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Eureka: Healthy labor markets
by Jay Gutman
2017-12-23 09:26:47
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Some people tell me that a healthy labor market is a labor market where people unionize. Not necessarily, I say. You don't have to form formal labor unions who lobby the government to legislate on labor to organize the labor market. You need to socialize. Socializing and unionizing are different.

labour01_400_03Now let's say you're in the automobile sales business in any American city. You work, let's say, for Chryser. As you go about your job, you start going out and meeting people who work for Oldsmobile. Then for GM. Then for Buick. Then for Cadillac. Sports cars. Italian cars. Japanese cars. German cars. As you socialize with those people, you start finding out what they make, what benefits they get and how business is going at their company. The advantage of all this is if you're stuck in your job, someone can always help you move to their company, if someone is stuck at his job you can help him move to your company. The same could be said about any business. The more people you meet from the business the better.

Now in countries like France it's considered rude to talk about your salary and benefits. Labor union membership can be very high in France, but the truth is if you're stuck at your job you're stuck at your job and have no other job to go to. Your French boss will know this. An American boss knows that if he takes it too hard on his workers they will start moving to competitors. Despite labor unions in France, your French boss knows that if you get harrassed you have to endure the pain, because hiring procedures are so complicated and involve so much paperwork that you basically have nowhere else to go. The same could be said about a lot of Middle Eastern countries and other countries.

Now in East Asia, a lot of the bigger companies actually had the CEOs unionize to prevent their workers from hoping from one conglomerate to another. That is they know they can't prevent their workers from meeting and socializing, so what they did was set up an informal rule that you can only get a job at a conglomerate if you're less than 25 years old or if you're in your last year of university. Celebrate your 26th birthday? Graduate from college? Samsung, Hyundai, LG, KIA and other Korean giants won't hire you, and the rule is very rigid. Same goes for Chinese and Japanese conglomerates.

In the French or Middle Eastern example where it's rude to talk about money or societies tend to be a bit tribal and not socialize as much as we do in Anglophone countries, the problem is the labor market is not regulating itself to be optimized. Let me explain the concept of labor market optimization.

The labor market is a living, breathing organism. If I use the autombile sales jobs for example, someone might work for an Italian manufacturer for a couple of years, then the Italian brand will start performing poorly, management will be chaotic and a mixture of other events means you have a skilled automobile salesman who is not unemployed, but who could have a smooth transition to a high sales German car maker. Then the German car maker might have a bad year and the salesman can move to a Korean car maker. When the labor market is optimized, it means you have the best people working at the jobs they perform best at, and at companies who perform best. Without really needing labor unions, you have CEOs and hierarchical superiors who have to take it easy, but also know they have the best people at the best spots. In sum, competent workers work for competent companies. 

Now in markets where the labor market is not optimized, say France or the Middle East or East Asia, you don't have the best people at the best companies, so companies have the disadvantage of a low-skilled, poorly productive labor force as in East Asia or a terrorized labor force as in France. France is only highly productive because unions forced employers to limit the workweek to 35 hours, meaning workers are terrorized and have to produce in 35 hours what the Koreans or Mexicans or Greeks produce in 70 hours a week. That's a lot of workers high on anti-depressants.

In an ideal labor market workers can form a loose coalition where they attract each other to their jobs. In an optimized labor market, workers tend to get what they deserve. In a non-optimized labor market, you're the weird one if you're being efficient or productive. The same can be said about innovation and creativity. In rigid labor markets you get career and pension chasers, not innovation chasers. In optimized labor markets, you get workers who want your company to perform. 

Now I'm not saying labor unions are useless. Some labor regulations are necessary. Regarding pensions, accidents, illness etc. But a little bit of unionizing and a little bit of socializing makes an optimal job market.

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