Monday, February 02, 2004

Rights & Reason: More on California's Corruption

Elan Journo and Brian Simpson of the Ayn Rand Institute discuss the root causes of the California grocery strike:
What is at issue in this dispute? Facing intensified competition, the stores wanted to lower costs by having workers share a portion of the expense for their medical benefits. Knowing that it can refuse with near impunity, the union rejected the proposed labor agreement. What is important here is the stores' right to set the terms of employment, which is abrogated. A rational employer expects to pay wages that enable him to earn a profit?not so high that he has to raise prices and lose customers, but not so low that he cannot attract and retain capable workers.

But unions pride themselves in artificially raising wages beyond the market price for such work. When demanding higher wages, unions do not promise employers that union workers will do a better job or be more productive. They don't have to. The union has a coercive power over employers. The California grocery stores will soon have to compete with Wal-Mart, which plans to open grocery stores in the state. They are right to be worried. At unionized stores in California workers get paid $10 per hour more than those at a nonunion store. Those artificially high wages have an impact on prices: a cart of groceries is 17 to 39 percent cheaper at nonunion stores.
The collective stupidity of the American people can be amazing. Bill Lockyer can argue with a straight face that the grocers are acting "anti-competitively", yet the unions are permitted to use as much coercive force as they want to accomplish the very thing the grocers are falsely accused of. The grocers, after all, have an incentive to maximize their customers' benefits. Unions have no such incentives. They are not business owners. Yet inevitably the media portrays labor disputes with a sympathetic eye towards the unions.

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