We want to work, not beg! Here is a slogan that accompanied many social manifestations in our years of transition. Those are two different ways to make a living. This is why purchase power, salary raises and salary “freezing” have often been controversial in negotiations with the government. An “acquired privilege” is hard to take away, because social structures exhibit a phenomenon of “remanence” (similar to electromagnetism). We can therefore understand what protestors feel about Emergency Ordinance 58/2000. The most serious cost of these manifestations (for a society like ours) is the damage they can inflict on our resources of mutual trust and goodwill. Cooperation, the essence of society and civilisation, requires of its members the willingness to include others’ interests into the concept of their own interests. If people start thinking they are being bilked, they will be ready to dump this imaginary harm on others.
If people then organise into groups to obtain a forceful solution to that injustice, they fuel the anger and resentment of others. Union leaders accused the government of using the principle “divide and rule.” Conel staff are maintaining the conflict should be resolved not by cutting back on salaries but by recovering the debt. The Cartel Alfa protestors therefore criticised the decisions made by BNS. “How can union members demand that power be cut off from other union members?” they said. At the root of all discord are the salaries, which are in for a “slimming” by Emergency Ordinance 58/2000.
In their protest, employees of various economic sectors are asking for “fair” prices and salaries. The groups “in conflict” leave it to simpler minds to answer whether existing salaries are “fair” or “right.” This approach has been very helpful to union leaders. As they lost hope of awakening altruistic feelings in the Romanian society or persuading the rulers (who are evil by definition) to be “fair,” they focused on an argument that had to appeal to the public’s selfish motivation so the latter can force the prime minister to grant the unions’ demands.
But how do we know exactly when workers get “enough” for a living? Can we determine the exact amount? In an economy based on exchange, one person’s revenue is another’s expense. Conel’s revenue (salaries included) is the cost debtors must pay. Debts can no longer be waived. The market calls for rigorous financial discipline and responsibility in contracts signed with partners. Each salary growth without a corresponding productivity growth increases the production cost. These costs need to be covered by revenue. This is why the BNS people are stubborn about recovering the debt, which is no less than 10 trillion lei! – of which Bucharest owes 200 billion.
On the other hand, it must be noted that when unions obtained higher salaries for their members (the Conel case) by limiting access to the profession, that raise came at the expense of the others, less powerful (the Alfa cartel). When a national company or regie pays its employees well, these higher salaries come at the expense of consumers (including households).
Natural monopolies distort the distribution of the “social cake.” But when employees enjoy high pay and better working conditions by virtue of the free market, when they obtain better pay through in-house competition for the best-paid jobs, this higher pay does not come at anybody’s expense. They come only at the expense of higher productivity, of more capital investments, extended qualifications. The macroeconomic link between productivity and salaries cannot be adjusted by ordinance. Negative effects arise if this correlation is ignored, especially inflation. This is the only way to secure a bigger “social cake.” And a “small slice of the cake” is better than “a slice of a small cake.” It’s all about national revenue.
Conel staff were getting their “shocking” salaries not because of their responsibility or technical prowess, but because of the protection they built around themselves within a trade union.
But the situation is much more complex. Trade unions made of highly qualified workers have certainly been able to raise their members’ pay.
Moreover, unions’ ability to improve some workers’ pay doesn’t mean the trade union movement as a whole is bound to do the same. On the contrary, and here is a source of conflict, the gains that powerful unions obtain for their members come at the expense of other workers. Better pay for well-paid workers, less pay for those who get lower salaries.
The Alfa members were indirectly affected, as consumers, when higher salaried paid in Conel were mirrored in higher consumer prices. Price growths are often justified by rising energy costs. Kilowatt-hours are unjustifiably expensive for everyone, including the Cartel Alfa union members. Workers had to resort to other activities, where productivity is lower. Therefore, everyone’s general consumer basket is smaller than it could have been.
We wondered, of course, how can a union set salaries so high? One way is to use or threaten to use force. Another, easier, way is to call for the government’s help. This is why union members in Hunedoara, Oradea and Bacau are seen picketing the Victoria Palace or “wooing” the politicians.
Union groups are demanding various legislative guarantees from the executive. Thus, they become in time genuine bastions of the state. These groups are dominated by the tendency to believe their own members more capable than the rest of the people. Therefore, they get better pay than regular people only because they are supposedly better.
It would suffice for a Romanian worker to visit another country – say, Germany or Israel – to find out that not personal qualities but the country itself makes it possible to earn more. The salary difference lies not in the personal inferiority or ignorance of Romanian entrepreneurs. The difference is in the supply of capital, in the amount of available goods and capital. In reality, capital investment per capita is higher in the so-called developed world compared to transition countries.
A businessman cannot pay his workers more than the value these workers add to the value of the product. If he pays more, the entrepreneur will fail to recover his expenditures from consumers, and will risk bankruptcy. It is a fact that salaries are determined by how people’s work increases a product’s value.
If the BNS demands that salaries be evaluated in dollars or euros, it admits that they can go up and down, depending on productivity. The key to understanding the situation is the most elementary economic principle, the law of demand. We can say unions have managed to maintain few jobs while keeping salaries high, generally with government help.