The Struggle in Wisconsin is Similar to the French Revolution

Posted by PITHOCRATES - March 5th, 2011

 Technology Kills Jobs and Unions

Here’s something that probably won’t bother a lot of people.  We may have fewer lawyers in the not so distant future.  Why?  Because technology is replacing them (see Technology Eats Lawyers by Douglas French posted 3/5/2011 on Ludwig von Mises Institute).

In 1900 America only had 100,000 lawyers, now there are somewhere around 1.2 million. However, lawyers are now the ones in the cross-hairs of technology’s death ray. Artificial intelligence has advanced to the point where “e-discovery” software can analyze documents faster and cheaper than humans.

“From a legal staffing viewpoint, it means that a lot of people who used to be allocated to conduct document review are no longer able to be billed out,” said Bill Herr, who as a lawyer at a major chemical company used to muster auditoriums of lawyers to read documents for weeks on end. “People get bored, people get headaches. Computers don’t.”

This new legal software is clever, allowing lawyers to determine the internal goings on within companies upon analyzing emails and other internal documents.

A computer replaces a lawyer?  Is that even possible?  A computer reads and interprets human language?  Nuance and slang?  Well, yeah.  Just ask Brad Rutter.  Or Ken Jennings.  Two of the biggest Jeopardy champions of all time.  Who lost to Watson.  A computer.

Technology marches on.  Always.  And it changes things.  Changes the world.

Back in 1900 over 40 percent of the America’s workforce was employed in agriculture. One hundred years later the percentage had fallen to less than two percent. What happened was technology. Tractors, balers and fertilizer meant that yours truly despite growing up in farm country didn’t get stuck down on the farm.

It’s happened to industry after industry and progress marches on. Any job that is mindless and repetitive, over time it’s likely going away. Some machine or technology will do it better and faster. And this is a great thing. Imagine what America would be like if almost half of us had to work on the farm producing food. Most of what we take for granted each day wouldn’t have even been thought of if half of us were slopping hogs and mending fences.

A century earlier most of us were farmers.  That’s why unions weren’t a significant political force around 1800.  Most were farming land they owned.  As the Industrial Revolution transformed America, cities grew.  People left farms to work in factories.  Following World War II, when Europe’s industries were in shambles, American industry exploded.  As did the power of unions.  It was the sweet-spot of the labor movement.  We rebuilt war-torn economies around the world.  Our factories were humming.  And they were organized.  The sky was the limit.  Because there was nowhere else to go.  So wage and benefit packages were very generous.  Then something happened.  The world’s economies recovered sometime in the 1960s.  All of a sudden, you could go somewhere else.  Not pay those high American prices.  And people did.

The unions grew strong when they could.  When there was no competition.  But when competition returned, the unions lost their power.  Because there was a limit to what they could demand.  You see, unlike before, businesses could not pass on higher and higher union costs to the consumer.  Companies that tried saw losses in market share.  So they had a choice.  Go out of business.  Replace people with robots.  Or outsource.  And they did all three.

Union membership in the private sector has declined since the ‘sweet-spot’ of organized labor.   From approximately 35% to less than 10%.  Interesting, though, this is not the case with public sector unions.  During the seventies, public sector workers belonging to a union jumped above 35%.  And has stayed there ever since.

Public Sector Unions:  Stealing from the Poor to Give to the Rich

So what’s the difference between the private sector and public sector that accounts for this divergence in union membership?  In a word, competition.  Where there is competition, union membership has declined.  Where there isn’t competition, union membership has grown and held steady.  Why?  Because of taxes.  States and municipalities have the power to tax.  And when they need more money for those generous salaries, health care and pension benefits, they go to the taxpayer. 

But there’s a problem.  You can’t keep raising taxes.  Especially when the people paying for the benefits have to sacrifice their own retirement and health care in the process.  And when we’re all living longer now (see How to fix the public sector pension system by Michael Johnson posted 3/5/2011 on the UK’s Telegraph).

There are two aspects to consider; affordability and fairness. A DB [defined benefit] pension provides the retiree with certainty of income until they die but, as the private sector has discovered, the cost of providing such certainty is now prohibitive, primarily because people are living longer in retirement. Indeed, the Government expects more than ten million people in the UK today to live to see their 100th birthday.

Private sector occupational pension provision has almost become a DB desert, replaced by defined contribution (DC) schemes, in which pensioners assume their own longevity risk. At retirement, unless a lifetime annuity is purchased (increasingly expensive), pensioners’ subsequent income is uncertain because they do not know how long they will live, nor how their assets will perform.

Conversely, public sector workers have access to valuable, state-provided longevity protection, care of their DB schemes (as well as no investment risk concerns). Their income is assured, irrespective of how long they live, but even after the introduction of higher employee contributions, tax-paying private sector workers would still be funding the bulk of the cost. It is unreasonable to expect them to assume, and pay for, the longevity risk of others, whilst not being able to enjoy a similar facility themselves. Furthermore, because our population is ageing, the number of workers supporting each pensioner is declining. Consequently, the tax burden is likely to rise, leaving our private sector workers with less to save for their own retirement…

Were such a DC framework for the public sector not to materialise, the Government would be tacitly signalling its acceptance that the quality of pension provision in the (wealth-creating) private sector is to remain second class.

And this is what the debate in Wisconsin is really about.  The ‘right’ for public sector unions to collective bargain isn’t about their salaries.  They are more than willing to give up some of that money.  It’s the benefits they’re worried about.  And what their ‘right’ of collective bargaining has given them.  That bargaining power has passed all those benefit costs onto the taxpayer.  Without the taxpayer’s consent.

This is indeed a class war.  Like there was in circa 1790 France.  Only the sans-culottes are the taxpayers.  And the ‘knee-breeches wearing’ aristocracy oppressing them are the public sector workers.  This development reminds me of a Monty Python’s Flying Circus sketch.  When Dennis Moore steals from the rich to give to the poor.  First stealing lupines.  Then valuables.  After awhile, though, the rich become poor.  And the poor become rich.  This verse near the end of the sketch says it best in song.

Dennis Moore, Dennis Moore
Riding through the land
Dennis Moore, Dennis Moore
Without a merry band
He steals from the poor
And gives to the rich
Stupid bitch

After this verse a confused Moore is struck with the realization of what he’s done and says, “Blimey this redistribution of wealth is trickier than I thought.”

Yes it is.  Indeed.  And the taxpayers get poorer while the public sector gets richer.  Thanks to collective bargaining against the taxpayers.  Public sector unions.  Just like Dennis Moore.  That stupid bitch.


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