The New York Transit Worker Union's illegal strike is going to cost their union $1m a day in fines, and the individual workers two workday wages for every day of the strike. But it is estimated to cost the NY economy even more—$400m a day. This economic cost will be levied on millions of ordinary people with ordinary jobs, many of them much less-paid than the strikers'.
If the transit workers were unhappy with their wages, and could find a better-paying job, they would take it, right? So that means that there are no such job offers. Instead they are demanding that their wages be raised by the management of the state-run Metropolitan Transportation Authority. But where do they expect the raise in their wages and benefits should come from? It should come from somewhere at any given time. Since the MTA is state-owned, it is the state that should provide the extra dough. The MTA itself has a huge surplus. That surplus has investment value. Does raising the wages with that money represent an investment? Perhaps if the workers work more efficiently at higher wages it will. In fact if they worked more efficiently there would be no need to that extra cash: the more efficient the transit, the more efficient the economy, the higher the real income of the people in the economy, and the higher the taxes that finance the MTA. But that is not what the workers want; they want more money, all else remaining the same as before. In fact, "Transit workers are tired of being underappreciated and disrespected," TWU chief Roger Toussaint says. TWU signs say "We move NY. Respect Us!" That is, they consider their demands to be their rights.
In terms of its economic effects, the 34,000 strikers' action is equivalent to each of them setting a $10 bill on fire about every minute. Those bills mostly come out of the pockets of ordinary people. Of course if one person actually does that he is likely to end up in jail. But when 34,000 persons in a union do that, they justify it as a "right" and as a demand for "respect."
But wages are not matters of right. They are matters of economy. They are prices of labour; like prices of other goods. That labour is provided by human beings does not change the economic role of its price, i.e. wages.
On the other hand, if the MTA was privately-owned, perhaps by shareholders, a raise (or decrease for that matter) in the wages and benefits of its workers would manifest itself in a change in the share prices, as the present value of the future consequences of that move. It would be then easy to determine whether the wage raise (or decrease) was economically sensible or not.
But with the existing state-ownership of the MTA and their workers unionized in TWU, it is inevitable that such economic decisions are eventually made by political wranglings and bullyings (from both sides) that amount to sending billions of dollars up in smokes in a matter of days.
Follow-up I wrote a piece over at FToI on the parallels and anti-parallels between Transit Workers Strike: Tehran and New York.
As someone who actually lives in NYC and commutes everyday I totally and absolutely disagree with the arguments made in this post :) For the following reason:
1) If we consider the economic aspects, the value of the services provided by the transit workers equals the amount of losses that are incurred when they are on strike, that is $400 million per day (According to Bloomberg).
1) Daily Income (altern. value for) of city when transit is not working=X
2) Daily Income (altern. value for) of city when transit is working=X+400,000,000
According to ANY general-equilibrium economic theory, if the transit workers were paid $399 million in order not to strike there would be a value of $1 million that would go to the city. In simple words, their work is worth $400 million in income for the city. Whether the city has money to pay them this much does not fall within the realm of economics, but in the realm of public policy. Actually what a transit strike does is that it shows the real value of transit in a city where it is taken for granted.
2) Economics without consideration to distribution issues is quite useless. The total "welfare" to society is a misnomer, since the vallue of an additional $1000 is very different for someone who makes $50,000 a year when compared to someone who makes $500,000 a year. This is the basis of utility theory. When bus drivers in New York city have to live with $50,000 at a time when rents are $2500 for a one bedroom apartment and rising betweeb 12-14% a year it is quite logical for unions to ask for a 8% rause after being denied a raise for the last three years.
In any case it is one thing to sit in the ivory tower and tell people whether or not they should be allowed to ask their rights. It's another when you are really a bus driver trying to send your children to college. At least that iis my view. I encounter these hard working people every day and feel they add much more value to society than most Investment bankers.
On the other hand, I should say that the unions are not necessarily saints either. They rarely care about their entire constitutents, but try to maximize the benefits of the senior members over junior members. That however does not diminish the claim of transit workers to increased salaries.
Cheers.
Ali
Posted by: Ali Mostashari at December 20, 2005 8:55 PMThanks Ali for your comment. But it raises more questions for me rather than explanations. With the knowledge that you have I am very eager to benefit from a reasonable discussion on the following:
1) Does the estimated raise of $400m in the real income of the city when transit is running mean that it is created only by the transit? I think not: it is not the value of the transit, but the value of the tranist+city using the transit. There is a huge amount of interaction in the system. This reflected in the fact that the wages of the transit workers amount to only a few hundred thousand dollars a day, and even after adding the capital costs of operating the transit, the sum is well below $400m a day. The rest is created by the rest of the system.
2) That the transit workers could not be paid $399m a day not to go on strike is still partly within economics. The real income that is generated by people using an operating transit is generated by people paying each other more on their daily economic transactions. Much of it is not at all available to be paid to transit workers because it is already spent. This is again another manifestation of the fact that the $400m in increased real income is not the value of the tranist, but the value of the transit+interaction, and in fact mostly the interaction.
3) Distribution issues are indeed important, but they take a lot of undue attention. They raise a lot of normative issues that are hard to make exact or objective. How are we really to decide who has a higher "value" if not in terms of generation of wealth? I think there should be first something, before we attempt at distributing it.
Posted by: Babak Seradjeh at December 20, 2005 9:27 PM