Tuesday, May 19, 2015

Right to Work laws are government intervention in the markets - for conservatives

I see that the Deseret News has noticed a problem with wages in Utah. Utah ranks about 37th in the nation for wages and wage growth. The article notes that wages are not even keeping up with inflation. Worse, wages have detached from productivity. That is we can learn from the source of the article, the Utah Department of Workforce Services.

Utah is a right-to-work state. That means that wherever there is a union, non-union employees can get the same pay and benefits without paying the dues. Utah has a right to work law that makes this possible. Proponents say that right to work laws allow the market to work. No, not really. If that were so, employers would find a market based solution rather than run to the government seeking help.

Unions started before there were even laws regulating them. They were a market response to unethical employer behavior. Unions have enjoyed great popularity in the United States up until Reagan started his first term as president. I remember how Reagan fired all of the air traffic controllers and set a new tone for the debate on unions in the marketplace. That new tone is this: when government intervenes in the market, they will side in favor of the employer not the employee.

The Utah Department of Workforce Services recognizes the detachment of wages from productivity and inflation as a national trend. Utah just happens to be at the lower end of the trend. It is worth noting that there is a pocket of brightness in Utah: The information sector - companies that work with storing and managing very large amounts of data - they're doing quite well. Data processing and management has been one of the biggest contributors to productivity in recent years.

When we say "data processing", think of applications that went from being an application you installed on your PC to an application that runs through a web browser. The application in a browser has been a revolution in productivity in the office. The browser interface that the employee sees is connected to a database on the back end. Such an application is easy to maintain, easy to manage and easy to update relative to the applications we install on our PC. This increase in productivity is not attributed to the employee, it's attributed to the IT department. Information technology workers in Utah are seeing unemployment rates of about 1/2 of one percent.

The detachment of wages from inflation and productivity is a symptom of a public policy decision, it is not simple economics. For at least the past 30 years, government at all levels has intervened in the market in favor of capital rather than labor.

Now that people are getting wise to that fact, and the mass media can no longer ignore it or cover it up, the emphasis has shifted to trade agreements negotiated in secret. You know, like the Trans Pacific Partnership and the Transatlantic Trade and Investment Partnership. They are called "free trade agreements" but really, they are business friendly legal frameworks designed to give even more cover to business. As if helping businesses any more would grow the economy.

Sure, that plan will work to direct all the growth in the economy to the top 1%. That kind of public policy is simply not economically sustainable. Henry Ford knew this when he first produced automobiles on an assembly line. He knew that unless he paid his workers enough, no one would be able to buy his cars. He linked wages to productivity and profited handsomely for it. Employers these days seem to have forgotten the lessons of Henry Ford. But they know well where to get help when they can't innovate out of a bad economy.
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