Sunday, March 15, 2015

Labor Strategy for the Coming Period

This post begins with an article in Socialist Action by Carl Sack, entitled 'Right to Work' Battle in Wisconsin. The scare quotes imply that "right to work" is anything but. Indeed, Mr. Sack claims that "Median wages for workers in states with Right-To-Work laws are almost $6000 a year lower than in states without them."

Of course that's the wrong metric. The true measure of government policy is the relative size of the total payroll--not the pay per worker. Even if the median salary is lower, but many more people are employed growing the total payroll, then both workers and society are better off.

The article (well-written and informative) reports on Wisconsin becoming the 25th state to pass a right-to-work (rtw) law. That means that workers in that state may join a union if they wish, but are not forced to do so if they don't wish. It is a right to disassociate. The so-called "battle" was a bit of a dud. There were a few demonstrations around the state, but the law passed with surprisingly little controversy.

The big brouhaha occurred in 2011 when the newly elected Republican governor and legislature defanged the public employee unions, essentially imposing rtw-light on them. Accordingly, as Mr. Sack reports, this "...has decimated the membership of the state’s public worker unions and the wages and benefits of public workers here."

So that begs the question. If unions are so valuable to workers, why don't they flock to join even without the legal obligation? The reason is pretty obvious--unions are no longer able to deliver benefits to their members commensurate with the union dues. Thus most workers simply choose to stop paying dues. I'm forced to pay dues to the professors' union, even though I don't think I derive any benefit from it.

Mr. Sack suggests that the public employees back in 2011, and private sector unions today, should have called for a general strike rather than fight the changes through the political process. Of course that wouldn't work. Public employees are not popular people these days. (Scott Walker has won three elections in four years, all by substantial margins.) Going on strike would simply have meant they'd all be fired.

The college professors wouldn't even be missed if they went on strike.

An article in North Star (whose new page design is vastly improved) by Ben Smiff is entitled In Search of Workers' Power. This engaging piece is about "deindustrialization," and attempts an analysis about how the labor movement should respond to the phenomenon.

Deindustrialization has two parts: 1) an increasing percentage of labor is working in so-called service industries, and 2) manufacturing has moved to rural places in the Southeast, far from any union influence.

Mr. Smiff recounts the efforts of workers in Minneapolis sandwich chain called Jimmy John's to organize a union. They eventually failed--by narrowly losing an NLRB vote. Why--if a union were such a slam-dunk good thing--would the election even be close? Because there is no money in fast food. The union would never be able to keep its promises. The only "benefit" accruing to the employees is the right to pay union dues.

Mr. Smiff notes that manufacturing remains a major part of the American economy, still employing 9% of the labor force. {Emphasis mine}
What’s more, as Kim Moody and Charlie Post point out in a recent article in Socialist Register 2015, despite overall losses in manufacturing jobs over the past several decades, as it stands today, “the United States produces more goods… than ever”:  ... 
The reason for this, Moody and Post note, relates to “enormous productivity increases since the early 1980s[…].” This stems from unceasing speed-ups imposed upon workers through the introduction of new machinery and, most significantly, through the social reorganization of production along more-efficient lines – so-called “lean production” techniques. {Emphasis mine}
Speed-ups is surely the wrong word. Automation, globalization, and above all, logistics, are more accurate descriptors. Manufacturers are able to deliver more products of higher quality to more people at ever cheaper prices. Only a Marxist can complain about that.

Mr. Smiff does us a good turn by citing an important article by Jasper Bernes entitled Logistics, Counterlogistics, and the Communist Prospect. Mr. Bernes is among the few Marxists who actually takes deindustrialization seriously.
Today’s supply chains are distinguished not just by their planetary extension and incredible speed but by their direct integration of manufacture and retail, their harmonisation of the rhythms of production and consumption. Since the 1980s, business writers have touted the value of “lean” and “flexible” production models, in which suppliers maintain the capacity to expand and contract production, as well as change the types of commodities produced, by relying on a network of subcontractors, temporary workers, and mutable organisational structures, adaptations that require precise control over the flow of goods and information between units.
Mr. Bernes describes accurately the dense connectivity of the modern economy, which he labels logistics. In such an environment it is almost impossible to go on strike. There exists another plant somewhere on the planet that can replace your output almost instantaneously.

Yet, as Mr. Bernes mentions, there are still a few choke points where labor holds the edge. One of these is the huge container ports, through which almost all freight must flow. He (writing in Sept., 2013) cites the Occupy blockade of the Port of Oakland. An even better example is the recently concluded work slowdown at the Port of Los Angeles. There a small group of longshoremen held a knife to the throat of the entire economy, extorting for themselves yet another large salary increase. They can get away with that as long as they don't overplay their hand. (It seems to me they've been very skillful.) For if they raise costs too high, then public pressure will eventually force their ouster, or somehow the Port of Los Angeles will be bypassed.

Mr. Bernes makes two claims--one which I think is factually wrong, and the second which makes me angry.

The first is that the new logistics is centralizing. He implies that it only works for big companies, such as Walmart. While it is true that Sam Walton was a leader in establishing the new logistics, it is not true that only Walmart-sized firms benefit from the technology. Indeed, even Ma & Pa shops use container shipping. Every product is assigned an SKU (store keeping unit), represented by the little barcode on the box. There are on the order of trillions of SKU numbers. Amazon (as best I can determine from the web) stocks 125 million SKUs. Walmart only carries around 300,000 SKUs. So of all the millions and (maybe) billions of different products out there, Walmart only sells a tiny fraction.

Most of the rest are sold by small firms. Amazon is less and less a store, and more a platform for third party vendors. My immigrant wife's employers sell products from the old country via Amazon, imported by container ship. And theirs is a small business indeed. So Mr. Bernes is wrong about how logistics favors big firms.

His second claim is even worse. He writes,
Much of the machinery of contemporary logistics aims to streamline the circulation of commodities and not use-values, to produce not the things that are necessary or beneficial but those that are profitable: individually packaged boxes of cereal, for instance, whose complex insignia distinguish them from the dozens of varieties of nearly identical cereals (sold and consumed in sizes and types that reflect certain social arrangements, such as the nuclear family).
So there it is--Marxism's dedication to poverty is laid bare. You want Cheerios for breakfast? Why you petty bourgeois scumbag! How dare you decide you want to eat something that has no use-value! After all, Jasper Bernes knows much better than you do what you should eat for breakfast. After all, he teaches poetry at UC Berkeley. He is much, much smarter than you are.

North Korea, Cuba and Venezuela are not poor because of some evil, imperialist plot. No--they are poor by design. Communism can't deal with too many SKUs. Everything has to be filtered through poetry professors. You little shits just need to get with the program.

Or face the firing squad.

Further Reading:

Tuesday, March 10, 2015

Walmart's Wages

Perhaps it's not surprising that The Militant is the only Trotskyist paper I follow that bothered to cover the news about Walmart raising it's wages. An article by Glova Scott states the facts clearly in her lede.
The Feb. 19 announcement that Walmart will increase starting wages to $9 an hour in April and for current “associates” to $10 next February puts wind in the sails of all of us fighting for better pay, a 40-hour workweek, union representation and dignity.
The Militant has long done a superb job of covering labor market issues, for which I commend them. I'm not sure that makes them more "revolutionary" (whatever that means), but it does make the paper more interesting for me to read.

Ms. Scott's explanation for Walmart's new found generosity is predictable. She credits the "...years of protests, including recent actions by OUR Walmart, backed by the United Food and Commercial Workers union." Wages are set from the bottom up, she maintains, and through struggle Walmart workers have done us all a favor by forcing more pennies from their employer.

I find this story unlikely. Very few OUR Walmart participants work at Walmart, and likely they're not even Walmart customers. Why Walmart should raise wages by a billion dollars on their account defeats reason. OUR Walmart is an irrelevant nuisance.

Some argue (not Ms. Scott) that Walmart is anticipating raises in the minimum wage, preempting the event. This might be more of a factor, but Walmart's core business is in low-wage states away from the coasts. So this does not look to be an important criterion--though surely more significant than OUR Walmart. (h/t Megan McArdle)

The CNBC crowd has yet another explanation, namely the imminent return of inflation. Their theory is that labor markets are becoming increasingly competitive, and therefore wages are being bid up. When this happens the Fed will inevitably raise interest rates to prevent a price spiral. And we should all quiver in our boots. Ms. Scott mentions this theory in passing, mostly as a reason why OUR Walmart's campaign was now successful.

I find the CNBC theory implausible. Labor market participation is still very low, and a relatively large number of workers are employed only part time. There remains a lot of slack in the labor market writ large, though for skilled workers it is much tighter than it used to be. Still, I don't think inflation is anywhere on the horizon. Everything from a glut of oil, to the rise of the dollar, to slowing economies elsewhere in the world argues against it. I see no evidence of wages generally being bid up anytime soon.

I actually think Megan McArdle has hit on the truth. She summarizes her case nicely in her closing paragraph.
I’ve written before that a company’s labor model is its business model, and Wal-Mart is no exception. If Wal-Mart is making a radical shift in one, it’s likely that you can expect at least a modest change in the other.
That is, Walmart doesn't need more employees, but rather different employees. It wants skilled workers who are willing to commit to the company for the long term. Walmart is by far the largest grocery store chain in the country. As Ms. McArdle points out, you can't run a produce or meat department with casual labor. When we used to live in Indiana we bought most of our groceries at Walmart. But since moving to New York we've found Walmart completely unsatisfactory. Shoddy merchandise, empty shelves, and terrible service made shopping in the store unpleasant. I haven't been in the store for several years now.

Walmart caught a lot of flak for its poor performance, and it's earnings have stagnated accordingly. You can't fix this without the right kind of workforce. The wage hike is the start of a new business model.

There are other clues. Fortune reports that Walmart is building a career path for its employees.
The company is also piloting a training program to help employees move out of entry-level positions and potentially make $15 an hour and more with increased responsibilities.
I'll take issue with one statement from Ms. McArdle. She says
Wal-Mart’s business model is, as my old entrepreneurship professor used to say, “Big Stores in Small Towns.” Its core value proposition is, as the slogan goes, “everyday low prices.” Its core demographic is the lower middle class. For a long time, this was a recipe for rapid growth. But the heartland is pretty much full of Wal-Marts, the lower middle class is struggling harder and spending less, and there’s more competition on the “low price” front than there used to be.
I'm not sure the lower middle class is struggling as much she says. Contrary to popular opinion, everybody in this country is getting richer. While incomes for lower middle class households might be decreasing, it's only because there are fewer people per household. Fewer people means money goes around further, and even those shoppers have more discretionary income. Walmart has competition from Target and TJMaxx. Accordingly, it has to move upscale.

Upgrading its workforce means that some current Walmart employees just won't cut it. Indeed, it is likely that they'll be hiring fewer employees overall. The folks most likely to be let go are those with the lowest skills. They may be forced out of the labor market.

John Tamny grapples with this problem in a recent piece.
About those choices, it once again needs stressing that the employment possibilities today aren't the same as they were in the mid ‘80s, late ‘90s, or as recently as 2003. Work opportunities have surely shrunk since then, and were particularly dire back in 2008-2009. There's no flippancy here despite a more unconventional attempt to explain unemployment. The main reason the latter remains high is due to government barriers to growth that have reduced the number of quality of jobs on offer.
I don't think he appreciates the difficulty. The redundant Walmart workers will join my neighbor's son, a man in his early 30s who has never had a job. He clearly has a below average IQ (though not retarded). I don't think he's ever been in serious trouble with the law. Obviously he made bad decisions back when he was 18 or 19 (drugs). You can blame him for that if you want, not that it helps any now.

How is he ever going to be employed? He'd need $2/hour just to cover the expense of working (gas, clothes, laundry, lunch). There's no way his labor is worth that much. So all he does is live off his mother's social security check.

There are lots and lots of former Walmart workers who are going to join him. So I think Mr. Tamny underestimates the barriers to full employment. Short of massive government subsidies these people will never find jobs.

The welfare state, far from shrinking, is likely going to grow. I see no way around that.

Further Reading: