How to think of modern unionization pushes
Note: I took last week off for the Holy week holiday in Spain and I know I’m going to be late this week. I apologize for the delays. I will add some more in the personal update, but suffice it to say that other obligations are taking first priority at the moment. I have mentioned previously that I hope to continue posting weekly, but it seems that transitioning to biweekly may be the best move until I have some more time.
So in recent weeks it’s been big news about how an Amazon warehouse in New York formed a union for the first time, after the failed bid in Alabama. There’s been a recent push for Starbucks baristas to unionize as well. It seems to be in the general zeitgeist to push for unionization among a lot of the left right now in a way that hasn’t been that way in a long time.
So I definitely have some thoughts on this. Being I tend to be fairly radically pro-markets and freedom for companies to do what they want along with the fact that I work as management, people tend to peg me as anti-union. The reality of where I stand is quite a bit more nuanced.
Just as companies more generally are a way to get groups of people to accomplish more together than they ever could as the sum of individuals, the same freedom applies to workers who would like to form a union. The inherent tension between the interest of employees who would like more pay and benefits is a good thing. That tension is the market finding the right price.
Now that theory and how it is implemented in practice are quite a bit different, and that logic for me only applies to private organizations. I do see public sector unions as inherently different as the government isn’t a market-based organization. In the US, I’m also fairly critical of how unionization is implemented with generally being forced to be a union member and the National Labor Relations Board requiring collective bargaining for all employees, not just those in the union. The union itself should be subject to the market forces in order to show its benefit that it’s worth the dues.
But anyway, none of that is neither here nor there as this is going to be mostly eggheaded theory this week. I wrote a few weeks ago about the dangers of nostalgia, and it seems to me that many on the left are falling into that same trap with respect to labor and unions. Looking to go back to a time when the US was the world’s manufacturing powerhouse1. The thing is most people live in a very different world now and the jobs looking to be unionized are generally in the services sector.
I’ll try not to make a full omelette, but time to get even more eggheady. In the service sector, the largest cost by a huge amount tends to be labor. That means that companies operate their margins based on the cost of the employees. Given those two facts together, there’s often just not that much money to go around in order to make a union worth it.
Let’s look at the case of Walmart, which tends to be the ire of many saying what is wrong with retail. Walmart has a net income of $13.673 Billion dollars and also has 2.3 Million employees. Doing simple division, that leads to a net income of about $6,000 per employee. That sounds like it leaves a lot for a big raise but keep in mind the average associate has earnings over $19/hr. Keeping in mind taxes and other operating expenses which are typically 15%, but let’s just say 10% for argument. That leaves a cost of $20.90/hr to Walmart. Taken over 2000 working hours in a year that’s an average cost of $41,800.
So using that same 2000 hour a year calculation and the amount of excess money per employee, the absolute maximum even possible is a $3/hr raise. Considering the company does have to have some amount of profits and the impact of taxes, the most possible allowed to be extracted is probably closer to $1/hr.
The Service Employees International Union (SEIU) typically charges 2% of wages (source links to PDF) for membership which would be roughly $0.40 per hour meaning that all of the mess and organizing would likely be able to net an employee around $0.50 /hr if anything at all.
This isn’t an issue of executive pay either. If Walmart’s CEO took his $20 Million dollar salary and spent it on every employee, it would be $10 per year extra. That’s one twentieth of a cent per hour at 2000 hours. It can seem absurd that a business so large just doesn’t have that much revenue, but when the main cost is the people, unfortunately that’s how you have to control costs.
Now there also seems to be the issue that unions tend to be much more about cultural signalling and enforcing cultural norms than strict worker benefits. There have been union pushes for some of the most highly compensated workers in the country that stem more from issues surrounding equality. The Kickstarter union doesn’t even mention increasing worker compensation as an objective, but has objectives more around equality.
This reads to me as members of the professional managerial class wanting to pretend to be in solidarity with labor movements without actually wanting to use the same methods or even all that interested in it. Funny enough, by making unionism more a cultural signifier about political sides and not realizing they are on the other side of where most union cleavages lie (workers/management), they are doing more to harm the cause than help. Sometimes if it’s not your fight, shutting up is the best move.
Personal update
As mentioned in the note, I’ve been on the road for work and looks like the workload is steadily ramping up. I will almost certainly go every two weeks. As far as canine updates, unfortunately they will mostly be minimal as I am away for now. Though he did get a new dog bed and has been very proudly lazing on it.