USA: Janus v AFSCME Part 3: The Case for Unions

Source: https://www.progressivebumperstickers.com

Update decision has been rendered: here and the SCOTUS blog post here.

As promised here is the third and final (maybe) post on unions and their relevance in light of the Janus Vs AFSCME case currently being examined in the US.

My guest author here is arguing in favour of continued union relevance while making the case that the traditional union as we know it has some problems which need to be addressed.

If you are interested, you can follow these links to find Part 1 and Part 2.

Paul Bergin was an assistant US attorney, federal prosecutor and defence lawyer. He famously represented celebrities like Queen Latifah, Naughty by Nature and Lil' Kim. He was a named partner at Pope, Bergrin & Verdesco and by all accounts was a talented defence lawyer. In March 2013, Paul Bergin was convicted of 23 counts of Conspiracy to murder a witness, bribery, fraud, racketeering, drug dealing, and prostitution. He was sentenced to life in prison. We can all agree that Paul Bergin was a corrupt lawyer, using his position of power over his clients to commit multiple felonies. However, because Begin was corrupt does this mean all lawyers are corrupt?

Are there corrupt Unions? One needs only to google the Teamsters union, the operating engineers, the longshoreman, or the labourers Union to get a laundry list of bribery, fraud, embezzlement and more serious crimes. Yet similarly to Mr Bergin does this mean that workplace advocacy on a whole needs to end? This is admittedly a bit of an extreme metaphor but it helps us frame what is being debated in Janus Vs. AFSCME.

At its core Janus Vs. AFSCME is about the union imposing forced membership, which included union fees to Political Action Funds, which were then used to primarily support the Democratic party in the US. Janus is contending that this system violated his constitutional right to freedom of speech by using his money to support a political party that he did not support. The ramifications of this case could be widespread if the Supreme Court overturns the union’s ability to impose forced membership or mandatory Union dues.  

This is a particularly interesting debate due to what is called the “duty of fair representation.” The duty of fair representation states that the union must fairly represent all employees and may not act in a way that is arbitrary, discriminatory or in bad faith. In Illinois where this case is being heard the duty of fair representation is applied regardless of membership in the union. In other words, an Employee who is not a card-carrying member of the union or does not support the union can still take the union to court if it fails to represent him or her. One could argue that if the union is bound legally to represent an employee and the employee benefits from the Collective Agreement, it would be reasonable for the union to charge the employee some sort of union dues.

Similarly to Illinois, in Canada, we have what is called the “Rand Formula,” which states that in a unionized environment all employees must be covered by the collective agreement regardless of membership and must be represented by the union fairly.

Now we come to the rub: where does fair representation end and infringement on free speech begin?

It is my position that there is a real need for continued workplace advocacy. Unions are a natural counterbalance to our capitalistic society, and we would be mistaken if due to unions overstepping we throw the baby out with the bathwater. It is interesting in Canada that mainstream union membership is on the decline, however, there is a movement of progressive unions where membership is increasing dramatically. These unions are based on the European social democratic model where the employer and employees are seen to be working in concert as opposed to the Marxist view of the class struggle between employer and employees.

These progressive unions have a number of core tenants which we do not have time to review here; but of particular importance to this discussion is Freedom of Association. This ideology states that we should have the inherent right to support or associate with whatever groups we desire. As a result, these unions oppose any political contributions. Interestingly, where a mainstream union member in Canada pays anywhere from 3%-15% of their hourly wage in dues, these progressive unions charge the lowest dues in Canada at anywhere from 1%-3% of hourly wages.

There can be little debate that unions have played a pivotal roll in shaping the employment conditions of the western world. It was unions that fought for the five-day work week, overtime pay, paid holidays, sick leave, and workplace safety to name a few. However, large mainstream unions have seemingly lost touch with their membership and have become akin to political parties themselves. It is my contention that rather then do away with workplace advocacy we need to rethink what a union should be in the 21^st century. The Canadian progressive labour movement seems in my opinion the appropriate place to start.

Great insight into the rising trend of progressive unions in Canada and abroad.

To frame both, (including mine, three) arguments together, we all ultimately hold a view that there is a problem with unions as they stand. all three of us, however, take slightly different views as to what course of action needs to be taken in order to correct these failures.

From injecting higher levels of competition to the view that unions are a massive market failure needing to be corrected to a view of hopefulness, that despite the actions of a few (large) players, there is still a need and a hope for the industry of labour representation and that perhaps the market is facilitating this transition on its own.

What are your views on this? Do you believe unions are still relevant? Are they in need of a change to a more progressive model? Or finally, has their purpose been served, leaving them as little more than a rent-seeking shell of past days?

Feel free to comment below.

USA: Janus v AFSCME Part 2: The Case Against Unions

Update decision has been rendered: here and the SCOTUS blog post here.

As promised, I have two guest writers presenting their cases for and against unions as a follow up to the previous post (here) or part 3 to this series in favour of unions (here). Below is the first of the two follow-up posts, making a case against current union relevance. 

Both of my guest writers have requested to remain anonymous, however, the content is still excellent as you can see below!

Lost amid most debate on unions is a tremendously important distinction: what sort of union do we mean? A private sector union or a public sector one? In the mind of most people, unions are associated with mining towns, manufacturers, and other industries tilted toward large employers with little geographic choice among workers. However, in 2018, it's these exact industries that no longer find themselves unionized: there are record low rates of 20% or less across most private sector industries. And a lot of this makes sense to a degree. Labor markets 100 years ago were not really markets in the true sense of the word: workers relocated without perfect information, they didn't have the buildup of capital that exists now allowing for more flexible job searches, the safety net of unemployment insurance systems still hadn't come into being, and mobility has never been more affordable than it is today.

However, one type of union remains strong: public sector unions, and it is these unions that receive the ire of most government reformers. Unlike private sector unions, which, at best, sit on one side of the bargaining table, public sector unions effectively sit on both sides of the bargaining table through their political action at the state and local level that ensures the very elected representatives whose responsibility it is to negotiate with these unions over salaries, benefits, and work requirements. And so it's unsurprising that this moral hazard has manifested itself in union heavy states over inflated public sector benefits resulting in debt, tax burdens, and budget crises. This in part explains the unexpected outcome that most of the heaviest tax burden states in the country also are the most indebted and the most unionized. In New York, Connecticut, New Jersey, Illinois, and California, unions have the strongest legacies of political action, and unsurprisingly these same states all suffer from the highest tax burdens of any other states, while also having the highest debt loads. 
One would think that high debt and high taxes wouldn't go together; it stands to reason that a state with high taxation should at least be paying for itself with those taxes, while conversely, a state with low taxes is somehow shirking its spending responsibility! Instead what we see are states with low taxes and low debt, and states with high taxes and high debt... the common denominator being high levels of political action on the part of public sector unions in the latter.

Simple associations are of course not conclusive economic study, however, the correlations are striking and the theories make sense. In addition to the concerns about moral hazards with public sector unions, there's a deeper more fundamental argument against the way they've existed to this point: their advocacy is by-definition public policy advocacy and political speech: therefore compelled unionization is compelled political speech, something nobody should ever be forced to do. 

In a free society, one has a fundamental right to organization and to collectively bargain if they so choose. However, forced unionization and forced political speech are the opposite of freedom, and in 2018 it's time to do away with the moral hazard and injustices they create.

A great argument! Again the purpose of having these guest writers is to show how several professionals, from different backgrounds and worldviews, can all hold differing thoughts on a subject matter. As a result, it is important to be critical of any idea masquerading itself as the only truth. Whether that be a statement I have made here, in class, or we have heard on the news, the majority of statements are normative in nature, even when backed with positives. 

As professionals, the important aspect is to allow our views to be challenged, entering into debate, not conflict. What are your thoughts? feel free to comment below. 

Cost Comparison of new vehicles

Source: https://www.popularmechanics.com/cars/g1792/12-new-cars-that-are-worth-waiting-for/

I have spent the last few days pricing out the differences in costs between the various hybrids, Plug-in Hybrid Electric Vehicles (PHEV) and Electric Vehicles (EV).

Currently, there are A LOT of options to choose from if you are interested in one of these three classes of cars, with many more set to hit the market later 2018, another round in 2019 and most producers offering full electric line-ups come 2020.

If you are willing or able to wait to buy, my belief is that through increased competition and technological advancements, over the next 2 years, we will see drastic decreases in the cost of these vehicles while simultaneously witnessing increases in electric range and capabilities.

But what exists now? Well based on a current level of driving and costs being faced I worked out the annual, 5-year and 10-year costs of ownership for each car on the market.

This is a limited study, however as it only focuses on new (2018) Vehicles because the data on these vehicles is easiest to obtain. furthermore, it does not include maintenance costs because I could not determine a reliable estimate of the new vehicle types (PHEV and EV). I would expect however that if you include maintenance costs, it would push up the price of Hybrid, and PHEV placing EVs at the lower cost spectrum in the long-run.

Without further adieu, The assumptions followed by the graphs.
Assumptions:

1. Gas is currently $1.459. over the last year, gas prices have increased by 12%. This seems aggressive to continue into the future, so I assume that gas prices will grow at an average rate of 8% a year. 
2. Electricity in BC is on a stepped system, I took an average cost of $0.09/Kwh while over the last year, electricity prices have decreased, I don't see this as a long-run trend so I make the assumption that electricity costs would increase at inflation, thus on average 2% a year. 
3. Car loans are at 5%, with any such loan being amortized over 5 years. 
4. The discount rate is 5%. That is $100 next year is only worth $95.24 today. 
5. Driving a total of 80km a day, 4 times a week (This is high for most I realize). 

Onto the graphs showing the cost by vehicle. First the cost of ownership over the first year followed by the a 5 year aggregate and 10 year aggregate cost. 

First up the annual cost of ownership. 

• Annual loan (blue) is the value of all loan payments in the first year.
• Annual gas - this guy gets a little complicated. 
• If the vehicle is PHEV and the one-way commute is less than the range then technically no gas has been used. However to include "one-off" long trips I have still included a fuel usage at 10% of total km driven. 
• Otherwise, the gas usage is straight gas usage based off of average L/100km. 
• Annual Electricity - How many Km driven versus the range of the vehicle providing the # of full charges required in a year. The Kwh required to charge multiplied by the cost yielding the electricity cost. 

At the 1 year horizon. 4 out of the 5 cheapest cars are hybrids, with one PHEV (Hyundai Ioniq EV+) making the list.

Moving out to the 5 year mark. at this point we are incorporating inflation of gas, electricity, as well as my discount rate (Future payments are not worth as much to me as present payments). As expected over this time period, the pricier cars which don't depend on gas begin to migrate to the cheaper side.

On the 5 year horizon, the top two remain constant, however, in the top 5 now only 3 are hybrids, one PHEV and one EV (Hyundai Ioniq dominates here).

Finally the ten year horizon, over this horizon the cost of gas begins to outweigh the larger purchase prices and the EV's overall begin to win out ... If you keep them, and they are not obsolete in 10 years...

Now the top 5 are made up of 3 EVs, one PHEV, and one Hybrid. over this time horizon, the cheapest vehicles are the 3 versions of the Hyundai Ioniq (EV, PHEV and Hybrid) as well as the Kia Soul and Nissan Leaf.

So if you are considering buying a vehicle, and view each vehicle as having very little differentiation, then the clear winner is the Hyundai Ioniq series of cars.

If you have a degree of preference of one model or brand over another, then you can begin to weigh your options between price and preference.

For this, I would really focus on the 5 year time horizon. Over the ten year horizon I feel that there will be so much technological change over the next ten years that the majority of vehicles bought today will be nearly obsolete in relation to the range and capabilities of the vehicles ten years from now.

This is all my 2 cents at least.

What are your thoughts? what do you think about all the new EV, PHEV cars hitting the market? Feel free to comment below.

Speculation tax push back.

Source: http://www.oecd.org/social/affordable-housing-database.htm

Since the proposed speculation tax in the 2018 BC budget, the news has blown up with opinion pieces and articles in opposition to this tax. some examples can be found here and here, although there are many more.

Predominately it seems that the majority of the outrage comes down to a misunderstanding of the tax due to a poor choice of naming. That is, the outraged cry is usually along the lines of

"I am not a speculator, I just have a home in Saanich which I only live in a few months in the summer because I love the area" 

True, these individuals are not speculating, but the problem still remains, they own a piece of capital (housing stock) which they are choosing to allow to sit idle while so many individuals in the region are unable to find housing, let alone affordable housing.

Thus the trouble is in the name, this should not be labelled as a speculation tax but rather a vacant homes tax. In this way, we get around the problem that keeps arising from people feeling as if they are being labelled as a speculator while addressing the real problem of an idle capital stock.

The recent article listed above (first hyperlink) by the Times Colonist claims that the new tax will be a job killer as it will depress the housing market due to the fact that people will no longer be buying properties (to sit vacant for the majority of the year).

True, if this tax successfully decreases the housing market - this will hurt the BC economy in the short-run. Currently, the FIRE (Finance, Insurance, Real Estate) industry accounts for about 25% of BCs GDP  (23% in 2012, 24% in 2016), making it the largest contributor to BCs economy by far. That is, if this tax successfully pushes down housing prices, it will ripple through the entire FIRE industry, pushing down BC's GDP, pushing up unemployment (all else equal in the short-run).

Does this then mean its a bad thing? Well yes... but.

The alternative is we do nothing, we allow capital to continue to sit idle, allow housing prices to continue to inflate exponentially faster than wages until we arrive at such a discrepancy (currently being seen in Toronto, Vancouver, etc.) that professionals can no longer afford to live in these municipalities, which similarly hurts jobs as there is no labour to be had. (here, here).

Along these lines talking to several HR professionals in the CRD I am continually hearing the same story that the only applicants they receive are either (A) from established (older, near retirement) Victora applicants or (B) from Vancouver (higher priced market). Any time a qualified applicant is offered a job outside of these two areas the applicant resultingly turns down the offer due to lack of housing.

If labour refuses to move here for jobs then employers have two options. They can either (A) begin to offer higher salaries (which would help offset the cost of living) or (B), if possible, they will relocate to other areas which jointly offer lower wages as well as cheaper land, thus jointly decreasing two costs of production.

So yes, this tax does stand to hurt us today - the alternative is prolonged hardship and a flow of labour out of the region, similarily contracting the economy in the future.

What are your thoughts on the new speculation (vacant homes) tax? will the benefits of this tax outweigh the costs or will the distortionary effects of a tax create more harm than good? feel free to comment below.