Great piece on how we're becoming protectionist

http://gregmankiw.blogspot.com/
Union leaders such as Mr Trumka and Andy Stern, the leader of the more moderate Service Employees International Union, are regular guests at the White House. Mr Obama has revoked some Bush-era executive orders that unions hate and issued a few they adore. He has appointed union insiders to top jobs, allowed Congress to add “buy American” provisions to the stimulus bill, risked a trade war with China to please tyre-workers, let other trade deals wither and brazenly favoured unions when bailing out car firms.

But his biggest favour has been green, foldable and borrowed. For example, he encourages the use of “Project Labour Agreements” on big federal construction projects, whereby contractors must recruit through a union hiring hall. Such agreements inflate costs by 12-18%, according to David Tuerck of Suffolk University, and were banned under Mr Bush. Even where PLAs are not in force, federal contractors are obliged to pay “prevailing” wages. That actually means something close to the union rates, which is nice for the workers in question but means that taxpayers get fewer roads and schools for their money.

But his biggest favour has been green, foldable and borrowed. For example, he encourages the use of “Project Labour Agreements” on big federal construction projects, whereby contractors must recruit through a union hiring hall. Such agreements inflate costs by 12-18%, according to David Tuerck of Suffolk University, and were banned under Mr Bush. Even where PLAs are not in force, federal contractors are obliged to pay “prevailing” wages. That actually means something close to the union rates, which is nice for the workers in question but means that taxpayers get fewer roads and schools for their money.

For the unions, public cash is a lifeline. The proportion of American workers at private firms who belong to unions tumbled from more than 30% in 1960 to 7% last year. By contrast, a hefty 40% of government workers are unionised and the rate has remained stable for decades. Under Mr Obama, the private sector has haemorrhaged jobs but the number of government workers has fallen only slightly. Last year for the first time more than half of American union members worked for the government.

Market forces place a natural check on unionisation at private firms. In the short term, collective bargaining can raise wages. But if unions demand above-market pay and impose cumbersome work rules, unionised firms will gradually lose market share to non-unionised competitors. The Nobel prize-winning economist Paul Samuelson’s quip—that unions determine “how industries in decline are accelerated towards their extinction”—is not quite right. Within an industry, firms with no unions (or less aggressive ones) tend to displace unionised ones. Capital moves to places where unions are weaker, and job-seekers follow it. Stephen Walters of Loyola University finds that American cities with above-median unionisation rates have grown poorer and less populous. Richard Vedder of Ohio University observes that, between 2000 and 2008, more than one American a minute moved from a closed-shop state to a “right-to-work” state (ie, one where you cannot be forced to join a union as a condition of employment).
Meanwhile, on the cushy side…

Such checks do not apply in the public sector. The government cannot easily go bust. When a company pays over the odds for labour, the money comes straight out of its owners’ pockets. They usually object. But when a politician hikes public servants’ pay, he wins votes. If this year’s budget is tight, he can promise lavish pensions, secure in the knowledge that the bill will come due only in the distant future. Unfortunately, that distant future is now, which is why so many states are in a fiscal pickle. Per hour worked, state and local government workers enjoy 34% higher wages and 70% more benefits than their private-sector counterparts, calculates Chris Edwards of the Cato Institute, a libertarian think-tank. But are the unions satisfied?

Not really. Mr Trumka sees a “pressing need” to pump “at least $3 trillion” into infrastructure over the coming years. Unions are desperate to be allowed to organise private firms without a secret ballot, and are hoping to slip this bad idea into the jobs bill. The Senate is unlikely to play ball, however. Stories of union featherbedding enrage the tea-party crowd, and that makes Democrats in swing states nervous. On February 9th Democratic senators from Arkansas and Nebraska voted to block the appointment of a union man to the National Labour Relations board.

Organised labour is, of course, organised; and that confers political influence. But union bosses can sound jarringly out of touch. “A job is a good job because workers fight to make it one,” says Mr Trumka. Many other Americans, however, think a job should pay well if you do it well, and grumble that this rule doesn’t seem to apply to unionised public servants. Taxpayers are angry, and itching to vote in November.

For the first time in history, union membership is primarily government workers.

Because the union could not survive in the free market, it went the one place it could... politics, where it could buy the politicians it needed...

It's nice to know that our taxes are going up because we're paying more for more expensive labor. No business would ever run this way.

I wouldn't cry so much if we were actually paying for the labor. But we're paying for "work rules" (meaning noone is working) and retirement pay for 40 year old "retirees".

I stopped reading as soon as I saw the word union in the first sentence. This article is nothing more than union bashing. Even Glenn Beck said that he supports unions in certain circumstances. GLENN BECK.

And Mankiw is not exactly a bright guy. I actually have one of his economic textbooks right in front of me. He supports cap and trade. He thinks that outsourcing is good. According to him, outsourcing of jobs by U.S. companies is "probably a plus for the economy in the long run." Even Republicans criticized him for saying that. Oh, and he thinks that making hamburgers at McDonalds is a "manufacturing" job.

"I stopped reading as soon as I saw the word union in the first sentence. This article is nothing more than union bashing. Even Glenn Beck said that he supports unions in certain circumstances. GLENN BECK. "

Stupid logic. I support drinking water; I don't support drowning. Unions can certainly be useful, unions in the current state are not.

> And Mankiw is not exactly a bright guy.

From you, thats a compliment.

> I actually have one of his economic textbooks right in front of me.

Can you get past the first page?

> He supports cap and trade.

He's certainly brighter than you.

> He thinks that outsourcing is good.

It is.

> According to him, outsourcing of jobs by U.S. companies is "probably a plus for the economy in the
> long run."

He's right.

> Even Republicans criticized him for saying that.

Well, there are stupid republicans, too.

> Oh, and he thinks that making hamburgers at McDonalds is a "manufacturing" job.

So, now we know where you work...

> He thinks that outsourcing is good.

It is.

Until it's YOUR JOB that gets outsourced.

and don;t think that only factory jobs get outsourced. White collar jobs can easily be outsourced too.

and if your company doesn't watch costs...it fails.
The best job security is having a skill in demand.

As a country we have two choices on outsourcing. We can prohibit it, watch our companies fail from being under-priced, or allow our companies to outsource and preserve the higher paying jobs.

"or allow our companies to outsource and preserve the higher paying jobs."
'
EXCUSE ME? We have outsopurcing right now and plenty of high paying jobs are being outsourced! Lawyers are being outsourced. Accountans are being outsourced. IT is outsourced. You mean these are not high paying jobs?

what are you talking about RS? these are generally multinational companies. the question is the amount of money that goes to the shareholders. without the ever-increasing pressure to provide additional returns for the wealthy we could do much better for our people.

go ahead. send all the jobs elsewhere. can you say declining empire?

American multi-nationals benefit our economy. They preserve higher paying skilled jobs by out-sourcing commodity skills to other countries with lower standards of living. If we did not do this, we'd we'd lose out to foreign based competitors offering superior products and services at lower prices.

Like I said on another thread, the people who don't work and earn are the ones who most like socialism.

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"what are you talking about RS? these are generally multinational companies. the question is the amount of money that goes to the shareholders. without the ever-increasing pressure to provide additional returns for the wealthy we could do much better for our people."

Aren't you the wife of an equity partner at a law firm? Don't you keep telling us your husband is an equity partner at a law firm? Haven't you told us that you own 50% of your husband's equity? Didn't you tell us your husband has been firing people from the firm where he is an equity partner?

"They preserve higher paying skilled jobs by out-sourcing commodity skills to other countries with lower standards of living."

Are you that dense? How many times do I have to tell you that SKILED JOBS are being outsourced... right now as we speak. The only jobs being preserved are the super high paying management jobs and the super low paying support jobs. After all, you can't outsource the janitor. But you can outsource the bean counters and the IT department.

Just because a job is white collar, it doesn't make it high-skill. Fighting against globalization is like pissing against the wind: you're not going to win. Like the "white man" sweeping over the country and kicking Native Americans out of their lifestyles, it's a societal tidal wave too large to stop. Sorta like the RE bubble. There's not enough money in the world to bet against the belief of 70% of humans on this earth that RE can only go up, and it should do so at rates beyond inflation.

Are there things we can / should do? Perhaps. The most obvious first step is to take a hard line against countries that juice their exports and discourage imports through currency controls. Second, we should perhaps take a harder stance against sometimes one-sided free trade situations.

However, none of this changes the fact that an accountant punching your tax data into TurboTax in India is doing work of equal value to the one in the U.S. What creates value and progress for an economy is that the work that used to require larger skill & manpower has been replaced by some software.

"There's not enough money in the world to bet against the belief of 70% of humans on this earth that RE can only go up, and it should do so at rates beyond inflation."

Now that is a funny quote. Sadly, probably true. How it applies to nyc now I'm not sure, but it ain't irrelevant. (did I just say, sadly...)

I support FAIR trade, not free trade. While Chinese imports are increasing, China is limiting their imports of US goods. One of the induistries that benefits most from trade is aviation and defense. Countries from all over the world buy our commercial planes and defense systems. But most other industries are not that fortunate. This is why the rust belt is a ghost town while Seattle (hometown of Boeing) is prospering. So Seattle might benefit from trade, but Indiana, Ohio, Michigan, Pennsylvania, etc. are not.

> > He thinks that outsourcing is good.
> It is.
> Until it's YOUR JOB that gets outsourced.

If this is the best logic you have, I guess the point is proven...

> go ahead. send all the jobs elsewhere. can you say declining empire?

Yes, outsourcing is likely preventing a lot of the decline. More, please.

saying you are pro fair-trade is a euphemism for being protectionist.

Right on the nose, riversider.

Every protectionist move has some sort of excuse. The biggest excuse is usually some protectionist move on the other side.

Free trade is good for us, and good for the world.

Next they'll say the gov't shouldn't conduct business with non-unionized shops.

Government is already doing this...

The government has already started that in New York, REQUIRING certain projects to be unionized. Hell, Kingsbridge project was turned down - which the residents wanted! - simply because the unions weren't getting their jobs.

And then NYS required unionization of all home health care aids... etc.

we should also award contracts to the highest bidder and not the lowest one.