July 28, 2014 9:55 AM
Coauthored with Alex Bolt.
President Barack Obama spuriously claimed, "These so-called right-to-work [RTW] laws, they don't have anything to do with economics," when he futilely attempted to thwart Michigan’s enactment of a right-to-work law.
A new study by the Competitive Enterprise Institute demolishes Obama’s spurious claim by showing how RTW laws, which free workers from a mandate to join a union in order to be employed, benefit states. RTW laws produce better income, population, and job growth than in forced-unionism states.
July 21, 2014 12:17 PM
Sadly, but unsurprisingly, it appears that former Secretary of Labor Hilda Solis may have violated the Hatch Act—which prohibits federal employees from engaging in political activity while on duty—by soliciting funds for President Obama’s reelection campaign during work hours.
The House Oversight Committee, chaired by Rep. Darell Issa (R-Calif.), broke the story when it released a voicemail of Solis calling a Department of Labor subordinate “off the record” to get help for Obama’s 2012 campaign. The release of the voicemail came as a result of a larger investigation into the Obama administration’s political activity during the 2012 election cycle.
Labor and Employment Scorecard: Pension Smoothing as a “Pay-For” in Highway and Transportation Funding ActJuly 16, 2014 4:57 PM
On July 15, 2014, the Competitive Enterprise Institute (CEI) scored U.S. House of Representatives Roll Call Vote #414 on final passage of the Highway and Transportation Funding Act of 2014 (H.R. 5021), a bailout of the Highway Trust Fund and extension of the current federal transpiration law, MAP-21.
Critically, funding for this bill involved “pension smoothing,” a pernicious accounting gimmick that encourages deficit spending and increases the risk of pension insolvency.
The vote is included in CEI’s Congressional Labor and Employment Scorecard, which can be found at CEI’s labor and employment policy project, WorkplaceChoice.org.
The Competitive Enterprise Institute opposed final passage of the Highway and Transportation Funding Act of 2014 (H.R.5021):
July 9, 2014 11:32 AM
Today, the Competitive Enterprise Institute released the first installment of CEI’s new three-part series, The High Cost of Big Labor, which looks at the economic impact of labor policies on U.S. states.
In “Understanding Public Pensions: A State-by-State Comparison,” economist Robert Sarvis ranks the states based on their pension debt. This debt burdens labor markets and worsens the business climate. To get a clear picture of the extent of this effect around the nation, this paper amalgamates six studies of states’ pension debts and ranks them from worst to best. Today, many states face budget crunches due to massive pension debts that have accumulated over the past two decades, often in the billions of dollars. There are several reasons.
One reason is legal. In many states, pension payments have stronger legal protections than other kinds of debt. This has made reform extremely difficult, as government employee unions can sue to block any scaling back of generous pension packages.
Second, there is the politics. For years, government employee unions have effectively opposed efforts to control the costs of generous pension benefits. Meanwhile, politicians who rely on government unions for electoral support have been reluctant to pursue reform, as they find it easier to pass the bill to future generations than to anger their union allies.
A third contributing factor has been math—or rather, bad math. For years, state governments have understated the underfunding of their pensions through the use of dubious accounting methods using a discount rate—the interest rate used to determine the present value of future cash flows—that is too high. This affects the valuation of liabilities and the level of governments’ contributions into their pension funds.
July 1, 2014 3:53 PM
When you can’t win, change the players. That was essentially the strategy pursued by government employee unions in recent years. This week, it came to a halt.
Yesterday’s Supreme Court ruling in Harris v. Quinn put a brake on government unions’ efforts to expand the definition of “public employee” to any service provide who receives state assistance, such as home care workers who are paid by Medicaid. The Court ruled that “partial public employees” like home care providers cannot be required to pay for the costs of representation by a union—representation many didn’t ask for.
Today, the Court gave some home care workers who have been forced to pay dues a renewed opportunity to get those dues back. The Court applied Harris v. Quinn to Schlaud v. Snyder, a suit brought by a group of Michigan home care workers seeking class action certification in order to get back union dues taken from them unwillingly.
June 30, 2014 3:42 PM
The U.S. Supreme Court’s decision in Harris v. Quinn puts a brake on an ongoing effort by organize labor to expand the definition of “public employee” to just about anyone who receives any form of government assistance, such as home care workers paid by Medicaid (a phenomenon I pointed out in a 2009 Cato Institute study on public sector unions; see page 9).
However, the Court did not address the issue of whether government employees may be required to pay union dues in the first place. Workers who aren’t union members but work under a collective bargaining agreement can be required to pay “agency fees,” which are essentially dues in all but name.
That would have required revisiting the Court’s 1977 decision, Abood v. Detroit Board of Education, which upheld a Michigan law, “whereby every employee represented by a union even though not a union member must pay to the union, as a condition of employment, a service fee equal in amount to union dues.” Yet, Justice Samuel Alito, writing for the Court’s majority in Harris, offers some strong criticisms of Abood that could well open the possibility of future challenges to it.
June 30, 2014 3:20 PM
The Harris v. Quinn decision today by the U.S. Supreme Court is a major human interest story.
Congratulations to Pam Harris and her son, Josh, and family whose First Amendment freedom of association rights were vindicated.
In total, eight women petitioned for their rights before the Supreme Court against a state governor and two massive unions. What’s more, all eight of these women were participants in a Medicaid program that afforded benefits for their loved ones who have been ill.
Caring for chronically ill loved ones is a costly endeavor, financially, temporally, and emotionally.
In the Harris v. Quinn victory, thwarting Big Labor’s attack on these eight family women and the other women who predominantly provide America’s home health care and daycare (in the sister case of Parrish v. Dayton) is great news.
June 27, 2014 12:46 PM
This Monday, the U.S. Supreme Court is scheduled to decide Harris v. Quinn, as one of the court’s last two decisions to be handed down in 2014.
The case, which originated in Illinois, concerns whether home health care workers who receive government assistance are public employees and can be unionized. These workers include individuals who offer home health care services, an industry that is largely run by women. A sister case in Minnesota, Parrish v. Dayton, addresses many of the same issues but focuses on daycare service providers. In both cases, all of the plaintiffs are women.
There are two big issues to keep in mind for Monday’s decision:
1. Forcing private employers, employees, and independent contractors to be government employees
Many daycare and home health care service providers end up being paid with government benefits because an individual they are caring for is a recipient of government benefits, such as Medicaid. At issue in this case is whether these providers may be considered state employees, because some of their earned pay comes from government dollars.
The argument is ridiculous that anyone directly or indirectly receiving government benefits as payment for service could therefore be considered a government employee. That is like arguing 7-Eleven workers are government employees because 7-Eleven accepts food stamps. In this case’s oral argument, the attorney representing the women suing the government, used the example of medical care, saying that by this logic, every doctor could then be considered a government employee for accepting Medicaid or Medicare.
2. Violating the First Amendment right to Freedom of Association
June 6, 2014 12:35 PM
Yesterday, as many in the D.C. metro area are aware, Virginia's Department of Motor Vehicles sent cease-and-desist letters to Uber (PDF) and Lyft (PDF) warning the ridesharing companies to halt their "illegal operations." As someone who has followed the regulatory battle over ridesharing closely, this was incredibly disappointing. But on the same day as the Virginia DMV's attack on competition and innovation, Colorado Gov. John Hickenlooper (D) signed Senate Bill 125 into law. This new law creates a regulatory class called the transportation network company, requires driver background checks, and spells out insurance requirements for ridesharing operators.
While this route is not ideal -- ideally, lawmakers would support broad liberalization of the transportation service industry -- explicitly recognizing the legality of ridesharing, along with some regulatory requirements, is superior to Virginia's approach. Some have referred to this as the "California compromise," as Colorado's bill is based on the California Public Utilities Commission regulations (PDF) that were promulgated in September 2013 after a long battle between ridesharing companies and various regulators in the Golden State.
June 5, 2014 3:22 PM
Are hedge funds dangerous? Depends on who you ask -- and where you look. For most investors, they're no riskier than other assets -- just ask Eastman Kodak shareholders. But this week, the Guardian featured a brief discussion of hedge funds that shines a light on type of investor whose involvement in hedge funds is more questionable: public pension funds seeking higher returns.
The first essay -- subtly titled, "Hedge funds: the mysterious power pulling strings on Wall Street" -- provides more heat than light. Author Chris Arnade describes hedge funds as shadowy entities that thrive on secrecy as a means of exaggerating performance in order to earn lavish compensation for fund managers.
The bottom line: investors, sophisticated or not, can't know in detail what many hedge funds are doing. But as long as the mystique exists, perhaps many don’t want to know.
In his response, Timothy Spangler clears away some of Arnade's imaginary fog. As he explains, hedge fund manager compensation isn't all that mysterious.
Hedge fund managers who earn large amounts of money from their clients do so for one simple reason. For every $1 of profit they earn on their client’s account, they get to keep 20 cents. This is called a performance fee. No profits, no performance fees.
So the astute manager who turns $100 into $200 gets to keep $20 as compensation. The client gets his or her original $100 back plus the $80 of profit. No profit, no performance fees. Its fairly clear incentive arrangement and aligns interests between manager and client in an unambiguous way.