A Tale of Two Unions

Holman Jenkins’s column over at the Wall Street Journal paints a somewhat different picture of the Hostess bankruptcy than the one we’ve been hearing for the last couple of unions. Rather than being mostly a battle between labor and management is it possible that Hostess collapsed due to a battle between the teamsters’ and the bakers’ unions?

Hostess has spent eight of the past 11 years in bankruptcy. As the company explained to its latest judge, the Hostess brands “have not been able to profit from many of their existing delivery stops and have been unable to enter potentially profitable markets, such as dollar stores, vending services and movie theaters.”

If Hostess were able to rationalize or outsource delivery to serve these customers, ready to go are “new products based on its best-selling cake items that have a longer shelf-life and can withstand freezing en route to customers over longer transportation hauls.”

Under pressure on Monday from Judge Robert Drain to back down from their strike aimed at forcing the company to liquidate, the bakers themselves pointed to “what everyone in the baking industry knew: Hostess’s production costs were neither excessive nor out of line with the market but its distribution costs were—to the tune of between $80 million and $130 million annually.”

Jenkins isn’t attacking the bakers’ union—he’s defending them as rational actors. Unfortunately for the rest of us, their rational choice may leave the public on the hook for a substantial tab.

One last thing worth mentioning. Over the last several decades a succession of jobs that involved actual physical labor, like being a baker or meatpacker, have gone from being good-paying jobs to “crummy-paying” ones. That’s a consequence of bipartisan policies.

7 comments… add one

  • One last thing worth mentioning. Over the last several decades a succession of jobs that involved actual physical labor, like being a baker or meatpacker, have gone from being good-paying jobs to “crummy-paying” ones. That’s a consequence of bipartisan policies.

    I’m not seeing how that works….explanation?

  • Sure. Immigration, trade policy, licensing and regulation, intellectual property law.

    Immigration policy has encouraged a large number of unskilled and semi-skilled workers to enter the country to push wages for those jobs down. Meatpacking used to be a job with decent pay. An inflow of new workers, initially from Mexico and more recently from Somalia and elsewhere has changed that.

    Trade policy has resulted in many things which used to be produced here by people paid reasonably well to be imported.

    If physicians and lawyers had received the same treatment that auto workers, meatpackers, and bakers have received, the median income for physicians would be $50,000 a year. If that.

    I’m not saying that free trade, more or less open borders, or steep licensing requirements for some but not all jobs are necessarily bad. I’m saying that they’re the result of policies and that those policies have consequences.

  • TastyBits


    If physicians and lawyers had received the same treatment that auto workers, meatpackers, and bakers have received, the median income for physicians would be $50,000 a year. If that.

    This sounds like the solution to healthcare costs.

  • Physicians’ wages alone don’t account for enough of total healthcare costs to constitute a complete solution to the problem of the cost of healthcare. I do believe that they have a sort of multiplier effect on salaries within the sector, however.

    As I’ve written before if physicians wages had only risen at the rate of those of other non-healthcare professionals, they’d be about 30% lower than they are now. My interpretation of that is that at the very least physicians must adjust themselves to the idea that at some point their wages are going to grow very slowly if at all.

  • steve

    “If physicians and lawyers had received the same treatment that auto workers, meatpackers, and bakers have received, the median income for physicians would be $50,000 a year. ”

    They would make less than what they do in Europe and India? (One of my docs visits India every year, so we talk about their salaries.) How would that work? (Assuming you want to compare apples with apples.) With $300 k or more worth of loans, how would that work? I can see how salaries would drop to approximate the rest of the world, but why would they drop lower?

    Link to article by Hostess baker. Might take it with a grain of salt, but they had taken a big salary hit. Management appears to have done ok.

    http://www.dailykos.com/story/2012/11/18/1162786/-Inside-the-Hostess-Bankery?detail=hide

    Steve

  • Several responses to your observations, steve. First, I’m not sure where you’re getting your information. According to this site physician salaries in India range from about 120,000 to 1.2 million rupees per year. A rupee is worth roughly 2 cents. That’s a lot less than $50,000. That’s pretty comparable to the $2,000 to $32,000 cited here.

    Second, outsize U. S. wages push physician wages up everywhere because there’s a global market for physicians, particularly GPs. You might notice that salaries for GPs in Europe are closer to U. S. salaries than specialist salaries are to their U. S. counterparts. The reason: GPs are more portable. It’s the working of the market.

    Third, medical education is expensive because that’s what prospective physicians are willing to pay. If physicians wages were lower, medical education would be lower, too. So would malpractice insurance for similar reasons.

    Finally, yes, absent protections wages for physicians would decline substantially. Probably not to the level of India but certainly to the level of comparable professionals, i.e. by about a third.

  • steve

    I ask Indian physicians who work here, who also have worked over there. Docs who have trained here make in the 50k to 150k (dollars) range. A lot of them work in private clinics and private hospitals. Those without a graduate education and working in the poor areas make in the 120k-200k (rupees) range. In govt hospitals they make more towards the high end that you cite. India has only about 0.5 docs to our 2.3 per unit of population. Not sure they will keep on training there people and letting them leave to provide us cheap docs. Will have to ask my Chinese doc what they pay.

    I can see US doc salaries dropping, I just dont see them dropping lower than European salaries in the near future. India and China, so far, dont put out enough to change the markets much.

    Finally, you really need a pretty substantial gradient to get people to move. Note that Europeans are not flocking to the US. Relatively few Canadian docs move here. All they have to do is learn how to tip and say about correctly, and they can move here to make 100k more, but not many do.

    Steve

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