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Robert Reich’s Meandering Piehole March 17, 2014

Posted by geoff in News.

Robert Reich, he who has made a career of gang aft agley, pipes up with another steaming helping of his near-DRBC* rhetoric:

It’s often assumed that people are paid what they’re worth. According to this logic, minimum wage workers aren’t worth more than the $7.25 an hour they now receive. If they were worth more, they’d earn more. Any attempt to force employers to pay them more will only kill jobs.

“Paid-what-you’re-worth” is a dangerous myth.

Fifty years ago, when General Motors was the largest employer in America, the typical GM worker got paid $35 an hour in today’s dollars. Today, America’s largest employer is Walmart, and the typical Walmart workers earns $8.80 an hour.

He explains that this unjust situation has come about because GM workers have union clout, while Walmart workers are non-union victims of eeevil executives. But his statement raised a lot of questions for me, questions like:

  • So why isn’t GM the largest employer in America today? Maybe it’s because GM’s share of vehicle sales in the US dropped from 50% in the 60’s to 26% in 2005, due in part to its unsustainable compensation packages. Or maybe it’s because GM now outsources 2/3 of its jobs to avoid those marvelous union-enhanced wages. The fact that the unions have severely damaged the automobile manufacturing sector doesn’t reflect well on Reich’s argument.
  • Why would anyone compare one company’s autoworkers’ salaries from 50 years ago to a different company’s retail salaries today? This is called fruit bowl analysis (at least by me, since this morning): cherrypicking data to compare yesterday’s apples to today’s oranges. If you compare autoworkers’ salaries in 1964 ($137.25/week) to wages for Retail Trade: Limited Price Variety Stores ($39.17/week), you find a 3.5X difference. Reich’s difference was 4X. So almost 90% of the time-warped wage disparity that Reich blames on Walmart actually existed in 1964.
  • Wouldn’t it be better to compare entry-level salaries for the two completely different types of jobs today (not that that makes any sense, either)? It would be slightly better, but his point would be greatly diminished. An entry-level Walmart employee makes minimum wage ($7.25/hr). An entry-level worker at GM makes just under $16/hr, dropping his 4X difference to 2X. And is that 2X due to unions or to the difference in jobs?
  • Why didn’t Reich simply compare today’s salaries of non-union and union autoworkers? I mean, doesn’t that get directly to the “plight of the non-unionized victim of rapacious management” story that Reich is trying to sell? Well, here’s a comparison of the two types of autoworkers: “Average labor costs — wages and benefits — for the unionized Detroit automakers and nonunion Toyota’s U.S. plants are about the same at $55 an hour, according to the Center for Automotive Research. But the rest pay less; nonunion Honda pays about $50 an hour. Nissan, Hyundai and Kia are at about $45.” Pretty small differences once you start comparing today’s apples to today’s apples.

I don’t know why Reich decided to make such an idiotic comparison between two completely dissimilar statistics – his data for the “myth” evaporates when you do a fair comparison. But nor do I know why he then wandered off into a diatribe against bankers unfairly benefiting from quantitative easing (somehow transitioning from salary disparities at the largest employers in the country to undeserved bonuses among a small group of managers). Not that I disagree – there’s little question in my mind that the $240/citizen/month of QE3 funding would have done far better being distributed in the population than concentrated in increasing the wealth of the banks and their beneficiaries.

Maybe he just wanted to get one thing kind of right.

*Dirty Rat Bastard Commie


1. Neo - March 17, 2014

Of course 50 years ago, Detroit was still basking in the glow of the post WWII situation that had America as the only industrial base of any size remaining.
By 1964, the Japanese were positioned to “eat America’s lunch.”

2. geoff - March 17, 2014

Libs continually make the mistake of cranking up spending during good times, thinking the gravy train will last forever. Even they should realize by now that every boom must end.

3. Retired Geezer - March 18, 2014

As an ex-union thug, I approve geoff’s message.

4. geoff - March 18, 2014

As an ex-union thug, I approve geoff’s message.

I do believe that employees without representation in a limited labor market are likely to be exploited by management – it’s just the nature of the MBA beast. But there’s no question that autoworker unions were instrumental in killing the golden goose.

5. Lipstick - March 20, 2014

Late to this here great post. My dad ran coal mines. Non-union ones.

Men would line up for those jobs because even though the salaries per hour were lower than the ones in nearby union mines, the take-home pay was higher because union dues were not extracted from their checks.

Plus, they trusted him to take care of them and he always did, as much as he possibly could in a dangerous job. A tiny example that is inconsequential to the main thing he cared about, which was safety: when the distributor raised the price of soda for the machines, he ate the difference rather than have the tired guys coming off a shift have to pay more.

This is not to say that unions were not sorely needed back in the day, nor that one story about a soda machine means much. But the take-home pay one does.

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