Labor

France Needs a “Power-Up” When It Comes to Labor Reform

by Matthew Melchiorre on June 5, 2013 · 0 comments

in Economy, Employment, International, Labor, Regulation

In its annual country report released on Monday, the IMF turned up the heat on France for labor reform. The Washington-based lender called for a “powering up” of Hollande’s labor reforms to tackle the “significant rigidities hinder[ing] the economy’s capacity to grow and create jobs.”

Socialist President Francois Hollande, who has suffered since inauguration the largest fall in popularity of any French President in the past 50 years, has already been under considerable pressure from a citizenry fatigued from anemic and oftentimes negative economic growth and rising unemployment since 2008. Yet he still hasn’t delivered on reviving France’s flailing job market.

That’s because he’s too focused on devising government schemes, such as giving subsidies to small businesses who hire young people and retain older workers, to avoid making real changes to business-crushing labor regulations that have come to be entitlements within French society. Hollande’s changes to these laws thus far, in an attempt to draw attention away from his inaction on structural reform, are merely cosmetic, as I point out in a February CS Monitor article.

These reforms only increase flexibility during economic downturns, and they do nothing to change the employer’s fundamental and burdensome obligations to employees.

First, firms still cannot lay off workers to improve competitiveness when the business is healthy; they can only make economic dismissals to preserve competitiveness when already in financial straits. In France, it ought to be legal to fix small problems before they become big.

Second, businesses remain obligated to assist laid-off employees in finding other jobs and in retraining them for their new positions – a distinctly French phenomenon. For businesses with more than 1,000 employees, this limbo period before dismissal can last from four to nine months.

Third, reform merely reduces the period for laid-off employees to legally challenge their dismissal from five years to two. Some progress! Not only does 1 in every 4 French employees bring a case to court, but French labor courts are the least business-friendly in Europe, with employers losing 75 percent of cases, according to the Organisation for Economic Co-operation and Development.

The agreement also increases taxes and fees for hiring workers on temporary contracts. This hits businesses hard because 8 of every 10 new hires are on these contracts, according to French Labor Ministry estimates. This was a union demand to discourage the use of temporary work, which is a competitive threat to union-protected permanent contracts.

The reforms especially harm French youth, as more than half of those employed now jump from job to job under temporary contracts, according to Eurostat. Understandably, businesses don’t want to take the risk of hiring an employee they can’t dismiss later.

France needs to increase labor flexibility, not create government programs that add needless complexity to a labor market that is already difficult to navigate for businesses. Hollande is playing a losing game of charades. It’s time for him to roll up his sleeves and deal with the difficult political battle that real reform entails.

European Skepticism of Minimum Wage Falls on Deaf Ears in America

by Matthew Melchiorre on June 3, 2013 · 0 comments

in Economy, International, Labor, Regulation

Spain’s central bank—operating within the European country with the highest rate of unemployment—just recommended to the government in Madrid a suspension of the minimum wage in certain industries. The bank wants to remove the law from being a “barrier” to hiring lesser skilled workers.

Say again? Our more left-leaning friends across the Atlantic just admitted that the minimum wage, a price floor for labor markets, creates unemployment. This simple economic logic is often denied by economists, pundits, and politicians in the U.S., and most recently by Barack Obama in pursuing his goal to increase the minimum wage to $9 per hour.

With more than half of all Spaniards under the age of 25 currently jobless, the welcome realization that minimum wage prices low-skilled and typically young workers out of lower-paid jobs they would gladly take comes at a high price.

Germans had this epiphany too at a time when they endured unemployment above that of their European peers. That’s why the Social Democratic government of the 2000s (yes, a bunch of center-left Europeans!) began implementing a “minijobs” program in 2003—as part of a larger package of labor liberalizations—for people who wanted to work a limited number of hours per week at a competitive and tax-free wage. Though Germany does not have an official minimum wage, most full-time wages are set through industry-level collective bargaining agreements, thereby creating the same price floor as a wage law. The minijob contract is exempt from these wage conditions.

According to the The Wall Street Journal, roughly two-thirds of minijob workers hold no other job—meaning that they would otherwise be unemployed. And one in every five working Germans has a minijob. As the Euro Area reported a record-high unemployment rate of 12.2 percent in April, German unemployment remained among the lowest in Europe, at 5.4 percent, and youth unemployment was similarly low, at 7.5 percent.

Labor flexibility creates jobs. Blanket regulation requiring higher wages creates unemployment. Spain and Germany found this out the hard way. With unemployment still stubbornly high at 7.5 percent, let’s hope America does not.

Anti-Business and Anti-Freedom: The United Nations Convention on the Rights of Persons with Disabilities

by Hans Bader on May 23, 2013 · 1 comment

in Economy, Employment, Insurance, International, Labor, Legal, Personal Liberty, Regulation

In the American Spectator, CEI Vice President for Strategy Iain Murray and Geoffrey McLatchey explain why the Senate should be skeptical of the United Nations Convention on the Rights of Persons with Disabilities, which fell six votes short of the 67 needed for ratification last December.  As they note, “the treaty would enable an enormous increase in the potential power of UN bureaucrats over the American people and undermine national sovereignty.”  Moreover, although “CRPD proponents argue that it merely reiterates existing U.S. disability law,” this is simply false, based on the treaty’s plain language.

It also delegates authority to a UN committee, they note, resulting in a “loss of U.S. sovereignty.” UN committees like to define free speech as discrimination against minority groups in violation of international treaties, making it dangerous to ratify such treaties.  For example, the  U.N. Committee on the Elimination of Racial Discrimination has ruled Germany violated international law by not prosecuting a former legislator for remarks to a scholarly journal about Turkish-immigrant welfare recipients that were deemed racially offensive. The UN committee ruled Germany’s failure to prosecute the speaker violated the International Convention on the Elimination of All Forms of Racial Discrimination.

As Murray and McLatchey point out, “Under CRPD Article 34, U.S. policy would be subject to the ‘Committee on the Rights of Persons with Disabilities,’ a U.N.-appointed panel consisting of 12 ‘experts.’ The history of other UN bodies [such as] the Human Rights Council — which includes countries with a long history of human rights abuses and hostility toward the United States — is not encouraging. And the Convention’s vague language — such as defining disabilities as ‘an evolving concept’ — suggests the Committee will have ample opportunity to redefine terms to America’s disadvantage.”

Subjecting American policies to the UN is a bad idea, especially given many UN officials’ anti-American ideologies. Such hostility is illustrated by the disturbing remarks blaming America for the Boston terrorist bombing by “Richard A. Falk, the U.N. ‘human rights’ official and Princeton professor. . . .Commenting on the Boston bombing, Falk wrote, “Should we not all be meditating on W.H. Auden’s haunting line: ‘Those to whom evil is done/do evil in return’?” “The American global domination project is bound to generate all kinds of resistance in the post-colonial world.”

As Murray and McLatchey note, “The CRPD also requires the United States to set up a propaganda agency. Yes, you read that right. Article 8 states that signatories must take “immediate and effective measures…to raise awareness throughout society, including at the family level, regarding persons with disabilities, and to foster respect for the rights and dignity of persons with disabilities.” It becomes the federal government’s duty to “combat stereotypes… in all areas of life” by “initiating and maintaining effective public awareness campaigns.”

We previously explained how the CRPD could harm small business and civil liberties at this link.  Cato Institute legal analyst Walter Olson highlighted troublesome provisions in the treaty in an article in The Daily Caller, and a followup analysis at Cato at Liberty.  As Olson pointed out, other mandates in the treaty that go beyond current U.S. law include costly “requirements for ‘guides, readers and professional sign language interpreters” for facilities that currently don’t require them.  As I previously noted, this would appear to partly override the Supreme Court’s decision in Southeastern Community College v. Davis (1979) limiting the degree of accommodation that can be imposed. They also seem to impose new insurance mandates that call into question fundamental actuarial principles used by prudent insurers.

Does Austerity Really “Kill”?

by Matthew Melchiorre on May 23, 2013 · 2 comments

in Economy, Health and Illness, Healthcare, International, Labor, Regulation

Does austerity kill? In a recent New York Times op-ed, David Stuckler and Sanjay Basu claim that fiscal austerity leads to a worsening of health outcomes, using higher suicide and disease rates across Southern Europe as their case-in-point. But there are problems with this formulation.

First, the authors make the mistake of linking fiscal austerity with less health spending.  Greece, Spain, and Italy chose to cut health spending even though there were better choices for cuts. And health spending didn’t put them into deep debt to begin with. Borrowing at cheap interest rates and spending it on pet projects and political patronage — which includes the welfare state, but not so much in health — put them in deep debt. Estonia swiftly and severely began to reduce the size of government in 2009, but it increased health spending during that period and suffered no health declines.

Second, Stuckler and Basu point to high unemployment and trimmed social services as the sources of increased depression and suicide in Southern Europe. But this is not an argument against austerity; it is an argument to make people less dependent on the social welfare system. In Southern Europe, labor markets are broken. That’s why the IMF gave each country a failing grade in labor market efficiency in 2010. In Italy, it’s illegal to fire employees for poor performance and difficult to dismiss them for outright negligence. Layoffs also are a long and expensive process. So,when recession comes, employers can’t hire at lower wages and don’t want to hire because of these factors — which makes matters even worse. Droves of Italians and Spaniards wouldn’t be dependent upon state welfare today if labor markets were more flexible. That’s why austerity should regard not just cutting spending and revenues, but also shrinking the regulatory state. Job protections,  a hidden cost of the welfare state, are the real killer.

The narrative with which the authors open their op-ed—in which an older Italian family commits suicide because Italy’s increasing the pension eligibility age forced the main breadwinner back into a workforce with meager opportunities—tells us to abandon not austerity but the level of commitment to current welfare-state policies. If businesses had more flexibility to hire and fire workers, if the implicit tax rate on labor wasn’t the highest in all of Europe, and if Italy’s court system was more efficient in resolving labor disputes, this family wouldn’t have been so reliant on receiving a state pension in the first place. Finding work would not have been such a hopeless proposition that it  ended in such tragedy.

Third, the authors bring up Estonia’s experience with poor health outcomes during its transition from communism but conveniently fail to mention its success with real austerity from 2009 to the present. After making deep cuts to both spending and revenues beginning in January 2009 (unlike any other country in the Euro Area), Estonia experienced positive economic growth by the third quarter of that year — more than 2 percent growth in 2010, and 7.6 percent growth in 2011. Unemployment began to decrease by the sixth quarter after austerity and is now below the Euro Area average. And most importantly to Stuckler and Basu, neither the change in the rate of suicides nor the change in the total death rate were statistically significant relative to Estonia’s previous 10 years. See my in-depth statistical report for more information: http://cei.org/web-memo/separating-european-austerity-fact-and-fiction.

Painting austerity as the grim reaper is more than a stretch. “Austerity” need not mean a reduction in health spending. And focusing on the short-term effects of trimming the welfare state ignores the long-term causes behind why some citizens’ lives depended so heavily upon it. Does austerity “kill”? It doesn’t have to.

The Economist on “the muddle-headed world of American public pension accounting”

by Ivan Osorio on May 9, 2013

in Bailout Watch, Economy, Labor

As state governments across the nation struggle to address a public pension underfunding crisis they can no longer deny, The Economist is the latest major news outlet to turn its gaze on the ongoing debacle. In the current issue, the magazine’s “Buttonwood” column draws a sketch of U.S. public pension accounting that is not only dysfunctional, but that runs against plain common sense.

American public-sector schemes discount their liabilities by the expected return on their assets. The riskier the asset mix, the higher the assumed return—and the lower the bill appears to be.

This is an odd way of thinking. Suppose a car company borrowed $10 billion in the form of a 20-year bond to build a manufacturing plant and planned to pay off the debt with the profits from running the plant. The car company will assume a higher return on capital than its financing cost (otherwise it should not build the plant). But it still has to recognise the $10 billion bond liability on its balance-sheet. It cannot say it owes only $2 billion because it expects a very high return.

The reason is clear. If the plant fails to earn a high return, the firm will still be liable to repay the bond. Similarly, if pension schemes fail to earn a high return on their assets, they still have to pay benefits. Final-salary pensions are a debt-like liability.

The Buttonwood columnist (currently Philip Coggan) notes recent changes to the nation’s largest public pension plan, the California Public Employee Retirement System (CalPERS), that would require greater employer contributions. But such changes will be ineffective in the long run unless they were to be accompanied by major reforms that address some of the structural factors that have made public pension shortfalls severe and chronic: payouts based on final-year pay, negotiation of benefits through collective bargaining, benefit increases through binding arbitration, politicized pension fund boards, and flawed accounting standards.

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Anti-Immigration Group: “They’re Taking Your Jobs!”

by David Bier on May 3, 2013 · 1 comment

in Labor

The Center for Immigration Studies (CIS), the close-America’s-doors lobby group, has a facile new study that purports to show “there really are no jobs that Americans won’t do.” The fact that this study was produced shows how utterly out of touch with economics CIS is. America’s workforce is 85.3% native-born—it is no surprise that the vast majority of all economic activity is performed by U.S. citizens.

This “news flash” is supposed to demonstrate that because “there are very few occupations that are majority im­migrant… the often-made argument that immigrants only take jobs Americans don’t want is mistaken.” But even this misrepresents the point: the fact that some Americans will do these jobs does not at all imply that Americans in general would do all these jobs. Many Americans do work as agricultural workers—37% of the total, in fact—but that doesn’t mean Americans will beat down farmers’ doors looking for jobs if the immigrants left (just that farmers will produce less).

The reality is that as has been shown in restrictionist European countries, some services simply don’t happen at all without inexpensive labor, whereas in America we just pay higher prices for them. That this needs to be pointed out is scarcely believable. If you banish individuals currently providing services, you get fewer services, making us poorer. In New York City in 2012, immigrants owned 70 to 90 percent of all laundry, taxi and limousine, grocery, beauty salon, and day care small businesses. Americans will suffer dramatically from the loss of all these services, particularly poorer Americans who will pay higher prices for these services.

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The Costs Of Union Shareholder Activism

by Ivan Osorio on May 2, 2013

in Economy, Employment, Labor, Regulation

Is shareholder activism a good or a bad thing? That depends on what any given resolution seeks to improve the company’s performance, and thereby increase shareholder value. That seems like a simple enough and easily understood measure to determine which shareholder resolutions merit consideration. But resolutions that do not meet that criterion are often introduced at public companies’ shareholder meetings, often by labor union pension funds.

A new study from Navigant Economics, commissioned by the U.S. Chamber of Commerce, analyzes resolutions scored by the AFL-CIO in its “Key Votes Survey” between 2009 and 2012, and finds “no conclusive or pervasive evidence that the shareholder proposals assessed in this study improve firm value or result in an economic benefit to pension plans and plan participants.”

Today, at a Chamber event to announce the study’s release, former Securities and Exchange Commission (SEC) Chairman Harvey Pitt. He noted that shareholder activism can be useful, but not when it seeks to advance social agendas. Moreover, successful shareholder activism should advance the interest of all shareholders.

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Did Hensarling Force Obama’s Hand On “Recess” Appointments?

by John Berlau on May 1, 2013

in Economy, Features, Labor, Nanny State, Personal Liberty, Regulation

Post image for Did Hensarling Force Obama’s Hand On “Recess” Appointments?

They called it a “stunt” early last week when House Financial Services Committee Chairman Jeb Hensarling (R-Texas) refused to allow Consumer Financial Protection Bureau (CFPB) director Richard Cordray to testify due to the constitutional cloud over Cordray’s appointment. But this “stunt” just may have forced the Obama administration’s hand in submitting a brief later in the week urging the Supreme Court to resolve the issue.

In a statement, Hensarling announced that the committee could not “legally accept testimony from Richard Cordray … until he is validly appointed as the bureau’s director.” In the letter that Hensarling sent to Cordray, Hensarling cited the ruling of the U.S. Court of Appeals for the D.C. Circuit in Noel Canning v. National Labor Relations Board that three “recess” appointments to the labor board made the same day and in the same manner as Cordray’s appointment were ruled unconstitutional. “It is clear,” Hensarling wrote, “as a number of legal scholars have concluded, that your appointment was also unconstitutional.”

This is exactly what the Competitive Enterprise Institute, and our co-plaintiffs the 60 Plus Association and the State National Bank of Big Spring (Texas), argue in our lawsuit challenging the constitutionality of the CFPB and other elements of Dodd-Frank, the so-called financial reform law rammed through Congress in 2010. Neither Cordray nor the NLRB officials were valid “recess” appointments, because the Senate was in pro-forma session, gaveling in and out every three days and ready for legislative business should it occur (including changes to payroll tax legislation Congress made during these sessions).

The Obama administration’s action was unprecedented. As noted by the nonpartisan Congressional Research Service and reported by Politico, during the 2007-08 pro forma sessions when the Democrats controlled both houses, President Bush “made no recess appointments between [Democrats’] initial pro forma sessions in November 2007 and the end of his presidency.” As I asked on OpenMarket on January 4, 2012, the day the recess appointments were made, “If any adjournment or break the Senate takes can be defined as ‘recess,’ can the president make appointments when the Senate is in formal session and gavels out for the evening?” Or could a recess even be declared when the Senate adjourns for a bathroom break?!

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Meet Julius: How Unions Hurt The Average Worker

by Matt Patterson on April 29, 2013

in Features, Labor, Video

Meet Julius.

Julius is an African American man living in modern-day America. Julius is a fictitious character, but the problems he faces are real problems that real people face every day. He wants the American Dream. He wants prosperity and opportunity. He wants his kids to have a better life than he did. When he retires, he wants to know that his years of hard work have meant some level of comfort in his old age.

In other words, Julius wants what all of us want.

Unfortunately, his economic hopes are continually frustrated in ways both large and small, both obvious and subtle, by a powerful force: labor unions.

In a new CEI video production, an animated film called “The Life of Julius,” we see how he is affected by the laws and regulations supported by unions at every turn of his working life.

As a young man entering the job market for the first time, for example, Julius finds the job pool artificially shrunk in part by minimum wage laws (vigorously promoted by unions for decades), laws that drive up the cost of business and kill thousands of entry-level jobs.

Later in life, as a homeowner in his 40′s, Julius is faced with the imminent prospect of sending one of his children to college. But for a whole host of reasons, labor unions have conspired to leave Julius with less take-home pay, limiting his ability to pay for his daughter’s education, as well as provide for food and vacations.

And on and on it goes, right up to and including his retirement at age 64 (I won’t spoil the end for you).

The point is this: people may not realize it, but labor unions have a stranglehold on the economy in hundreds of ways that affect every single worker, whether they are union members or, like Julius, never belong to a union in their entire life.

Julius just wants the best for him and his family, like all of us. Unfortunately, the best that Julius can do is not nearly as good as it could be, thanks in large part to the pernicious influence of labor unions.

Please come see Julius’s story at WorkplaceChoice.org, and share with your friends and family. After all — you are Julius. And so are we all.

Maryland Bill Will Force Teachers To Pay For The Privilege Of Going To Work

by Trey Kovacs on April 26, 2013 · 1 comment

in Features, Labor, Politics as Usual, Regulation

Post image for Maryland Bill Will Force Teachers To Pay For The Privilege Of Going To Work

In a recent Baltimore Sun op-ed and WorkplaceChoice.org blog post, I argue against Maryland’s Orwellian-named Fair Share Act, which contrary to its name is unfair and coercive in nature. The bill (currently waiting for Gov. Martin O’Malley’s signature) would make payments to teachers unions compulsory, whether a member or not, throughout all Maryland Public School Districts.

If passed into law, it would require all school districts to negotiate with the Maryland State Education Association to set a service fee to “cover” non-union members’ representation costs. Currently only 10 of Maryland’s 24 school districts require non-union teachers to pay union dues.

In the Sun I ask the questions:

But what if teachers don’t want this type of “equity”? What if they don’t want to join a union? What if they want to negotiate their own contract? Why shouldn’t they be allowed to do so?

Well, according to the Baltimore County Union President Abby Beytiun those are illegitimate concerns. In her letter to the editor published in the Baltimore Sun she responds with this doozy:

The Fair Share legislation will create an environment of fairness and equity among all of our educators, who all contribute to the negotiated benefits and legally required representation that they all enjoy. By state mandate, the union must represent all members of the bargaining unit in negotiations and contractual issues.

First, Beytiun’s proposition that state-granted power of coercion to garnish teachers wages as fair is more than disingenuous.

Second, Maryland and most other states already bill taxpayers for representational services provided by government-employee unions to nonmembers. The practice is known as union release time or “official time,” and it allows government employees to perform union duties during their workday.

In addition, through Maryland’s Public Information Act, the Competitive Enterprise Institute obtained union release-time records for nine of the 10 school districts that already require forced union dues. Here are the number of days taken for official time in 2011-2012:

  • Allegany County: 81.5 days
  • Anne Arundel County: 209 days
  • Baltimore City: 84 days
  • Baltimore County: 60 days
  • Calvert County: 120 days
  • Charles County: 31.8 days
  • Garrett County: 17.5 days
  • Howard County: 48 days
  • Prince George’s County: 322 days

Visit WorkplaceChoice.org to view the union release time public records requests in their entirety.

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