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OpenMarket: Labor and Employment

  • 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."

  • CEI Labor and Employment Scorecard: Insourcing Amendment to Intelligence Authorization Act

    May 30, 2014 8:39 AM

    This week, the Competitive Enterprise Institute (CEI) will score a vote in the U.S. House of Representatives in its consideration of the Intelligence Authorization Act for Fiscal Years 2014 and 2015 (H.R. 4681).

    The intelligence authorization is considered annually, though there is some history of the process falling short of annual enactment. The vote below pertains to employment considerations for America’s labor force, both governmental and private. The score will be incorporated into CEI’s Congressional Labor and Employment Scorecard, which can be seen in full on CEI’s labor and employment policy website, WorkplaceChoice.org.

    INSOURCING AND OUTSOURCING
    In the course of government operations, work and employees are transferred between the federal government and private employers through “insourcing,” whereby activity once performed by the private sector is brought under government control, and “outsourcing,” whereby the private sector takes over some functions formerly performed by government employees. When deciding whether to insource or outsource, policy makers should follow a basic principle: Businesses should not be subjected to unfair competition from government entities.

    A good guide is the “Yellow Pages” test, which has been applied by mayors and governors around the nation, both Democrat and Republican. It operates under a simple premise: If you can find a private sector firm providing products or services that the government is also providing, then the service should be provided by the private sector. This would insert market competition into the government procurement process, break up government monopolies, and provide better value for taxpayers.

    The Center for Naval Analyses found benefits of competing work, in its 1996 examination of the issue. The visibility and identification of alternate providers were beneficial aspects of the process identified by the Center. As a bottom line, the Center for Naval Analyses determined a 30 percent average savings resulted from this beneficial focus on competition, with savings persisting over time.

    Government workers cost more per hour worked than private sector employees. As the Congressional Budget Office concluded in 2012,

    On average for workers at all education levels, benefits for federal employees cost about $20 per hour worked, whereas benefits for private-sector employees cost $14, CBO estimates. Thus, benefits for federal workers cost 48 percent more per hour worked, on average, than benefits for private sector workers with similar attributes. Benefits also constituted a larger share of compensation for federal workers, accounting for 39 percent of the cost of total compensation, compared with 30 percent in the private sector.

  • How Policy Makers Should Approach Google's Driverless Shuttles

    May 28, 2014 10:25 AM

    Yesterday, Chris Urmson, director of Google's Self-Driving Car Project, wrote a post for the company blog describing Google's newest prototype: fully automated vehicles that lack manual steering, accelerating, and braking functions:

    It was inspiring to start with a blank sheet of paper and ask, “What should be different about this kind of vehicle?” We started with the most important thing: safety. They have sensors that remove blind spots, and they can detect objects out to a distance of more than two football fields in all directions, which is especially helpful on busy streets with lots of intersections. And we’ve capped the speed of these first vehicles at 25 mph. On the inside, we’ve designed for learning, not luxury, so we’re light on creature comforts, but we’ll have two seats (with seatbelts), a space for passengers’ belongings, buttons to start and stop, and a screen that shows the route—and that’s about it.

    Here's a short video of the prototype in action:

    Google's announcement of a low-speed, non-highway vehicle is not surprising. As Stanford Law's Bryant Walker Smith noted last fall at The Volokh Conspiracy,

  • Congress Must End Department of Transportation's Abuse of "Unfair and Deceptive Practices" Authority

    May 21, 2014 10:29 AM

    The Department of Transportation is opening a rulemaking proceeding to, among other things, require airlines and ticket agents to include ancillary fees (for, e.g., checked bags, seat assignments) in any fare comparison. More troubling is its expansion of "ticket agent" to "apply to all entities that hold out airfare, schedule, and availability information to consumers," including meta-search engines such as Google Flights and KAYAK. But most troubling is the Department's summary of its preliminary regulatory analysis, reproduced in full below:

    The quantifiable costs of this rulemaking exceed the quantifiable benefits. However, when unquantified costs and benefits are taken into account, we anticipate that the benefits of this rulemaking would justify the costs. It was not possible to measure the benefits of the proposals in this rulemaking, except for the benefits for provision 2. For example, there are a number of unquantified benefits for the proposals such as improved on time performance for newly reporting carriers and code-share flights of reporting carriers, improved customer goodwill towards ticket agents, and greater competition and lower overall prices for ancillary services and products. There are also some unquantified costs such as increased management costs to improve carrier performance, increased staff time to address consumer complaints, and decreased carrier flexibility to customize services, though we believe these costs would be minimal. If the value of the unquantified benefits, per passenger, is any amount greater than one cent and the unquantified costs are minimal as anticipated, then the entire rule is expected to be net beneficial. (Emphasis added.)

  • CEI Labor Scorecard: National Defense Authorization Act

    May 21, 2014 8:51 AM

    This week, the Competitive Enterprise Institute (CEI), a Washington, D.C.-based organization dedicated to the principles of free enterprise and limited government, will score a vote in the U.S. House of Representatives in its consideration of the National Defense Authorization Act for Fiscal Year 2015 (H.R. 4435). The defense authorization is one of the largest bills considered each year. The vote below pertains to employment considerations for America’s labor force, both governmental and private. The score will be incorporated into CEI’s Congressional Labor and Employment Scorecard, which can be seen in full on CEI’s labor and employment policy website, WorkplaceChoice.org.

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