I've been thinking that the USA would be affected less than Europe, due to weak unions in most sectors, but it's certainly possible for unions to form.
Furthermore, people aren't exactly keen on letting homeless people live in their property for free. Hotels in my city experimented with this: they got small checks for housing homeless people during COVID, when lockdown massacred the hospitality market. It was a complete disaster: the rooms were trashed and they lost more money than they received from the government.
https://arstechnica.com/tech-policy/2022/10/company-that-mak...
Most countries aren't America. Germany, as a point of comparison, had half the share of it's population enrolled in university. Part of this is because of age distribution: America is younger and has more college age people. Also, about 50% of German high schoolers go on to university as compared to 70% of Americans. People keep pointing to the European education system, but my retort is that following Europe's example would entail reducing enrollment considerably.
Healthcare is indeed one place where administrative changes could solve things. Most European countries, along with Japan and South Korea, work by giving citizens a stipend to spend on a healthcare plan from a marketplace of providers (either directly, or indirectly through subsidizing plans). This is largely what Romney was proposing in 2012, but that effort fizzled out. Unfortunately, the one party in America in favor of healthcare reform seems to be laser focused on a fully nationalized healthcare to the exclusion of anything else.
"Most countries aren't America" is just an excuse. Most European countries aren't Germany. So by that reasoning most European countries can't afford education or healthcare.
Here's what really makes the US different: most countries don't have America's massive wealth gaps. That's the real cause.
Again, wealth gaps don't affect the prices of goods. The cost of cars, cell phones, and plenty of other things are largely the same between the US and other developed countries. Housing in the US is plenty cheap outside desirable metros. And Europe similarly has expensive housing in desirable metros. Housing is expensive in Stockholm, the better parts of London, etc.
Here's another source supporting my claim.
https://www.wsj.com/articles/if-you-sell-a-house-these-days-...
While many folks would consider factory workers are working class, they were unionized and I'd consider them middle class.
Max income tax bracket in the 70s was 70%. This prevented the income disparity that we've seen since the 1980s.
https://taxfoundation.org/historical-income-tax-rates-bracke...
Which may not be surprising as high inflation discourages saving, meaning that people are more likely to buy the things they want now to not have to pay much more later, which results in businesses increasing production to fill the increased demand, requiring more labour, and thus labour finds itself in a stronger position.
As the only power unions wield is the threat of stoppage of service, the workers have to be in a strong enough financial position to be able to execute on that – to be able to live without an income for months, if not years – in order to make it a credible threat. This is why unions are typically only found in high paying professions, but during periods where the general labour pool grows stronger then that expands.
Indeed, I think we could argue inflation is a cause of unionisation as opposed to our OP's position where it is implied that unionisation leads to inflation.
That depends on what service they represent. Those who provide critical services (garbage removal, truck drivers, police, utilities, healthcare, grocery store workers) may make their absence felt very quickly. Also, anyone able to block a key element in a longer supply chain can cause a lot of damage quickly.
It's all about the ability to completely paralyze access to something essential. Let's say every employee at every data center in the US were striking belonged to the same union, and all went on strike at the same time, shutting down all hardware and staying on site to prevent anyone from turning it back on.
The effect would be instant and catastrophic. If there was no way to bring them back, society would collapse in days or hours. Most likely, the police would be used against them (like it was against factory workers in the early 1900s).
It's all about how coordinated, ruthless and willing to risk ignoring the wrath of the employers and government the unions are, as well as how much support they have from the general population.
Not that I'm expecting something this extreme anytime soon. It's more of an illustation of how powerful a strike can be, if taken to he maximum. Since around WW2, strikes have become more of a ritualistic dance, with rules for how far to take the conflict.
Such rules sometimes change, though. And the willingness to escalate conflicts seem to be on the rise.
> If anything, it seems that increased unionization lags behind inflation.
Anyway, I don't disagree that unionization and also union activity level (much of Europe is already unionized) is increased by inflation.
My point is that the labor market conflicts can ALSO cause inflation. And if something is both the cause and the effect of something, then you have a positive feedback loop.
While there are no doubt jurisdictional variances, unions are typically absolved of responsibility to incidental damage to company property, but purposefully damaging company property is unlikely to stand up. If the machines start to fail without oversight that's one thing, but purposefully shutting them down conveys an explicit intent.
> Most likely, the police would be used against them
No doubt. Such malice is most likely illegal. If the police aren't going to step in when someone is breaking the law, what purpose do they serve?
> society would collapse in days or hours.
You'd really better have your ducks in a row if you're going to cause society to collapse. That's going to require an incredible amount of money upfront. After society has collapsed it will be too late to prepare. So once again, you can't reasonably do this unless you're already rich.
> much of Europe is already unionized
Colour me skeptical. Canada is claimed to be the 6th most unionized country in the world and only ~25% of its workforce is unionized. There are 44 countries in Europe, according to the UN. This suggests that very few workers in Europe are in unions. Maybe I misinterpret what you are trying to say?
> My point is that the labor market conflicts can ALSO cause inflation.
Inflation can only occur if a currency loses value. What mechanism of labour conflict causes a currency to lose value (or lose more value than it would have otherwise)? If anything, I would expect currency to become more valuable as it becomes harder to attain during labour withdrawals.
The labour of industrialization doesn't go back that far in time so we don't have an incredible amount of data to look at, but from what data we do have it would appear that high inflation always precedes union growth. Which, again, seems expected as workers become stronger during the beginnings of high inflation due to the reasons explained above.
Where do we find counterexamples?
I'm not sure exactly what the ruling would be, but I would see this as the same as a factory worker stopping the machine he operates. Shutting down a machine is not the same as destroying it.
>> society would collapse in days or hours.
> You'd really better have your ducks in a row if you're going to cause society to collapse. That's going to require an incredible amount of money upfront. After society has collapsed it will be too late to prepare. So once again, you can't reasonably do this unless you're already rich.
By "collapse", I meant a lot of stuff would stop functioning, most temporarily so.
> Colour me skeptical. Canada is claimed to be the 6th most unionized country in the world and only ~25% of its workforce is unionized.
I did look it up. In my part of Europe (Scandinavia), every country has >50% of the workforce in unions. But it varies a lot by country, so I have to retract my generic statement. Still, most European countries have way more unionized workers than the USA.
> Inflation can only occur if a currency loses value.
Inflation (defined by the CPI) happens when there demand for goods and services exceed supply. As prices go up, aggregate demand will gradually decrease until balance is restored.
If this is met by increasing wages, though, demand increases again, bringing the PCI with it, if supply constrained.
> Inflation can only occur if a currency loses value. What mechanism of labour conflict causes a currency to lose value (or lose more value than it would have otherwise)?
Currency has no "essential" value. The value of the currency is defined by what you can buy with it now and what you expect to be able to buy with it in the future. Inflation happens demand for goods and services exceed supply.
> If anything, I would expect currency to become more valuable as it becomes harder to attain during labour withdrawals.
That depends on whether it affects supply or demand for goods and services more. If supply goes down more than demand, it causes inflation (people that go on strike, typically have savings, either personal or in their union). If demand goes down more than supply, it may temporarily reduce it. However, if strikes are successful in leading to wage increases, that will also cause inflation.
> The labour of industrialization doesn't go back that far in time so we don't have an incredible amount of data to look at, but from what data we do have it would appear that high inflation always precedes union growth.
This may or may not be true, as a rule of thumb. Though I'm sure a lot of people also joined unions during deflationary periods around 1930. But even if we assume you're right, it doesn't mean that unions (or rather certain actions commonly taken by unions) can ALSO serve to increase inflation.
Now as someone who lives in a country with more than 50% of the workforce unionized, it seems self-evident to me that unions drive prices up in several different ways. Not only through wages, but also through demanding all sorts of regulations to protect workers.
Also, for the record, I'm not making the argument that those things are all bad. Many union leaders act quite responsibly, and often cooperate with employers and the government to prevent excessive demands.
But unions are ultimately controlled by their members, not leaders. And it's a lot harder to make them accept a 5-10% loss of purchasing power than to stop them from demanding a wage increase that is 5-10% higher than what is sustainable when times are good.
Anyway, my prediction is that we're likely to have more labor market conflicts in 2023 in many places than we've seen since the 80s or even 70s. Time will tell if I'm right.
A factory machine that requires active involvement by a worker to be useful would have no impact if it were turned off, so even if a company wanted to bring legal action forward because a machine was turned off what would it be over?
> Shutting down a machine is not the same as destroying it.
Whereas the function of the machines here are quite useful even if there isn't a person in the place, at least so long as they continue to run not having staff to maintain them. The service would be damaged and would need to be repaired when people come back.
There is plenty of legal precedence for interruption of service being considered damage. Again, incidental interruption would no doubt side to the unions, but if done with malicious intent I can't see it standing.
> By "collapse", I meant a lot of stuff would stop functioning, most temporarily so.
Temporarily being as long as the employer can stave off hunger. Meaning that you need to be able to stave off hunger even longer if you want to hold the power.
> Currency has no "essential" value.
But it has value.
> The value of the currency is defined by what you can buy with it
Yup. Which is true of everything. Your value of car is defined by what you can buy with it. The value of your house defined by what you can buy with it. If you sell plastic trinkets, the value of those plastic trinkets are defined what you can buy with them.
If your car is traded for 10 chickens, your car's value is considered equal to 10 chickens. If 10 chickens is traded for 5 hours of labour, then your car is considered to have the same value as 10 chickens and 5 hours of labour. If 5 hours of labour is traded for 50 US dollars then 50 US dollars is considered to have the same value as 5 hours of labour, 10 chickens, a your car.
Now let's say that a study found that chicken has magical healing properties and, with greater desire to have chickens, the value of chicken doubled. Now you need either two of your cars to buy 10 chickens or accept that your single car can now only buy five chickens. Likewise, you now need 100 US dollars to buy 10 chickens. This scenario saw chicken inflation, but not currency inflation. The value of the currency remained the same.
It's all the same. Currency is just another thing that gets traded. The only thing unique about currency is that we normally like to talk about value relative to the value of currency. The question: "What's a dollar worth?" is then met with "A dollar!", but that doesn't actually answer the question. So, we use inflation to answer the question instead.
CPI takes a basket of goods and looks to extract uniform price movement across the basket to try and determine what is the currency component. If, say, the price of everything went up by 10% at the same time, you can reasonably conclude that it is the currency that declined in value and not that the value of everything else went up by the same amount at the same time. The latter is statistically unlikely and you can safely say that inflation is 10%. If the price of only one item in the basket went up by 10%, with no change to the rest, it is likely that there was no inflation. The real world isn't nearly as clean and tidy as a HN comment can be, but we try our best.
> This may or may not be true
Which is why we seek counterexamples to find cases where it hasn't been true. Even if technically possible, if it has never happened before, it is not worth presenting as something that likely to happen as has been done earlier in this conversation.
> Anyway, my prediction is that we're likely to have more labor market conflicts in 2023 in many places
It is certainly possible. All signs point to labour becoming stronger, and as indicated earlier, labour is more likely to stand up when they are strong – being in a better position to weather the storm that comes with pushing back. The wildcard is government, which throughout much of the world are working hard to crush labour's growing strength – a number of central banks have made it quite clear that they won't sleep until unemployment is high. If that is successful, labour could lose power before they stand up.
If a factory shuts down due to strike, it doesn't produce anything. If so, the price of whatever it would have produced goes up. Kind of like anything with chips in them when factories and supply chains were closed down during Covid.
And the problem with inflation caused by contracting supply, is that it MUST lead to reduction in aggregate consumption. But workers will typically react poorly to having to cut down consumption. Demagogues will argue that the "Fat Cat" capitalists has enough money to pay higher wages, as if more money leads to more consumer goods being produced. Still, union members tend to listen to the demagogues in time like this.
This leads to strikes, lock out, and reduction in production. Which intensifies supply side constraints and drives inflation further, leading to even more demand for raises, and so on, in a vicious circle.
This happens in a time where the West wants to repatriate strategic production from Asia, where there is a need to re-arm to meet growing security threats from China and Russia, where we're facing a huge wave of elderly that will want a massive increase in spending on healthcare and where the supply of younger working age adults is dwindling.
All these are factors that increase the demand for consumer goods and services (especially healthcare) and goods that compete with consumer good (like weapons) and where more of the goods will be built domestically (like chips).
So unless we can radically improve productivity, each person (on average) will be able to buy less than they're used to or expect.
Let's say there will be 10% less of "everything" available to consumers. Without unions, the market (and possibly government intervention) will allocate this reduction in real income relatively evenly over the population.
But it is kind of in the DNA of most unions to never accept reductions in real wages for the members. If we imagine that every worker was in a union, and everyone got a raise matching inflation from the previous year (including retired people), the new wage would still only allow the pupulation to consume the consumer goods that is actually produced. That would quickly cause prices to go up another 10%, again reducing purchasing power below what people are used to.
Now, add a few strikes into this. Let's say there is a general strike reducing economic output by 5%. This comes on top of the 10%, meaning that now 15% fewer consumer goods are available than people expect, causing prices to go up by 15% that year.
Now, if everyone tries to get back to their own level of consumption by loaning money, that's another 15% money chasing the same goods, which could lead to 30% inflation that year. To prevent that, central banks raise rates to, let's say, 15%.
As these rates enter morgage costs for middle aged people, the pain is magnified further, typically leading to more strikes, businesses going under (permanently removing them as a source of consumer goods), and so on. Unchecked, this can lead to hyperinflation.
Not that I expect it to turn out this bad. Demand is partly elastic. Some people WILL be willing to cut SOME consumption, especially if good investment opportunities open up.
Still, in a market where supply side output of consumer goods goes down by 10%, there exists a huge communication problem when trying to distribute this new reality to the population.
It can be done, though, especially during wartime, consumers may be able to understand that they simply cannot go on consuming as much as before. And if the consumers themselves understand it, the unions probably will too.
In peacetime it's harder, which we see if we look at what happened after the oil crisis in 1973, especially in the UK (where unions were very strong at the time). Labor conflict aggravated the already difficult situation, and played a part in the stagflation that would last for the rest of the decade and much of the next.
Eventually, it was brought under control, partly by new economic growth and partly by Thatcher crushing the strongest unions.
In the 1970's though, the west was in the middle of a demography-driven boom at the time, and with the boomer generation entering the labor market, growth was relatively easy to achieve.
Today, the situation is different. There are few young people to fill the jobs that retiring boomers are leaving. In Europe, the demographic development is more likely to cause economic contraction than growth. So unless something like AGI can cause a huge lift in productivity, we may actually face a long-lasting period where consumption has to stay at levels below what we're used to.
I expect it to take at least 10 years for that to sink in for most people.