Archive for category Employment
Public Employee Unions Strangle Governments and Numb Public Employees
Posted by Tom in Economics, Employment, Justice, State Finances, Unions on January 7, 2012
Reno Nevada cannot afford to staff five of its fire stations because of crippling union compensation, bloated benefits, top heavy command structure and make-work work rules. This is only one example of how public employee unions are strangling the communities that they are hired to serve. This is one small example that is replicated throughout each community and state in the nation. Unfunded union benefits alone–a time bomb waiting to explode–are Three Trillion Dollars nationwide.
The sad truth is that there is no justification for public employee unions in the first place. The system that tolerates them is dark and unjust existing only for (i) the benefit of the politicians dependent on union contributions and support to get themselves elected, (ii) the union bosses that get power and wealth from their members, and (iii) the few deadwood employees who would fail in any competitive environment and are dependent on union seniority to remain on the public payroll. Excellence is not even mentioned, mediocrity is the norm.
Also true, the good, dedicated, high-preforming public workers are held back by the same unions that claim to represent them. Performance bonuses that could otherwise be available to reward excellence in performance are nonexistent. Seniority governs, holding back the top performers. This disincentive enforces mediocrity, the stuff of a declining society. Likewise the union members really have no voice. The cliques supporting the union bosses pressure conformity. If work slowdowns are called for, work slowdowns are socially enforced. Then, there is the lack of political choice in where political contributions generated from the pockets of public employees from their union dues go. In essence, they are paying for incompetent political leadership but have no choice in the matter. Finally, there is the false promise of retirement benefits which, because of the incompetent political leadership, will not be available to them on retirement. In short, the public employee union members are used for short term gain by others.
There is a critical difference between private sector unions and public sector unions, PRIVATE SECTOR UNIONS ARE SUBJECT TO THE LAWS OF THE MARKETPLACE. PUBLIC UNIONS ARE A MONOPOLY WITHOUT MARKET COMPETITION.
This fact is lost on the voting public. Private unions work for companies that compete in the marketplace. If their demands are too exorbitant in terms of wages, benefits or work rules, their employer will lose business to it competition. If the employer loses enough business, the employees lose their jobs. So a competitive market forces parties to be reasonable and respond to market conditions; in short, to excel in their jobs.
In the public union case, the government by definition is a monopoly free from competition. There is no market in which it must compete. Governments are by definition inefficient necessities in society. If their workers are allowed to unionize and collectively bargain for wages and benefits, there is no check or balance on their ability to extort increases, security, tenure, etc. A strike, walkout or slowdown creates a situation where there are no substitute government services. No competition.
A public union labor negotiation, is really no negotiation at all. The ritual of collective bargaining in the public union case is just a union boss talking to the incompetent politician who was elected with the help of the union dues. This incestuous relationship is driving our states, counties and cities to the brink of bankruptcy. It is dis-economic at its core.
Public employee unions perpetrate a fraud not only on the unsuspecting public but on the public employees themselves. We all lose with this unjust, uneconomic system.
Time for a change!
Supply Side Analysis of Obama’s Latest Stimulus Plan
Posted by Tom in Congress, Deficit, Democrats, Economics, Employment, Fiscal Policy, Politics, Welfare on November 4, 2011
Obama’s incessant campaign call for the past months had been to demand the “Republican Congress” PASS IT NOW. The “It” is, of course, another stimulus plan, excuse me, “jobs bill;” you see the word “stimulus” has, by fiat, been stricken from the Democrat’s lexicon–must be something to do with the pejorative connotation generated by the last stimulus! Anyway, the new stimulus consist of: 1. Temporary payroll tax cuts, 2. Temporary extension of unemployment benefits to two years, 3. Additional debt to finance public sector jobs, and 4. Higher taxes on “the rich.” That this is an insincere reelection effort on his part can be of little doubt, since he knows it would not pass even his Democratic controlled Senate, much less the House.
Stimulus by whatever name it is called should, nonetheless, be subjected to economic analysis and Art Laffer, that infamous supply-sider, has obliged in the current issue of National Review. Laffer calls it a “four point plan for failure.” His article is worth a summary here, with full attribution:
Payroll tax: This is broad-based but effects only the moderately paid workers; it stops at a bit over $100,000 of annual compensation. Broad-based, low-rate taxes are generally good since there is little incentive to avoid them, so a reduction in these taxes presents little incentive to work or not to work, to hire or not to hire. Laffer points out that a reduction in this tax will not effect the decision makers typically earning over the $100K limit and much of that in dividends and capital gains. Laffers point is that cutting the payroll tax, temporarily, will not effect hiring or seeking employment. In other words, it doesn’t effect any job creation.
Extending unemployment benefits to almost two years: Laffer uses a time tested analogy to the Department of Agriculture payments: pay farmers to grow and they grow; pay them not to grow and they don’t grow. Simple: people respond to economic incentives. Obama wants to pay people not to work for almost two years. Obviously, they will take the money. And, by the way, not look very hard for that next job. In short, this is a big negative to job creation.
More deficit stimulus spending: Here we get in to the so-called Keynesian multiplier: the recipients of the extra federal dollar will spend a portion of it thereby creating new jobs which induce more spending thus more new new jobs. This “marginal propensity to consume” gives us the “multiplier;” or $1 divided by $1 minus that marginal propensity to consume. So if the marginal propensity to consume is only 50 cents, the multiplier effect is $2 for ever $1 borrowed! Thus the Keynesians have magically created money!
Wow! What’s missing here? Well, to get that dollar of federal largess, the federal government must take that dollar from someone else. In this case it must take not only that dollar, but it must run that dollar through the federal bureaucracy, then it must pay interest on that dollar because it borrowed the dollar. In short, the economic effect is to rob Peter, waste part of the loot on bureaucracy and interest, and pay Paul the balance. The economic effect is not neutral but is NEGATIVE. It destroys jobs, the jobs that would otherwise be created by Peter via his spending or investment! Look no further for proof than Obama’s last stimulus expenditures.
To cap off the point Laffer offers the “Slutsky equation:” This aggregates the deficit financed stimulus, both debits and credits. “By taking resources from those who produce and giving resources to those who don’t produce, government reduces the incentives to work for both parties. Output, employment, and production will fall.”
Higher taxes on “the rich:” It’s hard to tell if Obama wants to raise revenue or merely redistribute income with this effort. If raising income is the goal, increasing tax rates at the highest brackets will have the opposite effect; lowering tax rates on that bracket however will raise revenue. The simple reason is that those earners in the highest tax brackets have the ability to minimise marginal taxes by converting income to capital gains, deferring income, and shifting income; and they have access to tax accountants, investment advisors and attorneys to help in this process. If, on the other hand, he merely wants to redistribute income or wealth, he succeeds in his election tactic of creating class warfare but he fails in his so-called job creation purpose. And this for the same reason suggested by the “Slutsky equation.” Taking money from the producers and giving it to the non-producers has a negative effect on both; it’s a double disincentive!
In sum, our President is a campaigner who has a negative record on which to run. He has created a straw man with his rants against the “Republican Congress” failing to mention the Democrat controlled Senate which is fully one-half of that Congress. And he has come up with a sure-to-fail stimulus plan which he will use to deflect voter attention away from his abysmal record.
Minimum Wage Argument Debunked
Posted by Tom in Employment, Government Regulation, Minimum Wage, Poverty on October 14, 2011
Brad Schiller’s op-ed in yesterday’s WSJ is republished here in full:
Families Don’t Depend on the Minimum Wage
The data are clear: In most cases minimum-wage earnings are only a small fraction of family income.
By BRADLEY SCHILLER
The minimum wage is likely to be a hot-button issue in the 2012 presidential campaign.
Last month, MIT professor Paul Osterman wrote in the New York Times that 20% of American adults are employed at “poverty-level wages.” He said minimum wages should be raised if the economy is to grow and prosper (the federal minimum wage is currently $7.25, but it is as high as $8.67 in Washington state). Similarly, CNN.com and the Washington Post ran pieces recently on the importance of raising the minimum wage to get more cash to the working poor.
We do have serious poverty in our economy, even more so in this lingering recession. And everyone favors the rising real wages and living standards that come with productivity advance and economic growth. But advocates of a higher minimum wage put the cart before the horse. A growing economy generates good jobs; higher wages don’t grow the economy. And the overwhelming evidence is that higher minimum wages reduce the availability of jobs at the lowest end of the job market.
Consider that the official poverty threshold of $22,000 per year for a family of four implies a “poverty” wage of $11 an hour. This is the target minimum wage Mr. Osterman advocates in his book “Good Jobs America: Making Work Better for Everyone.” The flaw here is the implicit assumption that all minimum-wage workers not only have families to support, but do so single-handedly. That is clearly not the case for the million teenagers who are paid at or below the minimum wage.
Very few families depend on the earnings from a single minimum-wage job for their economic support. This is the conclusion of a study I helped conduct this year for the Employment Policies Institute.
The study used the National Longitudinal Survey of Youth to track the wages and finances of families over time. From the survey’s 31-year history, we pulled data for the years 1998-2006, a nine-year period when the federal minimum wage was $5.15. We then searched for every adult aged 33-50 who held a minimum-wage job at any time during those years. One out of four adults held a minimum-wage job at least once during those nine years.
One of the striking findings was that most adults who worked at the minimum wage did so for a relatively short time: Over 70% of them had no further minimum-wage job after two years. Almost all them held higher-paying jobs at some point, including ones they held while working at another that paid a minimum wage.
The family status of these adults is critical to the debate about “good jobs for everyone.” In 1998, 30% of adult minimum-wage workers in the survey were single parents (mostly female) and another 23% were married with children still at home. These are the two demographic groups that are of greatest concern in the debate over income dependence. The rest of the adult minimum-wage workers were married without kids at home (22%) or single (25%).
Single parents are clearly the most vulnerable. Every year the Census counts millions of them, many working at minimum-wage jobs. But it is important to recognize that these are not the same single parents every year. Three out of four of the single parents working for the minimum wage in 1998 were no longer single parents in 2006. They moved in and out of two-parent households frequently.
If we focus on two-parent families in which one parent holds a minimum-wage job, the obvious question is whether the spouse also works. The survey data reveal that the answer is overwhelmingly “yes”: Nine out of 10 married-with-children minimum-wage workers have a working spouse. Even more revealing is how much income that spouse earns: 40% of those spouses earn more than $40,000 a year. Another 27% report spousal earnings of $20,000-$40,000.
None of these households is in poverty. Nor is their economic well-being dependent on the minimum wage. In only 15% of these households are the earnings of both the minimum-wage worker and the spouse less than $10,000 apiece. (The federal poverty line for families with two children averaged around $17,000 during this period.) The minimum wage accounts for less than 20% of total family income in more than 75% of the families in which one spouse works for minimum wage.
The long-term survey data are clear: Family dependence on minimum wages is the exception rather than the rule. In most cases, minimum-wage earnings of adult workers are a small fraction of family income. Hiking the minimum wage as a way to achieve “poverty-level” incomes is both misguided and inefficient.
Mr. Schiller is professor of economics at the University of Nevada, Reno, and author of the textbook, “The Economy Today” (McGraw-Hill/Irwin, 2010).
Public Unions vs. the Public
Posted by Tom in Bankruptcy, Economics, Employment, State Finances, Unions on April 6, 2011
There is a critical difference between private sector unions and public sector unions, PRIVATE SECTOR UNIONS ARE SUBJECT TO THE LAWS OF THE MARKETPLACE. PUBLIC UNIONS ARE NOT AND HAVE NO CHECKS OR BALANCES.
This fact is lost on the ignorant public because the issue is framed in terms of “union rights.” Whatever that means it has no applicability to public unions. Private unions work for companies that compete in the marketplace. If their demands are too exorbitant in terms of wages and benefits, their employer will lose business to it competition. If the employer loses enough business, the employees lose their jobs. So a competitive market forces parties to be reasonable and respond to market conditions.
In the public union case, the government by definition is a monopoly free from competition. There is no market in which it must compete. Governments are by definition inefficient necessities in society. If their workers are allowed to unionize and collectively bargain for wages and benefits, there is no check or balance on their ability to extort increases, security, tenure, etc. A strike or walkout or slowdown creates a situation where there are no substitute government services. No competition.
Furthermore, the public unions are structured so that mandatory dues are taken from the pay of each government worker. A portion of those dues pay the union bosses and another portion go to political slush funds to be used to elect political candidates favorable to union causes. In essence the union bosses direct money to the elections of…..who? The very people who employ them and “negotiate” their wages and benefits.
So, a public union negotiation, is really no negotiation at all. The ritual of collective bargaining in the public union case is just a union boss talking to the employer boss who was elected with the help of the union boss!
This incestuous relationship is driving our states, counties and cities to the brink of bankruptcy. It is dis-economic to its core. It perpetrates a fraud upon the unsuspecting public. Finally, it increases the theft against our children and grandchildren and is wrong.
The only unrepresented parties are the taxpayers!
Obstruction of Government
Posted by Tom in Budgets, Employment, Politics, State Finances, Unions on March 25, 2011
Stephen Hayes and john McCormack chronicle the Democrats obstruction of government in their Weekly Standard article, On Wisconsin! They detail the fight, the several attempts at compromise, the bifurcation of the public employee bill, into a budgetary section and non-budgetary section, the independent legislative counsel’s blessing on that bifurcation and the ultimate passage of the bill restricting collective bargaining.
The fact that screams for attention is that the November election put the Republicans in control of both houses of the legislature and the governor’s mansion. The Republicans ran on platforms that the Democrats and public unions were bankrupting the state. The voters understood the danger of the unholy alliance between Democratic politicians and public union leaders: taxpayer money from the public trough went thru the union employee paychecks to the union bosses then back to elect the Democrat politicians. Incest at its best. No checks, no balances, no taxpayer input, unfettered theft! Well, the taxpayers did get their input at the ballot box in November and input they did.
In an historically Democratic state, a birthplace of so called “progressivism,” the voters kicked out the majority Democrats and installed a Republican government. But all the elected, Democrat and Republican, took an oath of office to uphold the constitution under which they were elected and sworn into office. At times it may be ugly but in the state democracies joined together in this republic under our constitution, the majority, fairly elected, is the government. Period!
It is obvious that those sacred oaths were only so many words to the defaulting Democrats. They were meaningless when put to the test. The elected minority, rather than honor their duties, deserted their offices, left the state, took a powder, went on the lamb. Dereliction of duty? Yes. Obstruction of government? Surely!
So after several attempts to cajole the recalcitrant Democrats to return, the legislature passed the ordinance freeing the state taxpayers, the voters from the most heinous aspects of the public employee union lock on the state treasury. The national brouhaha sponsored by President Obama and the national unions were only so much puff. The voters in Wisconsin and elsewhere realize that public unions have no place in a democracy, no competitive checks and balances to keep them and their political bosses honest. They have stolen way too much so far and amassed way too many unfunded liabilities yet to come.
The taxpayers are hurting and its time to stop this incestuous alliance. On Wisconsin!
Organizing For America
Posted by Tom in Employment, Politics, Presidency, Unions on February 20, 2011
Well, if you didn’t know by now, you now know what the job of a community organizer is. After all we have had one in the White House running the country for the past two years. The job of a community organizer is to promote dissension among various groups and thus gain political advantage, not for the groups mind you but for the “community organizer!”
John Fund covers President Obama’s current community organizing antics in his WSJ article, What’s at Stake in Wisconsin’s Budget Battle. “The real assault this week was led by Organizing for America, the successor to President’s Obama’s 2008 campaign organization. It helped fill buses of protesters who flooded the state capital of Madison and ran 15 phone banks urging people to call state legislators.”
“Myron Lieberman, a former Minnesota public school teacher who became a contract negotiator for the American Federation of Teachers, says that since the 1960s collective bargaining has so “greatly increased the political influence of unions” that they block the sorts of necessary change that other elements of society have had to accept.”
That’s right, a labor guy admits that the public employee unions control society. Even the most progressive of Democrats, FDR warned against this: ”The process of collective bargaining, as usually understood, cannot be transplanted into the public service,” Roosevelt wrote in 1937 to the National Federation of Federal Employees. Yes, public workers may demand fair treatment, wrote Roosevelt. But, he wrote, “I want to emphasize my conviction that militant tactics have no place” in the public sector. “A strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government.”
So the public unions control the leftist politicians, they have the votes, they own the elected! Not only that, but they have a monopoly. They don’t need to worry about competition as do the private sector unions. They are living fat, fatter than the private sector while the rest of us put up with their mouth pieces and pay their unsustainable wages, benefits and pensions.
Bravo to Governor Scott Walker, the Wisconsin Republicans and this mild proposal to level the playing field!
Animal Instincts on Hold
Posted by Tom in Academics, Business, Centrally Managed Economy, Deficit, Economics, Employment, Energy Facts & Policies, Liberalism, National Debt, Taxation on December 5, 2010
Christina Romer, who headed the Obama economic team but has jumped ship for the coddling confines of that bastion of leftist thought, the University of California Berkeley, penned an op-ed yesterday in that bastion of leftist propaganda, the New York Times, It’s the Big Questions That Slow Growth. In fairness, she gets the slow growth, non-investment, high unemployment correct: uncertainty is the culprit, it’s holding back the recovery.
Now she dismissed uncertainty over the future of the Bush tax cuts because the difference between the current 35% top rate and Obama’s 39.6% top rate is simply too small to put hiring and spending decisions on hold. Then she throws up an uncertainty monster saying that the future tax increases to deal with the “grossly unsustainable” budget deficits could be modest or “enormous.” OK, let’s say you’re a corporation that could build a factory and employ 1500 workers in Nevada or in South Korea; each option is close, but the prospect of enormous U.S. tax increases scares you. Uncertainty? You bet!
She posits “climate change” and dependence on foreign oil as problems that will not go away by “tabling plans to deal with them” which makes it harder for companies to plan and invest. Yeah, right! How about banning offshore drilling, or regulating the CO2 we exhale from both ends! Or what about the FCC discussing expropriation of investments in bandwidth all for so-called “net-neutrality?” Uncertainty that you didn’t mention Christina!
In a real knee-slapper she pans the uncertainty caused by the volatility of the economic forecasts. Let’s see, if you’re an economist forecasting the future of this or that, don’t you have the same access to the follies of leftist Washington as the businessman does?
Solutions, you bet, she has ‘em: “How do we resolve uncertainty about future growth? The Federal Reserve, Congress and the president need to reaffirm that they will do whatever it takes to restore the economy to full health. They could take a lesson from President Franklin D. Roosevelt, who declared in his 1933 inaugural address that he would treat the task of putting people back to work “as we would treat the emergency of a war.”
“They should follow up with powerful fiscal and monetary actions to create jobs — coupled with a concrete plan for tackling our long-run budget problems. We are at a critical moment. With many in Congress opposed to further jobs measures and tax increases of any kind, the chances of prolonged gridlock are high.”
Christiana Romer is typical of the political and academic hacks our leftist president has surrounded himself with, all puff with no concrete proposals to cut the big, behemoth intrusive, overreaching government. Uncertainty is indeed the problem, taxes, Obamacare, financial regulation, EPA, FCC, Fannie/Freddie, you name it. What it gets down to is that these academic “elites” think that they know what’s best for us, for the economy. They think they know more than Adam Smith’s invisible hand or Friedrich Hayek’s animal spirits! That hubris is their fatal flaw!
Christiana Romer is in a safer place now happily ensconced in academia. Safer, that is, for the nation. There she will only poison young liberal minds pretending to educate them in economics.
Temper Your Expectations for the Next Two Years
Posted by Tom in Business, Centrally Managed Economy, Economics, Employment, Government Regulation, Statism on October 29, 2010
One of the greatest restraints on economic growth is uncertainty. Business investment, the generator of growth and job creation, is risky even in the best of times. Uncertain times greatly increase the risk and often kill the decisions to invest, thus killing growth potential and job creation.
Obama and his leftist Congress with Pelosi and Reid in charge has added more uncertainty to the economy than any government in recent memory. Healthcare, financial regulation, cap and trade, tax policy and general expansion of government have added to the uncertainty. What direction will the legislation take, the regulations thereunder, the bureaucrats that make specific decisions pursuant to those regulations? And how will all of those affect my business investment?
Whether its consumer financial rule making, the EPA’s administrative imposition of emission limits on CO2, the health tzar’s specification of one-size-fits-all insurance policies, uncertainty abounds! Business will continue to stall and job creation will stall with it.
Charles Krauthammer in yesterday’s Washington Post op-ed, The great campaign of 2010, rightly predicts political paralysis if Republicans as predicted take the House and possibly the Senate. They can pass but Obama can veto. That means no repeal of Obamacare, nor of anything else for that matter.
Thus, center stage will be owned by the bureaucrats. By people like Kathleen Sebelius with Obamacare, Elizabeth Warren at the consumer financial protection bureau and Lisa Jackson at the EPA. These people can do real damage with or without legislation already on the books. Uncertainty will grow geometrically!
And costs to existing businesses will grow dramatically creating a further drag on the economy. For example, mid size real estate investment management companies will now be regulated by the SEC complements of Barney Frank’s financial regulation legislation. One company I know will be forced to spend $500,000 to set up the compliance accounting and controls, will be required to hire a compliance officer, will have all company emails for a running six year period scrutinized by the SEC and will require all principals and officers to have their home emails inspected for business content. Now this firm does not deal with the public, has no individual investors, and is owned by the individual partners. It deals in commercial and industrial real estate investments and invest for and advises major institutions. Not only will its costs go up but its business time will be diverted by this unnecessary compliance. Regulation for the sake of regulation keeps the bureaucrats in business.
In many respects this is the worst of all worlds. Political paralysis can be good, but not with bureaucratic uncertainty in full force. Lawless, unelected people with leftists agendas will govern unchecked. Regulation will be over done for the benefit of the regulators and little else. Remedies are limited and slow: court processes take years and further add to uncertainty. Impeachment for misconduct is rarely called for and more rarely used.
So the next two years will be a period of resistance on low-level, one-off battles and economic stagnation. We can take consolation in the fact that the bleeding from Obama’s more aggressive agenda will stop. And we can look forward to November 2012 for repudiation of his leftist, statist governance.
Meantime, KEEP SMILING!
Politics Not Economics–White House Rebutted
Posted by Tom in Economics, Employment, Fiscal Policy, Politics, Stimulus/Bailout on October 23, 2010
CEA Chairman Austan Goolsbee blames Bust and extolls Obama’s job creation. Unfortunately his chart is more polemic than economic. Keith Hennessey counters the arguments point by point. Warning, this is over 14 minutes long, but since we are about economics, this is definitely worth the time.
Employment Since the Recession
Posted by Tom in Centrally Managed Economy, Economics, Employment on September 21, 2010
The private sector basically supports the public sector, so it’s interesting to look at employment changes during the recession. This graphic is complements of the Heritage Foundation using BLS published data.
How long will the taxpayers allow this to continue? If unchecked, the parasite might indeed kill the host!