to give the employees themselves standing to challenge unlawful employer actions. Giving the employees' rights to the unions is tantamount to a theft of those rights, and opens the door to extortionate activity in which both the employer and the union conspire to deny employees their rights.

As shown in Charles Dickens' novel HARD TIMES, where a union member was faced with exactly this issue, these kinds of conspiracies are often the result of a legal system that is designed to serve the interests of the politically powerful rather than justice. This is why, first, employers and, now, unions have been given disproportionate power under the law, while the employee has always been ignored. Too bad Judge Posner refuses to address this inherent (and fatal) flaw in the law.

Based on personal experience, I agree with Judge Posner that: "some union activity ... is extortionate: the union and the employer tacitly agree that as long as the employer gives the workers a wage increase slightly above the union dues, the union will leave the employer alone."

However, not only does the law give union members who are victimized by such employer-union conspiracies no opportunity for redress, but it is the law that makes such behavior possible in the first place. This is because, under labor-relations law, union members have no standing to bring most kinds of work grievances against the employer on their own behalf.

Rather, only the union can do so, much the way that a public prosecutor has discretion over whether or not to file charges against a criminal perpetrator and the victim has no say in this decision. Thus, union leaders are able to bargain away an employee's rights in order to obtain something of benefit to the union or its leaders, leaving the employee with no recourse.

Accordingly, what is needed is a change in the law to give the employees themselves standing to challenge unlawful employer actions. Giving the employees' rights to the unions is tantamount to a theft of those rights, and opens the door to extortionate activity in which both the employer and the union conspire to deny employees their rights.

As shown in Charles Dickens' novel HARD TIMES, where a union member was faced with exactly this issue, these kinds of conspiracies are often the result of a legal system that is designed to serve the interests of the politically powerful rather than justice. This is why, first, employers and, now, unions have been given disproportionate power under the law, while the employee has always been ignored. Too bad Judge Posner refuses to address this inherent (and fatal) flaw in the law.

Chris & John, You're quite right in mentioning cultural differences in developed Labor Law. As for the South, The "Slave and Cropper" mentality still lies just beneath the surface. Which goes far in explaining the "Right to work" structure inherent in Southern Labor Law.

As for other cultures, the "Dictatorship of the Prolitariat" prevails or the control by class structure known as the "Untouchables" prevails.

So how do we reconcile these different approaches to the control of Labor with our Democratic Ideals? Such was the reason behind the legitimization of Unionization and the use of Collective Bargaining by the Congress & Federal Courts in the Twenties, Thirties and Forties.

Now why should I give up the power and control over "MY Workers" when it's in my interest to continue to hold them as slaves and croppers, prol's, and untouchables?

neilehat,
What we are seeing is people like Posner, who know little first-hand about the auto industry citing other equally ignorant bloggers like Kaus in support of their ideologically motivated thesis. Posner would never allow such hearsay in his courtroom!

84. Narby:

Plant work rules clearly affect productivity in the auto industry. However, it’s not fair to put the blame for them entirely on the UAW because many of the most troublesome rules originated long before the industry was unionized out of the now largely discredited theories of Frederick Taylor–the proliferation of narrow job classifications composed ofrepetitive assignments quickly learned by uneducated employees. These and other concepts did not originate with the UAW, but were incorporated into union agreements when the plants were unionized, BY AGREEMENT with management. These wage agreements and many other work rules have accumulated over 60 years and are very hard to change.

Since the 1980s the company and union have recognized the need for change and cooperated to change the plant rules and culture. That was why Saturn was formed in the early 1980s. NUMMI also was used as a model for change in GM plants. Plant managers and union leaders spent time together at NUMMI to see for themselves how the Toyota production system worked, and how the number of grievances were kept down close to zero through better communications and mutual respect between UAW representatives and NUMMI managers.

In contrast, the transplants were able to start with a clean slate in new plants, with no legacy pension and health insurance costs, and with policies which reflected new behavioral science concepts and policies advocated by W. Edwards Deming, e.g., very few job classifications (two production classifications: Team Member and Team Leader, and two skilled trades classifications: mechanical maintenance and electrical maintenance whereas, a typical big three plant had multiple production and skilled trades job classifications which resulted in many disputes, problems and inefficiencies.) The UAW and the auto companies have cooperated to eliminate many of these problems through “modern operating agreements” which permit more efficient production and maintenance. A number of Big Three plants equal or exceed productivity in the Japanese transplants.

From my experience in GM, the UAW deserves criticism for letting the local negotiations process get out of control when Leonard Woodcock was President and Irving Bluestone VP of the GM department. This continued and worsened under Owen Bieber and Steve Yokich. Local unions, instead of making good faith efforts to settle grievances on their merits saved them up to be bargained wholesale under the gun of a local strike deadline. This put tremendous pressure on management to concede to extreme demands at key parts plants or assembly plants for models in short supply. This process spread from triennial contract negotiations to strike authorizations during the contract over allegedly unreasonable production standards or health and safety hazards. The UAW damaged plant efficiency in many GM plants by repeatedly sujecting them to the pressure of 5-day strike authorization notices signed by the Vice President of the GM Department of the International Union. And GM management failed to develop an effective and consistent policy to deal with this problem. Instead of insisting that grievances be dealt with in the regular grienvance and arbitration procedure on their merits, out of short-run sales and profits considerations, management succumbed to countless unreasonable grievance settlements and unwise agreements on local work rules. Unravelling the accumulated mess cannot be accomplished by the stroke of a pen by the national parties. A long and arduous process is required.

At the national negotiations level mistakes were made as well. In my estimation the worst was the infamous “Jobs Bank” agreement negotiated by Alfred S. Warren, with the approval of Roger Smith, with Owen Bieber. Instead of telling the UAW that it was impossible to guarantee lifetime income security in a collective bargaining agreement; that job security could be achieved only by making attractive products and selling them at affordable prices; and this was especially true in view of the unprecedented international competition facing the company. GM didn’t tell the union that. Instead the company, at a time when the need to downsize was forseeable, made an agreement that greatly increased the cost of downsizing. This 1982? agreement should have gotten a Darwin award for the worst agreement in the history of collective bargaining.

Jan 2, 2009 - 2:00 pm

84. Narby:

Plant work rules clearly affect productivity in the auto industry. However, it’s not fair to put the blame for them entirely on the UAW because many of the most troublesome rules originated long before the industry was unionized out of the now largely discredited theories of Frederick Taylor–the proliferation of narrow job classifications composed ofrepetitive assignments quickly learned by uneducated employees. These and other concepts did not originate with the UAW, but were incorporated into union agreements when the plants were unionized, BY AGREEMENT with management. These wage agreements and many other work rules have accumulated over 60 years and are very hard to change.

Since the 1980s the company and union have recognized the need for change and cooperated to change the plant rules and culture. That was why Saturn was formed in the early 1980s. NUMMI also was used as a model for change in GM plants. Plant managers and union leaders spent time together at NUMMI to see for themselves how the Toyota production system worked, and how the number of grievances were kept down close to zero through better communications and mutual respect between UAW representatives and NUMMI managers.

In contrast, the transplants were able to start with a clean slate in new plants, with no legacy pension and health insurance costs, and with policies which reflected new behavioral science concepts and policies advocated by W. Edwards Deming, e.g., very few job classifications (two production classifications: Team Member and Team Leader, and two skilled trades classifications: mechanical maintenance and electrical maintenance whereas, a typical big three plant had multiple production and skilled trades job classifications which resulted in many disputes, problems and inefficiencies.) The UAW and the auto companies have cooperated to eliminate many of these problems through “modern operating agreements” which permit more efficient production and maintenance. A number of Big Three plants equal or exceed productivity in the Japanese transplants.

From my experience in GM, the UAW deserves criticism for letting the local negotiations process get out of control when Leonard Woodcock was President and Irving Bluestone VP of the GM department. This continued and worsened under Owen Bieber and Steve Yokich. Local unions, instead of making good faith efforts to settle grievances on their merits saved them up to be bargained wholesale under the gun of a local strike deadline. This put tremendous pressure on management to concede to extreme demands at key parts plants or assembly plants for models in short supply. This process spread from triennial contract negotiations to strike authorizations during the contract over allegedly unreasonable production standards or health and safety hazards. The UAW damaged plant efficiency in many GM plants by repeatedly sujecting them to the pressure of 5-day strike authorization notices signed by the Vice President of the GM Department of the International Union. And GM management failed to develop an effective and consistent policy to deal with this problem. Instead of insisting that grievances be dealt with in the regular grienvance and arbitration procedure on their merits, out of short-run sales and profits considerations, management succumbed to countless unreasonable grievance settlements and unwise agreements on local work rules. Unravelling the accumulated mess cannot be accomplished by the stroke of a pen by the national parties. A long and arduous process is required.

At the national negotiations level mistakes were made as well. In my estimation the worst was the infamous “Jobs Bank” agreement negotiated by Alfred S. Warren, with the approval of Roger Smith, with Owen Bieber. Instead of telling the UAW that it was impossible to guarantee lifetime income security in a collective bargaining agreement; that job security could be achieved only by making attractive products and selling them at affordable prices; and this was especially true in view of the unprecedented international competition facing the company. GM didn’t tell the union that. Instead the company, at a time when the need to downsize was forseeable, made an agreement that greatly increased the cost of downsizing. This 1982? agreement should have gotten a Darwin award for the worst agreement in the history of collective bargaining.

Jan 2, 2009 - 2:00 pm

neilehat,
In reply to your responses to two of my posts this week: 1. I do not agree that having a cooperative attitude is equivalent to becoming a slave. Friedrich Hayek makes a crucial distinction that might be relevant here. He distinguishes between what he terms "true" and "false" individualism. A false individualism that sees each person as a socially isolated atom leads to collectivism and social engineering. In contrast, true individualism places the autonomous person within a social context with personal ties to his fellows. The informal institutions that emerge around these personal relationships both facilitate cooperative, voluntary arrangements that serve everyone's interest while protecting people against external threats to individuals' liberty. A similar distinction is made by Historian David Hackett Fischer in his discussion of 'liberty' and 'freedom.' Fischer notes that "the words themselves had differing origins: the Latinate 'liberty' implied separation and independence. The root meaning of 'freedom' (akin to 'friend') connoted attachment: the rights of belonging in a community of freepeople." We need a combination of both liberty and freedom assuming that we have the necessary self-discipline that makes people "fit for liberty" as Jefferson put it.

In the present discussion, I am saying that the South has more of the true individualism as well as a better balance of freedom and liberty than the Northeast and Midwest. One reason for this is our tradition, which developed over time from various sources. Another is that the South has been more homogeneous ethnically and has set down more stable roots with less social and economic upheaval than other regions of the United States allowing a sense of place to emerge. Unfortunately, those factors are changing, and so is the South. I would say for the worse. It could be a paradox that the factors that favor economic growth that I am alluding to in this discussion are being undermined by their very economic success. Marx observed that capitalism tends to undercut traditional societies. I am afraid that he is right. Marx thought that loosening these bonds worked a beneficial side-effect to broaden people's social scope. I see it as destructive and tragic.

2. In your previous reply to my earlier comments, you said that you trusted Stiglitz and Gailbraith more that you trust me. Besides being hurt by the comment that you do not trust me after we have exchanged comments for the past few weeks (wryly smiling here), I would suggest instead that we rely on evidence and logic as well as intuition to discover the truth rather than rely solely on the word of experts. I see their comments quoted by another as reflecting a lack of understanding of the free market position. They seem to be saying that free market advocates simply believe in turning people loose to do whatever they so choose with no consequences. I am sorry to say that some "modal libertarians" and anarcho-capitalists do give such an impression. But the classical view of liberalism and the free market seeks social, economic, and legal arrangements that hold people accountable for their actions and advocate the use of state power to prevent fraud. So, I see the characterizations of free markets quoted above as misunderstandings or misrepresentations of the classically liberal position.

As for the so-called "Fresh Water" and "Salt Water" schools of economic thought, these terms are simply catchy ways to refer to divisions among economic theorists that have been in place for some time. I am very familiar with arguments for interventionism and undercomsumptionist macroeconomic theories. I find them unsatisfactory for the following reasons. The economy is far too complex and fluid to micro manage it. These interventions must also necessarily interfere with the discretion of the individual as well spontaneous interactions among individuals so as to violate both liberty and freedom. I find underconsumptionist theories mistaken since they overaggregate demand. They fail to realize that not all demand is sustainable over time. They also underestimate the intricate balance between the various elements of the macro economy especially the necessary link between savings and investment. This is also what Stiglitz and Gailbraith are missing in their evaluation of Invisible Hand approaches. Think of the economy as well as society as a giant eco-system that is so complex and intricately woven together that no human mind can fully comprehend its workings on the fly.

more on consumer confidence and how to reverse trend in US

Unions are dying for the same reason the buggy whip industry died: supply and demand. Organized labor served a purpose back in the days when we were transitioning from an agricultural economy into an industrial economy. Back then there was a seemingly inexhaustible supply of workers seeking to escape the misery of the farm, and the oversupply produced wages and working conditions that weren't favorable to workers. Unions were devised to give workers some modicum of market power. But those days are long gone. I understand that it's difficult for some to get their heads around the concept of a general scarcity of labor since is such a recent phenomenon, but that's where we are today: we're out of workers. And this shortage has made unions superfluous. Why else would 95% of the private sector workforce eschew them?

Chris, Ah yes... "liberty and freedomn" I prefer the distinction as, "Freedom is a state of mind, Liberty is a state of Reality." I've lived in the Northeast, Midwest, and the South. As for the South's conceived notion of it's superiority, most Texicans consider Dallas as the point where the North begins. The only difference I've seen is that the street and river names change. As for the "Gentlemanly" behaivor, I take it you have never had to pull Picket Duty and talked to the opposition all night long and then called down a mortar barrage on their heads the next morning. As for "Classical Liberalism" and it's economic proponents, that died along with Locke, Berkely, Hume, Mill, Smith, et al. It's all a simple text book study now. And what is the invisible hand? Today that "hand" is much more visible than it was in the past. In fact, it might be more apropos too call it the "Alien Hand Syndrome".

United Auto Workers Survive work very lovely. These work is useful and important.

This is a rather perverse definition of a union "The goal of unions is to redistribute wealth from the owners and managers of firms". You might as easily say "The goal of stores is to redistribute wealth from customers to owners." It nicely loads the argument with the toxic "redistribution of wealth" bogeyman.
The goal of unions is to increase the negotiating power of labor by negotiating collectively. Similarly the goal of corporations is the increase the power of capital by centralizing it in the corporation. It's a balancing act.
Unions didn't cause the erosion of America's manufacturing base. If they did, then non-unionized industries wouldn't have seen the same flight of factories.

This is a rather perverse definition of a union "The goal of unions is to redistribute wealth from the owners and managers of firms". You might as easily say "The goal of stores is to redistribute wealth from customers to owners." It nicely loads the argument with the toxic "redistribution of wealth" bogeyman.
The goal of unions is to increase the negotiating power of labor by negotiating collectively. Similarly the goal of corporations is the increase the power of capital by centralizing it in the corporation. It's a balancing act.
Unions didn't cause the erosion of America's manufacturing base. If they did, then non-unionized industries wouldn't have seen the same flight of factories.

Yes, neilehat, there are different definitions and applications of liberty and freedom. Most famously Issiah Berlin discussed two concepts of liberty in a famous essay. David Hackett Fischer, though, touches on a commonly overlooked distinction and crucially important aspect of freedom, viz. the freedom to form social unions with compatible people. Certainly, this notion of freedom has been completely lost on the ACLU.

Yes, indeed, the people one works and lives with have a tremendous effect on one's productivity, personal development, and personal happiness. Study after study demonstrates these relationships. We are not social atoms who are fungible. One accurate criticism of classical liberalism made by conservatives and Marx is that liberals neglect the vital importance of a common life with those one lives around. There are classical liberals who did not fall prey to this oversight such as Thomas Jefferson, Alexis de Tocqueville, and Benjamin Constant. But the notion that people are like interchangeable parts of a machine is part and parcel of the mindset that developed out of the Newtonian scientific-capitalistic mass production economy paradigm. I see this shortcoming as a legitimate target for attack by opponents of the market.

Philosopher Jerry Fodor observes that linguistic differences will emerge over time even if a group is homogeneous as they begin a process of geographical separation, say, by an ocean or mountain range. Not only does language evolve in different directions but so do all social conventions that facilitate human interaction. It is a catastrophic mistake to think that these habits and customs will just adjust and all will be fine. Most people are simply not that instantly flexible. Again, we have the seed of an astute criticism of capitalism. It is so flexible and adjusts so quickly that the human psyche and relationships cannot keep up. Unions' penchant for slowing growth and change may be harmful for economic reasons, but might very well be beneficial socially and psychologically.

Say What? Unions don't have an interest in growth and change and the expansion of the Economy in manner that is fair and equitable for the working man and woman?

One question Chris, "When was the last time you attended a Union Meeting?

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Sarah
http://www.thetreadmillguide.com

Welcome Sarah! In reply to neilehat on attending union meetings, I would ask you to consider the analysis of Edgar Schein that I mentioned above on the different levels of awareness in an organizational culture. Remember that the implicit level where people act day to day might very well differ from what workers and managers explicitly map out to accomplish. The implicit trumps the explicit.

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Sarah
http://www.thetreadmillguide.com

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One would not think that the bailout was unpopular the way it was covered in the media as being necessary to 'save' the US Auto industry.

One would not think that the bailout was unpopular the way it was covered in the media as being necessary to 'save' the US Auto industry.

I think you are thinking like sukrat, but I think you should cover the other side of the topic in the post too...

I am amazed with it. It is a good thing for my research. Thanks

Поздравляю всех посетителей www.becker-posner-blog.com с наступившем Новым Годом! :)

Пусть Новый год cо счастьем новым
Под сказку сна к вам в дом войдет
И вместе с запахом еловым
Здоровья, счастья принесет!

I am unable to understand this post. But well some points are useful for me.

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I must say that you provide genuine, quality information. Thanks for this!

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Спасибо мне очень понравился ваш блог и я обещаю заходить еще

Спасибо грандиозное за предоставленную сообщение. Дух рад разместить ее у себя на дневнике. Если Вы не против, то я так и совершу.Если духи какие-то проблеммы со копирайтом, постучитесь на мой дневник,я целое исправлю. Так же прибавил Ваш место на соцзакладки. Вообщем если что обращайтесь, - неизменно выслушаю и разгадаю. Со, уважительностью, Firestarter.

If Timur it is possible, also I will take, I will place here best-disk.ru

Все-же на самом деле нравится мне Ваш блог. Постоянно совсем любопытно читать, включая эту тЁму.

Быть - значит быть в восприятеи. нипомню кто произнёс но мнЁ кажеться в тему.
это вы к чему? :-)

I'm new to this blog. Apologize for asking this though, but to OP...
Do you know if this can be true;
http://www.bluestickers.info/ringtones.php ?
it came off http://ringtonecarrier.com
Thanks :)

I'm new to this blog. Apologize for asking this though, but to OP...
Do you know if this can be true;
http://www.bluestickers.info/ringtones.php ?
it came off http://ringtonecarrier.com
Thanks :)

When there will be a continuation?
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I'm new to this blog. Apologize for asking this though, but to OP...
Do you know if this can be true;
http://www.bluestickers.info/ringtones.php ?
it came off http://ringtonecarrier.com
Thanks :)

شات صوتي

شات

Все сидят за компами тупо! Интересно кто нибуть на улицу выходит ваще? Лето ведь уже...

scaffolding with Regards!!!

"The goal of unions is to redistribute wealth from the owners and managers of firms, and from workers willing to work for very low wages, to the unionized workers and the union's officers."
http://www.vcao.net

What we are seeing is people like Posner, who know little first-hand about the auto industry citing other equally ignorant bloggers like Kaus in support of their ideologically motivated thesis. Posner would never allow such hearsay in his courtroom! Like me, I now need to earn extra money to copy dvd or convert mp3 to zune or to psp and etc,

Прикольная статья, но хотелось бы поподробнее узнать о некоторых моментах... Как можно с Вами связаться?

Действительно интересно написано. Добавил в избранное, буду заходить почаще.

Да тема интересная, нигде подобного не встречал. Ну что ж ждем продолжения.

Хорошо что еще кто-то делает оригинальные сайты. Спасибо за информацию, очень интересно.

Интересный блог, побольше бы таких

Побольше бы и таких сайтов

Надеюсь ваш сайт будет дальше развиваться

Скажите а материалы с Вашего сайта можно у себя размещать?

Скажите а материалы с Вашего сайта можно у себя размещать?

Скажите а материалы с Вашего сайта можно у себя размещать?

Интересный сайт, автору спасибо

denswor, я Нокии вообще не люблю ;) Вроде бы SE вбухали в разработку нового телефона (кажется, той самой Ксперии) столько денег, что компания пошатнулась. Плюс падение продаж, ноль инноваций. Читал по этой теме статью месяца три назад где-то в интернете.

Hey, cool tips.