I just want to make clear, given my post yesterday, that while I am adamantly opposed to public sector unions, I have no problem with worker’s attempting to negotiate over wages, benefits, and working conditions in the private sector.
In the private sector, if unions ask for too much, at least they experience the natural consequences of destroying their own companies or industries (to wit, the auto industry). In addition, there are owners on the other side of the bargaining table who have strong incentives not to concede too much or they will lose their wealth. Collective bargaining in the private sector is a voluntary negotiation over how to split the revenue of a company. No one should be compelled to work for less than they think reasonable and no one should be compelled to pay others more than they think reasonable. In the end, owners and workers have to reach a mutually acceptable agreement, whether collectively or individually.
But in the public sector, unions are almost entirely insulated from the consequences of making unreasonable demands since governments rarely go out of business. Unlike in the private sector, public sector unions can drive total revenue for their industry higher without any improvements in productivity simply by getting public officials to increase taxes. And the public officials on the other side of the table are at least partially selected and heavily influenced by the unions themselves. In the private sector, unions can only select the officials with whom the bargain to the extent that they are shareholders. In the public sector, one only need be a citizen, and the unions are much better organized and financed citizens than is the average taxpayer.
One private sector union with which I am currently completely sympathetic is the NFL Players Association. First, the owners are asking that owners be allowed to keep the first $2 billion of professional football’s $9 billion in annual revenue. That assures them close to a 22% operating profit margin, since football teams have few expenses beyond the player’s salaries and stadium costs (some of which are stupidly subsidized by taxpayers). What industry can guarantee its owners a 22% operating profit margin?
In addition, the owners have always managed to get players to agree to a cap on team salaries as a further way of ensuring their profits. Anyone who is for the voluntary exchange of labor for pay should oppose industry-wide salary caps. All that a cap does is prevent excellent workers from bargaining for a larger share of total revenue. This discourages excellence and guarantees owner profits at the expense of workers.
And for those of you who say that salary caps are needed to promote equity in the competitiveness of teams…
1) Equity is not the prime goal of sports (or most other endeavors). Excellence is. If you want to watch contests that are always perfectly matched, I would suggest that you watch people flipping coins.
2) Rewarding more successful teams and players with the possibility of earning more money provides the proper incentives for them to try harder to win. If you don’t think that revenue sharing with a cap undermines incentives I have two words for you — Cleveland Browns.
3) If you are afraid that larger market teams will always win, just look at baseball which lacks a cap. Yes, big market teams are more likely to be in the post-season, but they don’t always win. If you think big markets and big payrolls can guarantee winning I have three words for you — New York Mets. Besides, what’s so wrong with larger markets more regularly having teams in the race for a championship? Only a bizarre system would prefer having small markets, like Green Bay and Indianapolis, regularly in the hunt.
And if you think NFL players are a bunch of rich felons who don’t deserve extra money, I would remind you that the average career is about 3 seasons and many players end up as cripples for life. The NFL is exploiting these workers like crazy and any decent liberal should be on the side of those who are exploited.
Unfortunately, the NFL players union has been awful in the past and failed to do nearly enough to protect their members from this exploitation. I hope it is different this time. And I hope that the unions prevail (as long as it is in the private sector and without government subsidies or coercion).
Jay P. Greene's Blog 
Well — the only problem with your argument is that the players aren’t asking to remove the salary cap either. In fact, (from what I can tell), the players are willing to concede the need for a rookie salary schedule and don’t seem to be putting up too much of a fight over that.
The question isn’t whether the owners will get more, but how much more they will get. It seems that most agree that the last CBA was a super good deal for the players, and I don’t know enough about it to disagree.
What the players want — and should get — is to keep the 16 game schedule and have better health care after retirement.
Oh — and I think that you meant the Cincinnati Bengals in your argument above: The Browns are terrible, but at least they are trying. Mike Brown (the Bengals owner) has been collecting checks without putting forth a serious effort to win for decades. Example: The Bengals are the only northern team without an indoor practice facility.
It’s the next lockout that’s going to be interesting. Unlike the NFL, there are a bunch of teams in the NBA that are losing money and something really needs to be done that the players won’t like, including contracting the league by a team or two.
What industry can guarantee its owners a 22% operating profit margin?
Any industry whose product is very strongly desired by a very large customer base but can’t be supplied (or not to the customer’s satisfaction, anyway – remember the XFL?) by anyone other than a relatively small group of suppliers – suppliers who are permitted to cartelize in a way that wouldn’t be permitted in most other industries.
I’m not taking the owners’ side here, I’m just pointing out that the NFL is not like most other industries. It does, in fact, control an all-but-guaranteed revenue stream. It needs to negotiate a mutually agreeable division of the spoils with its union, and where to draw that line is a subject on which I have no opinion. But dividing the spoils in a relatively safe market is not the same kind of activity as competing in a ruthless market.
No doubt better performance can increase the revenue stream on the margin and worse performance can decrease it on the margin, but this isn’t like GM or an airline, where the extinction of the company is (economically if not politically) a serious issue.
James Surowiecki agrees with Jay:
http://www.newyorker.com/talk/financial/2011/03/21/110321ta_talk_surowiecki
But, again, Surowiecki’s argument is strange because the player’s aren’t arguing against the salary cap. That’s not on the table, whether or not it should be.
Further, whether the NFL is a cartel or not depends on the nature of their relationship with each other. If the NFL is a competitive market on its own in which teams compete for revenue, then yes, it is a cartel. But if the NFL is its own business competing with other forms of entertainment — not only other sports, but movies and other ways that people spend their time — and the owners are just shareholders in that business, then they are just making a business decision on how to best allocate their collective dollars. I think that the latter is the better description of their relationship.
I don’t think that the players are entirely in the wrong here. There are real safety issues that have to be addressed and there is no other way to address them. But the salary cap is really beside the point.
I’m disappointed that the players are not taking on the salary cap. But I still think they have every right to seek greater compensation for the health risks they are taking and better care if they should be hurt. These are the basic work-condition and safety issues that were valid concerns in the early years of unionization are are still true for the NFL.
As to whether the NFL is a cartel… the owners don’t own a share of a single corporation called the NFL. They own competing teams. Yes, football has to compete with other forms of entertainment, but then again the restaurant industry competes with supermarkets to provide us with food. We would rightly object that restaurants were acting as a cartel if they coordinated in setting wages.
I know the courts have previously sided with the owners on this, but I don’t care. It’s still wrong.
Are McDonalds franchises a cartel? Doesn’t it work about the same way — individual owners of particular stores with a larger corporation tying them together with shared rules and regulations?
McDonald’s is in a market with lots of other competitors and low barriers to entry.
If you wanted, you could describe McDonald’s as a cartel whose cartelization doesn’t matter. But it’s simpler if we define “cartel” to include only cartels whose cartelization matters. It saves words.
I don’t believe that McDonalds sets wages across all of its franchisees.