Jay P. Greene's Blog

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).