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Workers Unite!

THE SO-CALLED EXPLOITATION OF THE WORKER

Given those four critical factors determining the power relationship between employees and employers we have 36 possible scenarios. In each one of those scenarios, the power relationship in a negotiation can be calculated by adding the total weights of the four factors for each BVA involved in the negotiation. For prospective cases (i.e. new hirings), we can use the same calculation because employers are seeking to acquire new capital from prospective employees. Thus calculations remain the same.

Obviously we don't have the time nor you have the stamina to analyze all 36 cases. As such, we will only make a few general comments regarding negotiations between employees and employers.

  • Power relationships are almost never balanced.
  • Power relationships can be biased towards employees or employers.
  • Power relationships can be biased towards employees despite their handicap in terms of time preference.
  • All things being equal (i.e. in a free market) power relationships are determined mostly by the nature of the business and to a very little degree by market conditions which are a given and tend to remain the same (i.e. favouring employees) and time preference which also remains the same (i.e. favouring employers).
  • Power relationships are seldom the power of one person against the combined power of BVAs with high infrastructure capital (what used to be called "owners"). This is so because one employee is dealing with one of the opposing BVA's, not with all of them. Think interviews. When you go to an interview your power opposes the power of your interviewer, not the power of the entire company.
  • Power relationship in group negotiations are based on the power of one group opposing the power of another group.
  • Power relationships of a group versus a person are rare.
  • Power relationships are always fair because they simply represent the amount of capital that each BVA is investing into the company and the external economic conditions in which this takes place. The larger the invested capital, the larger the amount of power. Think in terms of shareholders and the concept of one vote per share. The more shares you have the larger your voting power will be. It is important to notice that neither party controls economic conditions thus these conditions are "neutral" when it comes to "fairness". This is inherently fair.

The conclusion is obvious. The presumption that "workers" are always at a disadvantage when it comes to negotiating with "owners" is a fallacy. There are multiple possible cases, in many of which the power relationship is the exact opposite. Furthermore, in every negotiation every party is free to increase their capital or walk away should they choose to do so. The conclusion is simple:

In a free market, "workers" are never exploited by "owners".

THE MANAGED MARKET SCENARIO

The previous analysis is based on the assumption that all BVAs operate in free markets. However, today we do not have free markets. All we have anywhere in the world are managed markets and this changes things remarkably. Managed markets have the most notorious effects on market conditions. This should not be a surprise because the whole purpose of "managing" markets is to alter market conditions.

But we are dealing with reality and so we won't concern ourselves with the intentions of market manipulations but simply with their ultimate results. And those results are simple and exceedingly well-known: high unemployment and high entry barriers to competition.

This reflects in market conditions parameters as follows:

  • Employees are easily replaced because there is an excess of employee offers. Thus employers are further empowered during negotiations. Simple supply and demand.
  • Conditions facilitate the firing of older employees and the hiring of younger ones. Thus employers are further empowered during negotiations. Again, simple supply and demand.
  • Entry barriers are high thus employees are unlikely to create competing business. Thus employers are further empowered during negotiations.
  • Market conditions fluctuate from booms to busts making profits difficult to estimate thus reducing planning and forecast ability. In such conditions employers are more reluctant to negotiate.

As you can see, it is the deviations from free markets that cause undue and artificial biases in power relationships favouring employers. These biases originate in problems caused by the management of markets; problems that then need "fixes" from governments. Because of this we have Union laws and regulations, gender and age discrimination laws, unlawful firing, unemployment insurance and so on. However, none of these measures are effective; they are all only palliatives at best and more government waste at worse.

FILTHY RICH PEOPLE

On the same topic, we need to address the idea that somehow filthy rich people are not bound by these power relationships. This is, again, incorrect. Consider the following. Let's assume that Biming begins a business using his savings. This business grows and it is then passed on to Biming's son, Chang. Chang is a business genius and grows the family business until it becomes a massive transnational conglomerate. When Chang retires, the business is inherited by Chang's daughter Jiang. At this point it is obvious that Jiang has never worked a day or a single hour of her life. She is filthy rich from birth.

This business, let's call it Red Door Inc., is the sole property of Jiang. It is obvious that Jiang is the owner of a massive amount of infrastructure capital. This amount would put any potential employee of Red Door Inc. at a massive disadvantage when it comes to negotiating wages, even including all the other factors. And so all Red Door Inc., employees should work for sunflower seeds and water (when the company feels like paying them). Yet, if we look at the vast majority of corporations in those conditions, this almost never happens. How is it possible? Because Jiang is almost never doing the hiring. Her Vice Presidents, Managers and Supervisors do the hiring and they have considerably less capital than Jiang and are also affected by the remaining factors. Furthermore, these "officers" of the company tend to hire people at their level or one step below, not above. Which means that the negotiating power prospective employees will bring to the table will be comparable to the negotiating power that these "officers" have. Which means that power relationships will again be dictated by the rules previously described.

But what happens if a Union of Red Door Inc. employees, decides to negotiate with Jiang? Then all Red Door Inc., officers will pool their capital with Jiang's capital (as well as negotiation power provided by the remaining factors) to confront all Union member's capital (and their negotiation power provided by the remaining factors)… which again makes the confrontation fair.

The fact that we have filthy rich BVAs in businesses makes very little difference when it comes to power relationships in wage negotiations.

Note: please see the Glossary if you are unfamiliar with certain words.

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