In today's Opening Belle

💪 Unionisation: will unions push up wages?

👴👶 Demographics is all that matters

🍣  Buffett’s letter. What’s he doing?

Give it a listen 👇

The unionisation topic was prompted by this...

Biden urges workers to ‘make your voice heard’ as Amazon employees vote on union
President Joe Biden defended workers’ rights to form unions and warned against intimidation of workers in a video posted on Twitter on Sunday night, as Inc employees in Alabama vote on whether to unionize.
President Joe Biden defended workers’ rights to form unions and warned against intimidation of workers in a video posted on Twitter on Sunday night, as Inc employees in Alabama vote on whether to unionize.
Biden has vowed to increase union membership in the United States after years of steady declines.
The Bureau of Labor Statistics reported the union membership rate in the private sector was around 6.2% in 2019, compared to around 20% in 1983.

Could we see this trend mean revert?

With a high number of 'disenfranchised' workers feeling like they're not being paid their due, unions could gain appeal again...

Does this lead to higher wages and better conditions or a greater push to cost-saving automation?

This Alabama situation is less about wages and more about working conditions...

...Amazon’s productivity tracking started to grate on him. Richardson is a “picker,” which means he removes products from shelves that robots bring to his station, sometimes climbing a ladder to do so, scans them, and sends them to be packaged for shipment.
Amazon tracks how many items he scans, how quickly, and how much time he spends not scanning, which it calls “time off task,” or “TOT.” Going to the bathroom counts as “TOT.” Stretching between items counts as “TOT,” and after 30 minutes of “TOT,” workers get an automated writeup, and after two hours, they get fired, Richardson says.
He estimates he has to scan an item approximately every ten seconds, all day, to avoid penalties. “It’s a very consistent fast pace. You don’t have time to step back.”
“You come into work and need to be treated like a human being.”

The Great Demographic Reversal

Currently reading this book and the authors lay out a compelling case for inflation to increase, driven by higher wage growth, as the supply boom of cheap labour (e.g. China, Eastern Europe) comes to an end and the bargaining power of labour returns...

This conversation lays out the two positions

Employment fell steadily because capex went nowhere.
Firms saw labor as a substitute for capital in a world where growth and interest rates were low and labor was abundant. So they raised the return on capital through financial engineering rather than investment (even after a pro-cyclical tax cut in 2018 when the output gap had turned positive).

One of the things that the Fed rightly pointed out was that wage growth wasn’t strong with a tight labor market because productivity hadn’t risen (because capex hadn’t either). We didn’t get to see the finale play out, but I suspect that a labor market that kept tightening would have led to higher wage growth and inflation eventually -- as it turned out, the pandemic struck just as the U.S. output gap was turning positive…

We are arguing for the reversal of this abundance of labor. Labor is still cheap in China but the ratio of U.S.-China real wages has come down from 35-times to 5-times over the last 20 years -- that is incredible. With global labor supply growth turning south and the globalization in reverse, firms will invest more. That will push productivity higher, though not miraculously, and support higher wage growth.
Stephanie Flanders: What I have most problem with in the book is the assumption that labor bargaining power and wages will rise in line with the more favorable demand and supply dynamics, and inequality will fall.

Economists such as Richard Freeman at Harvard have shown clearly how rising supply of unskilled labor relative to demand was only part of the reason for long-term decline in unskilled wages.
Institutional changes -- not least the decline of trade unions and the rising share of service sector jobs (dispersed, hard to organize) seem like a much bigger factor.

To reverse that you not only have to see wholesale institutional change but also a reversal in the tendency for technological change and automation to further reduce labor bargaining power, even in countries where the working age population is already falling.

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🐐 Buffett & Munger (still) reign supreme

The Berkshire Hathaway website is like travelling back in time...

That aside, BH published the latest (2020) shareholder letter last week...

It's worth reading in full (so much knowledge)  - Buffett is no fan of buying bonds at historically low interest rates.

The most mind-blowing nugget was how Apple’s share buybacks increased Berkshire’s stake from 5.2% to 5.4%.

Their Apple investment was worth $120 billion at the end of 2020.

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