Tag: labor

The Rising Cost of Labor — a Triumph for Capitalism

Articles on page A7 and A8 of Saturday’s Wall Street Journal, about rising wages in China and France, confirm something that I learned from Julian Simon. As the Journal reported:

The 14% wage rise for private-sector workers in 2012, reported by China’s National Bureau of Statistics on Friday, represented an acceleration from 12.3% in 2011.

And:

With high labor costs eating into his bottom line, Mr. Madec uses frozen ingredients—and even complete main courses—for the dishes served at Les Templiers…. a steady increase in labor costs and food prices has fueled an unexpected phenomenon: Many restaurants can no longer afford to prepare meals from fresh ingredients in their own kitchens.

And what’s the lesson I learned from Julian Simon? As I wrote in Libertarianism: A Primer,

Over the long run, in real terms, the only price that consistently seems to rise is the price of human labor.  Looking back a hundred years or so, we see that prices of goods–from wheat to oil to computers–have fallen, while the real wage rate has quintupled in 50 years.  The only thing getting more scarce in economic terms, that is, relative to all other factors, is people.

 

The National Equalization of Opportunity Board

The National Labor Relations Board filed a complaint last month to stop Boeing from building its new 787 in South Carolina rather than Washington State. As Arthur Laffer and Stephen Moore explain in today’s Wall Street Journal, the Board’s action stems from Boeing’s declaration that it cannot “afford a work stoppage every three years” as has been happening in Washington. The New York Times seems to endorse the NLRB complaint, implying that the federal government must force companies to do business in agency-shop states like Washington, because otherwise they couldn’t compete with more efficient right-to-work states like South Carolina.

Laffer and Moore claim that the NLRB’s move is unprecedented, but it is actually highly reminiscent of the “Equalization of Opportunity Bill.” The EOB forbade entrepreneurs from owning more than one business, in order to allow less efficient, less capable entrepreneurs to compete with them. The EOB is, of course, a measure enacted by the United States Government in Ayn Rand’s Atlas Shrugged.

Yet more evidence that the Obama administration is not only conversant with Rand’s classic, it is using the book as a policy model. It’s just a little confused as to which characters were the heroes and which the bad guys.

Will Americans Line Up to Fill Jobs Now Held by Illegal Workers?

Do illegal immigrants take jobs away from Americans? With unemployment still at 9 percent, that’s a question Republicans were asking at a hearing Tuesday before the House Judiciary subcommittee on immigration policy and enforcement.

Committee Chairman Lamar Smith (R-TX) certainly thinks so. In a statement at the hearing, he noted that there are still 7 million illegal immigrant workers in the country while the unemployment rate among legal Hispanic workers is 12 percent and among blacks 16 percent. “These jobs [held by illegal workers] should go to legal workers, many of them minorities,” Smith said.

The math sounds simple, but it is not the way our economy works. In testimony before the same subcommittee in January on a related topic, I tried to explain to the members that

It may produce a good sound bite but it is misleading to assert that every low-skilled immigrant we can round up and deport will mean a job for an unemployed American. The real world economy doesn’t work that way. Low-skilled immigrants, whether legal or illegal, do not compete directly with the large majority of American workers. American companies hire immigrant workers to fill millions of low-skilled jobs because there are simply not enough American workers willing to fill those same jobs. The pay and working conditions for many of these jobs do not match the qualifications and aspirations of the large majority of Americans currently looking for employment in our recovering economy.

I go on to explain why there is no negative connection between immigration and levels of employment among native-born American workers, including black Americans. In fact, immigration creates employment opportunities for Americans.

You can read my full testimony here.

‘Why Your Boss Should Be Able To Fire You Over Facebook’

Suzanne Lucas, who blogs as Evil HR Lady, isn’t really evil, she’s just uncomfortably candid about many workplace truths that her fellow HR professionals tend to gloss over.

One of those truths is that in general no one owes you tenure in your job, even if you do it well. In our society, the principle of employment at will is still (fortunately) given much legal weight, meaning that an employment relationship continues only if both sides want it to.

And a consequence of that might just be that the law creates no right to slag your employer on your Facebook page one evening and demand that your employer overlook it the next morning:

So, why am I in favor of companies being able to terminate an employee for online behavior? (These things, of course, aren’t limited to Facebook. Myspace, Twitter, and blogs are all good candidates for firing). Here are 3 Reasons.

Easy firing=easy hiring. I want companies to hire people. In fact, my fondest wish is that all my readers who are searching for jobs find one this year. The more restrictions government places on terminating employees, the more hesitant companies are to hire new people.

Bad judgment isn’t limited to online behavior. Companies need employees they can trust to make good decisions. If you lack the critical thinking skills to say, “Hmmm, if I post that my boss is a jerk, my boss just might find out about it,” then you probably lack the critical thinking skills to do your job. Yes, people vent. But the internet is not private. And anyone who thinks they can trust all their 476 friends to keep something quiet isn’t someone I want on my staff.

Companies should be able to presume loyalty. I know, I know, your company doesn’t care much about your career and they have no problem firing you, so why should you care about them? Because they pay you to care about them….

You can read the whole thing, including the rest of her reasoning, here.

UK To Make It Easier To Hire, Fire Workers

In Britain, the coalition government of David Cameron hopes to stimulate much-needed hiring by reducing state interference with private employers’ right to choose their own workforces. Per the Telegraph, Cameron “hopes that relaxed employment laws will help to boost the private sector and encourage firms to take on thousands of new workers.”

For all the high hopes, the changes are in fact quite modest. Newly hired workers will wait two years, rather than one, before obtaining the power to challenge later firings before official tribunals. To discourage doomed or trivial claims, disgruntled workers will be charged a fee for resorting to a tribunal. The smallest employers will be exempted from some portions of the law, and so forth.

Judged by the “employment at will” principle that best exemplifies liberty of individual contract, Britain’s job market will remain far too highly regulated. But the direction of change is interesting. Despite the frequent impression that “Eurosclerosis” (and its equivalents elsewhere) puts the patient on a one-way course of decline, nations around the globe have repeatedly sought to shake off economic malaise by pulling back from labor regulation toward liberty of contract. Often these steps have stimulated exactly the economic expansions hoped for, as with Margaret Thatcher’s reforms in Britain in the 1980s and with New Zealand’s less famous yet more radical 1991 reforms. Alas, in both Britain and New Zealand, later Labour governments reimposed some (not all) of the previous types of regulation in deference to their union and Left constituencies.

What of the United States? For the most part, we’ve resisted the worst Euro labor-market practices — which has required us to ignore prevailing opinion among labor and employment specialists in our law schools, most of whom (as I’ve argued at book length in the past, and mention again in my forthcoming book on the influence of law schools) tend to support a great many bad proposals to restrict private employers’ liberty to hire and fire. Yet in our own distinctive way — which owes more to lawsuits and less to administrative tribunals — we keep edging toward European-style notions of workplace tenure. Newly released numbers show that federal complaints of employment bias surged to record levels last year, up 7 percent, led by a 17 percent spike in disability-discrimination claims, which now represent one-quarter of the nearly 100,000 total.

The newly activist posture of the Obama Equal Employment Opportunity Commission may have contributed to the trend a bit, and so may the state of the economy: laid-off workers may be more willing to pursue lawsuits when job prospects are bleak. But the main responsibility goes to the ADA Amendments Act passed by Congress in 2008 and signed by none other than Republican President George W. Bush, in this respect continuing his father’s tradition of uncritically endorsing almost any measure labeled as a matter of disabled rights. Among its other provisions, the 2008 ADA Amendments Act reversed a series of U.S. Supreme Court decisions that had tended to limit the scope of coverage of the ADA to persons with more severe disabilities. It also bestowed new rights to sue on persons “regarded as” disabled whether or not their actual medical condition so qualifies. The overall effect of the changes is to make it hard if not impossible to argue that a disability is too minor to deserve accommodation: “Challenging the employee’s ‘disability’ status is a waste of time with the new expanded definition of ‘disability’,” per one employer advisor. Karen Harned and Katelynn McBride have much more on the amendments in a new article in the Federalist Society publication “Engage.”

Once again, both major political parties pave the way to excessive regulation. And that makes it harder politically for an equivalent of Cameron’s reforms to come along here.

The Obama Labor Market

In a recent speech on the economy at Carnegie Mellon, President Obama took great pains to remind us that he inherited an economy that was “shrinking at an alarming rate.”  Of course his implication was that everything wrong with the economy today is George Bush’s fault.  While Bush does deserve considerable blame for current recess, a new working paper by economists at the University of Michigan and the New York and San Francisco Federal Reserve Banks paints a picture of a recession that was on par with previous deep recessions until well into 2009, when the labor market started to deviate, for the worst, from past trends.

For instance the authors find that during the first part of the current recession, labor force participation remained high, despite increasing unemployment, yet starting in May 2009 the labor force participation rate fell at its steepest rate since the 1950s.

The authors also focus on what economists call “Okun’s Law” - which shows a relationship between GDP growth and employment.  Historically Okun’s Law has shown that for every 2% GDP falls below trend, unemployment increases about 1 percent.  Under the Bush half of this recession, that historical relationship continued to hold.  Yet under Obama it broke down, and not in a good way.

The paper also examines the relationship between unemployment and posted job vacancies, called the “Beveridge curve” by economists.  They also find that the Obama economy has been far outside of this historical relationship, so there has been growth in vacancies but little improvement in the unemployment numbers.

The paper offers a description of recent labor market trends, without being able to completely explain why current trends have been so different (and worse) than previous recessions.  The authors do calculate that the extensions in unemployment insurance have likely increased unemployment by between 0.7 and 1.8 percentage points.

The real story, however, which this working paper misses, is that in the Obama economy, massive uncertainty coming from Washington and the increasingly intrusive nature of government is keeping employers from hiring, even when they are expanding output.  President Obama needs to get past the blame game and start moving us back toward a country that rewards private enterprise and values free markets.

Mainstream Media’s Trade Gap

In a post at the Enterprise Blog two days ago, economist Mark Perry deftly parodies a typical mainstream media account of trade protectionism by editing the story in redline to contrast its original presentation with its true significance. I recommend reading the whole thing, but here’s the first paragraph:

WASHINGTON POST (Reuters) - A U.S. trade panel gave final approval on Wednesday to duties taxes ranging from 10 to 16 percent on cost-conscious firms in the U.S. who purchase low-priced Chinese-made steel pipe rather than high-price domestic pipe, in the biggest U.S. trade case to date against China American companies (and their shareholders, employees, and customers) who shop globally for their inputs and find the best value in China.

Perry’s point—and I share his frustration—is that the mainstream media typically fail to convey even a sense of the costs of U.S. protectionism to U.S. interests even though Americans (and non-Americans living in the U.S.) bear the greatest burden of that protectionism. When the U.S. government imposes duties on Chinese steel, it is imposing taxes on U.S. consuming industries, their employees, their shareholders, and their customers.

Considering that more than half of the value of all U.S. imports in a typical year is raw materials and intermediate goods (i.e., inputs for producers operating in the United States, who employ people, transact with other businesses, and pay taxes in the United States), the number of U.S. victims of U.S. import taxes is much larger than one can ever glean from a typical media account. Taxes on Chinese-made ”Oil Country Tubular Goods” or OCTG (the subject in the article Perry edits), which are used for oil exploration and transport, will raise costs in the energy industry, which are likely to be passed onto consumers in the form of higher energy prices.

As described in this paper, trade is no longer a competition between “Us and Them.” There is competition between entities that—because of the proliferation of cross-border investment and transnational production and supply chains—often defy any meaningful national identification. But that competition is preceded by collaboration and cooperation between entities in different countries. The factory floor has broken through its walls and now spans borders and oceans—a fact that renders U.S. workers and workers in other countries complementary in more and more cases, and a fact that amplifies the cost of trade barriers.

But media—chained to the false “Us versus Them” paradigm—describe protectionist policies as actions taken by one national monolith against another, and convey the impression that American readers should be cheering for Team America. It is a worldview that conflates the well-being of “our producers” with some homogenized conception of “the national interest.” It is the same misguided scoreboard mentality that colors reporting of the trade account, where exports are deemed “good” and imports “bad.”  And, it is this simplistic, misleading characterization that, in my opinion, is most responsible for withering public opinion about trade and globalization over the past decade.

I look forward to more of Dr. Perry’s editing projects.