Despite a friendly Congress and a pending labor bill, unions are under fire these days in Detroit and elsewhere — perhaps with good reason. A working paper by David Lee and Alexandre Mas finds that a successful unionization vote significantly decreases the market value of the company even absent changes in organizational performance. Lee and Mas run a policy simulation and conclude that, “ … a policy-induced doubling of unionization would lead to a 4.3 percent decrease in the equity value of all firms at risk of unionization.” [%comments]
Does WalMart Have the Right Idea?
TAGS: union
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I, personally, look forward to the day when there are no unions and we can get back to the perfect world of Dickensian England.
Why do the owners of capital have a greater claim to the wealth than the owners of labor? Overall wealth isn’t being decreased it is just distributed differently. Minimum wage laws, OSHA, consumer safety laws, and enivormental regulations all decrease the equity value of companies that have to abide by these laws, should all of these laws be scrapped so Wal-Mart can make more money?
If we re-instituted slavery, Wal-Mart would probably be able to lower the labor costs, which would lead to an increase in their share price. The abolishment of slavery has clearly had a negative effect on the equity value of Wal-Mart, clearly this means we should re-instate the “peculiar institution” because it would cause an increase in their stock value.
Personally I don’t find this very surprising – Unions are only interested in maintain the status quo which is a death sentence to any business trying to survive in the modern global economy.
I think we’re finally at a point in American where we can say “nationalized industries and labor unions are less efficient than a completely free market system but we don’t care since they have the interests of the people at heart rather than simply profit.”
Sure free markets DO create more efficiency but look what this so called “efficiency” has wrought in the health care industry.
Greed may be the biggest motivator but it isn’t always the best motivator.
Kevin, come on.
No one is suggesting slavery. They’re simply suggesting that unions lead to a price floor on the price of labor. Price floors and price ceilings are government-imposed market inefficiencies; in the case of a price floor on wages, it means laber can be overpaid resulting in a societal deadweight loss.
The removal of unions (or at least the removal of the political rights behind striking) does not mean slavery, nor does it mean unsafe labor conditions. It simply means the companies and the employees can work out the market equilibrium wages. Why is it bad to get paid according to the demand (and quantity supplied, in terms of other workers) for your labor?
I am sure that I am not the most educated when it comes to the intricacies of unions but there does seem to be something wrong with the idea to me. When a person starts a business,he/she might become rich beyond what might be considered “polite” but that is because he took on all the risk. The members of a union do not take on anything close to this level of risk but yet seek to leverage itself on the “fulcrum” that its employer created. I do believe that we should have laws to ensure that there are fair labor practices but unions take this too far to where employees are subsidized by the general public beyond what their work is worth.
Look at Chrysler’s bankruptcy for a great example of what happens when unions become too powerful; the UAW is getting a 55% ownership stake in the company as a result of a failure they’re largely responsible for.
No, WalMart does not have it right.
The presumption is that increased value of the company is better, and that unionization lowers the value, and is therefore better. Walmart could become extremely more valuable if they were to literally enslave their employees too, but no one (outside of Jessie Helms, I think) ever claims that the South “Had it right”.
The question is, what is the likewise gain in employer welfare and happiness and to the overall economy (that union money gets spent somewhere) and how does that compare to the profits of Wal-Mart execs?