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Right-To-Work Prop A: Freedom of Speech, Association and Contract

30 Monday Jul 2018

Posted by pnuetz in Labor Markets, Right to Work, Unions

≈ Leave a comment

Tags

Andrew Wilson, Daniel J. Mitchell, Fifth Amendment, First Amendment, Fourteenth Amendment, Freedom of Association, Freedom of Contract, Freedom of Speech, Missouri 2018 Proposition A, Monopsony, Political Action Committees, Right to Work, Show-Me Institute, Steve Spillman, Union Activism, Union Dues

I’d be angry if my employer forced me to contribute to the company’s Political Action Committee (PAC), and that view is shared by many of my colleagues. It would be illegal, of course, at least as a condition of employment. I love my job, but I give nothing to the PAC because I do not trust it to properly represent my political preferences. That goes for political contributions and lobbying activity that might benefit the company and, by extension, my own economic interests. I simply do not believe the company will refrain from corporatist practices, and I do not under any circumstances want my contributions lavished on politicians with whom I have policy differences.

In my home state of Missouri, unions and their political allies insist that union dues payments should be a condition of employment in unionized workplaces. Like PACs, unions are major political contributors, and I’d be surprised if there weren’t a large number of union members who object to the use of their dues for political contributions and activism. Of course, most of that activism is broadly anti-capitalist. This, quite simply, constitutes compelled speech and is a violation of employees’ First Amendment free-speech rights. Forced membership is a violation of the worker’s freedom of association under the Fourteenth Amendment.

Unions are also presumed to represent the interests of workers in negotiating with management, but not everyone wants that representation, especially given the corruption that has often plagued unions over the years and the poor economic performance of unionized industries in general. That last statement applies to public employee unions no less than private sector unions. Prohibiting non-union workers from employment at a unionized firm violates their freedom of contract under the Fifth and Fourteenth Amendments. I agree, however, that an employee refusing to join a union should not automatically be entitled to the wages and benefits negotiated by the union in collective bargaining with the employer. That should be strictly between the non-union employee and the firm.

Missouri Proposition A, which is on the state’s August 7 ballot, is a referendum on a right-to-work (RtW) law already passed by the general assembly and signed by the governor last year. I’ve discussed reasons why some libertarians have expressed disagreement with this kind of legislation—primarily because it denies an employer the right to hire workers exclusively from a unionized pool of labor. As Daniel J. Mitchell has noted, right-to-work laws are a second-best, compensatory solution to other forms of government intervention in labor markets that essentially grant unions monopsony privileges. Furthermore, giving primacy to an employer’s right to deal exclusively with a union ignores the rights of non-union workers and the rights of union members who do not wish to contribute to a union’s political activities. Trampling on the latter stands in contrast to the established protection of my rights against coerced contributions to my employer’s PAC.

The standard economic argument in favor of RtW laws hinges on the favorability of a state’s business environment and its competitiveness with other states. Andrew Wilson explains how and why Prop A will create jobs in Missouri. He notes that over the ten years ending in 2014:

“…average job growth in the 22 states with RTW laws in place for most or all of that time was more than twice as fast (at 9.1 percent) as in the 28 forced-union states. The RTW states also had considerably faster growth in personal income (at 54.7 percent compared to 43.5 percent) and a much stronger economic growth (50.7 percent compared to 38.0 percent).”

Wilson also remarks on a historical phenomenon which pro-union forces refuse to acknowledge: unions have undermined the competitive position of the industries upon which their members rely. It’s a classic principal-agent problem. Workers appoint an agent for representation, but the agent acts independently to maximize its own gains, often at the expense of the workers. RtW applies discipline to the process, reinforcing the union’s incentive to put members’ interests above of its own. After all, nearly all employers have to compete for workers, and private employers have to compete in product markets. Union workers have been exempt from competition only to the extent that their wage demands have not undermined the business’ competitive position, but they frequently have.

The real rub, according to RtW opponents, is that business interests will simply “crush” unions under RtW and impose lower wages and poor work conditions on workers. But as I alluded above, there are employers that prefer to work with a union for a variety of reasons. Second, suppose that new employees of a unionized firm refuse to join the union, or that some union members opt out. That’s a pretty strong indication that union membership is an unattractive proposition. Whose fault is that?

I favor Proposition A because workers should not be forced to accept representation by any third party, firms should not be forced to hire exclusively from those willing to do so, and because workers should not be required to contribute to union political initiatives. But as Steve Spellman writes, unions could do much to enhance their value to both workers and firms, attracting membership and gaining advantages in bargaining with employers:

“If unions focused on providing helpful, outsourced H.R. functions to companies, such as worker recruitment, drug screening and taking care of all that labor-law-compliance paperwork, it would sure change their reputation. As would standing up for its members, while also taking necessary (and fair) disciplinary actions instead of covering up for the occasional bad apple (even if that is only one worker out of 1,000). … If we can dream a little here, unions could also be best positioned to stand up for workers who are discriminated against, for whatever reason, rather than waiting on the law to catch up with our evolving society.”

Proof of Concept: School Choice vs. Failing Publics

09 Monday Nov 2015

Posted by pnuetz in Education, School Choice

≈ 1 Comment

Tags

Administrative Costs, CATO Institute, Don Boudreaux, Monopoly Schools, Monopsonist Unions, Rural Education, School Choice, Show-Me Institute, Specialization, Teachers Unions, The Netherlands

School Vouchers2

The evidence that school choice is associated with better educational outcomes has been mounting. Given the poor performance of so many public schools, it is time to reject the “sanctity” of their monopoly privilege. The link above emphasizes the promise of choice as a reform for public schools in the U.S. (as do several other links below from the Show-Me Institute and elsewhere).

It is implausible to suggest that the opportunities afforded by choice could make things worse than public-school outcomes. Poorly-served students and families have too much to gain from broadening their educational options and they know it. A recent survey of African-American parents of school children found that more than 75% of the respondents were interested “in obtaining a voucher to cover the cost of private or parochial school tuition for [their] children“. A majority agreed that:

“… I should be able to enroll my child in the school I think will give my child the best educational opportunity. If my choice is a private or parochial school then I should be allowed to use the same tax dollars allotted to every child in public school to cover the cost of their tuition.“

Choice should not be viewed as a threat to the public school system, although that is a familiar narrative issued by school-choice opponents. In fact, it will create new opportunities for public schools to excel, taking advantage of the benefits of specialization that are well-known in most walks of life. Choice and competition will either reform or weed-out the worst-performing schools and will encourage a rationalization of the administrative bloat so characteristic of public institutions. That’s all to the good, but by weakening schools’ market power, choice will change the relationships between public schools and families. Apparently that is threatening to vested interests, which underscores the importance of reform.

The Netherlands has had a system of school vouchers in place for almost 100 years, and research indicates that it has been highly successful:

“Specifically, access to private schooling has helped Dutch students. A 2013 study reveal[ed] strong positive effects for students using the voucher program to attend private schools. The effects were anywhere between 0.2 and 0.3 standard deviations, which would move a student at the mean of the standard bell curve of student performance up 10 or so percentile points (from a 50 to a 60).

Given these large effects, it shouldn’t be surprising that in a system where two thirds of the schools are private, we see strong academic performance. What’s more, according to the National Center on Education Statistics, Dutch schools spend on average $1,500 less per student per year than American schools do.“

A recent study from the CATO Institute demonstrated the long-run impacts of school choice on several types of outcomes. Little wonder that choice is described as a “Moral and Financial Imperative” (video). School choice is also an option for providing better educations to students in rural areas, despite the worn-out argument that distances make it impossible. Under today’s archaic structure, course offerings at many rural schools are necessarily limited, but new technology and choice programs can allow those schools to specialize and give their local students broader access to educational resources.

Teacher’s unions have been consistent opponents of school choice. They view choice as a threat to their members’ job security and their own ability to negotiate favorable contract terms. Perhaps, but the goal of improving educational outcomes cannot be subjugated to the goals of union monopsonists. When it comes to education, the schools should focus on serving children and their parents, and parents in failing schools want the kind of solution choice can offer.

Several months ago, a post here on Sacred Cow Chips discussed an entertaining question posed by Don Boudreaux: What if supermarkets were like public schools? To quote Boudreaux directly:

“In the face of calls for supermarket choice, supermarket-workers unions would use their significant resources for lobbying—in favor of public-supermarkets’ monopoly power and against any suggestion that market forces are appropriate for delivering something as essential as groceries.“

Parental control is a critical change needed in our schools. Schools should never be placed in a position exceeding the authority of parents over their children, even if public funds are involved. Teachers and administrators of public schools must learn to treat parents like customers. The only way to assure that kind of responsiveness is to give parents a choice.

Major Mistake: The Minimum Opportunity Wage

06 Saturday Jun 2015

Posted by pnuetz in Price Controls

≈ 1 Comment

Tags

Alan Krueger, Brian Doherty, competition, Coyote Blog, David Card, Don Boudreaux, Economic justice, Fast food robots, Mark Perry, Minimum Wage, Monopsony, Reason Magazine, Rise of the Machines, Robert Reich, Robot replacements, Show-Me Institute, Steve Chapman, Substitutability, Tim Worstall, Unintended Consequences, Wage compression, Warren Meyer

government-problem

City leaders in St. Louis and Kansas City are the latest to fantasize that market manipulation can serve as a pathway to “economic justice”. They want to raise the local minimum wage to $15 by 2020, following similar actions in Los Angeles, Oakland  and Seattle. They will harm the lowest-skilled workers in these cities, not to mention local businesses, their own local economies and their own city budgets. Like many populists on the national level with a challenged understanding of market forces (such as Robert Reich), these politicians won’t recognize the evidence when it comes in. If they do, they won’t find it politically expedient to own up to it. A more cynical view is that the hike’s gradual phase-in may be a deliberate attempt to conceal its negative consequences.

There are many reasons to oppose a higher minimum wage, or any minimum wage for that matter. Prices (including wages) are rich with information about demand conditions and scarcity. They provide signals for owners and users of resources that guide them toward the best decisions. Price controls, such as a wage floor like the minimum wage, short-circuit those signals and are notorious for their disastrous unintended (but very predictable) consequences. Steve Chapman at Reason Magazine discusses the mechanics of such distortions here.

Supporters of a higher minimum wage usually fail to recognize the relationship between wages and worker productivity. That connection is why the imposition of a wage floor leads to a surplus of low-skilled labor. Those with the least skills and experience are the most likely to lose their jobs, work fewer hours or not be hired. In another Reason article, Brian Doherty explains that this is a thorny problem for charities providing transitional employment to workers with low-skills or employability. He also notes the following:

“All sorts of jobs have elements of learning or training, especially at the entry level. Merely having a job at all can have value down the line worth enormously more than the wage you are currently earning in terms of a proven track record of reliable employability or moving up within a particular organization.“

The negative employment effects of a higher wage floor are greater if the employer cannot easily pass higher costs along to customers. That’s why firms in highly competitive markets (and their workers) are more vulnerable. This detriment is all the worse when a higher wage floor is imposed within a single jurisdiction, such as the city of St. Louis. Bordering municipalities stand to benefit from the distorted wage levels in the city, but the net effect will be worse than a wash for the region, as adjustments to the new, artificial conditions are not costless. Again, it is likely that the least capable workers and least resourceful firms will be harmed the most.

The negative effects of a higher wage floor are also greater when substitutes for low-skilled labor are available. Here is a video on the robot solution for fast food order-taking. In fact, today there are robots capable of preparing meals, mopping floors, and performing a variety of other menial tasks. Alternatively, more experienced workers may be asked to perform more menial tasks or work longer hours. Either way, the employer takes a hit. Ultimately, the best alternative for some firms will be to close.

The impact of the higher minimum on the wage rates of more skilled workers is likely to be muted. A correspondent of mine mentioned the consequences of wage compression. From the link:

“In some cases, compression (or inequity) increases the risk of a fight or flee phenomonon [sic]–disgruntlement culminating in union organizing campaigns or, in the case of flee, higher turnover as the result of employees quitting. … all too often, companies are forced to address the problem by adjusting their entire compensation systems–usually upward and across-the-board. .. While wage adjustments may sound good for those who do not have to worry about profits and losses, the real impact for a company typically means it must either increase productivity or lay people off.“

For those who doubt the impact of the minimum wage hike on employment decisions, consider this calculation by Mark Perry:

“The pending 67% minimum wage hike in LA (from $9 to $15 per hour by 2020), which is the same as a $6 per hour tax (or $12,480 annual tax per full-time employee and more like $13,500 per year with increased employer payroll taxes…)….“

Don Boudreaux offers another interesting perspective, asking whether a change in the way the minimum wage is enforced might influence opinion:

“... if these policies were enforced by police officers monitoring workers and fining those workers who agreed to work at hourly wages below the legislated minimum – would you still support minimum wages?“

Proponents of a higher minimum wage often cite a study from 1994 by David Card and Alan Krueger purporting to show that a higher minimum wage in New Jersey actually increased employment in the fast food industry. Tim Worstall at Forbes discussed a severe shortcoming of the Card/Krueger study (HT: Don Boudreaux): Card and Krueger failed to include more labor-intensive independent operators in their analysis, instead focusing exclusively on employment at fast-food chain franchises. The latter were likely to benefit from the failure of independent competitors.

Another common argument put forward by supporters of higher minimum wages is that economic theory predicts positive employment effects if employers have monopsony power in hiring labor, or power to influence the market wage. This is a stretch: it describes labor market conditions in very few localities. Of course, any employer in an unregulated market is free to offer noncompetitive wages, but they will suffer the consequences of taking less skilled and less experienced hires, higher labor turnover and ultimately a competitive disadvantage. Such forces lead rational employers to offer competitive wages for the skills levels they require.

Minimum wages are also defended as an anti-poverty program, but this is a weak argument. A recent post at Coyote Blog explains “Why Minimum Wage Increases are a Terrible Anti-Poverty Program“. Among other points:

“Most minimum wage earners are not poor. The vast majority of minimum wage jobs are held as second jobs or held by second earners in a household or by the kids of affluent households. …

Most people in poverty don’t make the minimum wage. In fact, the typically [sic] hourly income of the poor appears to be around $14 an hour. The problem is not the hourly rate, the problem is the availability of work. The poor are poor because they don’t get enough job hours. …

Many young workers or poor workers with a spotty work record need to build a reliable work history to get better work in the future…. Further, many folks without much experience in the job market are missing critical skills — by these I am not talking about sophisticated things like CNC machine tool programming. I am referring to prosaic skills you likely take for granted (check your privilege!) such as showing up reliably each day for work, overcoming the typical frictions of working with diverse teammates, and working to achieve management-set goals via a defined process.”

Some of the same issues are highlighted by the Show-Me Institute, a Missouri think tank, in “Minimum Wage Increases Not Effective at Fighting Poverty“.

A higher minimum wage is one of those proposals that “sound good” to the progressive mind, but are counter-productive in the extreme. The cities of St. Louis and Kansas City would do well to avoid market manipulation that is likely to backfire.

Tragedy of the Common Core

17 Tuesday Jun 2014

Posted by pnuetz in Uncategorized

≈ 2 Comments

Tags

Common Core, Education Standards, Federalism, Missouri House Bill 1490, Show-Me Institute

Image

Common Core standards purport to encourage “critical thinking,” but much of the curriculum is a propagandized, dumbed-down version of subject matter better established by authorities at the local or even the state level.  Decentralized authority over school curricula is a more potent force for good education than a set of federal specifications, one effect of which is to encourage teaching to standardized tests. The Common Core curriculum is a step backward in math and language studies, and it is full of distorted information in both history and science. Contrary to assertions that its development was a collaborative effort, the “standards” were established by a relatively small cadre of “experts” and handed down from on-high.

Here are links to a two-part series outlining major concerns about the Common Core curriculum. Part 1 appeared in the Illinois Review and deals with english language arts and math. Part 2 appeared on the Heartland Institute blog and deals with history and science.

Missouri lawmakers recently approved a bill, now sitting on Governor Nixon’s desk, to “prevent the state board of education and DESE from adopting or implementing the Common Core State Standards. Additionally, it would require the Missouri General Assembly to approve future statewide education standards.” Here is the testimony from James Shuls, Director of Education Policy for the Show-Me Institute, a Missouri think-tank, in favor of House Bill 1490 before the Missouri House Education Committee.

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