Reservoir Clerks—Sailer`s Rule of Unions

Reservoir ClerksFrom an LA Times story on the strike at the giant L.A. / Long Beach port, which handles 40% of America`s cargo tonnage:

The small band of strikers that has effectively shut down the nation`s busiest shipping complex forced two huge cargo ships to head for other ports Thursday and kept at least three others away, hobbling an economic powerhouse in Southern California. 

The disruption is costing an estimated $1 billion a day at the ports of Los Angeles and Long Beach, on which some 600,000 truckers, dockworkers, trading companies and others depend for their livelihoods. 

“The longer it goes, the more the impacts increase,” said Paul Bingham, an economist with infrastructure consulting firm CDM Smith. “Retailers will have stock outages, lost sales for products not delivered. There will be shutdowns in factories, in manufacturing when they run out of parts.” 

Despite the union`s size — about 800 members of a unit of the International Longshore and Warehouse Union — it has managed to flex big muscles. Unlike almost anywhere else in the nation, union loyalty is strong at the country`s ports. Neither the longshoremen nor the truckers are crossing the tiny union`s picket lines. 

The strike started at the L.A. port`s largest terminal Tuesday and spread Wednesday to 10 of the two ports` 14 cargo terminals. These resemble seaside parking lots where long metal containers are loaded and unloaded with the help of giant cranes. 

The union contends that the dispute is over job security and the transfer of work from higher-paid union members to lower-paid employees in other countries. The 14-employer management group says that no jobs have been outsourced and that the union wants to continue a practice called “featherbedding,” or bringing in temporary workers even when there is no work. 

… Maritime unions “have successfully organized one of the most vital links in the supply chain, and it`s a tradition they nurture with all of their younger workers,” said Nelson Lichtenstein, a UC Santa Barbara history professor and workplace expert. “They have a very strong ideological sense of who they are, and for now they are strong.” 

In Los Angeles and Long Beach, the 800 clerical workers have been able to shut down most of the ports because the 10,000-member dockworkers union is honoring the picket lines. Work continues at only four cargo terminals, where the office clerical unit has no workers. 

Stephen Berry, lead negotiator for the shipping lines and cargo terminals, said the clerical workers have been offered a deal that includes “absolute job security,” a raise that would take average annual pay to $195,000 from $165,000, 11 weeks` paid vacation and a generous pension increase.

I believe that $195,000 figure is including benefits. In any case, being a unionized dockworker is a famously good job in the L.A./Long Beach area. I presume that to get one of these jobs, you need to be connected. For example, from Quentin Tarantino`s Reservoir Dogs, where Vic (Michael Madsen`s Mr. Blonde) has just done four years in prison without squealing on his gangster bosses Nice Guy Eddie and Joe. Now, Vic`s parole officer is insisting he get a real job instead of going back to pulling stickups for Eddie and Joe:

EDDIE

We can give you a lot of legitimate jobs.

Put you on the rotation at Long Beach as a dock worker. 

VIC

I don`t wanna lift crates. 

EDDIE

You don`t hafta …. You don`t really work there. But as far as the records are concerned, you do. I call up Matthews, the foreman, tell him he`s got a new guy. You`re on the schedule. You got a timecard, it`s clocked in and out for you everyday, and you  get a pay check at the end of the  week. And ya know dock workers don`t do too bad. So you can move into a halfway decent place …

And if Koons [Vic`s parole officer] ever wants to make a surprise visit, you`re gonethat day. That day we sent you to Tustin. … Part of your job is goindifferent places – and we got places all over the place. 

JOE

(to Vic)

Didn`t I tell ya not to worry?

(to Eddie)

Vic was worried. 

EDDIE

Me and you`ll drive down to Long Beach tomorrow. I`ll introduce

you to Matthews, tell him what`s going on. 

VIC

That`s great, guy, thanks a bunch.

(pause)

When do you think you`ll need me for real work?

 

This is all part of Sailer`s Rule of Unions that unions are strongest for the guys who seemingly need them the least: baseball players, Chicago Symphony musicians, and so forth.

The Port of Los Angeles/Long Beach represents an enormous fixed investment that can`t be easily replaced anywhere (although the government of Mexico has been trying to build a competitor for many years now, and the government of Panama is expanding the Canal to siphon off business). Therefore, the Harbor generates huge amounts of wealth and the various parties involved clash over how to divvy it up. The dockworkers are a tough bunch  and when they are not happy, unfortunate things seem to happen. When the workers are unhappy you should probably, you know, watch your step, because accidents can happen. Thus, they get paid well.

You see similar strong unions where there are huge fixed investments that can`t easily be moved somewhere else in pursuit of cheaper wages, such as Detroit auto factories and mines.

But the SoCal dock unions have managed to stay within within limits that keep the other players from pulling up stakes and relocating to a different port.

In contrast, the dockworker`s union in mid-20th Century San Francisco (led by Harry Bridges) was so larcenous that San Francisco`s remarkable natural harbor was bypassed by shippers in favor of the artificial harbor of Los Angeles. Now, containerized shipping makes it harder for stevedores to outright steal cargo, so the customers are more or less willing to pay high wages in L.A., at least until Mexico`s new Pacific ports get up to speed.

Public sympathies have turned very anti-union over my lifetime. In fact, I`m not sure they were ever all that pro-union. Strikes are extremely agitating for 3rd parties, partly because they happen on the strikers` schedule, not the bystanders. Presumably, the dock clerks picked the Christmas Rush for a strike precisely because so many businesses across the country are desperate to get deliveries before December 24.

Similarly, if you own a business, you don`t want to be in a perfectly competitive market, either. You want to figure out a way to grab a little bit of monopoly power. You want to be Apple not Dell, Microsoft not Digital Resources, Carlos Slim not some unconnected telecom entrepreneur.

I know they teach you all about the wonders of perfectly competitive markets in Econ 101, but, you know what? You don`t want to be stuck competing in a perfectly competitive market. You want to be well set up in a defensible corner where you aren`t facing perfect competition.