Could Workers Use An App, A Contingent-Fee Negotiator, & Flash Strikes To Get Higher Wages? Not A Union. An iGroup.
By David Grace (www.DavidGraceAuthor.com)
Prices Are Set By Bargaining Power
Wage rates, like all other prices, are determined by bargaining power. It doesn’t matter what the seller is offering, diamonds or donuts, unskilled labor or highly-skilled brain surgery. The more bargaining power the seller of a good or service has, the higher the price he can get, and, conversely, the less bargaining power the seller has, the lower the price he will be forced to take.
For a detailed discussion of how prices are actually set, see my column: Real-World Limitations On Bargaining Power, Not The Law Of Supply & Demand, Are The Primary Reasons For The Low Price For Unskilled Labor. Supply And Demand Are Only Two Of The Many Factors That Affect Bargaining Power, And Bargaining Power, Not Supply & Demand, Is The Main Factor That Determines Price.
I’ve been thinking about some entrepreneur using the Internet’s person-to-person communication and coordination technology to increase workers’ bargaining power, essentially creating Unions 2.0.
Union Drawbacks
Traditional unions have tons of drawbacks.
- Many people hate them and thus resist joining or dealing with them.
- Many people feel that unions make unreasonable demands in the areas of work rules, featherbedding, firing and the like.
- They have a history of corruption, blackmail and kickbacks.
- They are expensive. The average dues for UAW members are about $705/year or a little less than $60/month.
- They are difficult to establish in industries where the workforce is spread over hundreds or thousands of relatively small employers.
Instead Of A Union, Use The Internet To Hire A Negotiator
I think one strategy that might increase the bargaining power of minimum-wage workers could be for the workers to use a free app to hire a negotiator who would bargain for them.
Given the negative connotation of the word “union” the workers using this app shouldn’t call their group a union.
I would suggest that they refer to themselves as an “iGroup” as in the “Restaurant Employees iGroup” and their representative would be the Restaurant Employees’ iGroup Negotiator.
The iGroup Negotiator would do one and only one thing — negotiate wages and basic benefits. Keep It Simple. Just negotiate wages and fringe befits such as medical insurance and Paid Time Off (PTO).
How would it work?
Forming An iGroup
Anyone who worked or wanted to work in a given industry, for example restaurant workers, could use a free smart-phone app to sign up with the iGroup representing employees in their industry.
The iGroup would use on-line survey tools to allow the members to pick the wage and fringe benefits targets that the negotiator should shoot for. Any offers from employers would accepted or rejected on-line as would any strike authorization.
An iGroup strike would be different from a traditional strike. Only one informational picketer would stand outside each the target location with a single sign: “On strike for a living wage of $XX.XX/hour.” There would be no mobs of picketers designed to block access.
If a majority of members voted in favor of a strike then the iGroup would ask them to stop working for the target employer, but those who could not afford to do that would be encouraged arrive late, leave early and work very slowly.
If they got fired, the next person who showed up to be trained to take their place would possibly work no faster than they did. The goal would be to gum up the employer’s business as much as possible for as long as necessary to get the employer to agree to pay a living wage.
Cost
There would be no traditional union dues.
Instead, the iGroup negotiator would act as an independent contractor to furnish wage and fringe-benefit negotiating services in exchange for a commission based on the results achieved.
Compensation would be similar to a trial lawyer’s contingent fee — “If we don’t win, you don’t pay.”
As part of any settlement, the employer would agree to honor the members’ written authorizations and withhold and pay to the iGroup an amount equal to some percentage (10% to 15%) of the increase in wages and benefits earned by members over the first X months (between 6 months and 12 months) that the new contract was in effect.
For example, if the hourly pay went from $10/hour to $15/hour the iGroup negotiator would receive a fee equal to 10% X $5/hour wage increase or $.50 for each hour worked by each member during the first six or twelve months that the wage increase was in effect.
Each month (172 working hours) each full-time employee would earn an extra $860 of which the iGroup would get $86.
If the new contract included additional paid-time-off (PTO), it would be valued at eight hours times the number of additional PTO days during that period.
If the member went from no PTO to 3 days PTO/year and if the new pay rate was $15/hour then 8 hours X $15/hr X 3 days =$360 X 10% = $36 one-time payment to the iGroup negotiator as compensation for negotiating the increase in annual PTO.
If the iGroup negotiator didn’t get the workers any additional money he/she would not get paid.
Member Communications
The iGroup’s website could host worker discussions about employment topics including what should be asked for in the next negotiation.
The website could also give the workers daily updates about working conditions, pending negotiations, etc.
Would it be effective? It’s impossible to tell unless and until someone tries it.
Three Obstacles To Getting Fast-Food Wage Increases
>How Many Workers Can Afford To Strike And For How Long?
The first unknown is not how many workers would be willing to put the free iGroup app on their phones, but how many would actually go on strike and stay on strike.
Will there be enough participation over a long enough period of time to make it cheaper for the employers to pay a higher wage than to live with the problems over the short term?
>Nationwide Pricing Inhibits Or Prevents Local Price Increases
A wage increase would require a price increase for the affected outlets. Fast-food chains often advertise a set price for products in all outlets in a large geographical area, so the stores paying a higher wage might be prevented from passing that increased wage cost on to their customers in the form of higher prices.
For example, a fast-food wage increase from $10/hour to $15/hour will require a roughly 15% price increase, raising the retail price of a 99 cent burger to about $1.15
This local, higher price might well conflict with the franchiser’s advertised state-wide or nation-wide price.
>Single-Chain Higher Wages Cause Competitive Problems
Even if the chain’s local outlets would have the flexibility to selectively raise prices to cover local increases in wages, the owners of the restaurants in one chain, for example, Burger King, would strongly resist paying higher wages (and charging higher prices) because that would put them at a price disadvantage vis a vis other local sellers such a McDonalds and Jack In The Box.
No Easy Strategy
On the one hand, workers can exert much more pressure by pursuing one employer at a time, e.g. just going after Burger King, because while the Burger King workers were on strike the BK owners would see their customers migrating to McDonalds.
On the other hand the Burger King owners would be strongly motivated to resist agreeing to any wage increase because they would know that it would result in their post-strike prices being higher than McDonalds, thus putting them at a competitive disadvantage.
It would actually be far better for the employers to have a higher wage structure imposed simultaneously on everyone because that would not put any one company at a pricing disadvantage vis a vis its competitors.
These two factors:
- The franchiser’s desire to have uniform prices in all outlets over a large geographical area, and
- The franchiser’s desire to avoid putting its stores at a competitive price disadvantage vis a vis other fast-food outlets
will make these employers extremely reluctant to agree to any wage increases.
Both of those employer concerns disappear if a wage increase is imposed on all employers in the entire state via a higher minimum wage, but unless and until that happens employees will only be able increase their wages if they can exert increased bargaining power via some kind of unified action.
The question is: Will some entrepreneur create the iGroup business? Will someone build Unions 2.0 and if they do, will it actually work?
– David Grace (www.DavidGraceAuthor.com)
