Productivity Verses Unions : Revenue Generation Debated

It looks like a battle between government sub sized industries and the free market to rise wages and create jobs. With the Obama administration giving control of General Motors (GM) to the unions with 56% of the company shares didn't help the company become profitable as we saw the taxpayer shares of GM sold off with a $10 billion loss.

Union jobs, especially in the auto industry, are front line jobs but still they are repetitive and not innovative which is needed for the expansion of the job market and the raising of wages. Unions jobs for the most part are not competitive in that they are negotiated, while Walmart jobs keeps expanding in all directions. while GM fights to just hold on to their share of the market.

Walmart is not unionized.

Revenue will go up along with wages for retail and service sectors of the economy as demand goes up, while the auto industry will remain struggling to keep their collective heads above water having to deal with a union and demand flat or dropping.

They, the auto industry, have good years and then bad years and innovate where they can even under the heavy hand of federal regulations, are able to turn spotty profits, while Walmart continues to expand.

Generation of revenue is king for Walmart through mass expansion in it's market, while auto makers must rely on better ideas and skills. Little wonder then while the auto industry can produce a better worker to revenue figure while the auto industry will never match Walmart and the like for expansion of revenue collection. They are just different markets and different skill sets.

Unions Can't Raise Wage But High Productivity Can
Source: Megan McArdle, "Where Have All Our Wages Gone?" Bloomberg, March 24, 2015.

March 25, 2015

Many theories have been advanced for why unions, and median wages, are not growing very fast. Some say it is because of fewer union protections. However, this cannot explain the fate of the United Automobile Workers employees at General Motors. Theirs was a very powerful union; it was able to mobilize politicians to get them a much better deal out of GM's bankruptcy than they probably would have gotten otherwise.

However, they were not able to save the old wage structure. New workers make substantially less. Also, in the 1970s, GM employed nearly a half million auto workers. Today, the number is closer to one-tenth of that.

Competition from machines and competition from abroad lead to decreasing U.S.workforce numbers. When dealing with a cartel, it is easy to make big wage demands, because the companies can just pass those demands on to consumers, by either raising the price or taking some quality out of the product.
According to Bloomberg terminal:

• GM's U.S. operations, with around 50,000 hourly employees, generate $85 billion in revenue.
• Walmart's U.S. operations, with around a million hourly employees, generate about $330 billion. Much more revenue — but to make four times as much money, Wal-Mart needs 20 times as many front-line employees.

That is why wages at Wal-Mart are rising and why median incomes look floppy. Wages could rise across every sector, but if the available jobs are shifting out of high-productivity sectors and into lower-productivity industries, wage growth will continue suffering.