The conspiracy of rent seekers runs deep in industrial relations

In this piece placed on Quadrant, I have a slightly different take than most other people on the sensible side of the IR debate regarding the Toyota and building industry union interfaces (including the PM as well as David Flint  and Peter Smith).

The central issues are clearly about the union movement seeking to control industries, creating influence for the future politicians in their hierarchy and the reinforcing synergistic ties with the ALP itself and the judicial and other appointments they make to bolster their influence and reward their associates.  The outcome of the union influence clearly adversely impacts the productivity of the economy by raising costs.  It is also correct to point out that, loss of revenues aside, the union hierarchy is indifferent to the workers they represent losing their jobs as a result of the excessive remuneration and conditions. 

However, the union members are not hapless flotsam being mercilessly and cruelly exploited.  The union/political/legal Mafiosi have created entry monopolies into the construction, motor vehicle and some other industries whereby the union membership is a necessary prerequisite to getting and holding a job in the sector.  This prevention of competition allows wages and conditions to be demanded that are well in excess of the market rates, a matter that the ACCC has refused to address, preferring instead to confine itself to attacking confected  business monopolies. 

Some of the resultant rents from preventing competition in the labour supply are creamed off by the union hierarchy and hence their political supporters who receive campaign donations.  But much, in fact most, judging by evidence of pay packets goes to the “decent” unionists themselves. 

The unionists concerned probably earn 50 per cent more than they would if the union monopoly were to go.  They are not stupid and realise this is far more than their next best employment opportunity.  Hence we see a demonstrable loyalty of union members to the union hierarchy.

We are now finding in the car industry that the game is ending.  The excessive costs required by unions have left the plants vulnerable to overseas competition.  The union hierarchy saw no advantage to itself in allowing market rates of remuneration and still less in non-union shops, hence its members are now being discarded as cannon fodder.  Maintaining the excessive wages and union income stream created by monopolistic supply of labour is difficult for tradeable goods industries, like car assembly, that face of competition overseas firms which are beyond the control of the Australian monopolist Mafiosi.  It would be impossible without massive government assistance. 

The absence of overseas competition has made it easier to control the construction sector’s labour supply.  To release the productivity locked up in this sector will involve smashing the monopoly the unions have gained.  That process had commenced with the industry watchdog, the Australian Building and Construction Commission, under John Lloyd, which Julia Gillard destroyed in recognition that it was choking off the funding and political recruitment the ALP needs for its present business model. For this reason the ALP and its partners will fight with great intensity to retain the monopoly privileges of the unions. 

 

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49 Responses to The conspiracy of rent seekers runs deep in industrial relations

  1. Motelier

    Alan,

    You forgot to mention the ongoing cost to the IR system of “Catch up” by other industries. This leads to higher wages in industries and locations that cannot afford higher wages.

  2. coz

    How deep is the rent seeker conspiracy in the political classes though?

  3. coz

    So, Al, are the politicians the masters or the servants?

  4. Ed

    God, I hate unions.
    Compulsory unionism is a denial of free association (if you don’t want to join their club, no work for you); and the closed shop is a denial of the employer’s right to hire the best person for the job. thus unionism is anti freedom in both directions.

  5. coz

    God, I hate unions.
    Compulsory unionism is a denial of free association (if you don’t want to join their club, no work for you); and the closed shop is a denial of the employer’s right to hire the best person for the job. thus unionism is anti freedom in both directions.

    so, you hate the lawyers union and the doctors union too?

  6. Cato the Elder

    Coz

    And what’s your point?

  7. Ripper

    so, you hate the lawyers union and the doctors union too?

    They are closed shops as well.

  8. dismissive

    Coz – yes, the AMA are scum

  9. Dianne

    On 2gb tonight they were talking about the rent seekers in the aboriginal industry. As one caller said, it seems to be only the public servants that do any good out of all of this.

    Supported of course by the public sector & teachers unions.

  10. Cato the Elder

    They are closed shops as well.

    Yes/no.

    There is a good reason to limit medical practice, legal practice, commercial air-line pilots, electricians and a laundry list of others to people who have the required training.

    But the AMA and the various Law Societies sure try to milk their “barrier to entry” for as much as they can. I’m still not sure whether it’s ego or greed.

  11. coz

    Politics is a lawyers union, this is where all the lawyers in all the ‘parties’ draft industrial legislation to send more money their way.

  12. Ripper

    There is a good reason to limit medical practice, legal practice, commercial air-line pilots, electricians and a laundry list of others to people who have the required training.

    And the good reasons are?

  13. Cato the Elder

    “And the good reasons are?”

    Not putting your life or life’s savings in the hands of someone who has no idea what they are doing . . . .

    No, wait . . . .

  14. Ed

    so, you hate the lawyers union and the doctors union too?

    To the extent that they act as unions, yes.
    To the extent that they are professional associations, no.

  15. Ed

    But anyway that’s a gotcha question.The AMA resembles a union but isn’t a union in the strict sense. How about you ask my opinion of the CFMEU.

  16. Cato the Elder

    But seriously, was your question serious?

    If so, then my response is that training requirements and compulsory insurance don’t eliminate all of the idiots but tend to keep the worst out, or provide a basis for compensation if they screw up.

  17. A H

    The car industry is one of the first to go… but eventually all the unionised industries will succumb.

    The is the Internet age, communication is easy and free. The barrier of entry to the non-unionised organisations is lower because they can get their name and price out there more easily.

  18. Oh come on

    so, you hate the lawyers union and the doctors union too?

    lol um YES, pretty much!

    Christ, lefties and their crappy gotchas.

    It doesn’t top Fran Barlow’s gotcha-fail, though. Remember that one? The smug assumption that everyone here would be a slavish devotee of the War on Drugs. That was a cracker. It was when we started seeing much less of Fran. I think she was genuinely shaken by the realisation her assumptions could be so wrong-headed, as her tribe purports to be so open-minded and tolerant of other perspectives etc etc.

  19. James B

    Aren’t closed shops illegal?

  20. sabrina

    Politics is a lawyers union – supported by some crooked Accountants and biased Economists.

  21. Blogstrop

    The parasite has killed the auto construction host. Another variety is gradually weakening Fairfax, although in the ABC they have (to date) found a vein inexhaustable to latch onto.

  22. Dan

    so, you hate the lawyers union and the doctors union too?

    The difference is that I am not a member of the AMA and no-one cares- no one asks to see my prof of membership, I’m not considered scab labour etc

    It is wearying to see people still banging on about the AMA and barriers to entry. The AMA do not control entry into anything, they set no professional barriers. They don’t control med school numbers or hospital jobs and they don’t accredit anything. The number of doctors graduating each year has doubled in the last decade so people wanting doctors pay and conditions to worsen won’t have to wait very long at all. The AMA does of course engage in petty turf warfare like trying to prevent pharmacists giving injections though. Now the pharmacists…

  23. tomix

    Heard this story in Melbourne c. 1989. Mercedes Benz were out in Australia in the early 80s, interested in building passenger vehicles in Perth. They spoke to the Vehicle Builders Union hierarchy, who told them words to this effect:
    “Our mates will fight you all the way to stop the plant being built, and if it ever does get built, we’ll stop you from ever operating it”. M-B returned to Germany.

    A lots been said about the “poor workers” who were “robbed” by Craig Thomson. My opinion: It couldn’t happen to a bigger bunch of cnuts and the only pity is that he didn’t get away with more.

  24. Uber

    I think you’ll find that Tony Abbott knows all this. He is playing a clever game with Labor as this is a razor’s edge situation for the Coalition; to go too far or not far enough is political death. The Royal Commission I’m sure is the beginning of a long term strategy that has probably been planned many months in advance.

  25. Uber

    Dan: It is wearying to see people still banging on about the AMA and barriers to entry. The AMA do not control entry into anything, they set no professional barriers.

    You’re kidding, right? No specialist can operate in Australia without being kissed by that dreadful boy’s club.

    In the mining industry it’s the same. The AusIMM have set themselves up as the monopolistic arbiters of Competency for engineers to sign off on mineral reserve estimates for the ASX. The cost to be able to carry out your work is around $500 per year (usually worn by employers in recognition of the outrage that it is), and in exchange you receive nothing.

  26. oldmiseryguts

    Professional firefighters are an extreme example of a closed shop in Victoria. The union controls the management and nothing happens without their approval. The firefighters are paid at rates far far higher than would be the case if there was some form of competitive private provision. Trouble is it’s a small group that the gov finds easier to pay off rather than reform.

    Lets hope that one day Victoria will get a genuine free market government. I can’t see Abbott having the balls or the support to do what has to be done.

  27. Dan

    You’re kidding, right? No specialist can operate in Australia without being kissed by that dreadful boy’s club.

    Are you referring to the AMA? I am telling you that like many people I am not a member and have no contact with that organisation whatsoever. If you so confidently describe how things operate maybe tell me exactly how it works and in what way no “specialist can operate”.

  28. Ed

    Bringing up the AMA is just an attempt to derail the discussion, and it worked.
    The AMA is not a union. It is like a union in some ways, but it isn’t one.
    How about we get back to talking about the construction industry?

  29. crocodile

    Bringing up the AMA is just an attempt to derail the discussion, and it worked.
    The AMA is not a union. It is like a union in some ways, but it isn’t one.
    How about we get back to talking about the construction industry?

    Not sure about that Ed. They are a union even as acknowledged on their own website
    https://ama.com.au/about/history
    Adding the bar association, AMA and their cohorts, the College of Surgeons to the list adds to the discussion rather than derailing it. In the sense that they use their collective clout to squeeze the market they certainly are unions.

  30. Mayan

    Perhaps much of the wrongs attributed to the AMA (still a pack of degenerate rent seekers) are actually more attributable to the various medical colleges, whom it could very easily be said operate to restrict entry to the specialities unreasonably. Someone said elsewhere, if the knowledge required by those exams really are so important, they should resit them every five years.

    More generally, medicine still suffers from the ‘god complex’. Sadly, the public plays along; check the deference given to doctors by their clients. Heck, not only do too many doctors believe they have patients (meat lumps) to whom they do things, but most people play along. It would be better were the whole to be reframed as doctors have clients (people) for whom they do things.

  31. Pickles

    The Royal Commission I’m sure is the beginning of a long term strategy that has probably been planned many months in advance.

    Busy Brandis. Curious George.

  32. rickw

    “If so, then my response is that training requirements and compulsory insurance don’t eliminate all of the idiots but tend to keep the worst out, or provide a basis for compensation if they screw up.”

    I doubt that very very much. Unionism helps entrench duds, I haven’t seen it do any different in any industry, I fail to see how Doctors and Pilots would be a unique exception.

  33. Token

    However, the union members are not hapless flotsam being mercilessly and cruelly exploited. The union/political/legal Mafiosi have created entry monopolies into the construction, motor vehicle and some other industries whereby the union membership is a necessary prerequisite to getting and holding a job in the sector. This prevention of competition allows wages and conditions to be demanded that are well in excess of the market rates, a matter that the ACCC has refused to address, preferring instead to confine itself to attacking confected business monopolies.

    All this is true of many of the public sector groups of workers, but unlike construction, motor vehicles and other industries the Public Service, Education & Health unions have not been tackled and been allowed to work toward developing a political consensus where shutting down the alternative products.

  34. Alfonso

    You’re confusing the AMA with the Colleges. FRACS etc….are professional standards boards.
    Like having an Airline Transport Pilot Licence with requisite experience, instrument rating and type endorsements before you get to be employed as trainee FO with a major airline. Nothing to do with the pilots’ association / union.

  35. David Brewer

    This is the legacy of the Gillard years – whole industries closing down thanks to union sweetheart deals pricing their firms out of existence.

    One measure of this is the “competitiveness problem” now as prices for non-tradeables continue to rise, while prices for tradeables have been falling for four years. Sure, our terms of trade improved, reducing prices on tradeables. But those terms have been falling back again for nearly 3 years. It’s non-tradeable prices that should be stalling now, but they are not thanks to accumulated featherbedding. See the last graph and commentary here.

  36. Dan

    Colleges vary, but mine has no cap on numbers. If the State government employs you based on their funding abilities and clinical needs, you can do the specialist training. Exams are difficult but I got through on my first attempt as do most candidates. It is believe it or not a market. The AMA are most definitely a union in terms of negotiating universal terms for doctors in training though. But in terms of incomes for specialists that depends on our quality. As for the bullshit about patients being lumps of meat and not clients, I am mostly in private practice in a competitive field and I need my clients to sing my praises to keep getting referrals. More to the point I bill in arrears. And many are uninsured. If they think I treated them like a lump of meat they sure wouldn’t be helping me pay the mortgage.

    I am happy to take queries here if people would like to reduce their profound ignorance of modern medicine especially in modern private practice, otherwise you are just spouting nonsense. Unless your own doctors really are that bad, in which case exert your rights and get new ones.

  37. Token

    The AMA are most definitely a union in terms of negotiating universal terms for doctors in training though. But in terms of incomes for specialists that depends on our quality.

    The bottle neck on the supply of operating theatres in most locations across Australia has been resolved so now the only limits on the market are the number of specialists and the willingness of people to pay for their services.

    The law of the market suggests that if more specialists with the skills were available the cost of the services would drop. Has the absolute number of specialists being trained been increased in the past number of years?

  38. Token

    Unless your own doctors really are that bad, in which case exert your rights and get new ones.

    The real challenge for the AMA is the improvement of medical services in countries previously viewed as the “Third World”. At the moment most people buy into the whole “don’t risk it” scare campaign, but it won’t last.

    Like most markets where there is an unbelievably high margin entrepreneurs find opportunities. When the very well established organisations which review and certify these new modern medical facilities build up enough trust by medical consumers there will be great change in the health market which will reflect what is occuring in the US.

  39. What is the scope for introducing substantial competition into the union space?

    I’ve thought for a little while that requiring unions and companies treating with each other to be no more than a certain ratio different in size. Small unions dealing with small companies, big unions with big companies.

    And no unions at all in the public sector.

  40. dan

    Perhaps I was a little harsh above.

    Token, in my specialty the number of specialists trained has doubled in the last five years.
    You are right, there is big growth in the private sector but junior specialists should really be in teaching hospitals to start with.
    It can be pretty dire for the new guys. If you make the mistake of being say a haematologist who marries an anaesthetist you may well be looking for jobs in NYC or London if you want to both have academic jobs and stay near each other.
    That’s the market for you and it is certainly not just doctors who are affected, but I guess that’s the point, medicine isn’t a unique yellow brick road with some “union” sorting out all your problems.

    If you still believe the AMA is our “union” please consider that no GPs have them negotiating salaries on their behalf whether self-employed or corporatised, no-one in private practice specialties can negotiate collectively of course whether self-employed or corporatised. Doctors in training and some hospital consultants may be represented but I hated the system as lazy slackers would be guaranteed the same income as people who took their jobs seriously and there was no reward for quality. I am not the only person who felt that way. And in my opinion the AMA’s outcomes were generally sub-optimal, after all we weren’t going to withdraw our labour and the training system is a government monopoly.

  41. dan

    The real challenge for the AMA is the improvement of medical services in countries previously viewed as the “Third World”. At the moment most people buy into the whole “don’t risk it” scare campaign, but it won’t last.

    Like most markets where there is an unbelievably high margin entrepreneurs find opportunities. When the very well established organisations which review and certify these new modern medical facilities build up enough trust by medical consumers there will be great change in the health market which will reflect what is occuring in the US.

    Well the standard in say India is fine in good hospitals, not so familiar with China but it would be heading that way. Cardiac hospitals in Delhi have turnover that dwarfs anything in Australia.
    However I doubt there will be too much leakage to these countries. On a practical level, what happens to the kids while you are over there, do you want to be away from family

    Anyone I know who has anything major happen overseas just wants to rush back home even if there is really no need. I actually think there is much more scope for medical tourism inbound to Australia.

    Local competition is starting to keep prices down. I am definitely having downward pressure on my fees. This will only get worse, or better depending on which side you are on!

  42. Alan Moran

    Having no unions in the public sector sounds a reasonable approach.

    The disciplines of democracy ensure that workers there are fairly treated and the fact that politicians rely on them actually means they get over-remunerated. The politicians, unlike private sector businesses, don’t nbeed to cover the costs i teh commercial market. Many claim they are underpaid but the next best paid job for a departmental head on $500k to $1 million a year is only a fraction of this.

  43. Token

    Thanks Dan for your contributions. Looks like you have a good visibility of the changes that are going on in the medcial market and very realistic expectations.

    You are correct the world I discuss will not destroy the medical market as I know too well there are great opportunities.

    PS: The other markets I was referring to in addtion to India are countries like Taiwan, Singapore, Thailand and Phillipines where there are exceptional facility and good staff if you know where to look.

  44. pseudonym

    The monopoly power of unions is truly a tough nut to crack.

    I once thought that the big unions had to be broken up to provide some competition. The idea being that employers could have some hope of hiring staff who were members of a union led by a sensible official (ie, as opposed to the more unreasonable types who tend to dominate the larger unions). Remember what Rupert was able to achieve at Waping?

    The problem is that if you have multiple unions on site, that may lead to all sorts of problems ranging from demarkation disputes to competing demands by rival unions.

    I’m not smart enough to work through all these issues. Has anyone here looked at this kind of thing?

  45. dan

    Phillipines

    The work ethic there and of the workers from there who come here is legendary not only in medicine but also in industry I think. So noticeable at work.

  46. Senile Old Guy

    As for the bullshit about patients being lumps of meat and not clients, I am mostly in private practice in a competitive field and I need my clients to sing my praises to keep getting referrals.

    As one who is routinely a client, no GP or specialist I’ve seen would take the “lump of meat” attitude. As Dan says, I would be giving nearly all of them my highest recommendation.

  47. Louis Hissink

    Uber,

    The mining industry competency system is a reaction to the occasional litigation from disgruntled shareholders who invested in some IPO that failed to deliver. In Australia it remains self regulation, but government is trying very hard to make it a regulatory requirement. What we in the AIG and AusIMM don’t want to see is government control of the mining and exploration professions. The task is to stop dodgy entrepreneurs creating highly decorated IPO’s or reporting over optimistic results to get the share price off the ground and into blue sky.

    Mind you most of the complaints come from investors who don’t like paying for their map-investments. As these are generally also lefties, (what lefty ever admits error?) government intervention is the usual policy direction, as Canada has done.

    But neither the AusIMM or AIG set renumeration levels etc. All they really do is set professional standards, and those professionals who have the AIG RPGeo post nominal can be considered to be ethical and kosher. AIG fees are somewhat lower than AusIMM but then we don’t have their overheads.

  48. Blogstrop,

    The parasite has killed the auto construction host. Another variety is gradually weakening Fairfax, although in the ABC they have (to date) found a vein inexhaustable to latch onto.

    I’m sure Fairfax staff were hoping that when it finally went broke, Madam Slush and Conroy would borrow a few more billion on our account to buy them out, and add a newspaper arm to their ALPBC.

  49. Wozzup

    Recent reports have confirmed that in 2012 the Victorian government commissioned a report from consultants which showed that Australia’s construction sector is the lest productive and most expensive IN THE WORLD or very close to it. This report was commissioned to convince other Australian governments of the need for urgent reform of this sector. Of course the only ones in a position to do anything meaningful was the mob of Labor drops kicks then in power in Canberra, so of course, relatively little came of it. Although at least it went to the Productivity Commission to be reviewed, but this seemed to be under duress and besides the problems are well known and have been the subject of many, many inquiries and reports already – draw your own conclusions about what Labor was up to! (Hint: Its very easy to ignore a PC report if you are so inclined). It was clear from almost everything done by that government that they had abandoned reform altogether. In fact quite the opposite – they were intent on rolling back reforms that had gone before. It was as if the Hawke-Keating years never happened and instead of serving the people of Australia it was abundantly clear that they saw their role as being to serve the interests of their mates and owners the unions. For this is what the unions are – the owners of parliamentary labor. As awhole the labor movement is corrupt to the core and intent on putting in place policies that seemed custom designed to do the maximum damage possible to Australia’s economy and society. The thing that gets me is that labor and their mates are so bloody brazen about it. No shame, not even a pretense of shame. But of course why not! So many good old style labor identities (the more honest and widely respected ones) had already quit the party in embarrassment and shame by the time of the latter years of Rudd-Gillard so for the most part the only ones left in the party were the ones who would do the unions bidding without question, without demur. People like that shambolic pinhead, Shorty Shorten. Roll on Royal Commission.

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