Wednesday, 13 January 2016

We are reminded that unions are not in the consumer interest


Izabella Kaminska - whose trendy lefty ignorance we've touched on before - says that the good folk who drive cabs for Uber need to unionise:

In the first instance, the Uber drivers working on these systems aim to withdraw supply en masse if rates go below their average break-even rates exposing customers to surge pricing more regularly. But the aim eventually is to gain collective bargaining power against Uber in all sorts of worker-rights disputes.

The point that Izabella is making revolves around here belief that Uber has too many (or rather allows for there to be too many) drivers or "ignoring the law of supply and demand" as she ignorantly puts it.

...Uber doesn’t really care about how many drivers are in the market at any particular time because the company is more concerned about taking a commission linked to total utilised capacity than ensuring supply and demand is ever properly matched. Nor do customers care about market imbalances since they are the temporary beneficiaries of the app’s arguably unsustainable cost structures.

The solution is for the drivers to unionise and to use this 'collective bargaining' to force Uber to place a limit on the number of drivers in any given taxi market. The argument for this this limit isn't consumer interest but a belief that somehow Uber's drivers are a special case in the 'being-exploited' stakes. And that this will happen:

The fundamental truth being ignored in the “sharing economy” is that exploited labour always wises up. That open-ended supply markets always form licensed communities to protect jobs and minimum wages. That unregulated markets inevitably self-regulate from the bottom up. And that workers always have an interest in aggregating and sharing the cost of risk and insurance between them, which is ultimately factored into the cost of service.

Or as Adam Smith put it:

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”.

Indeed this is entirely what has happened in taxi markets - taxi operators and drivers, aided and abetted by local or national government, has placed expensive barriers in the way of market entry. And one of those contrivances - those conspiracies against the public - is the union. For the entire purpose of the union is to improve the lot of its members. For all the noble purposes laid claim to by unions the bare truth is that their purpose is seldom, if ever, in the interests of the consumers who use the services those union members provide or the products they produce. Indeed Izabella, in her lefty reverie concludes this too:

The core point really is that taxis can never serve customers as well as outright ownership of a private car in optionality terms — because taxis can never be perfectly supplied to meet peak rate time demand without somebody somewhere carrying the cost of off-peak idle capital. Nor can they, for that matter, ever be as cost effective as public transport.

If and when Uber drivers efficiently unionise to reduce the scale of oversupply in the market, we’ll finally understand that.

Let's leave aside the self-evident observation that this point is entirely contained in the fact that a train ride from Bingley to Leeds is less than a fiver whereas a taxi ride will costs you £40 or more. Instead let's consider what's being said here - essentially Uber, by not limiting how many drivers a market can hold, has pushed down prices. As a consumer this is excellent news - although the bus or the tube will still be cheaper, I'll take a 20% drop in fares as well as less reliance on surge pricing (because the increased demand for cabs on say New Years Eve means more drivers come out to meet that demand). If the drivers are unionised and succeed in 'reducing the scale of oversupply' the result will be a system more like the one we have.

It's clear that, wherever we look, unions - by promoting the interests of their members - act to raise costs, limit supply or otherwise act against the consumer interest. This is the case with doctors, lawyers and local government officers just as much as it is with taxi drivers. And this is why the activities of unions need to be regulated and limited - just as is the case with any rent-seeking anti-consumer cartel.


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