Archive for the ‘unions’ Category

Rejecting the Bangladesh Safety Accord

Image by rijans (Creative Commons)

Image by rijans (Creative Commons)

It’s easy to villainize a company like Walmart for being unwilling to sign an agreement seeking to improve safety for workers in Bangladesh. What’s harder is to assess the company’s actual motives, and its obligations.

Headlines recently blared that Walmart has refused to sign the new “Accord on Fire and Building Safety in Bangladesh”, despite the fact that 24 other companies (including Europe’s two largest clothing retailers, as well as American brand Tommy Hilfiger and Canada’s Loblaw) had signed.

Other news sources avoided the Walmart-centric hysteria and pointed out that lots of retail chains have in fact opted not to sign. For its part, Walmart says says it plans to undertake its own plan to verify and improve conditions at its suppliers’ factories in Bangladesh. Supporters of the accord, however, are skeptical about the effectiveness of company’s proposed independent effort.

From the point of view of ethical responsibilities, could a well-intentioned company conscientiously decline to sign the pact?

It’s worth looking at a few reasons why a company might choose not to sign a pact designed to improve, and even save, lives. Walmart presumably believes that its own effort will be sufficient, and perhaps even superior. The company’s famous efficiency and notorious influence over suppliers lend some credibility to such a notion. Other companies have worried that signing the pact would bring new legal liabilities, which of course is precisely the point of a legally-binding document. (Gap, for instance, has said that it will sign only if language regarding arbitration is removed, a stance that effectively amounts to refusal.)

There may also be worries about governance: the accord provides for the appointment of a steering committee “with equal representation chosen by the trade union signatories and company signatories” — equal, but to be chaired by a seventh member selected by the International Labour Organization (ILO). Perhaps some worry that the ILO-appointed chair won’t really be neutral, giving unions an effective majority.

Other companies — including ones like Walmart, which is famous for its efficiency — may worry about the extra administrative burden implied by weaving this accord’s regulatory apparatus into its own systems of supply-chain oversight.

Another worry might be the fact that the accord applies only to Bangladesh, and makes that country the subject of a separate set of procedures. The accord also commits signatories to expenditures specifically on safety in Bangladesh, when from a particular company’s point of view Bangladesh might not be a priority. In the wake of the April factory collapse, it’s worth pointing out that there are other places in the world with unsafe factories and crummy working conditions. It’s not unreasonable for at least some companies to focus their efforts on places where conditions are equally bad, and that host even more of their suppliers.

None of this goes any distance toward excusing inaction. None of it condones apathy. The point is simply that while failure to sign a particular accord makes great headlines, we need to look carefully at reasons, as well as at a company’s full range of obligations, if we are to make sense of such a decision.

NHL Lockout and the Ethics of Labour Disputes

When the rich and powerful butt heads, are they obligated to look out for the little guy?

The NHL lockout may be over, but its impact is far from forgotten. Or even clear. And the impact goes far beyond the loss of income to the NHL, its member teams and its players.

The end of the dispute may mean little to the economy as a whole, but to one portion of the economy — the portion that depends for its livelihood on the actual playing of hockey games — it means everything. The economic loss to Canada as a whole as a result of the loss of half a season of hockey may amount to less than 0.05 per cent of GDP, but the impact was felt disproportionately by the thousands of businesses and individuals that depend for their livelihood on the NHL and its players. For every Sidney Crosby or Daniel Alfredsson making millions on the ice, there is an entire ecosystem of managers, announcers, hotdog vendors, and Zamboni drivers who only have jobs because hockey is being played.

The lockout resulted, in other words, in a lot of so-called ‘collateral damage.’ Some teams had to lay off staff (in some cases, that meant hundreds of employees per team) and many businesses — from sports bars to the guy selling hotdogs outside the arena — saw business dip or even bottom out entirely.

Of course, this is true in almost any labour dispute. When auto assembly-line workers go on strike, workers at companies that manufacture parts for those assembly lines may see hard times as a result. But as many have pointed out, the dispute between the NHLPA and the NHL was a dispute between millionaires and billionaires, which gives the whole thing a distinctly different feel.

Whether the 113-day dispute was worthwhile to either the players or the league — whether either side gained more than it lost — is for them to decide. The relevant ethics question, here, is what part the financial fate of these innocent bystanders should have played in the decision making of the two parties to this dispute, namely the NHL and the National Hockey League Players’ Association (NHLPA). Should the league and players have felt any obligation to end the dispute early, in order to limit financial collateral damage?

It is tempting to cast this question as a matter of what economists call ‘externalities.’ Externalities are the effects that an economic transaction has on non-consenting bystanders. Pollution and noise are standard examples. And both economic theory and ethical theory agree that externalities are a bad thing. It is typically both inefficient and unfair if significant costs are foisted on innocent bystanders.

But economic theory, at least, doesn’t typically count the income effects of competitive behaviour as “real” externalities. If I outbid you in an auction, your interests have been harmed but not in a way that results in either economic inefficiency or real injustice. If I invent a better mousetrap and put makers of lesser products out of business, the result is ‘frictional’ unemployment but also long-term social gain. And during a labour dispute, money not being spent on hockey-arena hotdogs or Zamboni-driver wages are surely being spent on something else: one man’s loss is another’s gain.

But while not technically unfair, the outcome for bystanders is certainly unfortunate, a bad thing by almost any measure even if not the result of wrongful behaviour. And when the dispute at hand is between millionaires and billionaires, it’s worth asking at least whether the rich don’t have some duty, some social obligation, to take better care of those less fortunate.

Once upon a time, the rich and powerful cleaved to the notion of ‘noblesse oblige,’ the idea that with wealth and power come responsibility. Of course, even if the team owners and the players took such social obligations seriously, that doesn’t necessarily mean the dispute would have ended earlier. An obligation to look out for the little guy doesn’t mean an obligation to throw in the towel. But the notion of social responsibility, not to say humility, might well have done something to reduce the length, and impact, of what many regard to have been a pointless conflict in the first place.

Chinatown: The Other Walmart?

Chinatown, TorontoControversy has arisen recently over plans to build a new Walmart in Los Angeles’s Chinatown neighbourhood. Some residents support the plan, welcoming the idea of a convenient source of low-price groceries, clothes, and electronics. Others worry about the effect on small businesses, as well as the potential impact the retail giant would have on Chinatown’s unique culture and flare.

The controversy strikes me as amusing, given certain similarities between Walmart and the stores that already typify Chinatowns in many North American cities. Maybe if Walmart displaces smaller stores it wouldn’t really be as much of a change as critics say it would.

Think of it this way. If I told you I recently bought a very cheap umbrella, made in China, from a store that was chock-full of low-price goods imported from China, and that the clerk who sold it to me was non-unionized, and that I had serious doubts about whether the “organic” apples for sale in the store really lived up to the label, where would you guess I had been shopping?

No, I wasn’t at Walmart. I was at some little nameless place in Toronto’s Chinatown, just a few blocks from where I live. But the similarity between this little hole in the wall and a massive Walmart is in many ways striking. In fact, it often occurs to me as I walk through Chinatown that the entire neighbourhood sort of “adds up” to a Walmart, in certain ways: for starters, there’s the cheap, imported merchandise at low, low prices, and not a unionized worker in sight.

Now, the comparison between Walmart and Chinatown may strike some as insulting. So I hasten to assure you that none of this is intended to criticize Chinatowns in particular. Were it not for the recent controversy in LA, we could just as easily be talking about bodegas, 7-Elevens, and the millions of little mom-and-pop shops that inhabit the nooks and crannies of our larger cities. And I realize that Chinatown consists of more than just small shops selling food and manufactured goods, but those kinds of shops are the ones most clearly in jeopardy when a Walmart comes to town.

Nor is my intention to trivialize what is great about Chinatowns, many of which are surely among the most culturally rich and varied neighbourhoods in North America. Toronto’s Chinatown, the one with which I am most familiar, is an amazing place with an energy and exuberance not found anywhere else in the city.

But still, it is instructive to note that many of the practices for which Walmart has been criticized also seem, to a casual observer at least, typical of the tiny stores that inhabit the streets and alleys of Chinatown.

Now, to be sure, there are also plenty of differences. Where Chinatown is vibrant, Walmart is sterile. Where Chinatown is zany and chaotic, Walmart is a study in top-down control. Where Chinatown is entrepreneurial, Walmart is imperialistic. But it is important to see that not all of the differences play out in Chinatown’s favour.

Indeed, the careful top-down control for which Walmart is famous brings significant benefits, from a business ethics point of view. For one major difference between Walmart and Chinatown has to do precisely with centralized accountability. If you worry about Walmart’s supply chain, for example, and about the manufacturing processes and labour practices that result in those low, low prices, you know who to talk to. If on the other hand you worry about the manufacturing processes and labour practices that result in the wares for sale in Chinatown, then, well, feel free to wonder but there is little concrete you can do about it. The wondrous diversity that typifies Chinatown also implies a problem when it comes to assessing business practices and changing them when change is required.

Another crucial difference has to do with publicity. It matters a lot that Walmart, in part because of its size, is so highly visible. Little that Walmart does goes unnoticed; bad practices and mis-steps draw fire quickly. Compare this to how little we know about the business practices of thousands of tiny, virtually anonymous retailers. It’s not much of a stretch to say that Walmart really is the devil we know.

So, what are we to think about a situation in which Walmart is about to move into a vibrant neighbourhood and, inevitably, jeopardize the future of dozens or perhaps hundreds of small businesses? Clearly, there would be some downsides. But just as clearly, there would be some upsides. But what is perhaps least obvious is that some things just wouldn’t change at all.

Healthcare, Unions, and Selling Donuts to Canadians

Selling donuts to Canadians sounds so easy that it seems like the punch-line to a not-very-funny joke.

Apparently, however, it isn’t always such and easy thing to do. Or at least, not easy enough to support paying double the minimum wage to the people who serve the donuts. Witness the case of the three Tim Hortons kiosks at Windsor Regional Hospital (in Windsor, Ontario, just across the border from Detroit, MI). At Windsor Regional, the donut-and-coffee kiosks are a big drain (to the tune of a quarter-million dollars a year) rather than a source of revenue. Part of the reason, apparently, is that the servers who work there are paid over $20/hour — far above Ontario’s minimum wage of $10.25. The kiosks are in effect being driven under by their own employees.

Part of the complexity of this story lies in the fact that the donut kiosks in question are at a hospital. So this isn’t just a question of a profit-hungry capitalist at odds with unionized employees. The cost overrun in this case is borne by the hospital, a not-for-profit organization that must recoup the cost in other ways.

The donut kiosks, along with other food service outlets at the hospital, are part of the organization’s overall operating budget, part of the overall cost of providing healthcare to the people in the hospital’s catchment area. As Canadian health economist Robert Evans has often pointed out, every dollar spent on healthcare is a dollar of income for someone. The result is that there are plenty of people — some wealthy, and some not so wealthy — with a vested interest in not reducing the cost of healthcare. That’s not a matter of malice; it’s just a matter of math.

But of course, the salaries of unionized employees can only be part of the tale, here. If the three kiosks have, say, two employees on duty at a time, then paying each of them only minimum wage would still only save about $120,000 — which accounts for less than half of the shortfall. So it doesn’t make sense to point to the workers’ wages as “the” cause of the problem. The supply of donuts and coffee at Windsor Regional simply seems to be out of line with demand.

Of course, one way out would be for the coffee kiosks to raise their prices. That may or may not be permitted by Tim Hortons’ franchise agreement. But anyway, raising prices would mean pushing the burden onto patients and their families along with hospital staff. And at most hospitals, the on-site food outlets have a virtual monopoly, which puts customers at a serious disadvantage. It also means that demand at a hospital is less elastic, which means the hospital kiosks have more power to raise prices than a non-hospital donut seller would. And if you believe that the wage currently being paid is a fair one (by some measure), then that’s what should be done. They should raise prices to benefit employees at the expense of patients, families, and staff.

All if this just illustrates that idealism about fair wages has its limits. In a world of limited resources — i.e., the world we live in — giving more to one person often means taking more from someone else. The result is that you can’t argue for higher (or lower) wages without talking about prices. Wages are part of an economic system, and discussions of justice in one part of that system can’t ignore justice in the others.

(Thanks to Prof. Alexei Marcoux for pointing out this story to me.)

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