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Archives for Economics (page 3 / 8)

Why Manufacturing Jobs Move Overseas (An Apple Case Study)

Why Manufacturing Jobs Move Overseas (An Apple Case Study) →

This was a very interesting read. If you haven't already read it, you should. Most commenters that I've seen have focused in on the wage differential (and the hours that the Chinese employees work) between U.S. and Chinese workers. That wasn't, primarily, what caught my eye. Instead, it was the overwhelming difference in flexibility.

One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. … Within 96 hours, the plant was producing over 10,000 iPhones a day.

Can you imagine a union dominated, U.S. manufacturing plant turning around assembly line processes anywhere near that quickly?

Though components differ between versions, all iPhones contain hundreds of parts, an estimated 90 percent of which are manufactured abroad. Advanced semiconductors have come from Germany and Taiwan, memory from Korea and Japan, display panels and circuitry from Korea and Taiwan, chipsets from Europe and rare metals from Africa and Asia. And all of it is put together in China.

Simply put, China is a lot closer to the raw materials than America is. In many cases, it makes a lot of sense to keep the manufacturing plant close to the supply chain.

“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

How about quickly, nearly instantaneously, finding new employees to ramp up production?

“[Foxconn] could hire 3,000 people overnight,” said Jennifer Rigoni, who was Apple’s worldwide supply demand manager until 2010, but declined to discuss specifics of her work. “What U.S. plant can find 3,000 people overnight and convince them to live in dorms?”

… Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.

In China, it took 15 days.

… In particular, companies say they need engineers with more than high school, but not necessarily a bachelor’s degree. Americans at that skill level are hard to find, executives contend. “They’re good jobs, but the country doesn’t have enough to feed the demand,” Mr. Schmidt said.

There are many, many reasons why manufacturing jobs are being created in China and not in the U.S. It's nowhere near as simple as just calling it "greed" and condemning U.S. employers. In a highly dynamic, constantly changing world, is the U.S. producing skilled employees (at all skill levels!) who are willing to quickly change what they do and how they do it?

Unemployment Insurance Changes Incentives to Work

Unemployment Insurance Changes Incentives to Work →

Scott Sumner talks about unemployment insurance (UI).

The statistical evidence on UI is overwhelming significant. When the UI benefits maxed out at 26 weeks, there was a spike in the number re-employed right after the benefits ran out. That’s not to say the benefits are necessarily inefficient, if the spike was due to the income effect then UI might actually make the job market more efficient. But it’s hard to dispute the fact that UI insurance does have some effect on labor supply. And that means some effect on employment, as studies show that the effects on unemployment duration even occur in areas with double digit unemployment.

This entry was not tagged.

Lets get real about poverty in America

Lets get real about poverty in America →

Walter E. Williams, Professor of Economics at George Mason University, summarizes 3 recent papers about poverty in America: "Understanding Poverty in the United States: Surprising Facts About America's Poor", "The Material Well-Being of the Poor and the Middle Class Since 1980", and "Income Mobility in the U.S. from 1996 to 2005".

The truth is that there isn't nearly as much poverty in the U.S. as is commonly assumed. And poverty doesn't tend to be nearly as bad as we assume it is. It's still plenty bad. And being part of a smaller group of poor people doesn't make it suck any less to be poor. But having an accurate view of poverty might change the ways and means that we use to alleviate and attack poverty.

This entry was tagged. Poverty

Milton Friedman on Wealth Redistribution

I'm a sucker for Milton Friedman videos and I'm a sucker for people explaining the secondary effects of economic regulations: the unseen that comes after the seen. Friedman does that here, schooling a student on how a 100% inheritance tax on wealth would destroy our society.

This entry was tagged. Taxes Wealth

Public Pensions: Some Numbers and Reality

Public Pensions: Some Numbers and Reality →

I can get into the details of the situation where $29 billion in deposits and $62 billion in payouts aren’t a problem… but that’s not the situation that holds in NJ. It requires the benefits to be “running off”, where the population and benefit amounts are decreasing, and a nice, hefty investment fund to begin with.

That is not the situation with the NJ pension plans.

The pension numbers are looking scary in both New Jersey and Illinois. It's going to be very, very expensive for both governments to come close to paying for the pension benefits that they've promised.

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American Airlines Enters Bankruptcy

American Airlines Enters Bankruptcy →

Megan McArdle, on my American Airlines is entering bankruptcy.

But airlines do have another problem that's special to them: their unions, which are both powerful, and plentiful.

Whatever you think about the United Autoworkers, at least there's only one of them. The union doesn't want to kill the company any more than management does. In theory, at least, you should be able to work something out.

But when there are three or four unions--pilots, flight attendants, mechanics, and baggage handlers--things get complicated. All of those groups are completely necessary to make sure that the plane gets in the air. If one of them doesn't show up, you lose all the money on every seat.

... But when times aren't so flush, this dynamic becomes a problem. The company's past labor agreements don't leave much margin for error--particularly when there were sizeable pensions, as there have been at most of these legacy airlines.

It's not clear what will happen to American's $8 billion worth of pension obligations, which are underfunded by billions, but I'd expect that the company will push hard to shed them. It will also want the judge to rewrite its labor contracts.

This entry was tagged. Unions

The Income Mobility of Millionaires

The Income Mobility of Millionaires →

Hate the rich? Don't worry, most of them won't be rich for long. Only about 6% of millionaires manage to stay millionaires for 9 years or more.

This week, Mercatus Center Research Fellow Veronique de Rugy examines the income dynamics of taxpayers with millionaire status using data calculated by the Tax Foundation that followed the same Internal Revenue Service (IRS) tax returns from 1999 through 2007. The data represent 675,000 taxpayers who were millionaires at some point during this period; this number serves as the benchmark for the percentages of millionaires who remain millionaires.

... Interestingly, things look rosier at the bottom of the income distribution. That same Tax Foundation study also shows that about 60 percent of households that were in the lowest income quintile in 1999 were in a higher quintile in 2007, and about a third of those in the lowest quintile moved to the middle quintile or higher. In other words, while it is difficult for one to rise from rags to riches, and while it may be harder now than it was in the past, there is still real upward economic mobility in the United States. (Mark Perry, over at the Enterprise Blog, reported back in March on similar data from the Federal Reserve Bank of Minneapolis.)

This entry was tagged. Income

Three Policies That Gave Us the Jobs Economy

Three Policies That Gave Us the Jobs Economy →

Amity Shlaes on what sparked the job growth of the 1980's.

The era didn't start well. The mid-1970s were a dead period. Then suddenly, from 1977 to 1978, new private capital devoted to venture capital increased by 15 times, to $570 million in 1978 from $39 million the year before.

In 1977, public underwritings of firms with a net worth of less than $5 million amounted to a meager $75 million. By 1980 that figure was $822 million, as Michael K. Evans, founder of Chase Econometrics, points out. The venture-capital boom continued down the decades, serving computing, technology, biotech and many other areas.

But what caused this boom? Three policy changes. The first was a [capital gains] tax cut for which this newspaper campaigned. ...

A second policy change came in pension law. ...

A third factor, and one that ensured the boom would continue, was a law ... [that] clarified murky intellectual property rights so that universities and professors, especially, knew they owned their own ideas and could sell them. ...

The Top One Percent Includes You

The Top One Percent Includes You →

Carl Haub, senior demographer at the Population Reference Bureau in Washington, D.C., has estimated that 106 billion humans have been born since Homo sapiens appeared about 50,000 years ago. That means that the richest one percent in history includes 1.06 billion people. There are currently 6.2 billion humans alive, leaving approximately 100 billion who have died. Who among the dead was rich by today's standards? Not many. Royalty, popes, presidents, dictators, large landholders, and the occasional wealthy industrialist, such as Andrew Carnegie and Leland Stanford, were certainly rich. All told, it is difficult to imagine more than 20 million of these people since ancient Egyptian times. This leaves 1.04 billion wealthy alive today, or 17% of the world's population.

The poor in the United States, by contrast, live on up to $23.50 a day. Except for the few hundred thousand who are homeless, the Americans whom the U.S. government defines as poor live exceptionally rich lives. In most ways, their lives are better than those of kings and queens just 200 years ago. Consider the quality and quantity of our food, clothing, refrigerators, televisions, washing machines, stereo systems, and automobiles. King Louis XIV of France had a greenhouse so he could eat oranges. The poor in this country can eat an orange every day, regardless of season. King Edward III of England could summon the royal musicians to play music. The poor in this country have a wide variety of music at their command, 24 hours a day, played note-perfect every time. Edward III lived in a dark, smelly, cold castle. Even the worst houses in this country are more comfortable and have electric lights, too. Care to live without showers and flush toilets? The kings of England and France had to. Next time you see a Shakespeare play in which kings and princes cavort, remember that royalty in Shakespeare's day had rotten teeth, terrible breath, and body odor that would make you keel over.

This entry was tagged. History Wealth

How Lifetime Benefits and Contributions Point the Way Toward Reforming Our Senior Entitlement Programs

How Lifetime Benefits and Contributions Point the Way Toward Reforming Our Senior Entitlement Programs →

When you get Medicare and Social Security benefits, you're not really getting "your" money back. In many cases, you're getting back far more than you paid in and the whole system isn't designed to make that kind of math work.

Our recent analyses of lifetime contributions and expected benefits in Medicare show that, over a wide range of scenarios, beneficiaries retiring at age 65 in 2011 can expect to receive dramatically more in total benefits than they have paid in dedicated taxes. For example, single beneficiaries and dual-earner couples who had earned the average wage throughout their working careers can expect to receive about $3 in Medicare benefits for every $1 paid in Medicare payroll taxes. If only one member of the couple had worked, we calculate a six-fold difference between contributions and benefits since both spouses are eligible for Medicare yet only one has paid taxes. Higher earning workers will have paid somewhat higher Medicare taxes, but their expected lifetime benefits still far outpace their lifetime contributions.

Social Security benefits and contributions come closer to balancing out over the lifetime for many beneficiaries (middle panel), but the one-earner couple again comes out far ahead due to a Social Security system that was designed decades ago around the stereotypical family of the past, with a working father and a stay-at-home mother. While a single woman who worked a full career at the average wage can expect to receive Social Security benefits roughly in line with her payroll contributions, a married woman who never worked but whose husband paid the same taxes as the single woman can expect to receive about $180,000 in spousal and survivor benefits. Unlike private pensions, these additional benefits are essentially free but only to those who are married, regardless of need, contributions or any child rearing. They are financed by all Social Security taxpayers, including single mothers who get no spousal or survivor benefits at all.

Examining both programs together (bottom panel) highlights the large dollar value of benefits being paid out and the fact that total lifetime benefits consistently outweigh lifetime contributions across a range of scenarios. It is no wonder these programs now account for one-third of all federal spending each year. Furthermore, our projections for people retiring in 2030 (data not shown) reveal a continuation of the difference between benefits and contributions under the current unsustainable structure of these programs.

Can Matt Damon Bring Clean Water To Africa?

Can Matt Damon Bring Clean Water To Africa? →

Ignore the too-cute by half photo that gives Matt Damon a halo and give the article a shot. It's a pretty interesting look at the effort to bring clean water wells to Africa and the unconventional ways that Matt Damon is pursuing this goal.

Still, even after White had led dozens of projects, he remained frustrated. "Projects -- everyone's projects -- were failing at a really high rate." Communities had broken wells or faucets that villagers were unable to repair, or the wells produced water more dangerous than that of the filthy rivers that flowed nearby. There were also few, if any, sanitation projects. "In the '80s and '90s, the approach was really supply-driven -- 'We are here to give you your water project,' " he says. Dig a well, put up a plaque, take a picture, and scram. "People were designing projects for people, not with them." White came to understand that community engagement (a term rendered almost meaningless by politicians, major brands, and social-networking companies) is a life-or-death strategy in the developing world. "There needs to be a water committee. At least 80% of the community needs to sign up and raise money for the project, participate in its construction and up-keep," he says. That's how a project turns from top-down charity to bottom-up sustainability.

This entry was tagged. Charity

Why the Jobs Situation Is Worse Than It Looks

Why the Jobs Situation Is Worse Than It Looks →

This article from U.S. News is pretty scary—and depressing.

Today, over 14 million people are unemployed. We now have more idle men and women than at any time since the Great Depression. Nearly seven people in the labor pool compete for every job opening. Hiring announcements have plunged to 10,248 in May, down from 59,648 in April. Hiring is now 17 percent lower than the lowest level in the 2001-02 downturn. One fifth of all men of prime working age are not getting up and going to work. Equally disturbing is that the number of people unemployed for six months or longer grew 361,000 to 6.2 million, increasing their share of the unemployed to 45.1 percent. We face the specter that long-term unemployment is becoming structural and not just cyclical, raising the risk that the jobless will lose their skills and become permanently unemployable.

Don't pay too much attention to the headline unemployment rate of 9.1 percent. It is scary enough, but it is a gloss on the reality. These numbers do not include the millions who have stopped looking for a job or who are working part time but would work full time if a position were available. And they count only those people who have actively applied for a job within the last four weeks.

Include those others and the real number is a nasty 16 percent. The 16 percent includes 8.5 million part-timers who want to work full time (which is double the historical norm) and those who have applied for a job within the last six months, including many of the long-term unemployed. And this 16 percent does not take into account the discouraged workers who have left the labor force. The fact is that the longer duration of six months is the more relevant testing period since the mean duration of unemployment is now 39.7 weeks, an increase from 37.1 weeks in February.

This entry was tagged. Jobs

Why You Should Never, Ever Cosign a Loan for Anyone

Why You Should Never, Ever Cosign a Loan for Anyone →

Very good advice, from Megan McArdle.

If you think that they really need the money, and that you're not just helping someone dig themselves even deeper into financial irresponsibility, then my advice is to just give them the money.

Give them the money?  I can't possibly afford to do that!

Well, my friend, given the default rates of primary borrowers, that is what you're doing when you cosign--with the additional cost of origination fees, interest payments, late fees, collection fees, a black mark on your credit report, and probably, a destroyed relationship.

This entry was tagged. Charity Debt

No Evidence of Climate Change Harm

No Evidence of Climate Change Harm →

Don Boudreaux quotes Indur Goklany, on climate change (emphasis added by your kindly editor).

Here’s part of the conclusion of a recent, data-rich paper by Indur Goklany; this paper is Chapter 6 in Climate Coup (Patrick J. Michaels, ed., 2011):

Despite claims that global warming will reduce human well-being in developing countries, there is no evidence that this is actually happening. Empirical trends show that by any objective climate-sensitive measure, human well-being has, in fact, improved remarkably over the last several decades. Specifically, agricultural productivity has increased; the proportion of population suffering from chronic hunger has declined; the rate of extreme poverty has been more than halved; rates of death and disease from malaria, other vector-borne diseases, and extreme weather events have declined; and, consequently, life-expectancy has more than doubled since 1900.

And while economic growth and technological development fueled mainly by fossil fuels are responsible for some portion of the warming experienced this century, they are largely responsible for the above-noted improvements in human well-being in developing countries (and elsewhere). The fact that these improvements occurred despite any global warming indicates that economic and technological development has been, overall, a benefit to developing countries [pp. 181-182].

This is why I don't think we should be engaging in any crash programs to reduce carbon emissions or restrict fossil fuel usage.

To Rent or to Buy?

To Rent or to Buy? →

A new academic article in Real Estate Economics turns this conventional wisdom on its head. Using data from 1979 to 2009, the authors demonstrate that renting was the superior investment strategy for most of the past 30 years. Counterintuitive as the finding may be to some, it is actually quite logical. Unless someone possesses the cash necessary to buy a residence, he or she will be renting one way or another. The choice is between renting the property directly or instead renting the capital necessary to buy the property. The amount of capital to be rented is a function of house prices, while the bulk of a mortgage payment is interest, which is the rental payment on this capital. After 2 years, the typical 30-year amortizing mortgage balance has been reduced by less than 3%. This means that a household that took out a $300,000 mortgage with a 5% interest rate to buy a home has only reduced its mortgage balance by $8,600 after two years despite spending nearly $39,000 in total over this period.

... Importantly, the authors make clear that in general, renting is only the superior financial choice if the renting household has the discipline to invest its marginal savings into financial assets. Renting generates residual savings because the cash outlays tied to housing consumption (or purchase) are lower. But if renting households, or the individuals themselves lack the discipline to save this money, and instead increase non-housing consumption, any wealth gains will clearly disappear. The basic intuition is that the principal portion of mortgages is what usually leads to more wealth. But as this article shows, that’s because it represents incremental savings not because of anything intrinsic to the mortgage itself. Viewed in this light, the economic gains come not from “owning” a home but rather the forced savings generated by the principal portion of the monthly mortgage payment.

It is instructive that at the end of the analysis, the much-touted economic gains from homeownership really come from the forced savings of an amortizing mortgage. And this benefit only accrues to myopic households that would not otherwise save.

This entry was tagged. Home Ownership

Turning Washing into Books

Turning Washing into Books →

"If you have democracy, people will vote for washing machines".

Hans Rosling talks about the magic of the washing machine — a device that turns drudgery into books.

This is a popular topic around our house: our washing machine and our dishwasher free up hours each day and many more hours each week, allowing us to do more things together as a family.

It's only 9 minutes long, so do yourself a favor and watch it.

(Or, avoid Flash and watch the video directly.)

This entry was tagged. Innovation

The White House vs. Boeing

The White House vs. Boeing →

Senator Lamar Alexander (R-Tennessee) says that Tennessee attracted thousands of auto industry jobs because of its right-to-work laws. This

This reminds me of a White House state dinner in February 1979, when I was governor of Tennessee. President Jimmy Carter said, "Governors, go to Japan. Persuade them to make here what they sell here."

"Make here what they sell here" was then the union battle cry, part of an effort to slow the tide of Japanese cars and trucks entering the U.S. market.

Off I flew to Tokyo to meet with Nissan executives who were deciding where to put their first U.S. manufacturing plant.

... In 1980 Nissan chose Tennessee, a state with almost no auto jobs. Today auto assembly plants and suppliers provide one-third of our state's manufacturing jobs. Tennessee is the home for production of the Leaf, Nissan's all-electric vehicle, and the batteries that power it. Recently Nissan announced that 85% of the cars and trucks it sells in the U.S. will be made in the U.S.— making it one of the largest "American" auto companies and nearly fulfilling Mr. Carter's request of 30 years ago.

This is directly applicable to today's battle between the NLRB and Boeing, over whether or not Boeing can open a production line in a right-to-work state.

This entry was tagged. Unions

The top 10 lines for hitting on an economist

The top 10 lines for hitting on an economist →

  1. You’ve got the curves to supply my demand!

  2. Let’s go to bed and try to disprove the law of diminishing marginal utility.

  3. You’re my very favorite kind of moral hazard.

  4. I have a feeling you really understand the “nature of the firm.”

  5. Baby, I love you so much I’m willing to forgo my exit option.

  6. Wanna talk about our private goods?

  7. You’re an economist. I’m an economist. How about a little horizontal integration?

  8. Now those are some tangible assets!

  9. I’ll reveal my preferences if you will.

And the very best pick up line to catch your own economist, as well as the filthiest thing ever said in public by an economist (and I include various jokes I’ve heard at cocktail parties) is brought to us by the dynamic duo of Roberts and Papola, and comes straight from their new Hayek/Keynes rap video.

  1. Bottom up or top down?

This entry was tagged. Humor

Unions: A Good Solution for a Vanishing Problem

I think that unions are a good solution for a problem that no longer exists. One hundred years ago, many jobs were for factory work or mine work. The skill and quality of the individual employee didn't matter. A person would spend an entire day tending a loom, welding rivets, or doing some other mindless, repetitive job.

If one person quit (or died), someone else could easily step in and take over the job without noticeably slowing production. Workers were largely powerless because management could easily replace individual employees. This left each, individual, employee with almost no leverage. The only way that a threat to stop working meant anything is if every employee made the threat simultaneously. Even that threat was largely meaningless unless an employer could be prevented from just bringing in replacement workers en-masse.

In this kind of environment, a union made a lot of sense. It gave largely indistinguishable workers a way to band together and make management take notice of them. It gave them bargaining power, to fight for safer working conditions and better treatment. It gave them the leverage to end abusive practices like the company store.

During this period, workers were like cogs in a vast, industrial machine. Individually, they were interchangeable, easily replaceable, and mostly ignored. Ultimately, the factory machines (or the mine itself) were far more important or valuable than the individual worker was. But together, they had a voice and could force management to pay attention to them. In this environment, unions were a useful tool.

In a union company, it was important that the job get done. It wasn't really important who did that job. But we no longer live in that environment.

We live in a dynamic economy where factories provide fewer and fewer jobs even as factory output increases. The factory "worker" is changing from interchangeable employees to interchangeable robots. The true factory workers need to have unique, valuable skills. They need to be able to watch the factory floor, constantly looking for problems and creating solutions. The worker is more valuable than the machines he watches over. They can be replaced with a purchase order to the manufacturer. His knowledge and skills can't be replaced so easily.

We live in a dynamic economy where knowledge matters. A lot. A good teacher isn't just a replaceable cog in a machine. He or she knows how to construct a lesson plan, knows how to grade papers fairly, knows the subject matter backwards and forwards, knows how to motivate students, knows how to communicate with parents, and more. A good teacher is valuable and hard to find.

We live in a dynamic economy where the best worker is the one who can learn the most and do more than one task well. We live in a dynamic economy where what you can do today isn't nearly as important as what you'll be able to do tomorrow. We live in a dynamic economy where individual creativity and initiative far outweigh the ability to follow rote orders or do the exact same thing day after day, year after year.

In a modern company, it's still important that the job get done. But it's far more important who does the job. The employee's unique knowledge, skills, and input are crucial to the success of the company. The employee is hired to make decisions, to look at a problem, see a solution, and then implement the solution. The employee is hired to work independently and confidently, using his brain as the ultimate tool. This is the environment we live in now.

Unions are ill suited to this environment. Union collective bargaining agreements are written for last century's economy. Union contracts treat employees as replaceable cogs in a machine.

Take, for example, the contract for Madison Teachers Incorporated. Pages 10-15 of the 2009-2011 contract lay out the pay scale for teachers. The entire section assumes that one teacher with a given set of qualifications and credentials is just as good as another teacher with the same set of qualifications and credentials.

No allowance is made for differences in the amount of time that teachers put into the job each day. No allowance is made for the enthusiasm or creative thinking that each teacher brings to the job. No allowance is made for, well, anything that makes a good teacher a good teacher. As far as the contract is concerned, you could take away Mr. Smith and replace him with Ms. Jones and absolutely nothing would have changed.

Instead of valuing flexibility, creativity, and employee knowledge, a union values employee longevity. The employee that has been around the longest, that has the most invested in the union, that has the most clout in the union is favored over the younger employee. That holds true even when the older employee is contributing little to the organization and the younger employee is contributing much to the organization. It doesn't matter. When the time comes for layoffs, the younger employee goes and the tenured, long-time employee stays. This, of course, does wonders for the work effort and morale of the younger employees.

Unions also restrict the ability of the employer to reward and retain the most valuable employees. Union contracts reward every employee the same, based on classification. When it comes time for raises, everyone in the unit gets the same raise regardless of their individual value to the organization. In any organization there are a few great employees who provide much of the creativity and drive. There are a lot of good employees who do their jobs well. And there are always a few bad employees who either don't do their job well or who can't be relied upon to make good decisions and execute tasks properly.

An organization should have the freedom to reward the top performers appropriately, giving them little reason to leave for greener pastures. And the organization should have the freedom to fire the low performers and seek out new hires who might be able to contribute more. Union contracts forbid this kind of personnel management and leave departments unable to retain their top performers while they're also unable to shed their dead weight.

Worse still, the union contract locks in a specific set of work conditions and job responsibilities. It gives employers very little flexibility to deal with changing conditions and changing needs. Before any change can occur, the employer must first convince the employees that the change is necessary and desirable.

For workers who are used to working a specific way (and have grown comfortable in that), that's a very tough sell. If large changes are needed, it can be practically impossible to convince the employees to change. The employer is stuck with a workforce that won't adapt to new needs and that it can't replace. That's a recipe for stagnation and, eventually, death.

Unions are, quite understandably, opposed to any changes that might lead to the elimination of any jobs. Unions exist to protect workers and to ensure that no jobs are ever destroyed. Unions can (and do!) prevent employers from switching to more efficient processes and more efficient technology.

The union mindset would ensure that every car still came with a buggy whip holder and a buggy whip. Sure, they're useless. But the alternative would mean that buggy whip makers would be unemployed and a union wouldn't be able to allow that. Don't believe me? Then why did railroads pay "firemen" to ride in the cab of diesel locomotives, 50 years after diesel engines replaced coal engines?

No, unions are ill suited to the modern work environment. Where the economy requires flexibility, unions offer rigidity. Where the economy requires creativity, unions offer only cog-like employees. Where the economy values unique skills and contributions, the union values longevity.

An organization full of union employees is an organization that is quickly headed for the trash heap of history.

This entry was tagged. History Unions