We all hope we’re wrong about climate change

This is not something that is made explicit enough, or made explicit often enough. This story brought the point to mind:

Europe’s leaders are being warned to prepare for big new flows of migration by 2020 as climate change puts strains on food and water supplies, provokes natural disasters and undermines political stability in poorer, neighboring countries.

A report prepared for the European Union heads of government, who will meet Thursday in Brussels, said that the rest of the world could not insulate itself from the impact of changes that could overwhelm regions that already suffer from poverty and conflict.

…

In North Africa and the sub-Sahara, drought and overfarming could lead to a loss of 75 percent of arable land. The Nile Delta could be threatened by both rising sea levels and salinization of agricultural land. Between 12 and 15 percent of arable land could be lost to rising seas in this century with five million people affected by 2050. Meanwhile, both the Horn of Africa and southern Africa are vulnerable to reduced rainfall and higher temperatures.

Sounds shit, frankly – worse only for the people doing the moving (I meant shit for me, living in the Midlands of England). This is just a number of all-too-likely consequences of all-too-likely catastrophic climate change, and is exactly why those of us who believe in the problem would like very much to be wrong. I’m happy to have colleagues (known but not named) to call me up once per week for the remainder of my life, giving me stick about my Henny Penny paranoia – if only it meant that none of this misery will come to pass. Somehow, though, I doubt it.

Meanwhile, some war predictions:

• If McCain is made President, Iran first, then almost anybody of whom he can think, because he’s clearly psychotic (sorry, Ms. Portman);
• Iraq and Turkey, over the Tigres (Turkey is upstream);
• Syria and Turkey, over the Euphrates (Turkey is upstream);
• Israel and Palestine, over the river Jordan (Israel is upstream);
• Israel and Lebanon, over the Hasbani (Lebanon is upstream);
• Any number of countries with themselves, over internal dams;
• The Netherlands and Germany (or any other coastal country with its inland neighbour) over land lost to rising sea-levels.

There’s also the water one cannot drink – China and the US over the West Pacific, for example. There also are plenty of instances of good and neighbourly management of the scarce resource, but as the resource becomes more scarce still, who knows? We could see Adelaide go to war with Melbourne, for all I know.

There are also plenty of voices who say that the probabilities just don’t match the rhetoric. Could be. I see, though, water the new land – the fixed and needed natural resource of the future, over which we will be prepared to fight long and hard. Because our lives just might depend upon it. Which, sure, makes me a miserable bastard. Like I said, I do hope we all turn out to be plain wrong.

Employment statistics are the best statistics

Because they can tell any story you like – just the way economists like it.

On Friday, the government will release the latest employment report, which will help clarify whether the economy is slipping into a recession. Wall Street forecasters are predicting that the February unemployment rate will have inched up to 5 percent, from 4.9 percent in January.

Whatever the survey shows, however, you can be sure of one thing: Politicians will be quick to point out that joblessness remains low by historical standards.

Ed Lazear, the chairman of the Council of Economic Advisers of President George W. Bush, said recently that “5 percent is still a low unemployment rate.” He added: “It’s below the average for the last three decades.”

You will note that “the last three decades” conveniently includes one or so in which employment was crap. Hell, we’d do better to compare today’s numbers to the last five decades.

Consider this: The average unemployment rate in this decade, just above 5 percent, has been lower than in any decade since the 1960s.

Yet the percentage of prime-age men (those 25 to 54 years old) who are not working has been higher than in any decade since World War II.

In January, almost 13 percent of prime-age men did not hold jobs, up from 11 percent in 1998, 11 percent in 1988, 9 percent in 1978 and just 6 percent in 1968.

…

There are only two possible explanations for this bizarre combination of a falling employment rate and a falling unemployment rate. The first is that there has been a big increase in the number of people not working purely by their own choice. You can think of them as the self-unemployed. They include retirees, as well as stay-at-home parents, people caring for aging parents and others doing unpaid work.

If growth in this group were the reason for the confusing statistics, there should be no to worry. It would be perfectly fair to say that unemployment was historically low.

The second possible explanation – a jump in the number of people who are not working, who are not actively looking but who would, in fact, like to find good jobs – is less comforting. It also appears to be the more accurate explanation.

Why the latter is more accurate, I don’t know. In fact, the author has conflated the two. We went through this (hilariously) in class: suppose you’re in your mid/late-fifties and you get laid off. The economy has been in a jobless recovery since 2001, and is now in a jobless plateau/decline. What do you do?

First, the hilarity: a student raised his hand and said “I’d get a job”. Even re-stating the question did not help. I believe he ended up taking my word for the fact that ‘getting another job’ isn’t really on the cards for Hypothetical Man (my University is seriously middle-class and up – I doubt my students, overall, really understand unemployment as a lived concept).

The answer, for the rest of the group, is retire. Or call yourself retired. Live off savings until Social Security kicks in – maybe try for that sweet deal their offering. In the UK – and, no doubt, similar countries – people are going onto disability pensions, which is essentially becoming a path to early retirement for many (what would you rather be on: a disability pension, or unemployment benefits?).

It is my belief that retirement numbers contain a lot of the missing people, and are helping mightly to keep the unemployment statistics nice and low (relatively speaking). This is where the conflation occurs – calling one’s self retired and being retired are two different things (just ask Michael Jordan or Jay Z).

We should, of course, also bear in mind how dangerous/difficult tracking a macroeconomy in real-time is, but the unemployment rates indicate, reasonably clearly, the drivers of unemployment. From the latest release by the Bureau of Labor Statistics:

The over-55’s are the only group for whom the unemployment rate has declined:

And somehow I don’t think the Births/Deaths jobs are going to that group first.

Did John Edwards have an advantage all along?

The advantage being that there are fewer sons of mill-workers – meaning he had a monopoly on the narrative (I don’t know if his father was a flour-mill-worker or not). From The American Journal of Industrial Medicine, via Reuters:

Using data from the Washington State health department, researchers found that the children of men who worked in flour mills were disproportionately female. Of 59 children born to these workers between 1980 and 2002, 37 — or roughly 63 percent — were girls.

In contrast, just over 51 percent of children born in Washington during that period were boys, according to the findings published in the American Journal of Industrial Medicine.

…

The current study found that, besides the low prevalence of male births, boys born to flour mill workers also weighed significantly less than average. Their average birthweight was 7 pounds, compared with nearly 8 pounds among girls born to flour mill workers, and about 7 pounds, 12 ounces among boys born statewide.

Unfortunately, and despite their false promises, my library either doesn’t have access, or won’t give it to me, off-campus, but from the paper’s abstract:

Background
The Washington State Department of Health has collected and coded parental occupation information on birth certificates since 1980. We used these data to search for possible effects of parental occupational exposures on birth outcomes.

Methods
We tabulated sex ratio, birth weight, and proportions of multiple births, still births, and malformations by mothers’ and fathers’ occupations.

Results
There were 59 births (22 boys and 37 girls) where the father’s occupation was specified as flour mill worker. The sex ratio of 0.373 (95% confidence interval [CI]: 0.261-0.500) was lower than the mean sex ratio of 0.512. The mean birth weight for flour mill workers’ boy babies was 3,180 g (95% CI: 2,971-3,389), compared to an overall mean of 3,511 g for all boy babies. The mean birth weight of flour mill workers’ girl babies was 3,602 (95% CI: 3,380-3,824), compared to an overall mean of 3,389 for all girl babies.

Conclusion
The low prevalence of male infants born to fathers of flour mill workers in Washington State suggests that fumigants that they are exposed to are causing testicular dysfunction. The very low birth weight seen in the male infants of flour mill fathers is unprecedented and may be another genotoxic endpoint.

This lack of access is annoying, because I really want to see the paper. Why, you ask? Well I can certainly understand that question, having just asked it myself (hat-tip to Colonel Blake).

This sort of analysis is prone to several statistical problems. The first is what we call “power”. “Power” is a function of sample size: small samples are under-powered. Why? Because a small sample has less information, possibly too little information, with which to establish properly the distribution of the data. Moreover, too-small samples are less and less likely to represent properly a population (meaning your results apply only to your sample – in this case Washington State, say – and not to the population at large). The authors are, above, using confidence intervals, meaning they’re relying upon the Central Limit Theorem. They certainly can do this, although their sample of 59, with p = .373, isn’t all that close to the criteria for textbook statistics (at nearly 50/50 probabilities, one is a lot more assured of underlying normality).

I’m just wary of small samples. I’d like to see what else they did. The proportion of males is statistically significantly less than the population proportion (we can see this because the 95% confidence interval of the proportion of males does not include 0.512), but I’m willing to bet the confidence intervals of each (p = .373 and p* = .512 overlap significantly, and I’d like to see by how much (meaning I’d like to see how the confidence intervals work using the “population” numbers, rather than the mill-worker numbers).

The other problem I’d like to see worked out is Simpson’s Paradox. Simpson’s paradox is an aggregation issue and the classic example of it, in fact, relates to low-birth-weight babies (of smokers). It basically says that, merely by dis-aggregating data, one can draw incorrect conclusions. In the case of this paper, the low-birth-weight problem, once children have been separated by gender, might not have been observed had they not been separated by gender.

Don’t get me wrong – I’m not suggesting that there’s nothing here worth responding to. At the very least it has picked up the workers of Washington State, and Washington State ought to respond – assuming the “population” numbers are also Washington State, rather than national, in which case another set of comparisons would be needed. This is more a stats-geek level of interest.

Oh, I think Edwards’ father worked at a textile mill.

Be a nurse; get pregnant: make $10,000

According to the Sydney Morning Herald:

Nurses will be offered a $6000 cash bonus to rejoin the workforce and help fill more than 19,000 hospital vacancies across Australia – but the lure will not be enough to fix the health system, experts said.

The Prime Minister, Kevin Rudd, announced the scheme at Royal Prince Alfred Hospital yesterday, saying he hoped to attract about 7750 nurses back into the system in the next five years.

Nurses who have been out of the system for more than a year will be paid $3000 after six months’ work and another $3000 12 months later. Hospitals will receive $1000 for every nurse retrained.

The acting general secretary of the NSW Nurses Association, Judith Kiejda, said she hoped nurses “would come back in droves”. “If they do, it will ease the pressure on those already in the system and allow them to take a step back and catch their breath,” she said. “But it is not enough – we have 1300 vacancies in NSW and resources are very stretched. Our members are constantly covering these positions, so we want rewards for the nurses who have stuck it out.”

One wonders how this shortage of skilled labour could have arisen. I’ve written a couple of times about the policies of the former government, and their being structured (a) towards getting women out of the workplace, and (b) against them returning.

Hence a shortage of skilled labour, across the board (or, at the very least, a board made up of industries staffed predominantly by women).

The so-called “baby bonus” – originally AUD3,000, now AUD4,187, makes up the fee listed in the title.

This is all an excellent example of why the Austrians don’t like government intervention: offer a subsidy to (on paper) boost the birth-rate, but generate dis-incentives with respect to another very key component of our economic growth: labour force participation. What to do? Well, obviously, offer another set of targeted incentives for specific industries.

Now, the problem is not, necessarily, with recruitment: it is with retention:

“This is a good start, but it is a small part of what is needed. We need an overhaul of the health system and we need the Government to invest very heavily in primary and aged care to keep patient numbers down in public hospitals and take some of the pressure off nurses,” she said.

After 12 years out of the workforce, Karen O’Connor, a former clinical nurse specialist at Royal North Shore’s emergency department, will return to work soon – but refuses to re-enter the public system because staff “are not supported, the work is too stressful and the shifts are not conducive to family life”.

“There are few incentives to get back into nursing. I think the $6000 is a great start, but it’s not enough when you have no support and have to work shifts, including night shift,” Ms O’Connor said.

So what happens in a year or so when – specific to nursing, an under-appreciated and over-worked sector in the economy – nurses get/earn their $6,000, but realise they’re back to the position they were in originally (maybe they even want to have another child?). The government can reasonably be assumed to be containing costs by offering a signing bonus, rather than higher wages (which are dramatically more expensive, raising the costs of every nurse, even incumbent ones) – but short-term incentives usually produce short-term effects.

Gender quotas in Norway quite the success

From yeterday’s Guardian:

Almost a quarter of Norway’s companies have failed to comply with a controversial law requiring them to increase the proportion of women on their boards to 40%, according to government figures. If they do not promote more women, they could be shut down.

Norway’s 487 public limited companies, including 175 firms listed on the Oslo stock exchange, have until the end of the year on Monday to implement a 2003 act that requires firms to boost the number of female directors.

…

The quota law was the brainchild of an unlikely feminist: a 52-year-old Conservative trade and industry secretary and former businessman, Ansgar Gabrielsen, who served in a previous cabinet. Gabrielsen’s focus was less about gender equality and more about “the fact that diversity is a value in itself, that it creates wealth.

“I could not see why, after 25-30 years of having an equal ratio of women and men in universities and with having so many educated women with experience, there were so few of them on boards,” he said.

“From my time in the business world, I saw how board members were picked: they come from the same small circle of people. They go hunting and fishing together. They’re buddies.”

Very interesting. One rarely sees the argument in favour of a quota explained so clearly. They aren’t standard: quotas for minority places in Universities, for example, can run in real trouble as move farther down the table of University prestige – mostly because the discrimination begins at birth. By the time everyone is 18 or 19, it’s a bit late to force Universities (or the workplace) to fix things. For women in the workforce, though, Gabrielsen makes an excellent argument: why be like Australia, with women effectively taxed out of the workplace while we suffer a shortage of skilled labour?

I think the argument that diversity creates wealth, while the status quo merely secures it (for the status quo) is incredibly sound. Just look at politics in the US – 97ish percent incumbency rates in the Senate, a current White House administration that began with a Boys’ Club extending back to Nixon. Who could seriously argue that this is fostering the greatest level of innovation and creativity in solving the country’s problems? A little diversity in any government wouldn’t hurt (getting women and minorities through preselection/primaries, of course, is another matter).

WGA update: the not-so-basic economics of industrial action

First: I love Alec Baldwin. That isn’t so related; it’s just worth putting “out there”.

He has written a piece for the Huffington Post, concerning the ongoing industrial action of the Writers’ Guild of America – for whom it is hard not to feel: hell, even the collective noun for their opponents (the Alliance of Motion Picture and Television Producers) sounds evil, and that’s not just because I’m a fan of Firefly, because so is ever other right-thinking individual.

To the article!

The entertainment business, movies, TV, music, is divided between buyers and sellers. The sellers are actors, musicians, directors writers and their agents. The buyers are the studios, the networks, the labels. Over the last fifteen years or more, the balance of power has shifted dramatically from the sellers to the buyers.

Once, powerful agencies made astronomical deals on behalf of their biggest clients. The rising tide that resulted lifted all boats. Major stars were paid large fees and their supporting castmates made enviable salaries, as well. In the 1990s, that began to change. Today, the biggest stars are still paid huge salaries, but other salaries have dropped significantly. Roles are cast at a fixed price and the producers find the actor who will work at that budgeted amount.

…

Some of the most prominent names in film and television switched sides. The end of the sellers’ market meant big name agents became producers, even executives, as the party was ending for many of their clients. Today, most agencies, one could argue, work for the buyers. Agents realize that their ten percent of their clients’ income comes from the studios and networks as a cushion shot. It is banked off of their clients, but it comes from the buyers. When I started in this business, agents went to war with the buyers on behalf of their clients over casting and money. Agents still fight for their clients to get a role, but the money discussion is brief. The buyers essentially fax over the deal and the artist says yea or nay.

The strike may go on for a variety of reasons. On one hand, the writers are cursed because they are right on most issues but they are awful negotiators. They got screwed in 1988 and expect the buyers to make up for that, like some kind of reparations. That will never happen. The time for making that situation right was 1988.

The studios have a different problem. They are owned by huge, creativity-deadening corporations and operated by lawyers and marketing executives who lord over the worst creative decline I have witnessed in a long time, particularly in films.

In television, companies like GE view properties like NBC the way realtors view square footage. GE does not care what is on NBC. So long as the programming is relatively inoffensive, they want to earn as much per square foot as they can. In the current strike, the writers expect the buyers to have a soul. The buyers, who cannot count a real filmmaker or television programmer among them, view a soul as an impediment to business.

Working backwards – and, full disclosure-wise-speaking, I do not own a TV in either town of my living – I find the line “the worst creative decline I have witnessed in a long time” speaks “to” something I cannot define easily. For a start, Joss Whedon and Stargate notwithstanding, nothing thoroughly intelligent has really been on since MASH and Astroboy; more specifically, though, what I see, now, is hand-wringing at the idea of ever-more reality shows making it on air, TV absent writers. That’s the yardstick? No bloody wonder TV drives me spare. We have writing still, meanwhile “news” is already a field for which Glenn Beck and Bill O’Reilly qualify.

Apropos which – writers being employees/form-writers, rather than artistic content-providers – the New York Times’ article concerning advertising was almost good (it was lazy, and utterly incomplete, but not a bad start).

Alec Baldwin is wrong, however, in his description of the industrial organisation of TV and film, “The sellers are actors, musicians, directors writers and their agents. The buyers are the studios, the networks, the labels.” It is not a market with buyers and sellers: it is an example (at the moment a very complex example) of a Principal-Agent model. Specifically: Agents (this is going to get weird), actors, etc. are not Sellers, per se. Content-providers (including actors) are Principals; Agents and Collective Representation Organisations (guilds, unions) are Agents.

Agents are Agents, rather than sellers, or Principals, because they aren’t selling anything: they are facilitating the selling of skilled labour, on behalf of the suppliers of that skilled labour. Why? Because actors know how to act: they are not versed in studio/corporate crap. Same for writers, musicians. When you see your doctor, they are your agent: you do not know how much medical care to purchase; your doctor, as your agent, advises you. You trust them, because they have information that you do not. Structurally (from blessed Wikipedia):

What’s the problem? The Agent often has incentives that differ systematically from those of Principal: this is the Principal-Agent problem. If one’s dentist tells them they need a root canal, maybe they do: maybe, though, they simply have a problem, for which a root canal is lucrative over-kill. When one is trying (and, here, failing) to successfully bargain collectively for a new system of profit-sharing, the Agents (agents, unions, guilds) may benefit from strike where the Principals do not.

This makes the problem quite complex: how does the Principal even figure this out? The Agent exists precisely because the Principal does not have this sort of information (and, remember, it isn’t as though every writer out there is – or has the time to become – properly informed about this issue). However, consider these as options for the Agent, as it appears negotiations are failing:

1. Concede. Pursue a Maximin/second-best/least-worst outcome for the Principal. Risk, as a result, losing membership amongst a newly-dis-enfranchised Sellers/Principals, or
2. Fight. Pursue instead, possibly a Pyrrhic victory, possibly a Forster-esque honourable defeat, possibly outright victory – but almost certainly a risky strategy that is more likely than not to leave the Principal with negative net utility. This time, however you will have put up a fight, and be more likely to keep your members.

During a strike, with incomes lost and the future at its least certain, we are inclined to rely more heavily upon our Agents; in fact, it is the time at which we should examine them the most closely (let me also point out that I am a staunchly unionist-leaning Australian. Don’t assume any of this means that I am against unions. Or dentists or doctors. Incentives are the way they are, though, and that’s that). Even Alec Baldwin says

In the current strike, the writers expect the buyers to have a soul. The buyers, who cannot count a real filmmaker or television programmer among them, view a soul as an impediment to business.

By conflating Principals and Agents a sellers, collectively, he makes the naive assumption that the Agents are any different to the Buyers.

To end Political: as we learn more and more about which “leaders” in Congress and the Senate heard and knew about, say, illegal wire-tapping, extra-ordinary rendition, water-boarding, etc., it behoves us also to consider the Principal Agent problem of our time. This applies to Government and to Media (including the Huffington Post. Hell, including me).

HowTo: The Prisoner’s Dilemma. Or, strikes are neither good nor bad economics. Just economics.

This has been bothering me since I saw it (which is to say, since I began to have no time for anything but dealing with exams and looking up Mos Def clips on Youtube – what?).

From the Huffington Post, sometime during the weekend (just prior to the writers’ strike).

… the representatives of the Writers Guild have to remember is that all union contract negotiations are to set minimums, and that the effect of the change in residuals from DVDs and New Media they are seeking will not rise to the level of revenue they are asking for – or what the strike is going to cost the Guild’s active members. Once again, the eventual cost of a strike will exceed the financial gain being sought.

Going on strike to lose more than you gain is not smart negotiating.

The writer (Ari Emanuel) is making more than just this point, but this point is still his central one, and it betrays a lack of understanding of at least game theory.

Simultaneous Games

Let’s simplify the game a bit. Two players (writers and studios, i.e. a Duopoly) are bargaining for revenue (the payoff). They can co-operate or not co-operate (writers can strike or not strike; studios can pay the writers demands or not pay). This gives us the Prisoner’s Dilemma, and the following payoff matrix:

Or does it? In Payoff Matrix 1 (before-the-comma = Writers, after-the-comma = Studios), I’m suggesting more-or-less a zero-sum game, working from the status quo (i.e. revenues are re-distributed). Each player’s Dominant Strategy varies: Studios should not co-operate, but writers should – i.e. striking is, as Ari Emanuel suggests, a bad move (but not, I would remind you, bad economics – we’re having fun, right?). This is following his suggestion that they lose more than they gain (reflected in the payoffs). Striking is not the Nash Equilibrium.

Suppose instead that the payoff to co-operation includes some compromise, but ‘winning’ by non-co-operation secures higher payoff (since you then do not need to compromise – Gingrich revolution, anyone?). Then we’d have another imaginary payoff matrix, such as:

Here the Dominant Strategies converge to the classic Nash Equilibria of non-co-operation, and it’s perfectly sensible, since these are as the Dominant Strategies dictate (the Dominant Strategy is the one that has the highest payoff, irrespective of what the other player does).

The real lesson, I hope you saw, was that that we don’t really know the payoffs, and changing the payoffs changes everything. Clearly the writers believe that non-co-operation will benefit them. The other lesson is that we should be careful about dealing with this as a simultaneous game.

Sequential Games

Suppose that, rather than this paper-rock-scissors-simultaneity, the Guild of whomever and the studios bargain in an ongoing game, of which this is one episode. There is no Nash Equilibrium needed, necessarily, because repeated games inter-act (or, at least, their players do).

This then generates the real question: to what end does this strike tend? Is it designed to secure a higher payoff than co-operation in this game? Or is it designed to secure higher payoffs in future games? My thoughts are that it is more likely to be the latter.

The key to a good bluff, after all, is that, sometimes, you do need to be holding all the cards (Bernanke could do with being reminded of this, for example – if you can tear him away from cutting interest rates everytime he gets 4 other people into a room).

This, then, makes the writers’ strike an excellent game-theoretic move. Studios need to be reminded that there is punishment for repeated non-co-operation (remember, their Dominant Strategy was non-co-operation, so they will do that always) – periodically they will need to be punished for this. Every such player in every such repeated game needs such a reminder (Democrats might do with being reminded of this fact, if they can remember where they stashed away their backbones, back in ’95).

So, to Ari Emanuel’s claim that political posturing is going to interfere with good economics (question mark): the posturing – political or not – is part of the economics. He also closes his argument with calling for consideration of everybody else affected:

… not only for the sake of the writers, the studios, and the networks but for the millions of people in the community who will be hurt by a strike, including below-the-line workers and all those who aren’t in show business but whose livelihood is dependent on a Hollywood that is up and running.

That is, sad to say, bad economics. None of those people were in the game, for a good reason: they are not in the game. The writers’ guild is not responsible for the outcomes to non-writers. If those players want to participate, they ought to form collective representation and make the writers another offer not to strike – i.e. compensate the writers themselves, for the losses they will incur by leaving the studios to take advantage of them (again). Or compensate the studios for co-operating.

Something, though. The Dominant Strategies are the Dominant Strategies, and anyone trying to overcome those on behalf of negative externalities needs to come up with compensation to shift those Dominant Strategies to ones without negative externalities (the Coasean solution to negative externalities in repeated games – I think I just earned my Nobel prize).

The Agency Problem

A final problem, not addressed in the article, but still relevant with unions and industrial action. Consider the following:

Who strikes? The union.

Why? To secure better outcomes for the members of the union.

Really? Not necessarily, no.

What does the Union have to gain? More than just good outcomes for its members. What does the GOP have to gain from rail-roading Congress and the Senate away from a properly-functioning house of democracy? The people lose, but the GOP looks tough for its members – who re-elect them, support them, etc.

Unions can push a strike earlier than when a strike is deemed to be properly necessarily. They can push – and maintain – a strike when, in a repeated game, they come to be perceived as weak. This is the agency problem: the union telling you that you need to strike is the same one that will sell it to you.

We don’t like to think this way (I don’t – I’m Australian, for Cliff’s sake). However, we also do not like to think this way about doctor’s, dentists, lawyers (maybe not lawyers), politicians – the list goes on and on. Climate change scientists. Engineers. Why not unions?

This is, I should say, also neither good nor bad economics – just economics. People work according to their own self-interests. We assume unions push a strike because their self-interest accord with those of their members (like government, like the medical profession, like the sciences); there’s no reason why this always has to be the case, though. If their self-interests diverge, the Union, as an economic agent, will still operate in its own self-interest.

So: strikes. Neither good economics, nor bad. Just economics.

UAW/Chrysler deal slowly not failing…

Chrysler workers at three of four key United Auto Workers union locals voting Wednesday approved a new contract with the company, the presidents of the locals said.

…

Votes were still being tallied Wednesday night at Local 1700 in Sterling Heights. That local represents 2,500 workers who make the Chrysler Sebring and Dodge Avenger midsize cars.

The votes were good news for UAW President Ron Gettelfinger, who has faced serious challenges from some members opposed to the deal. The tentative agreement must be ratified by a majority of members to go into effect.

The four union locals voting Wednesday represent more than 8,600 workers – or roughly 19 percent of the 45,000 workers who would be covered by the historic four-year agreement.

It is interesting to see that which, usually, has indicated success, across the board. This time, however, mere percentages aren’t helping. Somebody get Dan Rather.

Eight local unions representing more than 16,000 workers have now turned down the landmark pact, while nine locals representing about 15,200 workers have approved it. It’s nearly impossible to keep a running total because most local union officials give out only percentages and not the number of people who voted. Also, officials of some smaller locals could not be reached or would not give out results.

Gary Chaison, a labor specialist at Clark University in Worcester, Mass., said the discontent with the contract is a sign of a union in disarray.

“Each local is looking out for themselves now,” Chaison said. “The larger locals, the big assembly locals, see the most to lose in terms of job cuts. They feel they can oppose the national officers.”

Interestingly, little to no importance (either in reporting or negotiation) has been given to the (new) Cerberus ownership of Chrysler. I’m not suggesting this is related – it could have just been that such ownership made up the impetus needed to really push back against the UAW and extract some real concessions (and I’m not even convinced that manufacturing cars people only want thanks to tax cuts is in America’s real interests, anyway).

One has to hand it to them, though: a fractured union, two-tiered workforce, self-interested locals displaying little cohesion or solidarity. If Cerberus’d made a list of cool things to do when they bought Chrysler, these would have rated well above whiskers on kittens.

UAW/Chrysler deal slowly failing

Having just written a UAW story. I’m not even a labour economist (hell, I don’t even drive).

Workers at three more United Auto Workers locals have rejected a tentative contract agreement between the union and Chrysler LLC, casting doubt on whether the deal will be ratified.

…

Although final totals from the 45,000 workers voting on the pact won’t be made known until next week, the size and locations of the locals voting no are not good signs for leaders in Detroit, said Harley Shaiken, a professor at the University of California at Berkeley who specializes in labor issues.

“The early results are abysmal,” Shaiken said. “Members have sent a message of considerable unrest.”

Given that the UAW/GM deal barely passed, overall (65% or so for, from memory), the pessimism and bad feeling setting in is a fairly bad sign (I think), concerning the ultimate prospects. The factories voting differ somewhat, though – specifically in terms of the future expectations of workers.

… 14 of 21 factories … have no future products to make after the current product life cycle or the life of the new contract. Seven were to get future products.

… McDonaugh, who favors the contract, said the vote was better than expected because the Newark plant is slated to be closed by the company. He was appalled at locals voting down the agreement at plants with future product guarantees and accused dissidents of spreading misinformation.

Many “noncore” workers at his plant thought their pay would be cut in half to around $14 per hour under the new contract, but McDonaugh said that isn’t true.

“The language states, no current seniority worker will be assigned entry-level wages even if they are classified in non-core jobs,” McDonaugh said. “They will be on the fork trucks, handling the material and working in the tool stores until they retire, quit or die,” he said.

One can see a problem asking a plant set for closure to vote on a new contract. However, this is still a workers’ union – is there solidarity or is there not? Surely the UAW can reasonably expect it. Given the high risk of the two-tiered workforce driving big splits in unionised labour, the smooth functioning of the workforce (the power of collective bargaining when it’s only half of the collective), to see bitter votes pushing towards the first failure of ratification in a couple of decades (and maybe it’s about time?) can hardly raise smiles in union offices.

There is also the voting itself – is a majority of members, or of plants, required? Reading the AP story, it seems that their success stories come from substantially smaller plants than those at which the ratification is failing.

To “save” the domestic auto industry, the union may end up killing itself

Columnist for the Nation Max Fraser made this his principle assessment of that last, mad rush to close the Summer and the Summer’s negotiations, for the United Auto Workers.

The historic concessions made by the United Auto Workers, billed as necessary measures to keep the reeling Big Three from bankruptcy, in fact represent something far more ominous. To “save” the domestic auto industry, the union may end up killing itself.

This is a fair assessment (allowing for the trouble the union is having with ratification for the Chrysler deal. The GM deal was ratified – just). The union has protected – more or less – its current members, but has done so at the cost of getting many more. Having established two tiers of auto workers – the new hires, the “non-core” hires, will cost around a third less (depending upon the estimates I see), so the odds of them giving any of what’s left to the union that created that tier is small. Even allowing for the argument that, without that concession, the jobs wouldn’t exist, on any tier (Communication Workers Union, if you’re reading…).

Fraser looks, with some clarity (and some subjectivity, but that’s cool, too) to the future:

… the proliferation of Toyota, Honda and other foreign-owned plants has accounted for virtually all recent growth in domestic auto manufacturing. After decades of watching plants close down and jobs move overseas, the UAW finds itself beset by a process of globalization-in-reverse, as foreign automakers increasingly “insource” production with cheap nonunion labor in right-to-work and Rust Belt states. The global South has arrived in Detroit’s backyard.

…

If the UAW is to have a future, it must figure out a way into these foreign-owned factories.

More easily said than done. Amongst other things, we’re talking about foreign firms building factories in the US. They aren’t stupid: in the Age of Waltons and Monopsony Employers, they know exactly how to keep both unions, and out-of-work-union-labour-from-out-of-state (read: Detroit) from buggering up their game – while also having learned exactly how Big Firms Appeal to State Legislatures. The UAW probably only had employed, unionised workers for them, and they just mortgaged off most of their future of that resource.

Ultimately, the debate is larger than this, entirely, including such questions as, should the US even make its own cars anymore? Can it compete in the world for the production of elaborately-transformed manufactures? At some point even the protectionist resource allocators may need to decide that there just isn’t a margin in pursuing that final value-added step in production.

Eco 1 students: this is comparative advantage, specialisation and gains from trade. Come the day, we may well look back on the death of Big Union with gratitude, for allowing unimpeded pursuit of points of consumption well outside our production possibilities frontiers. We may also deeply regret it – that’s half the fun of economics (we’re never the ones being squeezed out of our mortgages, you see).