Tuesday, April 27, 2010

Our priorities, and labor's priorities

In the comments on my last post, Yonah asked,
Do you know how much of the cost savings afforded by jitneys are due to the lower pay their drivers receive? How much do they get paid relative to publicly employed drivers?

Excellent question. I don't know the exact answers. I have the impression that some drivers work as independent contractors: some own their own vans and work as part of a syndicate, others drive the vans and pay either a flat fee or a percentage to the van owner. In either of those cases, they don't have a fixed wage. They may not even earn minimum wage, which I believe is legal for legitimate independent contractors.

In any case, I imagine that the drivers wind up taking home significantly less than drivers paid by the MTA. I also doubt that they get any of the benefits negotiated by the TWU, which just about everyone would agree are quite generous.

I don't feel great about this. As I've said before, I'm a big leftie. My dad was in a union, my wife is in a union, and in general I think unions play a critical role in standing up for workers. I also think that everyone deserves a living wage, decent medical and pension benefits, and reasonable work hours and conditions.

That said, I do have other priorities, as shown at the top of the blog. If it comes down to it, I would have to say that reducing pollution and carnage, increasing efficiency, improving society and providing access for all are more important than labor issues. As long as the drivers aren't being enslaved or abused, I wouldn't insist that they have absolute parity with TWU drivers.

In response to previous posts on this issue, some commenters have argued that the TWU contracts go beyond reasonable. I have to admit that there are several things that bother me about the current contract. The idea that pension benefits are based on the last year's pay including overtime is just preposterous. I didn't appreciate the TWU taking a cost-of-living raise when the cost of living was not actually rising. The relatively young retirement age is also not appropriate.

I wouldn't have a problem with these things if the MTA were flush with cash, but it's clearly not. Why should the transit workers get raises while the MTA is cutting service? The TWU has fought for congestion pricing and bridge tolls, but they haven't put their full power behind that issue. Of course it's not just the TWU, but also the other public employee unions that have demanded more at a time when the government is earning less. Is the TWU really okay with getting hefty raises and benefits in the short term, while putting the government in a position where it won't be able to hire transit workers in the long term?

Essentially, the TWU's first priority is providing for all their members, and transit seems to be only an afterthought. My first priority is providing for myself and my family, but transit comes next. In my priorities the wages and conditions of transit workers are important, but they are a lower priority than the very existence of transit.


Cap'n Transit said...

An anonymous correspondent sends this in:

You write:

"Essentially, the TWU's first priority is providing for all their members, and transit seems to be only an afterthought."

Actually, the whole metaphor of "brotherhood" does sound like it's meant to conjure a healthy family that provides for all of their members. But if the TWU were really like that, wouldn't it be offering salary concessions to prevent its most junior members from being laid off due to massive service cuts?

My impression of labor unions is that, like most organisations, they're primarily about the needs of their more senior members, who tend, of course, to be the leadership.

Yonah Freemark said...

I have mixed feelings about what you've written here: On the one hand, I understand your argument that lower wages may allow more transit to be provided and thus provide benefits to society beyond those possible within a high-wage system; on the other, I think it's always dangerous to suggest that some workers should live with low wages because it helps society.

That's pretty much the Wal-Mart maxim: it's okay that we pay our employees so little, because our prices are so cheap. The overall societal benefits are positive, the company claims.

The problem, of course, is when that is taken too far: when Wal-Mart employs more than 2 million people, it's bringing down wages for everyone. (In addition to contributing to sprawl everywhere, but that's a separate matter.)

Similarly, if we accept low wages for jitney drivers and allow their proliferation in the name of "cheap transit," how long before we abandon the idea that transportation operators should also provide good jobs? The societal benefits of providing middle class wages to train and bus drivers are not negligible.

In my mind, the public sector has a responsibility to employ workers at good wages because not doing so is morally reprehensible. Allowing the public sector to maintain its monopoly on transit ensures that wages are kept reasonable, rather than submitted to unregulated competition that would drive salaries downhill.

It is true that there are plenty of people who would be willing to drive jitneys for far less than MTA workers are paid, but I have a hard time accepting that there should be fewer MTA workers (and more jitney drivers) because public sector workers are "too expensive."

Cap'n Transit said...

I had some of the same feelings, Yonah. But ultimately I decided that just as transportation can't shoulder the entire burden of equalizing class differences in America (or anywhere else) through provision of access, it can't shoulder it through employee wages.

Why should transit be different from any other industry? There are private schools and private security firms that offer less in wages and benefits than public schools and police forces. We don't insist that the government should have an enforced monopoly on schooling and policing so that every teacher and guard are guaranteed a living wage and a pension. Why should we do that for transit?

Cap'n Transit said...

I should also point out that labor is lobbying for more transit funding at the federal level. But they seem unwilling to press the issue at the state level, refusing to stand up to teacher, police and firefighter unions who demand more driving subsidies for their members.

saosebastiao said...

I'd like to comment from a completely different perspective.

1) From a purely economic perspective, the most efficient that an economy can run is on a least cost basis (as long as real externalities are accounted for). This insures that the most wealth is created and available to the most people.

In order to operate on a least cost basis, you must pay in a way that lowers your costs the most...not just your labor costs. No consulting firm is going to hire illiterate illegal immigrants because they can be hired cheap. And no construction contractors are going to hire PhDs because they are smart. Both of those decisions are exaggerations, but they illustrate that lowest-cost doesn't mean lowest wage. Generally speaking, firms seek to hire in a way that lowers their total costs...and this is a good thing for economic efficiency.

2) The Walmart mentality isn't "bringing wages down". They pay lower than other jobs, yes. But people wouldn't work for WalMart if a) they didn't want to, or b) they didn't have any other options available to them.

Now if we were to get rid of walmart, like some people think we should get rid of jitneys, then we would have two things happen. Some people that want to work at walmart would no longer be able to work at their preferred place, and the people that don't have any other options would end up unemployed. To compound the situation, millions of poor and unemployed people would no longer be able to save money in the way that Walmart allowed. That is not a socially optimal solution to low wages.

3) There are some unintended benefits to individuals (positive externalities) to paying on a least cost basis. You see, people almost always seek out the highest wages that they can get. A highly skilled person should be able to find a job that pays well, presumably because the employers that seek those skills needs to pay well to attract that talent.

This causes two things: It causes skilled workers to seek jobs where their skills can be used. Wouldn't it be a travesty if we had master engineers working as custodians? Furthermore, what happens when we have unskilled workers doing unskilled jobs but getting pay worthy of a skilled job? Is there any incentive to increase your personal human capital?

When low skilled workers get paid beyond their skill level, sure they might have a humane and morally just job where everybody can sleep easy at night knowing that he isn't stressing about paying his bills...but we have also taken away all of his incentive to improve his human capital. Who will go to college if their union job pays higher than a starting wage for a college grad? Incentives matter.

I have morals too. I hate to see people suffer because of poor living conditions and low wages. But at the same time, paying based on what makes us feel good about ourselves doesn't fix the problem. It often makes the problem worse...because we have fixed the problem for the people who are visible to us, but only in the near term (we cripple their future), and we make the problem worse for society by raising the cost to customers and using resources inefficiently.

Cap'n Transit said...

Well, this is only tangentially related to the post, but I have to disagree with you on a couple points, Saosebastiao:

1. If a master engineer would be happier working as custodians, I don't think it would be a travesty. Maybe they could reengineer the cleaning workflow. Maybe they could just get away from the pressure.

2. I believe in developing human capital, but I also believe in valuing people and the work they do. I also think that many people have a tendency to confuse wage level, class and skill level. While just about anyone can clean a bathroom, it actually takes some thought, knowledge and background to do it well and efficiently.

Efficiency and skill are important, but let's not fetishize them, and let's not assume that just because the market doesn't value a skill highly it's not an important skill.

saosebastiao said...

On the first point I agree with you, but only because I was explaining my point thinking of a master engineer who works as a custodian because being a unionized custodian pays more than his engineering job. If he wants to, by all means let him do it. But if his skills are misused because distorted economic incentives move him there, then that is a travesty.

The second point I guess I agree with, but it doesn't change my point. I employ quite a few low skilled workers, and they get paid wages that reflect their skill level. That doesn't mean that I don't value the work that they do. I value it because without their work, I don't have a business at all.

But you see, while the work itself is extremely important, the worker individually is not as important to the outcome. Being low skilled jobs that require little training outside of a drivers license, if one quits, they can be replaced the next day by someone new.

If they couldn't be replaced the next day by someone else, then obviously their individual skills merit higher pay, because higher pay ensures two things: That they are less likely to quit and that I can attract people that will require less on-the-job training.

For some, this might be counterintuitive, but in my business, the cleaning workers are not the lowest wage workers...the office workers are. You see, the buses we run cost a lot of money. If we had inefficient custodians on low wages, it would actually cost us more, because every moment that a bus is not on the road means lost revenue and higher capital costs. We pay more because we need more efficient workers. Some of our most efficient cleaning workers earn more than our drivers. The office workers on the other hand have an extremely interchangeable skill set...they answer phone calls, take messages, dispatch drivers (on an incredibly easy to use dispatch software system), and handle over-the-phone orders. Any 16 year old girl could take over their jobs the very next day if they quit.

Once again, the job is important, but if the skills are extremely common, then it is often the lowest cost option to pay less. If they are not common skills, then the lower cost option is to pay more.

What ends up happening if I value and pay someone beyond their skill level? Well, that person gets a good job, and I can sleep at night knowing they can feed their family. But I also get someone who stays happy with their current skill level and never works to improve it.

But worst of all, I get Will Hunting permanently happy with his job as a custodian, when that job can easily be given to an unskilled illiterate immigrant who desperately wants to feed his family.

I know that sounds like an exaggeration of the situation, but it is real to so many unemployed people who want jobs manufacturing cars but can't get them because they are held so closely by unionized workers that are capable of so much more.

Alon Levy said...

The jitneys and Wal-Mart have nothing to do with each other. It's true that Wal-Mart is infamous for paying low wages, but the mom-and-pop shops it displaces pay even lower wages. The campaigns against Wal-Mart usually come from small business concerns, precisely the same concerns that would run jitney service instead of oppose it. Big labor either doesn't really care (AFL-CIO) or tries to organize Wal-Mart workers (SEIU).

Jitneys may pay less than the MTA, but it probably isn't the main issue. Most likely they minimize turnaround times and have very little deadheading: they don't need to send their vehicles to distant depots. They probably don't overstaff as much as the MTA. This is in line with the behavior of other low-cost providers, such as Southwest and JetBlue (while JetBlue is non-union, Southwest is more unionized than the legacy airlines).

CityLights said...

I agree with what Saosebastiao said, and I would like to simplify his economic argument further. Unions engage in price- and wage-fixing, almost by definition. Since these wages are above market wages, for every X union workers there are Y unemployed people who would have jobs if the union people were paid market wage. This is basic supply and demand.

Our basis of comparison should not be MTA drivers vs. jitney drivers, but MTA drivers vs. people with no job because there are too few driving jobs. And I'd venture a guess that jitney drivers are better off than people with no job at all.

Also, unemployed people bring various negative externalities with them: unemployment, food stamp, and other government payments; increased crime levels; suicides; etc. So unions do damage twice - once by causing a rise in unemployment, and again by lowering the quality of life for everyone because the unemployed don't just disappear into thin air; they continue to live and consume resources.

This applies to all the arguments public employee unions have - "the government has a duty to provide well-paid jobs and benefits - but only for the union, not for everyone else". Why? A government should treat all of its citizens equally.

Alon Levy said...

There isn't a shortage of drivers.