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OpenMarket: Labor and Employment

  • CEI Ranks States' Pension Debt and Analyzes the Consequences

    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.

    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.

  • Harris v. Quinn Gives Home Care Workers Renewed Opportunity to Get Back Compulsory Dues

    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.

  • Is Harris v. Quinn Decision Preview of Abood Challenge?

    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. 

  • Harris v. Quinn: A Human Interest Angle

    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.

  • What’s at Stake in Monday’s SCOTUS Decision on Harris v. Quinn

    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

  • Ridesharing Wars: Uber, Regulators, and the "California Compromise"

    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.

  • When Hedge Funds Meet Pension Funds

    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.

  • The Doctor Will Release You Now: How Official Time Contributed to the VA Scandal

    June 3, 2014 1:00 PM

    Socialized medicine and union corruption are a potent combination and, in the case of the VA, a deadly one. The VA scandal has brought the network of hospitals under a national spotlight.

    But the troubled hospitals have been joined under the spotlight by a more widespread problem in America: union “official time,” also known as, “release time.”

    Kim Strassel of The Wall Street Journal has shed light on how the VA is in a Big Labor choke hold, granting the president of local lodge 1798 of the National Federation of Federal Employees 100 percent “official time,” which effectively means that the president is not really a VA employee since she is not obligated to do any work for the hospital.

    But “official” or release time at the VA doesn’t end with the union president. Strassel also tells us that,

    Manhattan Institute scholar Diana Furchtgott-Roth recently detailed Office of Personnel Management numbers obtained through a Freedom of Information Act request by Rep. Phil Gingrey (R., Ga.). On May 25, Ms. Furchtgott-Roth reported on MarketWatch that the VA in 2012 paid 258 employees to be 100% "full-time," receiving full pay and benefits to do only union work. Seventeen had six-figure salaries, up to $132,000. According to the Office of Personnel Management, the VA paid for 988,000 hours of "official" time in fiscal 2011, a 23% increase from 2010.

  • 33 House Republicans Join ALPA to Restrict Competition and Soak Consumers

    June 3, 2014 10:01 AM

    previously wrote about the campaign from the Air Line Pilots Association (ALPA) against Norwegian Air International's (NAI) attempt to offer low-cost flights from the U.S. to Europe. Having lost their case in Europe, ALPA has teamed up with a European pilots' union to pressure the Federal Aviation Administration to deny NAI's petition for a foreign air carrier permit. In addition, ALPA is spending millions on a xenophobic ad campaign in a pathetic attempt to stoke ethnic and national division for its members' narrow benefit. A sample line: “NAI calls itself Norwegian, but it registers its airplanes in Ireland, hires its pilots in Singapore, and bases its flight crews in Thailand.”

    As I noted, none of this is surprising given ALPA's history of turning a blind eye to racism within their ranks. For instance, in 2012, ALPA succeeded in getting one of its member pilots, Marcin Kolodziejczyk, reinstated after he had been fired by his employer Mesa Airlines. Kolodziejczyk, who at the time was vice chairman of the Master Executive Council (MEC) at Mesa, was fired by the airline after sending an email to a number of ALPA officials with the following remarks about Mesa's Senior Vice President of Human Resources, who also happens to be black, during contract negotiations:

    He was hanging from the ceiling making monkey sounds. That's all I witnessed at the meeting I was at . . . Stay focused and I already have the chains for him, just need your help to string him up!

    Not only did ALPA get Kolodziejczyk reinstated with full seniority and back pay by exploiting technicalities within the collective bargaining agreement, it then promoted him to chairman of the MEC at Mesa. Making things even worse, ALPA is currently featuring a YouTube video starring Kolodziejczyk from November of last year. I guess we know how to get ahead at ALPA.

    Their multi-million dollar campaign against NAI is rooted in similar small-minded bigotry, although this time it's cloaked in creepy nationalism and vague appeals to patriotism. Many have seen through this anti-consumer protectionist campaign. Unfortunately, 33 House GOP members sent a letter to the Secretary of Transportation yesterday parroting ALPA's bogus claims against NAI. Republicans constantly talk about "principles," "limited government," and "free enterprise." But when the time comes to actually promoting free enterprise, competition, and consumer welfare, they often do the opposite of their stated beliefs.

  • Seattle Minimum Wage Hike Already Hurting Businesses

    June 2, 2014 2:19 PM

    What did they think would happen?

    Seattle is likely to lift its minimum wage to $15 an hour. The move, supported by leftists and labor unions, would make the city's artificial wage floor the highest in the nation. Proponents gush about the importance of "living wages," while opponents, citing economic research, warn against the increases in unemployment and harm to small businesses likely to follow. Unfortunately for artificial wage floor boosters, Seattle politicians need only look a few miles away to see the harm a $15 minimum wage can do.

    SeaTac, a suburb of Seattle, recently decided to raise the minimum wage to $15 an hour and United Liberty tells us that employers in SeaTac have had to cut employee benefits to stay in business after the dramatic raise. In an interview with a publisher from Northwestern Asian Weekly, one employee describes how her company had to cut her benefits to counter the skyrocketing cost of wages: “I lost my 401k, health insurance, paid holiday, and vacation,” she responded. “No more free food,” she added. The wage hike is already hurting Seattle businesses, even though it has not been implemented yet.

    The Washington Policy Center chimes in as well, showing how the minimum wage hike has discouraged small business expansion and kept small business owners from opening new businesses or hiring new workers.

    The Seattle Times also notes, “At the Clarion Hotel off International Boulevard, a sit-down restaurant has been shuttered, though it might soon be replaced by a less-labor-intensive cafe."

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