July 14, 2004
More about Strikes

I've been thinking over the strike thing some more, and it makes me madder and madder the more I think about it.

Basically, strikes are most effective when the striking laborers are giving up much less than the employer is -- that is, when the employer's costs in having their factory/hotel/convention center/port/whatever sit idle are much larger than the strikers' costs in lost wages.

In other words, strikes are most effective against the sorts of businesses where labor is adding the least value to the enterprise.

Hypothetically -- the ideal situation for a striking worker would be a business where, say, 100 million dollars worth of capital are tied up in a fancy machine -- a wonderful machine that earns a 10% return on capital when it's working. But in order for the machine to work, the worker needs to push a button. Suppose that for performing this task, the worker is paid a "mere" $100,000 a year.

One day the worker decides that $100k is not enough. He wants $250k. He wants benefits. He wants a six-month-long all-expense-paid vacation in Hawaii, every year.

What does he do? He forms a union -- ButtonPushers Local 137. They get out the signs and walk the picket line until their demands are met. And they're met. Sure they're met -- the business is losing $9.9 million a year as long as that button is not being pushed.

When the labor costs are a large fraction of the business's expenses, a strike is pointless. In fact, at the point where the labor is very skilled, it was probably expensive to acquire the necessary skills and certification, so effectively the worker owns some of the capital which is not being employed -- in that the worker "owns" himself. So progammers don't strike; doctors don't strike.

Longshoremen strike. What are you going to do, build another port?

Commercial pilots strike. Is that because they usually (at least in the US) don't pay the cost of their training? In any case, expensive planes sit around, rusting, while the airline has to make the lease payments.

And those are just the businesses where the opportunity to strike is intrinsic in the nature of the business because the business is capital-intensive. What about strikes where the strikers get leverage because they have a government-granted monopoly? Air-traffic controller strikes. Garbage strikes. Teachers' strikes.

Here in Canada, the nurses sometimes strikes. The EMT's strike. Ambulance drivers strike. I've never heard of such a thing in the States. (They do happen, apparently.) But I suppose strikes by health workers are just another cost of state-paid health care....

Posted by Sam at 03:04 AM