Over at The American Spectator, I break down the debate over regulation’s impact on the job market and propose one regulation that could create countless jobs:
As everyone knows, winter is coming. And many of the nation’s least-employed states will see a lot of snow this year. Already, giant snowplows are beginning to traverse the highways and byways of Michigan, Ohio, and other states going through hard times. With these plows, one man can do the work of a hundred.
I say we ban snowplows and hand out some shovels.
Think about it for a minute. In Michigan alone, nearly 520,000 people are looking for a job and can’t find one. Tens of thousands of miles of roads zig and zag across the state. If this winter lives up to lofty Midwestern standards, it’s possible that every last one of those 520,000 could work at least part time clearing the way for their fellow citizens. And all because of regulation!
I do enjoy economic humor. Read the whole thing here.
In California, a war is quietly being fought: workers versus technology. And the war has materialized in the form of a bill that seeks to ban the sale of alcohol by automated checkout machines at grocery stores. You may have seen them, those machines that allow customers to scan and bag their own items, which can speed up the process and keep lines smaller. Those machines also allow grocery store owners to reduce their costs by employing fewer workers. Herein lays the problem: workers fear that they are slowly being replaced by machines and that increased reliance on automatic check out machines threatens their jobs.
The legislation, AB 183, would ban the sale of alcohol at self-checkout aisles. The bill’s proponents drag out the old “save the children” argument, claiming that minors can easily purchase alcohol without the human oversight a traditional checkout process offers. Of course, the robots aren’t completely automated and require a worker to authorize any purchase that contains an age-restricted item such as alcohol. Additionally, the numbers of “sales to a minor” violations submitted by the state’s alcohol control board seem to indicate that most of these sales do not occur at grocery stores, but rather at liquor stores and in restaurants.
[click to continue…]
The economy may be slowly recovering, but that’s in spite of — not because of — the recent orgy of federal spending. Two economics professors, Tim Conley and Bill Dupor, concluded this month that the $800 billion stimulus package wiped out a million private-sector jobs, destroying a net 550,000 jobs. (The American Recovery and Reinvestment Act, also known as the stimulus package, created 450,000 government jobs, partly offsetting the million private-sector jobs it wiped out.) “The majority of destroyed/forestalled jobs were in growth industries,” they say.
The stimulus package was earlier criticized by many leading economics professors, like Harvard’s Jeffrey Miron, Robert Barro, and Martin Feldstein. Professor Barro called it “the worst bill that has been put forward since the 1930s.” Nobel laureates Gary Becker and Vernon Smith have also criticized it. 200 economists signed a statement publicly opposing the stimulus package.
While pushing the stimulus package through Congress, Obama cited claims by the Congressional Budget Office (CBO) that it would save jobs in the short run, while ignoring the CBO’s own conclusion that the stimulus package will actually shrink the economy over the long run, by increasing the national debt and thus crowding out private investment. Contrary to the CBO’s findings, Obama claimed that “irreversible decline” would occur if the stimulus was not enacted into law.
Obama has run up the largest budget deficits in history, running monthly deficits that are bigger than Bush’s entire annual deficit for 2007, after the economy started to go south.
Wendell Cox had an interesting article this week on his new findings on land-use regulation and housing prices. Long a critic of smart-growth planning, Cox’s new study puts a quantitative face on what excessive land-use regulations do to housing prices:
The overwhelming majority of new housing in the United States continues to be detached and is built near or on the urban fringe (Note 2). For new detached homes, the Index is 1.0 in six metropolitan markets (Atlanta, Dallas-Fort Worth, Houston, Indianapolis, Raleigh-Durham and St. Louis). This indicates that land use regulation is less restrictive and does not add more than normal to the price of new homes (Note 3).
In the other five metropolitan markets, the land and regulation cost ratio has risen above 20%, resulting in a higher Index. The Index is 2.4 in Minneapolis-St. Paul, 3.9 in Seattle, 4.5 in Portland, 5.7 in Washington-Baltimore and 13.2 in San Diego. It is estimated that more restrictive land use regulation raises the price of the least expensive detached houses from nearly $30,000 (in Minneapolis-St. Paul) to more than $220,000 (in San Diego) than would be expected if these metropolitan markets had retained less restrictive land use regulation (Figure 2).
Ironically, smart-growth proponents are still peddling the myth that “sprawl” is the main problem, rather than their misguided central planning. Take this new report from left-wing environmentalist and “[un]affordable housing” advocates, which claims that any of the benefits of cheaper housing on Virginia urban peripheries are outweighed by increases in transportation spending.
Of course, their analysis doesn’t consider the fact that the vast majority of Americans prefer to live in detached single-family homes on larger lots, as opposed to apartments in dense urban areas. This is particularly true of families with children. While demonizing cars, the report’s author fails to note that car ownership significantly increases employment opportunities and pay (and that this is particularly significant for lower-income minorities). His solution? Continuing the same aggressive central planning that made housing too expensive in the first place, that disproportionately harms the poor, and that likely helped drive the housing crisis.
Have a listen by clicking here.
Ryan Radia, CEI’s Associate Director of Technology Studies, talks about obstacles and opportunities for job creation in the high-tech sector. Regulatory uncertainty is making companies wary of making long-term investments. The sheer number of regulations makes it very expensive to hire workers. According to an article Radia coauthored at RealClearMarkets, rolling back the regulatory state could pave the way for more jobs.
Over at RealClearMarkets.com, my CEI colleague Ryan Radia offer some ideas for how to create more high-tech jobs. Our main points:
-Do more with less. This often involves cutting workers who aren’t productive enough to offset their wages. Sounds like bad news. But it’s actually crucial to job creation. That’s because in the long run, automation frees up resources — and employees — for new opportunities.
-Hiring new employees means jumping through countless regulatory hoops. According to a 2005 study by economist W. Mark Crain, compliance costs average $5,282 per employee at large companies. Small businesses pay $7,647 per employee. Some of those resources could have been spent hiring more employees. Over-regulation causes unemployment.
-Politicians can’t create jobs. But they can help to foster better conditions for wealth and job creation. Regulations cost businesses and consumers $1.17 trillion last year alone. Congress should roll them back. Some companies fear potential clampdowns on their businesses. Congress should leave them alone. Some failing businesses are eating up resources that could be better used elsewhere. Congress should stop bailing them out.
My colleague Ryan Radia and I recently sent this letter to The New York Times:
Editor, New York Times:
Catherine Rampell’s September 7 article, “Once a Dynamo, the Tech Sector Is Slow to Hire,” mourns the recent decline in U.S. data processing jobs. She blames much of the decline on the automation of previously tedious tasks.
May we suggest one way to get those jobs back: No more automation. Ban the use of computers for data processing. Imagine how much information flows through today’s global economy in an average day. Computers handle most of the load. That costs millions of jobs.
The effects would reverberate far beyond the tech sector. The paper, pen, and pencil industries would also boom.
Companies are dead-set on doing more with less. True, that creates more jobs in the long run by freeing up resources — and employees — for new ventures. But if only they would consider doing less with more, they could create more data processing jobs.
Ryan Young and Ryan Radia
Competitive Enterprise Institute
Washington, D.C.
The recent announcement that the GDP grew in the third quarter at an annualized rate of 3.5 percent was referred to by Treasury Secretary Tim Geithner as proof that the economy is finally improving. But a quick glance at history demonstrates that this is not the case.
Between 1934 and 1937—during the heart of the Great Depression—GDP grew at by an average of 9.5 percent annually. In 1934, GDP grew by nearly 11 percent, but it would be six more years until the depression finally ended. Clearly, GDP growth alone cannot be taken as an indicator that the economy is on the upswing.
It is also disheartening that the two major contributors to GDP growth in the third quarter were housing construction and auto sales, both of which were propped up by government subsidies. Auto sales were boosted by the Cash for Clunkers program, and housing construction was driven by the $8,000 first time home buyer tax credit.
Combine this with other spurious accounting maneuvers used to calculate third quarter GDP, and it begins to appear that GDP might actually have decreased during this period.
In addition to phony GDP growth, there are other signs that the recession is not yet over. Employment during the third quarter fell by over 750,000, and it is expected to fall further still. Employment has been called a lagging indicator of economic health, but when economic health is measured in terms of the financial well-being of the population, employment is not a lagging indicator, it is the indicator.
The recent bankruptcy of CIT Group is another sign that our economic woes are far from over. A recipient of $2.3 billion in TARP funds—deemed likely unrecoverable—CIT Group Inc. filed for Chapter 11 today, seeking protection from $10 billion in debt. CIT finances close to one million businesses, and conducts business with over 80 percent of all Fortune 1000 companies, so there is enormous potential for negative secondary effects stemming from the bankruptcy.
The CIT Group bankruptcy comes on the heels of nine more bank failures on Friday, which brings this year’s total to 115. These bank failures came at a cost of $2.5 billion to the FDIC deposit insurance fund.
There is a clear political incentive for Geithner and others to make efforts to convince us that this economic slump is over. It is unfortunate that these efforts include no actual facts.
My good friend and Bureaucrash ally Xaq Fixx recently altered me to an interesting story on the intersection of politics, technology and free speech. It seems that the state government of California, through the California Employment Training Panel, is paying contractors who train in-state workers in new skills – an effort to boost the Golden State’s notoriously sagging economy. Nothing too unusual there.
Enter SF Weekly’s Matt Smith, who noticed that the list of recipients of this state-subsidized training were employees of Cybernet Entertainment LLC. Cybernet in turn is the proprietor of a number of websites which feature videos catering to adult and, ah, highly specialized interests. Kinky but legal, in other words. Smith submitted a public records request regarding the company’s participation to the state, and received a reply to the effect that “the government had been unaware that Cybernet was in the business of narrowcasting videos depicting sexualized torture.”
Thus informed, however, officials at the Employment Training Panel promptly canceled Cybernet’s participation in the program, citing a policy of not working with the adult entertainment industry. The company’s COO Daniel Riedel, has vowed to fight the state to keep the subsidy. Interestingly, scribe Smith goes on to cite the possibility that denying participation in the program based on the content produced by Cybernet may violate the First Amendment:
Does the state’s refusal to train porn-makers violate constitutional free-speech guarantees? I’m not joking. Some serious and credible people says it’s worth considering whether it’s legal to deny training to porn workers merely because they film naked, shackled women with live electrodes clipped to their genitals.
Smith then goes on to cite experts from the California First Amendment Coalition and the UC Hastings College of the Law to the effect that there might, in fact, be a case here for Cybernet. And, of course, they have their natural allies within their own industry – porn titan Vivid Entertainment Group is also opposed to the decision.
So what do we think, OpenMarket readers? Assuming that there’s going to be an employment training subsidy program in place at all, should the people running it have discretion to deny participation to legal businesses because they don’t like the product being pedaled? Should vegan grant administrators, for example, be able to veto applications from meat processing plants, or Catholic administrators applications from health clinics that provide abortions? Tell us what you think in the comments section.
An update from our very own Ivan Osorio:
Sen. Arlen Specter (R-Penn.) is expected to announce this afternoon that he plans to vote against cloture on the so-called Employee Free Choice Act, according to Grover Norquist, president of Americans for Tax Reform, who was called by Specter’s office. He announced this at the Capital Research Center labor conference, at which I spoke on a panel this morning.
CongressDaily is also reporting the news.
RSS Updates 
RSS E-Mail Updates 
Twitter 
Facebook 
CEI.org 
WorkPlaceChoice.org 
GlobalWarming.org 
CEI On Demand Video 
Liberty Week Podcast 