Archives: 02/2018

Construction Has the Tightest Labor Market Since 2000

In recent years, construction employers have complained about difficulty in finding skilled workers and asked Congress for reforms to the immigration system to address the issue. The data support their on-the-ground impressions. Since 2000, the labor market in construction has never been tighter than it was in 2017. Immigration reform would help employers find skilled workers and increase production in the construction industry.

Some commentators compare construction employment to other industries in order to evaluate its need for workers, but this is inappropriate. Construction projects are by their nature temporary and often seasonal, and so the natural rate of unemployment at any given time will always be higher for construction than other industries. For this reason, it is important to compare the construction labor market today to its labor market in prior years. This tells us how difficult it is for employers to fill jobs—how “tight” the labor market is—given the industry’s peculiarities. 

The best measure of labor market tightness is unemployment relative to job openings. Following the housing bust, the number of unemployed construction workers shot up to nearly 1.8 million in 2009, while the number of job openings fell to less than 52,000. The total number of unemployed was almost 35 times higher than the number of job openings. As Figure 1 shows, the number of unemployed was only 3 times higher than the job openings rate in 2017. In other words, the labor market was 90 percent tighter in 2017 than in 2009. No year on record had an average ratio of unemployment to job openings as low as 2016 and 2017 did.

Figure 1: Unemployed Workers Per Job Opening in Construction, 2000* to 2017.

Sources: Bureau of Labor Statistics JOLTS Survey; Bureau of Labor Statistics, *Only December

The Janus Argument Felt like Groundhog Day

We didn’t learn anything from this morning’s argument in Janus v. AFSCME, which asks whether state laws that compel the payment of “agency fees” by nonmembers of public-sector unions violate the First Amendment by forcing those workers to support policy positions they don’t like. None of the eight justices who heard the Friedrichs case on the same issue two years ago—which ended up 4-4 after Justice Antonin Scalia’s death—appeared to have changed their minds. The ninth, Justice Neil Gorsuch, didn’t ask a single question or otherwise show his hand. The whole exercise seemed like redundant pointlessness.

Justice Ruth Bader Ginsburg opened the questioning by asking about the validity of student activity fees and bar dues if Illinois state employee Mark Janus were to prevail, as well as how such a ruling would affect private-sector unions. Janus’s lawyer, Bill Messenger, responded that different state interests were at play there and that there’s no state action in the private sector and so no First Amendment harm. (Justice Scalia, in a 25-year-old case called Lehnert v. Ferris Faculty Association, made the same point, which is why he was considered the swing vote in Friedrichs—though he showed himself to unambiguously be on Rebecca Friedrichs’s side during oral argument in that case.)

Justice Elena Kagan expressed concern about the practical impact of a ruling that struck down the laws of 22 states that allow agency fees, which would also affect thousands of collectively bargained contracts. As expected, much of the questioning focused on stare decisis—the weight of a 40-year-old precedent that needs to be overturned for Janus to win—an issue that Cato’s amicus brief focused on.

Messenger explained that the law works fine in the other states, the contracts would all expire in the next few years at most, and that in any event, maintaining an unconstitutional contract can’t be a valid reliance interest. Solicitor General Noel Francisco, siding with Janus, added that the contracts were negotiated “in the shadow of” two recent opinions, Knox v. SEIU and Harris v. Quinn, that threw serious doubt on Abood’s continuing validity.

On the other side, Justice Anthony Kennedy showed palpable disgust at the idea that the government would force people to pay for advocacy with which they disagreed, particularly given the reality that unions uniformly advocated for larger workforces, higher taxes, and generally bigger government. Frankly, the only time I’ve seen him as exercised was when he orally summarized the joint dissent in NFIB v. Sebelius, the 2012 Obamacare case.

The FISA Follies: The “Schiff Memo” Edition

On Saturday (Feb. 24), House Intelligence Committee Democrats were finally able to publish their rebuttal to the “Nunes Memo” written by the committee’s GOP majority staff and released earlier this month. So what have we learned from this Democratic rebuttal memo? As it turns out, not much we didn’t already know—though you wouldn’t get that impression from the media’s reaction to and characterization of the “Schiff Memo” following its release. 

NPR’s Philip Ewing and his editors preferred to treat the dueling memos episode as a game:

The more a game is played, the more adept teams become at its rules and strategies. Basketball defenders deliberately foul an opponent to force a free-throw. A manager brings up a left-handed reliever to pitch inside to a dangerous left-handed hitter.

The Republican memo gambit and last weekend’s Democratic riposte complete the first enactment of what could become a recurring sideshow inside Washington. The majority uses its control of the committee and its alliances inside the executive branch to release an unexpurgated file even if some of the relevant agencies object—as the FBI and Justice objected to the release of the Nunes memo.

The minority can’t twist the arms of the agencies controlled by its opponents and it can’t get parity with the opening shot: Nunes’ memo was released by lunchtime on a Friday following a week of extensive coverage. Schiff’s memo came out with no preliminary fanfare on a Saturday afternoon.

So will this be the template for each game? Or will Nunes and Schiff take a different approach next time? And with the rules more or less set, how will other players respond? Round Two is already different: Nunes suggested he was preparing another memo about what he calls problems with President Obama’s State Department. So a former State official wrote a column in the Washington Post that tried to short-circuit that attack.

So for NPR, allegations of FBI/DoJ potential misuse of the FISA process is like watching a Wizards-Celtics match-up on ESPN.

Purging Unions from the Public Sector

The Supreme Court hears arguments today regarding the ability of state governments and their labor unions to extract union fees from unwilling employees. The case involves an Illinois state worker who decided not to join the AFSCME union that covers his job, but is being forced to pay a $45 per month “agency fee” to the union nonetheless.

Illinois is one of 23 states that allow unions to impose agency fees on nonmembers. The other 27 states allow people the “Right To Work” without unions picking their pockets. There has been a shift toward Right to Work in recent years, but the chart below shows that while union membership has plunged in the private sector, it has remained high in state and local governments.

Prior to the 1960s, unions represented less than 15 percent of the state-local government workforce. That changed during the 1960s and 1970s, as a flood of state laws triggered a dramatic rise in public-sector unionism. Many states passed laws that encouraged or required collective bargaining in the public sector, while also imposing compulsory union fees. The chart shows that we had reached today’s high rates of public-sector unionism by the early 1980s, which is when hard data on membership begins.

In 2017, 30.3 percent of state government workers and 40.1 percent of local government workers were union members, compared to just 6.5 percent of workers in the private sector. The combined state-local rate of union membership at 36.1 percent is more than five times higher than the private-sector rate. The most recent BLS data is here.

Conservatives and a Libertarian on Immigration at CPAC

I spoke on a panel at CPAC with three conservatives—Scott Walter of Capitol Research Center, Ralph Hallow of the Washington Times, and Congressman Michael Burgess (R-TX)—moderated by Christopher Malagisi of Conservative Book Club (starts at 1:02:00). My main takeaway was that economics is not a major concern among the conference goers, though the congressman emphasized it. Both the audience and panel were overwhelmingly concerned with issues of assimilation, crime, and politics.

My View: Evidence Is Overwhelming in Favor of Immigration

In my opening statement, which you can watch here, I argued that conservatives should not act as liberals do on many issues. Liberals focus on mass shootings, not on the numerous cases of defensive gun use. Many liberals also ignore the incredible wealth that capitalism has created, preferring to highlight those people in capitalist societies who have been relatively less successful. In other words, liberals tend to focus on the exceptions to the rule.

Unfortunately, conservatives often act similarly on immigration. They focus on immigrant crime, even though the U.S. Census Bureau tells us that immigrants—including illegal immigrants—are about half as likely to be incarcerated in the United States. They highlight the fiscal costs of immigrants, even though the National Academy of Sciences 2016 report found that the average recent immigrant will pay at least $92,000 more in taxes than they receive in benefits over their lifetime (in net present value terms).

On assimilation, English language comprehension at arrival is at its highest levels on record. Today’s immigrants integrate quickly into the labor market, acquiring jobs at higher rates than the U.S.-born population. Two-thirds of eligible immigrants have already become citizens. On policy, while there are a few differences between noncitizens and U.S.-born citizens, the General Social Survey finds no statistically significant differences between naturalized and U.S.-born citizens on almost any major policy area except immigration.

In conclusion, I argued that just as liberals want to grow the government and take away liberties to deal with exceptions in the free market or on guns, many conservatives want to spend billions of dollars on infrastructure to keep out people who would happily come to this country legally. They want to create an electronic national identification for every U.S. worker and every U.S. employer (called E-Verify), and they want government agents—as is already happening—to stop motorists and board trains and buses and demand that people prove their citizenship to them.

My message was simple: stop highlighting the exceptions as liberals do on guns or capitalism and pay attention to the big picture or it will inevitably lead to bigger government and less freedom.

Support Parental Leave by Saving Not Spending

Some conservative writers are proposing to raid Social Security for the costs of a new parental leave program. Proponents are selling it as a sort-of free lunch. The plan would be “self financing” says the IWF’s Kristin Shapiro because “new parents would agree to defer their collection of Social Security benefits upon retirement for the period of time necessary to offset the cost of their parental benefits.”

But Social Security is not a savings program with a pool of assets to draw on. If the government starts mailing checks to millions of new parents, the only “financing” would be more federal borrowing. What Shapiro calls $7 billion a year in “parental benefits” would be $7 billion more in government spending. What Shapiro calls “self financing” would be more government debt.

In theory, the government would delay retirement handouts for participating individuals three decades down to the road. But, if enacted, lobby groups and politicians would get to work undoing those future savings. And if this sort of accounting trick is used for spending on parental leave, then the flood gates would be opened for Social Security spending on home purchases, job training, and other trendy causes.

What ever happened to personal saving? Humans can look ahead and plan, and they have been doing so since the beginning of time. Personal saving is the most powerful financing tool. But the more the government hands out benefits—for retirement, health care, unemployment, parental leave, and many other things—the more it undermines the innate and responsible saving incentive. The more the nanny state spends, the more it sabotages a culture of savings and the practical ability to save as taxes rise.

Young people thinking about having children should start setting aside some of their paychecks. Young people should be taught that kids are expensive, and they should plan accordingly. Alas, personal responsibility and saving are not the starting points for most policy discussions these days.

Do U.S. Bases Overseas Create Peace?

In a Cato study last year, I argued that the U.S. policy of maintaining hundreds of permanent forward-deployed military bases around the world is not only unnecessary, but also actually counterproductive in some ways. Advocates of forward-deployment claim it pacifies the international system by deterring adversaries and reassuring allies, thus ameliorating conflict spirals and staving off interstate wars.

I argued instead that today’s lower rates of interstate conflict are a result of many factors – including defense dominance, economic interdependence, changing norms, etc. – other than forward basing and the security guarantees that underlie them. I further claimed that forward bases can actually undermine peace and stability by incentivizing “reckless driving” by allies and counterbalancing by adversaries. This is a view deeply at odds with the prevailing opinion in the Washington, DC foreign policy establishment.

Yet a new study from the RAND Corporation bears some of my analysis out. RAND researchers developed a statistical model to see how U.S. overseas bases correlated with interstate conflict. Though they find that “on average, U.S. troop presence was associated with…a lower likelihood of interstate war,” they concede their model can’t determine causation and can’t account for the impact that other factors (mentioned above) have had on the reduction of interstate conflict in the post-WWII period.