re: #7 elizajane

Small rant of the day:

What is this middle class race to the bottom? Why, when confronted with the benefits enjoyed by at least some government workers, do private sector workers not say, “Hey! My employer, whose stock has doubled in value in the past 2 years, should be giving me those kind of benefits too!” Why do they say instead “Hey, my salary hasn’t gone up in five years and I have crappy health insurance and a minimal retirement plan. Everybody else should have it just as bad as I do!”
How exactly have the Republicans managed to convince the middle class that they should grab those just above them as they and their mortgages sink under water? That instead of trying to improve their own lot, they should fight to worsen the lots of others?

It really, really bothers me.

It should bother you when some people seek to hurt the general welfare rather than raise it, or at a minimum, raise their own. But what you’re missing is that the private sector is different from the public sector.

The private sector isn’t in a position to grant increases in pay and benefits except when it’s making money. The more value a private sector company produces, the more is available for distribution to stockholders, management, workers, and the general public. [The general public gets a share of the benefits of this economic activity, because any voluntary exchange benefits both parties.] Unions, in the private sector, are part of the equation determining how these benefits are shared out. But unions, as well as corporations, are constrained by the fact that prices have to cover costs, and if costs rise too far, the price that the market will offer won’t be enough to do that. The company will fail. Nobody wants that, not management, not workers, not unions, and not the public. So mostly that sort of overreach is avoided.

When a public sector union negotiates for a pay or benefit raise, the equation is different. Those on the other side of the table are not similarly constrained. In fact, it is in their own interests to agree to the demands. Grateful union management will contribute cash and man-hours to their next campaign. Management doesn’t have to face angry stockholders or customers…there aren’t any.

So, granting benefits to public sector unions carries no cost. It’s a win-win equation. There’s no reason benefits and pay should not be raised. Higher, and higher, and then yet higher. What sort of grouch would get in the way of that?

You see the snag, right? In the real world, while fiat money is potentially infinite, apples and oranges must come from orchards. Every economic good is in limited supply. At some point, yet more for some is, inexorably, less for others. Somehow, somewhere, somebody makes do with less, when somebody else gets too much. The only way out of this is if the somebody who gets more is doing great work, and merits that pay. The supply and quality of human labor is contingent, more so than the supply of the other economic inputs.

Unionized ublic workers’ pay, in the minds of those who object to yet higher pay and benefits for public sector unions, has already got as high as it can go and be in any sort of objective relation to the quality of the work done. That is to say, workers in the private sector are underpaid relative to their unionized public sector counterparts. (Turn it around—-public sector unionized workers are overpaid.) This is mostly due to a disparity in “benefits”, rather than in overt wages. In Wisconsin, for instance, the state picks up almost all medical and pension expenses. Private sector workers can mostly only dream of such a deal.

The fact that there are other hogs at the trough, others who provide value not commensurate with their reward, does not make this particular pig-out any better. Management that scores huge bonuses even as it’s crashing the company is another case of rewards that are out of line with reality.