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OpenMarket: Labor and Employment

  • Democrats vs. Government Unions

    December 29, 2014 2:22 PM

    If late House Speaker Tip O’Neill’s famous saying that all politics is local has a corollary, it may be that politics is at its most substantive at the local level. While the people’s elected representatives in Congress—many from safe districts—trade ideological barbs, state and local elected officials often have to deal in the language of dollars and cents, as they weigh policy decisions that directly affect their constituents.

    That in turn creates different conflicts than those found on Capitol Hill. And nowhere is that more visible than in the growing conflict between state and local Democratic elected officials trying to put their governments’ finances in order. As the Manhattan Institute’s Daniel DiSalvo explains:

    Public sector unions create a genuine political conundrum for Democrats. On the one hand, they are genuinely powerful, and Democrats rely on their money and manpower during elections. Teachers unions, AFSCME, and SEIU are among the biggest donors to Democratic candidates and are organizationally braided into the party apparatus. However, public employee unions drive up government costs and depress productivity, weakening the state’s capacity to assist the poor and middle class.

    There’s the rub. Insofar as public unions secure for their members better pay, more generous benefits, and work rules shielding them from management discretion government doesn’t perform as well—and, consequently, neither do Democrats. Therefore, some Democrats are under pressure to take policy actions their union allies oppose. But taking such action puts them at odds with the most powerful and best-organized segment of their coalition.

    How does it happen that citizens of modest means suffer as public sector unions gain? A big part of the problem is that many states and cities have been providing more public services and promising to pay for them later by back-loading public employee compensation into retirement. And as the share of state and local budgets devoted to public employee pension and health benefits increases, the latter “crowds out” government spending on parks, education, public safety, and other services on which the poor and middle class rely. Democrats find themselves in the difficult position of defending governments that spend more but do less.

    This conflict has been brewing for some time, as my colleague Trey Kovacs and I outlined three years ago, and the rift between government unions and pragmatically-minded Democrats only keeps growing wider, as pension underfunding has grown worse.

    For more on pension reform, see “Best Practices for Reforming State Employee Pensions.”

  • NLRB Advances against McDonald’s

    December 23, 2014 12:21 PM

    By issuing complaints against McDonald’s on December 19, 2014, the National Labor Relations Board gave unions a boost and further riled business groups. On July 29, 2014, the National Labor Relations Board’s (NLRB’s) Office of the General Counsel had set the labor and employment world on fire by authorizing these complaints, which needed Friday’s Board approval to move forward.

    In essence, the Board itself has now preliminarily determined that the franchisor McDonald’s is a joint employer with McDonald’s franchisees and thus is liable for the actions of the franchisees, beyond just the opinion of the NLRB General Counsel.

    In a press call, the International Franchise Association joined the U.S. Chamber of Commerce, National Restaurant Association, and National Retail Federation to address last Friday’s issuance of complaints against McDonald’s.                      

    Robert Cresanti, Executive Vice President of Government Relations and Public Policy for the International Franchise Association explained that holding franchisors liable for the actions of their franchisees, as the NLRB General Counsel has proposed in an amicus brief, would move the franchise system toward large, corporate-owned outlets and away from independently owned operations.

    On the call, Cresanti pointed out two important, real-world impacts such a decision would entail: 1) Minorities would be disproportionately disadvantaged as minority ownership is notably higher among franchise businesses than non-franchise businesses, and 2) Job growth would be constrained as business resources are sapped and franchise expansion curtailed.

    Glenn Spencer, Vice President of the Workforce Freedom Initiative at the U.S. Chamber of Commerce, discussed how the direction of the NLRB leaves businesses with an uncertain standard for compliance.

    Angelo Amador, Vice President & Regulatory Counsel with National Restaurant Association, noted the breadth of the issue goes far beyond McDonald’s and even far beyond restaurants.

    David French, Senior Vice President of Government Relations for the National Retail Federation talked of the retail industry’s concern about the NLRB’s action today.

    Indeed, the NLRB General Counsel’s brief in the BFI case speaks directly to franchising, staffing/temp agencies, and contracting/subcontracting. All of these industries must be concerned with the NLRB’s march against McDonald’s.

  • New Minimum Wage Study: Tradeoffs Exist

    December 10, 2014 11:22 AM

    Many progressives strongly support minimum wage increases. This is troubling, because the effects those increases actually have on many poor people are regressive. Signaling your concern for the poor is different from actually helping the poor; feeling good about yourself is often different from actually doing good for others. At the very least, minimum wage supporters should acknowledge that the minimum wage has tradeoffs. It is not a free lunch.

    new study by UC-San Diego economists Jeffrey Clemens and Michael Wither on the minimum wage reaffirms the obvious. Some workers benefit from minimum wage increases, and this is a good thing. But it comes at a cost. Other workers lose their jobs:

    Over the late 2000s, the average effective minimum wage rose by nearly 30 percent across the United States. Our best estimate is that this period’s minimum wage increases reduced working-age adults’ employment-to-population ratio by 0.7 percentage point. This accounts for 14 percent of the total decline over the relevant time period.  [p.5]

    This finding is in line with what I’ve pointed out before, that the minimum wage has a reverse-Robin Hood effect. Some workers lose their entire income, which gets transferred instead to other workers fortunate enough to keep their jobs, and get raises besides. Income redistribution programs are supposed to flow from better-off people to worse-off people—not the other way around.

    If the goal is to lift as many people as possible out of poverty, minimum wage increases are simply not up to the task. The tradeoffs are too severe.

  • "I'll Gladly Pay Future Generations for my Pension Check Today"

    December 3, 2014 3:25 PM

    “I’ll gladly pay you Tuesday for a hamburger today” was the trademark utterance of J. Wellington Wimpy, the mooching character from the old Popeye cartoons. These days, he might find work to pay for his burgers managing a public pension fund—while playing bingo after hours.

    In recent years, state and local governments’ pension shortfalls have gained greater public attention, due in part to the 2008 financial crisis, which left many in even worse shape. But the financial crisis isn’t alone to blame.

    For years, public pension managers have been contributing less than the actuarially recommended contribution, essentially eating the proverbial burger today while leaving a future patron to pay the bill. Then, as the burger bill grows larger and our friend Wimpy gets more worried about ever paying it back, he turns to playing bingo, making ever larger wagers in the hope of clawing his way out of the hole he’s dug for himself.

    At that point, as the American Enterprise Institute’s Andrew Biggs explains in The Wall Street Journal:

    [P]ublic-plan managers may see little option other than to double down on risk. In 2013 nearly half of state and local plan sponsors failed to make their full pension contribution. Moving from the 7.5% return currently assumed by Calpers [the California Public Employee Retirement System] to the roughly 5% yield on a 38%-62% stock-bond portfolio would increase annual contributions by around 50%—an additional $4 billion—making funding even more challenging.

    But the fundamental misunderstanding afflicting practically the entire public-pension community is that taking more investment risk does not make a plan less expensive. It merely makes it less expensive today, by reducing contributions on the assumption that high investment returns will make up the difference. Risky investments shift the costs onto future generations who must make up for shortfalls if investments don’t pay off as assumed.

  • NLRB's Mysterious New Member Dodges Important Questions, But Stresses Need for Fully Staffed Board

    November 24, 2014 9:45 AM

    On December 16, Nancy Schiffer’s term on the National Labor Relations Board will end. Sharon Block was set to take her place but the Obama administration abruptly withdrew her nomination on November 12, 2014.

    Lauren McFerran, formerly the chief labor counsel and deputy staff director of the Senate HELP Committee is the next nominee in line.

    The NLRB has some very important cases before it including whether or not student athletes should be unionized, whether or not unions can use a company’s email to organize, and whether or not a union can get the private information of workers they are attempting to unionize. The most important case by far, however, is the joint employer case.

    With the NLRB potentially reclassifying a decades-old joint employer rule to devastating and systemic impact on the economy, those familiar with the issue were eagerly waiting to hear McFerran’s position. Would she support NLRB General Counsel Richard Griffin’s authorization of complaints against McDonald’s, thus blurring any meaningful distinction between franchisee and franchisor and classifying most business relationships as joint employer relationships?

    The short answer is that no one knows. The only indication McFerran gave about her beliefs in the Senate HELP Committee hearing was when she described herself as “pro act,” meaning that she was trained not to desire a specific outcome but only to look at the facts and try to give the right answer. Besides that, McFerran didn’t give us much to go on besides saying vaguely positive things about how her role, if confirmed to the NLRB, would be to solve real problems for real people and reach across the aisle.

    When Sens. Lamar Alexander (R-Tenn.) and Richard Burr (R-N.C.) asked her directly about the joint employer controversy, she would only say that she could not give an opinion on the controversy since it would be one she would have a role in resolving if confirmed to the Board.

    Sen. Alexander also asked McFerran if she thought it was appropriate for student athletes to be unionized, since they receive full scholarships that pay many of their living expenses. Again McFerran dodged the question by saying she could not give an opinion since the question was also one that would come before her if confirmed.

    Sen. Burr, taking into consideration McFerran’s reservations about giving a decisive opinion on a case she would preside over, asked a more general question: “Are there any limitations to what the NLRB can do to determine how many people who don’t actually pay the check are in the chain of liability for joint employer?”

    McFerran answered, “If the issue were to come before me as a Board member, all I can pledge to you is that I would consider it with a very open mind, I would look at the arguments presented to me in the case, I would review the record, I would consult with my colleagues, and I would review the issue with a completely open mind.”

    Well, McFerran might be open-minded, but the bad news here is that if somebody wants to be confirmed to a position on the NLRB, all they have to do is say vaguely positive things.

  • New NLRB Nominee Would Strengthen Big Labor's Agenda

    November 19, 2014 1:06 PM

    The left has a troubling Big Labor agenda that can only be accomplished by a pen-and-phone strategy to evade the U.S. Senate and House. The strategy centers largely upon the National Labor Relations Board (NLRB) that will need the key fifth board member to cast the deciding votes for the agenda.

    With the December 16 expiration of Nancy Schiffer’s term on the NLRB, Big Labor is scrambling to see someone confirmed before then to take her place. Their surprise answer is to withdraw Sharon Block, who had already had her confirmation hearing, had passed in a bipartisan fashion out of committee, and had been placed on the Senate Executive Calendar for a vote.

    Now President Obama and Big Labor have taken three steps back and on November 12 nominated Lauren McFarren, chief labor counsel and deputy staff director of the jurisdictional Senate Health, Education, Labor and Pensions Committee.

    McFerran should not be slid through a committee hearing a mere week after she is nominated. Given the issues at hand, full advice and consent cannot be provided in such time.

    Big Labor Agenda

    What is on the Big Labor agenda?

    Commercial concerns include whether franchises, staffing agencies, and contractors/subcontractors will suffer major changes to their businesses, as Big Labor’s allies attempt to make businesses joint employers and transform everyone into an employee of a big conglomerate that faces huge liabilities and expenses and is more easily unionized.

    Privacy advocates are concerned by Big Labor attempts to obtain workers’ private information so that, in addition to knocking at the doors of their homes, unions can email, text, and instant message workers.

    Property rights defenders are worried that Big Labor wants to use businesses’ email systems for their unionization purposes unrelated to the business.

    Businesses large and small are disturbed at the NLRB concept that profane and insubordinate actions—cursing out and telling off bosses, even in front of customers—is to be considered protected organizing activity.

    The NLRB wants to give unions the ability to put up anti-business posters in the business in plain view of the customers.

    Employers have been alarmed at the NLRB push to have unions and bargaining units as small as two people—micro-unions—which creates massive administrative headaches.

    The NLRB is attempting to speed up union elections to as few as 10 days from the request to unionize, thereby ambushing businesses that are left without time to discuss downsides.

    These examples only begin to paint the picture of Big Labor’s problematic agenda.

  • Voters Approve Minimum Wage Hikes

    November 5, 2014 11:47 AM

    As pollsters predicted, voters approved increases in state-level minimum wages in four states (Alaska, Arkansas, Nebraska, and South Dakota), although to levels less than the increase in the minimum wage proposed by Congressional Democrats (to $9.75 in Alaska, $9 in Nebraska, and $8.50 in Arkansas and South Dakota). Voters in the City of San Francisco voted to raise the minimum wage to a whopping $15 per hour from the current $10.74.

    As National Review notes, “In February, the Congressional Budget Office concluded that a higher wage floor would have significant disemployment effects” by increasing unemployment.

    As economics professor Mark J. Perry notes, minimum wage increases drive up unemployment among teens, knocking some of them off the bottom rung of the economic ladder. Quoting economist Kevin Erdmann, he notes that “In every episode” in which the minimum wage increased over the last 60 years, “except 1996 (which is the smallest hike relative to average wages), there was a distinct decline in the trend of teen employment, over the period of time covering from a few months before the initial hike until a few months after the follow-up hike.” Recent research published by the National Bureau of Economic Research arrives at similar conclusions.

  • Volunteering Violation Vignettes

    November 4, 2014 3:59 PM

    Did you know it is against the law to volunteer for a for-profit business?

    The issue has surfaced in a trio of varied settings recently.

    Let’s begin in mid-America.

    Congressman Tim Griffin and Senator John Boozman have introduced federal legislation, H.R. 3173 and S. 1656, to help women, predominantly, who volunteer at used-children’s-clothing consignment sales. The consignment sales are a small business that helps reduce waste by promoting the re-use of clothing that might otherwise be tossed in the garbage, were a marketplace not fostered. People selling the children’s clothes make some money, and purchasers save some money, rather than have to shell out bigger dollars for new outfits for their kids. It seems win-win-win, right?

    Well, the supposedly dastardly aspect to it is that people commonly volunteer on the day of the consignment sale to organize the clothes and put them on racks. Volunteers are there early to arrange the clothes, and as a benefit, these volunteers get first pick of the used clothes. Again, seemingly win-win, right?

    Ahhh, there’s the rub. These volunteers, commonly women, are volunteering against the law. “In 2013, the U.S. Department of Labor ruled that the business model, as represented by Rhea Lana’s, violated the Fair Labor Standards Act,” reports the Kansas City Star. The proprietor of the business was cited for failing to employ all of the volunteers. The Star continues, “Rhea Lana Riner, the founder and CEO of Rhea Lana’s…calls it a social business model that has grown in popularity because times have been tough and money tight for a lot of families. ‘We feel moms are co-venturing with us because they have a desire to use their personal time for their benefit.’”

    The Children’s Consignment Event Recognition Act seems sensible and would allow children’s consignment events to continue by specifically exempting them from the Fair Labor Standards Act. The bill has been cosponsored by other Midwestern legislators.

  • Joint Employer Action Anxiously Anticipated

    November 3, 2014 8:59 AM

    On July 29, 2014, the National Labor Relations Board’s Office of the General Counsel set the labor and employment world on fire by authorized complaints against McDonald’s, determining that the franchisor McDonald’s is a joint employer with McDonald’s franchisees and thus liable for the actions of the franchisees.

    Were franchisors typically held liable for the actions of their franchisees, as the NLRB General Counsel has proposed in an amicus brief, the franchise system as we know it would implode.

    With October now past, it has been over three months. Yet, despite the General Counsel’s determination, no formal complaint has been filed by the full National Labor Relations Board (NLRB) against franchisor McDonald’s as a joint employer.

    This lack of action from the Board comes as something of a surprise, given the time and high-profile attention paid to the matter and given that the norm is for the Board to follow the advice of General Counsel Richard Griffin, himself a former Board Member.

  • Minimum Wages Have Tradeoffs

    October 27, 2014 12:51 PM

    Minimum wages help some workers, which is why they are so popular. But they aren’t a free lunch. There are tradeoffs. They aren’t always easy to see, but they exist just the same. My colleague Iain Murray has a piece about those tradeoffs in the Washington Examiner, to which I contributed. As Iain summarizes:

    Breaking out of poverty is difficult for many people, and the evidence is that a minimum wage adds to the difficulty. Workers are fired, hours are cut, jobs are not created, non-wage perks, including insurance, free parking, free meals, and vacation days evaporate, annual bonuses shrink, prices rise, (squeezing minimum wage earners themselves), big businesses gain an artificial competitive advantage over their smaller competitors, and crime rates rise. It is a bleak litany.

    On the flip side, minimum wages do give some workers a raise. Are the tradeoffs that others have to endure worth it? Read the whole thing here (or here for a facsimile of the print edition, starting at p. 24).


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