Haddonfield Buzz: The Economy and Unions

Here's a peek at what Haddonfield is buzzing about on the Internet chat room Haddonfield Talks:

Daniel Tompkins:

I recommend the interview with Congressman Robert Andrews. He emphasizes the bleak economic picture and amount of stress citizens in our district currently feel.

Looking further, one finds a very useful chart of unemployment in the
USA, year by year, with a graph tool for adding particular states. It
looks as if unemployment has come down faster and further in NY, Ohio
and PA than in NJ. Reduction of the state workforce by 20,000 or so
cannot have helped, and it needs to be remembered that these 20,000
live (mostly) and buy things in NJ, so their loss hurts not only them
but others.

Herb Hess:

Where would the funding come to keep all or a portion of those 20,000 employed by the state?

I believe the money is not available based on the State's gross receipts.

Have a disproportionate amount of services been lost based on the reduction of 20,000 from the State's employment rolls? That is, have residents been impacted to the extent that it would require more than 20,000 state employees to correct the deficits in services that have been experienced? Again, if so, where will the funding come from?

From a macro level, it appears to me that we need to unwind our collective personal and state borrowing as well as restoring incentives to work and adherance to metrics in both public and private enterprise.

If 20,000 people are no longer employed by the state I would ask the question (as an employer) why haven't any of them knocked on my door to ask what they can do to add value to my business as an employee and/or a contractor? Are there wage demands compatible with the marketplace?

I'm willing to experience some economic pain (and I am) if it means achieving economic balance in the long run.

Daniel Tompkins:

Note that I was speaking comparatively, and reporting that  NJ is doing worse, on the unemployment front, than all but a dozen other states.  Whether we were doing that much worse, and why, is an interesting question.

You raise the classic question of growth v austerity in hard times.
I'm no economist, but I would call attention to the word "buy" in my
initial post.  Unemployment has the bad effect of reducing disposable
income and thus aggregate spending and hence employment.  This is
fairly standard stuff, and the austerity camp's argument that we
cannot afford to maintain employment is standard too.

Which is right?  We're now in an international set of petri dishes to
see whether austerity will have the desired effect.  Nationally, we
tried this in 1937, and it was bad.  The "State's gross receipts,"
mentioned  below,  are of course a function of taxation, and until 18
months ago, those who could afford to were paying higher taxes -- and
not, according to all the empirical data I've seen -- fleeing the
state.

"Have residents been impacted"?  That depends on which residents one
means.  Right now, I believe, we're down to only one hospital crisis
center in the county, at Kennedy.  Women's health centers are closing.
 The state attorney general's office is losing some of its best
lawyers.  I'm not pregnant or facing a nervous breakdown, though I do
worry about the damage coal-fired plants in the midwest are doing
here, so I'm batting two out of three on being impacted.  I'm
certainly nervous about losing qualified state staff.

I think that looking around will disclose other areas that are being
hit by reductions in state funding.  Certainly other school districts
are feeling more pain than ours.

At the moment, supporters of "austerity" (for some) seem to be in
charge.  It will be a few years until we know how well this worked.

agrylfriend:

But businesses are not hiring. The hiring large firms are doing is in India and China. Many added employees the last several months - abroad. How do you propose that businesses are encouraged to employee Americans?

Francis Collins:

Unemployment has been increasingly mistaken in discussions of the economy as the cause of our economic malaise. I believe unemployment is an effect not the cause of the problem. The cause of our economic problems is an increasing lack of economic freedom in the US which is acutely bad in some states like our beloved NJ. The purpose of economic activity is not to provide jobs to people but to provide goods and service the maket demands. Jobs are a side effect of economic activity.

If you look at the Heritage foundation's index of economic freedom which 
takes into account 10 factors important to prosperity, the US has been sliding 
down the index for decades. We have been plagued by government intervention in the free markets, high taxation, overwhelming regulation, and an atrocious 
monetary policy. This causes capital to flee the markets. Capital flows to the 
areas of highest economic freedom. Capital is what ultimately drives economic 
activity and thus job growth. Today, capital is on the side lines waiting for 
2012 election or has fled the state and country entirely.

The article addresses government employment. Government is an inefficient 
allocator capital. A society with high levels of government will have less 
prosperity than a free society as government siphons off capital from the 
private economy. If government were truly the answer, then all we would have to do is give everybody a government job. We would have 0% unemployment but no other goods or services. Taking money out of the private economy via 
taxation, and handing it out to state employees for them to give it back to the 
private economy is crazy and produces no net economic benefit! We need trade 
with other states and countries to have true prosperity and that comes from the 
private sector. 20,000 state jobs cut? I think we need to cut much more 
than that.

Herb Hess:

...  re: the Budd Company (fluke or metaphor) and am I anti-union? One need only visit Philadelphia, Buffalo, Illinois, Indiana, Michigan (Detroit has lost 26% of its population), etc. as I have to see the devestation to our manufacturing industry. Wages are like water, they seek the lowest ground. Trade barriers are like dams. They may hold up the water (wages) for some time, but pressure will ultimately knock them down.

What part do unions play in all of this? A variety of parts - some positive and some not. Unions historically start out as progressive bodies fighting for basic worker rights - fair wages, proper living conditions, etc. The dialog between unions and management (or even society) in many cases seems to morph into one where the ultimate goal of creating wealth is lost to each side seeking an ever increasing share of the often diminishing pie.

We're in a brave new world. If unions can add value, that's great. The Budd Company was an example where they didn't. The rusting hulk of the factory is gone now and it ain't coming back. The next factories we see are in the minds of our youth. We need to build them up and protect them and give them opportunities to succeed, not cling to dying traditions.

agrylfriend:

Actually it sounds as if the company retaliated against the union in the Budd example. Isn't this illegal? I am guessing you like what Christie is doing with the unions in NJ? If labor is like water then why are the CEOs of so many companies paid well beyone what they are worth? 
In terms of poor people in India, I think you are looking at the wrong population. The poor people in the countryside have not benefited from the IT revolution there and there is tension between the 2 groups. The Indians who come here and displace Americans are educated and generally very wealthy. One woman I worked with told me she never had to work again in her life if she chose not to, she had chauffeurs in India. Another's father was employed at the UN. I don't know if the ones I work with who are located in India are that wealthy, but I doubt they were poor to begin with. The really poor ones don't have the advantages there just as it is here. Part of the reason people in India are not a burden on the state is they have universal health insurance. Some of them are bright, but they certainly do not outperform Americans. I have had that before and I take exception to it.  Actually we have had to have backups for the offshore people since they think nothing of taking a day off for personal reasons - whatever that means. It is a rarity that an American calls off where I work, they are too scared, which is just where the company likes us.