Some thoughts for the new chapter 14.
1) blaming the unions
2) a story about Desi and Lucy
3) defending the unions
4) how GM bought peace
5) cost shifting consequences
6) the business cycle and unions
7) unwinding unsustainable promises...
8) without chicanery (can the unions themselves do it)
9) evolving roles, union survival.
Showing posts with label business cycle. Show all posts
Showing posts with label business cycle. Show all posts
15 July 2011
14 July 2011
Changes
I continue to work on what will be the short version of "Gambling With Borrowed Chips," my discussion of the role of leverage, speculation, and regulation in a modern economy. I'm making great progress.
Perhaps it is a sign of my progress that I have now abandoned the original outlines I wrote of the final chapters . Indeed, as the book has moved along the difference between the actual content of each chapter and the original plan/outline has expanded.
At one time, I had contemplated that chapters 13 to 17 would have the following titles:
13. Bankruptcies and Rescues
14. Public and Private Pensions
15. Home Ownership
16. Energy
17. Conclusions.
According to the latest plan, whatever actually will be their titles, their content will be respectively thus:
13. Early Responses to The Crisis
(Especially focusing on the first year of the Obama administration and things that didn't work.)
14. Labor Unions and Pensions
(Working analytically, from the basic justifications for labor unions to their newer roles and the demographics.)
15. The Ideology of Home Equity
(I'd like to present this in the form of a fable.)
16. Health Care
(The key to the second year of the Obama administration, and its business-cycle significance, along with some philosophizing about biology.)
17. Final Thoughts
(Final thoughts.)
Yes, that might not seem to hang together when put thus, but I've learned that the teller should not fight the tale.
Perhaps it is a sign of my progress that I have now abandoned the original outlines I wrote of the final chapters . Indeed, as the book has moved along the difference between the actual content of each chapter and the original plan/outline has expanded.
At one time, I had contemplated that chapters 13 to 17 would have the following titles:
13. Bankruptcies and Rescues
14. Public and Private Pensions
15. Home Ownership
16. Energy
17. Conclusions.
According to the latest plan, whatever actually will be their titles, their content will be respectively thus:
13. Early Responses to The Crisis
(Especially focusing on the first year of the Obama administration and things that didn't work.)
14. Labor Unions and Pensions
(Working analytically, from the basic justifications for labor unions to their newer roles and the demographics.)
15. The Ideology of Home Equity
(I'd like to present this in the form of a fable.)
16. Health Care
(The key to the second year of the Obama administration, and its business-cycle significance, along with some philosophizing about biology.)
17. Final Thoughts
(Final thoughts.)
Yes, that might not seem to hang together when put thus, but I've learned that the teller should not fight the tale.
08 November 2008
Collective bargaining
Should unions seek to expand talks with management beyond the traditional scope thereof: beyond wages, hours, pensions, etc.?
Maybe unions should concern themselves with the size of the bond issues by which their employer corporations are financed. The thought comes to mind while reading about the link between capital structure and corporate strategy. Before I delve further into it, let me do my bibliographic duty.
Elsevier, the Amsterdam-based academic publishing company, has come out with a new anthology on corporate finance, repetitively and undramatically titled, Handbook of Corporate Finance: Empirical Corporate Finance, Vol. 2.
Volume 1 of the set, out last year, covered banks, public offerings, and private sources of capital.
This second volume focuses on bankruptcies, margers, dividend policy and capital structure. [For those who don't know the lingo, the "capital structure" of a corporation is its mix of debt and equity financing, taking into account also the different varieties of equity -- preferred versus common -- and the different levels of seniority of debt.]
So this brings us back to "Capital Structure and Corporate Strategy," by Chris Parsons of McGill University and Sheridan Titman of the University of Texas, chapter 13 of this volume.
One question Parsons & Titman consider is the relationship between the indebtedness of a firm and its relationship with its employees. The empirical research -- most of it with a U.S. focus - suggests that firms with high leverage "pay lower wages, fund pensions less aggressively, and provide less job security to their workers during downturns," in their summary.
This makes intuitive sense. A company that has issued a lot of bonds relative to its equity may struggle to make the interest payments and thus be more quck to lay off employees in a downturn. Looking at it the other way, in industries where a good deal of the relevant labor requires a lot of training, or where sheer experience counts most, a company might want to "hoard" its laborers through a downturn. it might want to keep them on payroll so that it can take better advantage of the eventual recovery of demand for its products. If the company is going to hoard talented labor, it will want to limit its interest obligations. Industries where labor is talented (i.e. not fungible) are, interestingly, the industries most susceptible to unionization.
So I wondered as I was reading: why don't unions know about this research? And if they do know, are they pressing their employers to use more equity issuance, less debt issuance, in their capital structure? Dividend policy, after all, is discretionary. A company funded mostly by the sale of stock can withhold dividends during a downturn to hoard its labor. There's no discretion in interest payments.
Parsons & Titman address this issue only in a brief footnote, in which they say: "Labor laws specifically prohibit unions from negotiating over issues that do not directly influence workers."
That statement sent my head spinning. I do have memories of taking a course in labor law way back in my law school days -- more than twenty years ago -- and I must have passed it. I'd remember a fail. So I learned something, but nothing that stuck.
So I asked a lawyer friend, Henry. This isn't his field of expertise (he's a first amendment maven), but I was confident he'd know someone whose expertise it is. I was right. Thanks then, to Henry and thanks to the recipient of the passed buck, Vince, for enlightenment on this point.
That brief footnote was, it seems, excessively simple. Labor laws in the U.S. prohibit employers from REFUSING to negotiate with unions over certain subjects. These mandatory subjects of negotiation are the matters that "directly influence workers" as the above footnote phrases it -- wages, hours, conditions of employment. Some subjects are prohibited: the two sides aren't supposed to discuss requiring union membership as a condition of employment. But in between there is a region of "permissible" subjects.
It seems to me, if I understand Vince right, that capital structure would fall into the permissible range. If a union had enough "juice," or if it were willing to make concessions elsewhere, it might well persuade an employer to talk about the matter and to limit its equity-debt structure.
Ah, concessions elsewhere. That's the rub. There's always a trade-off.
I'm reminded of an episode of The Sopranoes. Tony is talking to Dr. Melfi, after watching some educational/historical television show. He says, "Do you know that the United States is the only country that mentions happiness in its founding document? Well, where's my fuckin' happiness, eh?"
Melfi: "It says 'pursuit'."
Tony: "There's always a loophole."
Maybe unions should concern themselves with the size of the bond issues by which their employer corporations are financed. The thought comes to mind while reading about the link between capital structure and corporate strategy. Before I delve further into it, let me do my bibliographic duty.
Elsevier, the Amsterdam-based academic publishing company, has come out with a new anthology on corporate finance, repetitively and undramatically titled, Handbook of Corporate Finance: Empirical Corporate Finance, Vol. 2.
Volume 1 of the set, out last year, covered banks, public offerings, and private sources of capital.
This second volume focuses on bankruptcies, margers, dividend policy and capital structure. [For those who don't know the lingo, the "capital structure" of a corporation is its mix of debt and equity financing, taking into account also the different varieties of equity -- preferred versus common -- and the different levels of seniority of debt.]
So this brings us back to "Capital Structure and Corporate Strategy," by Chris Parsons of McGill University and Sheridan Titman of the University of Texas, chapter 13 of this volume.
One question Parsons & Titman consider is the relationship between the indebtedness of a firm and its relationship with its employees. The empirical research -- most of it with a U.S. focus - suggests that firms with high leverage "pay lower wages, fund pensions less aggressively, and provide less job security to their workers during downturns," in their summary.
This makes intuitive sense. A company that has issued a lot of bonds relative to its equity may struggle to make the interest payments and thus be more quck to lay off employees in a downturn. Looking at it the other way, in industries where a good deal of the relevant labor requires a lot of training, or where sheer experience counts most, a company might want to "hoard" its laborers through a downturn. it might want to keep them on payroll so that it can take better advantage of the eventual recovery of demand for its products. If the company is going to hoard talented labor, it will want to limit its interest obligations. Industries where labor is talented (i.e. not fungible) are, interestingly, the industries most susceptible to unionization.
So I wondered as I was reading: why don't unions know about this research? And if they do know, are they pressing their employers to use more equity issuance, less debt issuance, in their capital structure? Dividend policy, after all, is discretionary. A company funded mostly by the sale of stock can withhold dividends during a downturn to hoard its labor. There's no discretion in interest payments.
Parsons & Titman address this issue only in a brief footnote, in which they say: "Labor laws specifically prohibit unions from negotiating over issues that do not directly influence workers."
That statement sent my head spinning. I do have memories of taking a course in labor law way back in my law school days -- more than twenty years ago -- and I must have passed it. I'd remember a fail. So I learned something, but nothing that stuck.
So I asked a lawyer friend, Henry. This isn't his field of expertise (he's a first amendment maven), but I was confident he'd know someone whose expertise it is. I was right. Thanks then, to Henry and thanks to the recipient of the passed buck, Vince, for enlightenment on this point.
That brief footnote was, it seems, excessively simple. Labor laws in the U.S. prohibit employers from REFUSING to negotiate with unions over certain subjects. These mandatory subjects of negotiation are the matters that "directly influence workers" as the above footnote phrases it -- wages, hours, conditions of employment. Some subjects are prohibited: the two sides aren't supposed to discuss requiring union membership as a condition of employment. But in between there is a region of "permissible" subjects.
It seems to me, if I understand Vince right, that capital structure would fall into the permissible range. If a union had enough "juice," or if it were willing to make concessions elsewhere, it might well persuade an employer to talk about the matter and to limit its equity-debt structure.
Ah, concessions elsewhere. That's the rub. There's always a trade-off.
I'm reminded of an episode of The Sopranoes. Tony is talking to Dr. Melfi, after watching some educational/historical television show. He says, "Do you know that the United States is the only country that mentions happiness in its founding document? Well, where's my fuckin' happiness, eh?"
Melfi: "It says 'pursuit'."
Tony: "There's always a loophole."
01 September 2007
A Smart Guy, But....
There's no doubt Federal Reserve chairman Ben Bernanke is a smart guy. In fact, on the scale of Bush administration appointees he's off the charts.
He was the chairman of the economics department at Princeton University, and the editor of the American Economic Review, to name just two dandy resume brighteners in his bio.
But you have to wonder, in view of recent events, whether this isn't the sort of brightness that can hurt more than it helps in real-world applications.
Jim Cramer was right in a bit of his now-famous televised meltdown. Bernanke doesn't have any idea. But Cramer was right in the wrong way. Cramer was demanding, with veins popping in forehead and all, that the Fed bail out the big Wall Street institutions with a discount rate cut. To prove that he did have a clue. Bernanke agreed with the scary guy and did exactly that, proving the contrary.
The business cycle is always a credit cycle. When credit is too easy, an upswing becomesd an unsustainable bubble. The only rational thing to do about a bubble is to pop it, and accept the consequences. Instead, the easy thing to do is to work to preserve and continue expanding the bubble, which is the course Bernanke has taken.
That always means that the popping will be worse when it does come. And it will.
Bernanke once gave a speech speculating about the use of a helicopter to drop dollar bills and save the economy. He seems to be trying to do that:
http://prudentinvestor.blogspot.com/2005/10/ben-helicopter-bernanke-could-land-at.html
He was the chairman of the economics department at Princeton University, and the editor of the American Economic Review, to name just two dandy resume brighteners in his bio.
But you have to wonder, in view of recent events, whether this isn't the sort of brightness that can hurt more than it helps in real-world applications.
Jim Cramer was right in a bit of his now-famous televised meltdown. Bernanke doesn't have any idea. But Cramer was right in the wrong way. Cramer was demanding, with veins popping in forehead and all, that the Fed bail out the big Wall Street institutions with a discount rate cut. To prove that he did have a clue. Bernanke agreed with the scary guy and did exactly that, proving the contrary.
The business cycle is always a credit cycle. When credit is too easy, an upswing becomesd an unsustainable bubble. The only rational thing to do about a bubble is to pop it, and accept the consequences. Instead, the easy thing to do is to work to preserve and continue expanding the bubble, which is the course Bernanke has taken.
That always means that the popping will be worse when it does come. And it will.
Bernanke once gave a speech speculating about the use of a helicopter to drop dollar bills and save the economy. He seems to be trying to do that:
http://prudentinvestor.blogspot.com/2005/10/ben-helicopter-bernanke-could-land-at.html
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