I don't see how you see it as bizarre. There is always some spread between what a person is paid and the marginal value they generate -- if there were not, then there is no way companies could return profits to shareholders. How much of that spread people capture necessarily depends on their ability to negotiate for it and unions can improve their negotiating position.
Unions do not change the value their members produce, which puts a ceiling on the wages they can negotiate. Companies won't hire people who cost more than they produce.
That is neither here nor there. There must be a gap between what people produce and what they are paid (or else there would be no profits) -- the size of that gap is what is up for negotiation.
the size of that gap is what is up for negotiation.
Not really. The gap is the ROI of what the compensation could otherwise be invested in. The negotiation is about convincing the employer that your work would have a higher ROI.
There is no easy way to determine "the ROI of what the compensation could otherwise be invested in", so this is not an exercise any one goes through when actually trying to sort out what wages to pay. Negotiating for a higher salary certainly involves convincing people you're "worth it" but I doubt any one actually tries to sort out what the comparable investments are and benchmark their employees against them.
In the long run, businesses that aren't able to realize comparable ROI with compensation to what they could otherwise invest in must go out of business, since capital will gradually migrate to its more productive uses; but this is assuming a kind of steady state model. It's certainly not going to be clear to managers or anyone else what the entire space of comparable investments actually is.
It's definitely not all investments. One realizes revenue from ramen shop compensation before the employees are even paid, whereas one realizes revenue from bonds only at fixed intervals of months or years, and from real estate after a period of years or decades. Yet short term bonds may actually be a fine alternative to auto manufacturing compensation, since it can take a few weeks or even a couple of months for a car to make it to the dealership from the factory.
> There is no easy way to determine "the ROI of what the compensation could otherwise be invested in",
That's exactly what cost accountants do. A large part of running a company successfully is determining the ROI of various uses of capital. The people running companies are not idiots.
It seems like you're saying that the way salary negotiation works is: the manager benchmarks the candidate's salary request against an alternative investment, like bonds, &c -- not an alternative candidate in the market place -- and then considers whether to spend that money on the candidate or on the investment.
Unions could be far more helpful. They should be focused on guiding their members towards individually increased bargaining power (by guiding them into more skilled specialties etc, and teaching them how to self-market), rather than the picket marching antagonistic crap.
