PG on Unions

http://www.paulgraham.com/unions.html

by chwolfe • 19 years ago

27 73 19 years ago

adnam3• 19 years ago

"A union brings democratic practices to the work environment."

Do workplaces need democratic practices? I've never worked for a company that threatened my life, liberty, or pursuit of happiness -- mostly, they tend to secure the blessings of (financial) liberty to myself and my posterity by paying me an amount that I find satisfactory. If they didn't, I could always cry oppression, but it would be more mature for me to just find a better job. And if I had a higher estimation of my worth as an employee than any employer, I might consider my own estimate incorrect.

It's a fallacy to apply your political principles to anything outside of politics. If you want to work for a business that runs itself like a country, work for GM (and pray for your pension).

adnam3• 19 years ago

lupin_sansei4• 19 years ago

The democracy in the workplace is you are free to leave and join another company at any time. This is a good thing. Any attempt to make it harder for employers to employ people always pushes back by raising unemployment. (See the minimum wage)

natrius5• 19 years ago

A safe work environment should be guaranteed by legislation. Beyond that, if you don't like your job, you should find a new one. Democratic practices are completely unrelated to a work environment. No one is ruling over you. You're free to go.

Granted, switching jobs isn't a simple thing to do, mainly because our labor market is so inefficient. There are other things attached to having a job, like healthcare, that complicate things. If only we separated healthcare from employment somehow...

Out of curiosity, what gains did you get from forming a union?

byrneseyeview7• 19 years ago

"A safe work environment should be guaranteed by legislation."

You're confusing actions and goals. If we pass legislation banning unsafe environments, all we're saying is "Dangerous work should only be done by criminals." If you think coal mines and slaughterhouses are bad now, just imagine how much worse they'd be if they were run by the mob.[1]

They might even be as dangerous as mines in the kind of country that does try to guarantee workers' safety and happiness through legislation ( http://www.chinadaily.com.cn/english/doc/2004-11/13/content_391242.htm )

[1] We've passed laws that say "Nobody should smoke pot," but the effect of those laws is, essentially, "People should only buy their pot from someone who has little to lose from committing additional crimes, such as someone already involved in illicit traffic and already able to extralegally enforce illegal agreements.

adnam3• 19 years ago

"Democratic practices are completely unrelated to a work environment."

Maybe to YOUR work environment, but not all.

What gains did we get? Well, for one, a voice so that we could communicate with management in an orgainzed way, just as management generally do with the labourforce. Before, each person who had a problem was isolated and dealing with it alone.

Then add in the free legal representation, negotiation advice, free training etc etc

abstractbill• 19 years ago

"...cannot expect management to treat everyone equally and fairly..."

The best manager I've ever worked for once told me that he believed in treating people fairly, but definitely not equally. I think he had a good pont.

Tichy2• 19 years ago

Why would it not be democratic enough that you can quit your job if you are unhappy with the work conditions?

Of course there may be the concern that you would have no opportunity to find another job. However, then I don't understand why it is deemed fair for society to dump the social responsibility on the enterprises. Is it the companies fault that you cannot find another job, or is it maybe your "fault" that you lack the qualifications?

Ultimately society pays anyway: if the company has to overpay the inefficient workers, it's products will get more expensive, rest of society pays. I think it would be cleaner to just have society pay directly, which might enable economic pressure against the inefficiency, too (if society pays, the problem is open and can be tackled). Worst case is the whole company goes out of business because it cannot compete anymore.

especkman2• 19 years ago

I don't quite buy the analogy. Manufacturing was a profitable business (particularly the auto industry) during the union heyday. The same can hardly be said for most startups investing in infrastructure during the dot com bubble.

byrneseyeview7• 19 years ago

Ventures have changed. During the Industrial Revolution, startups were started within a company -- Andrew Carnegie was a bond broker and speculator who got into a (very risky) sideline in steel; Du Pont was a gunpowder company before they started messing around with chemistry[1].

The auto business was enormously profitable for GM and Ford, but there were thousands of equally promising auto startups at the same time. Most of them built prototypes bespoke for rich people; none of them are still around.

[1] And cars. They used to own about a fourth of GM, until they were forced to divest.

pg2• 19 years ago

Actually there were a huge number of car companies, nearly all of which died. It was very much like happened with Internet startups. In fact during the Bubble Rupert Murdoch used the history of the car business as an example to explain why he wasn't in a rush to invest in Internet companies.

especkman2• 19 years ago

I'm just not feeling it.

I think it is better to think of labor unions themselves as startups that eventually consolidated. They gained control of a resource that was in demand by a growing industry, manufacturing. They grew by competition and consolidation (as did their most successful customers) They supplied that resource at a price negotiated with their customers. Manufacturing prospered, and so did it's suppliers, including the labor unions.

The labor unions failed to adapt to a changing market (as did many of their customers), which is why they are on hard times.

That they failed to adapt says little or nothing about the considerable, commitment and sacrifice it took to found them. I agree though, that the presence or absence of those attributes in modern day union organization and membership isn't the whole story about why they are throughly failing today.

dfranke• 19 years ago

I don't understand how that damages the analogy. The point of the essay is that an environment where you have to grow fast or die makes it better to overspend on some things than to waste time trying to bring the price down. If that's valid logic for an unprofitable company, it seems it should make even more sense for a profitable one.

davidw2• 19 years ago

Aaaagghh... we don't need to bring reddit to yc news. Note that PG didn't put a yc news link on this article.

danielha2• 19 years ago

While Startup News sounds like it should be all about startups, I've come to think that it should just be submissions that would be of interest or value to this community. We've come to understand each others' likes pretty well, so as long as something isn't blatantly off topic, it should have a chance here.

ecuzzillo2• 19 years ago

a) PG has said that they will determinedly keep the place focused, and

b) Reddit did exactly what you're saying, and now look where it is.

brett• 19 years ago

Solid +1. I think of this the same way.

chwolfe• 19 years ago

Sorry... didn't notice the lack of a yc news link on the article. But to be fair, this article is closer to dealing with startups (labor relations, corporate structure) than a lot of things I've seen grace the front page.

far33d• 19 years ago

Certainly, PG's point here is very true with respect to the legacy airline carriers: Most of the union contracts were negotiated during airline regulation. Regulated prices guaranteed that the airlines could pass any increases in labor costs on to the customers and still turn a profit - thus, they had no incentive to negotiate with them. Then deregulation and suddenly those contracts don't make much sense anymore.

However, it's very shortsighted to solely blame the unions. A contract is a contract, and if an employer made a bad one, they are still bound to uphold it.

jason1313• 19 years ago

Why do we need a "Theory" to justify being against Unions? If we want to be selfish and keep all the money for the people at top of society. Let us just be honest about it, and say we are selfish and will use the power we have to satisfy our own greed.

earthboundkid2• 19 years ago

The whole point of capitalism is that people are basically going to be greedy no matter what, but if you tell them, "Well, be as greedy as you like, but to get money you have to convince other people to give it to you, and the best way to do that is usually to make something they like," then things work out ok. Of course, we still need regulation to ensure that the best way to make money really is to make something people like, but outside of that there's no reason to blame geed per se. Greed is the engine that drives the machine!

jason1313• 19 years ago

I certainly agree with the philosophy of trying to use greed as a motivation/engine for good.

But I certainly do not think it is moral for unions to be weak.

Prrometheus• 19 years ago

Unions are labor cartels. Sellers of labor ban together to set price floors. The force of special legal privilege alone has prevented unions from being consigned to the scrap heap of history's unsuccessful cartels. This privilege prevents the alternate sellers of goods that normally break up cartel ("scabs") from entering the market.

greendestiny• 19 years ago

Well at least unions have become cartels. I don't see a problem with voluntary bodies representing workers, advocating for them as a body and so forth. In fact I think remove special protections for unions would make them more accountable to their members, making them better at doing what they are suppose to do; look after their members.

nostrademons• 19 years ago

I've got another explanation, one that's perhaps simpler and grounded in more orthodox economics:

The great union boom of the postwar era came about because labor was relatively the scarcest factor of production. Millions of people had been killed by WW2; billions more were locked up behind the iron curtain or stuck in third-world post-colonial nations, and hence unable to contribute to the global economy. Meanwhile, the U.S. had a huge capital stock leftover from WW2, and plenty of new innovations to develop. High supply of capital + high demand for products + low supply of labor = rising wages.

The nifty thing about this model is that it can explain virtually all economic history from the past millenia. For example:

Around A.D. 1000, the population of Europe began rising, marking a slow trend out of the Dark Ages. As labor became more abundant, land became scarcer (capital was not much of a factor in those days). This led to the glory days of feudalism: serfs would be bound to the feudal estate, since land was dear and labor cheap.

This continued until 1347, when Black Death hit. Within a few years, 1/3 of Europe's population was wiped out, leading to large-scale chaos in the social order. When people recovered, wages started rising. Feudalism collapsed, as there were not enough workers left to work the field, and surviving laborers began demanding more rights. The new entrepeneurial spirit led to innovations, particularly the development of modern finance, Medici-style banking. As capital became progressively more important and labor more abundant, returns to capital increased (the speculative booms in the late 1600s) and wages dropped.

Colonialism also opened up large new land areas during this time period, dropping the returns to land and increasing the returns to labor and capital. This sounded the final death knell of feudalism: you really don't hear about many knights in shining armor after the 1600s.

As labor expanded across the new continents, it eventually reached a point of diminishing returns. It's no coincidence that the industrial revolution kicked into high gear just as the Americas and European-habitable parts of Africa and Australia became fully settled. With no more land for the taking, people had to turn to machinery to increase their returns. And once the machinery had been invented, wages dropped as labor became less necessary.

This reached a head during the Great Depression, when capital outpaced what labor could buy. The immediate cause of the Great Depression was a major contraction in the money supply. This, in turn, was caused by the bursting of a major credit bubble that had inflated throughout the 1920. Credit is a way for rich people to give poor people money, so that poor people can continue to buy the products that rich people make. Unfortunately, creditors generally expect to be paid back, so it sucks when people find out that's impossible.

The Depression led to the political unrest that eventually led to World War 2. WW2 had four major effects: it killed a lot of people, it made the U.S. build up a huge industrial base for war production, it destroyed the capital stocks of most European countries, and it led to the Cold War and rise of communism. The net effect is detailed above: labor became scarce, capital became abundant, and that lead to a large increase in wages and general prosperity.

That changed in the 1980s. People generally attribute the change to Ronald Reagan and Margaret Thatcher, but it's worth asking how they came to power. In the 1980s, the peak of the baby boom generation was just entering the workforce. The increased labor supply drove wages down ("jobless recovery", anyone?) and returns to capital up.

The pendulum should've started swinging the other way around 1990, when the relatively small Gen-X started entering the workforce and the 1920s-born Silent Generation started retiring. And that's what happened among skilled professionals: wages for the top 20% of the population have increased significantly lately.

But the end of the Cold War put a kink in a more broad-based prosperity. When Communism collapsed, lots and lots of additional workers entered the global labor pool. And with Y2K and outsourcing and the Internet, we found out how to put them to use. So the global supply of labor has been increasing and increasing fast, which keeps real wages down and returns to capital up. Hence the booming stock market of the last 10 years, amidst fears that Main Street USA is missing out on the party.

In the last 3-4 years or so, a new wrinkle has been added. The new Asian workers are voracious savers, which means that the supply of financial capital has been high along with the supply of labor. That's why real interest rates are fairly low, and stocks are trading at valuations higher than their historical norms.

It also means the relatively scarce factor of production is innovation: the ability to take available capital and make something people want. That's why the returns to entrepreneurship have been so high for these past couple years, and why so many people have been starting startups. We're attempting to fill a supply/demand imbalance and turn all that free money floating around into useful products for people. When YouTube gets bought for $1.6B despite having little revenues and no profits, it's not because Google is stupid. It's because Google stock has been bid up to stratospheric heights by large influxes of money, and so the rational thing to do is trade it away to make life a bit better for its customers.

So PG's wrong when he says unions are a historical anomaly. (Well, the particular organization of a "union" is a historical anomaly, but the general phenomenom of labor making greater demands in times of scarcity is not.) Labor will have its day again, when a war or famine or plague kills off large numbers of people. Similarly, the startup ecosystem isn't a brave new world that'll last forever: rather, it's a reaction to the particular economic conditions that exist on earth at this time. As long as capital and labor both remain abundant, though, startups will continue to be a profitable career path.

pg2• 19 years ago

Sure, labor prices always vary with supply and demand. I'm not contradicting that, or merely restating it. What I'm saying is that the hot companies of the early 20th century happened to be a type that needed lots of people. Those before and after didn't, earlier ones because they just weren't as big, and later ones because they tended to hire programmers by the tens, not factory workers by the hundreds.

So labor unions were a historical anomaly, because they happened at a time when, uniquely in history, single organizations needed to hire large numbers of people and didn't need to be too careful about how much they paid them.

jason1313• 19 years ago

That is an interesting argument.

Now what public policies would you advocate for based on your previous thesis ?

muzzy• 19 years ago

manufacturing laborers unionized because they were in great demand? so shouldn't the tech bubble workers have unionized as well since they, too, were in such great demand? union qua union, ithink, serves a purpose -- ie ensure the well being of its members. and it was unions that provided workers with leverage to negotiate higher salaries and more benefits - not because they wer in such great demand. if workers already had leverage because they were scarce, i don't see why this would lead them to forming unions. and contrary to what PG implies, i think there were some extraordinary, heroic union organizers.

BrandonM4• 19 years ago

Everyone seems to be missing an important point of unions, which is to increase the standard of the work environment. If you have never worked in manufacturing you will not understand, but I spent three summers working in steel mills, and even today the conditions are not very good. There is constantly steel dust floating around in the air, sulfuric acid fumes, and excessive heat. If conditions are like that now, with unions, I cannot imagine what things must have been like earlier in the century.

It may be easy to simply view laborers as commodities (in fact, pg compares them to servers), but it's important to remember these are human beings with lives to live. Before the era of unions, these people were treated as tools, and unions forced companies to recognize that they need to actually give their workers livable working conditions.

So I would like to submit that one reason for the decline of unions today is that government regulates companies much more tightly. Organizations like OSHA and the Workers' Compensation Fund ensure that workers have reasonable demands placed upon them, and if they get hurt, they will still have enough money to live on.

No web consultant ever had to worry about getting electrocuted by the machine he or she uses, or about passing out from excessive heat and falling into dangerous machinery. To compare the union movement of the early 1900s to the boon of web developers in the 90s is absurd, in my opinion. The people who were part of the union movement were heroic, in a way, by forcing faceless companies to recognize the health and humanity of their workers.

jason1313• 19 years ago

Well said.

Goladus5• 19 years ago

Three comments.

First, I think Henry Ford deserves a lot of credit for recognizing that manufacturing workers are people, not servers. He was the one who discovered the benefits of the 40-hour work week. I'm not sure how Unions factor into that, but treating workers like people does make economic sense (even if many managers even today still do not recognize this).

In any case, in addition to working for better conditions, Unions grew to combat corruption. Blacklisting, for example: One manufacturer fires an employee for trying to organize workers and puts him on a blacklist, preventing him from being hired by anyone else. This is a fear tactic that has a large destructive power in an economy where collective bargaining is not protected.

Recently, I heard from an acquaintance. He is a manager at a corporation that was putting on presentations about preventing Union organization. During the presentation, they shared a list of reasons employees form unions, and salary was _dead last_. I don't remember all the reasons, but mostly the issues were related to blatant Management disregard for(or mistreatment of) employees.

owinebar• 19 years ago

It seemed as though pg was talking about the unions of the 1950's. Those unions weren't heroic. The heroism was in the union movement of the late 1800s/early 1900s. Companies/capitalists of that gilded age were often enough a law unto themselves, and workers organizing to have their legal rights respected were in very real danger.

BrandonM4• 19 years ago

It's a good thing that union organizers are in no real danger anymore, and companies allow a fair negotiation process between workers and the corporate offices who determines their pay.

Oh, wait...

http://killercoke.org/crimes.htm

http://www.wakeupwalmart.com/facts/#anti-union

An article about the double standard applied to unions vs. corpoartions:

http://www.tpmcafe.com/blog/coffeehouse/2006/sep/24/biased_anti_union_reporting

Sure, in a field where there is a high demand for workers, unions are unnecessary, because any deficiencies in pay will be punished. In manufacturing and retail, however, where the demand is not as high, there has to be someone out there establishing a minimum standard for their employees to receive in compensation for their work. Since minimum wage in the U.S. is not enough to live on, the only other groups with the possibility to enforce such standards are unions.

I think that the recent trend (as in the last couple decades) of discounting the importance of unions is in large part due to comparing dissimilar organizations. Manufacturing and retail is a completely different beast from the service industry, and to lump them all into one "unions fight for overcompensation" group is shameful.

earthboundkid2• 19 years ago

Two questions:

1) Isn't it more efficient to mandate minimum safety standards through the government/OSHA than through unions?

2) When you took the job, did you know about the conditions there? If so, why did you take it? I can't speak for you, but I want to guess the money made up for the suckiness, right? So, it seems like if people know what the conditions are in a job before they sign up, isn't it up to the individual to decide whether the money is enough to get them to put up with the sucky conditions?

Just curious.

BrandonM4• 19 years ago

1) Isn't it more efficient to mandate minimum safety standards through the government/OSHA than through unions?

That's an interesting question. My initial inclination, however, is to answer "no". The conditions and safety issues associated with different jobs vary so greatly that it would be quite difficult for any general organization to encompass and mandate all relevant standards. Unions can be much more specific, even taking care of issues like, "Workers working in location X should receive extra pay because it is 15 degrees warmer than the rest of the plant." (That's a bad example, but I hope you get what I mean.)

The 3 summers were actually 3 different jobs. The first one I took, I didn't know much about the conditions. My uncle got me the job (he's a boss there), and the experience turned out to be a very eye-opening one. This was actually the one with the worst conditions: the company I worked for that summer was hired to do the things that their client companies' (unionized) workers wouldn't want to do. This meant that we were in places with high carbon monoxide, extreme heat, excessive dirt (I crawled around in grease on several occasions), and so on. This company was not unionized, and its workers received abysmal pay... anywhere from $9.50-13.50 per hour, with only a couple guys getting more than $11. On one occasion, I worked 11 straight 13-hour shifts, and the full-time guys were frequently expected to work a month or so at a time (8+ hrs/day) without a day off.

The reason the company could go on like this is because work in my area is at a premium. I live in the steel manufacturing area of northeastern Ohio, and since the early 90s, plants have been slowly laying off workers and closing down. There are so many people without jobs that places like the one I worked for can pay ridiculously low amounts for very dangerous work, and they are bound to get someone to take the job. I guess if you've always lived in a place with plenty of jobs, this situation is hard to envision, but sometimes when you have a family to support, you'll take whatever work you can get.

The following 2 summers, I managed to get a job in one of the steel mills, instead of the company I had worked for before. For me, the situation improved dramatically, largely because it was a union job. The pay was better and the demands were much more reasonable. There were still some jobs, however, that if someone asked you to do them, your first reaction would surely be, "Are you serious?" One of the summer workers' duties was basically to work these jobs that the more tenured workers would never do on a regular basis. At least for us, we could look at the end of the summer as the light at the end of the tunnel. For the guys who worked there full-time, many had 30+ more years to go. So I didn't complain too much regardless of what job I was given.

In all cases, I worked the jobs because they were the best money I could get close to home. This does not mean that the money even comes close to making up for the actual value of the worker or the peril of the job (although in the case of the union job, the situation was markedly improved). This is where unions become very important: to ensure that even in a poor job market, workers get their due compensation for the work that they perform.

jeffrese• 19 years ago

What an arrogant, ignorant jackass. PG doesn't know what the hell he is talking about. He sounds stupid explaining unions the way he did. I guess that's what happens when you surround yourself with sycophants and yes men.

PG on Unions

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