Unions' Obsession With Wages Deflects Attention From Opportunities

 

I always enjoy reading columns by Tim Nesbitt, former president of the Oregon AFL-CIO.  He deals intelligently and honestly with the problems facing today’s working people:  unemployment,  low wages, and increasing economic inequality.

This said,  I fear that Nesbitt’s focus on raising wages and fringe benefits has blinded him to a more promising way to reduce economic inequality. 

Forcing low wages up is a poor strategy since increasing the price of anything (including labor) is hardly likely to increase demand for it.  As Nesbitt is well aware,  increasing the cost  of labor encourages  employers to outsource work to low wage  countries and replace workers with machines. 

Nesbitt correctly thinks unions need to do “more legislating than bargaining and … more political campaigning than workplace organizing.”   But for what legislation should unions be campaigning?  He gives mandated sick leave as an example.  But Oregon’s recent sick leave mandate does not necessarily increase a worker’s annual income,  and to the extent that it does it increases the cost of  labor with all of the usual bad side effects.   It does not reduce unemployment. 

Alaska's oil dividend suggests a better way to reduce income inequality. Every Alaska resident receives a substantial and equal annual dividend from the oil-based trust fund.  When the equal dividend is added to people’s unequal wages (or no wages at all for the unemployed) the net result is less inequality in total personal income.

Imagine a trust fund for the entire United States that could capture royalties from public assets such as oil and other minerals extracted from public lands,  from leasing of rights to graze cattle on public lands, and  from leasing rights to use radio and TV spectrum.  When federal policy requires creation of new money,  the new money should be created in the trust fund instead of being captured by private bankers or spent by the government.  The trust fund might also include estate tax receipts.  

The annual dividend from a federal trust fund would be much larger than the Alaskan dividend.  And remember, it would be distributed equally to every man, woman,  and child subject to the jurisdiction of  our federal government.  When added to unequal wages this would substantially reduce economic inequality between families, especially since each family would receive the dividend for each of its children.   This reduction in inequality would come without the bad side effects of  forcing wages above their natural level----the level at which we have no unemployment because the demand for labor equals its supply.

If the federal dividend were big enough, rather than working some people might choose to live simply and engage in other useful pursuits:  caring for small children,  volunteering with worthwhile causes as many retired people do now. The dividend would also provide security for people who lose their jobs.   

I commend Tim Nesbitt for his concern for working people,  for his insights into the problems facing labor unions, and for his conclusion that legislation is a more promising approach to reducing inequality than is collective bargaining with employers.   But he needs to broaden his vision of the legislation which unions should be promoting and rise above an inhibiting obsession with increasing wages.