The State of American Labor

I agree with Dana Milbank that the labor situation in the United States is likely to foster a backlash from American voters:

Straws in the wind suggest a building backlash. On Tuesday, Los Angeles approved a $15 minimum wage, joining more than 17 states and several municipalities that have raised their minimum wages since 2013. Fast food and retail employers, under pressure, have announced increases in low wages covering some 2 million workers.

Organized labor, in retreat for decades, has been reasserting itself within the Democratic Party. This week, Philadelphia Democrats chose as their next mayor Jim Kenney, who had strong union backing in the primary (and faces only token opposition in November). The come-from-behind victory for Kenney, who had been outspent 3 to 1, follows similar long-shot wins for union-backed mayoral candidates in Boston and New York.

but I see few signs that the backlash will take the form he’s proposing, strengthening the hand of organized labor. If it is I just don’t see it.

Today about 11% of the American workforce is unionized, nearly a third of what it was in 1950. Of those roughly 35% are public sector employees while only 6% work in the private sector. Men are slightly more likely than women to be union members, blacks more likely than whites or Hispanics, and Baby Boomers significantly more likely than Millennials. A sixth of Baby Boomer workers are unionized; less than 5% of Millennials are.

The optimistic interpretation of that is that unions are due for a comeback; the pessimistic one is that they’re dying out. I think the latter interpretation is probably closer to the truth than the former.

It should be obvious that union membership has followed the fortunes of manufacturing. As the number of workers employed in manufacturing has declined, so has union membership. I believe that this is because the opportunities for effective labor action are much greater in high margin sectors with a high cost of entry dominated by a small number of companies, e.g. auto manufacturing, than they are in low margin sectors with low costs of entry and many small operators, e.g. food service. As the number of American workers in food service, hospitality, and retail increase, union strength is likely to diminish.

If Illinois is any gauge, the political winds are shifting but they’re not shifting in the direction of labor unions:

The legislature is scheduled to adjourn May 31, but Senate Republican leader Christine Radogno dismissed the deadline and said the package of bills Rauner presented to the General Assembly represents the bare minimum for the governor and GOP lawmakers to even begin to consider a tax hike to help close a gaping $6.6 billion hole for the budget year that starts July 1.

But many of Rauner’s proposals are politically toxic to Democratic lawmakers and their allies, including legislative term limits, changes in workers’ compensation, limitations on damage awards in civil lawsuits, and weakened union rights for municipal workers and teachers to bargain for pay.

Rauner also is proposing a property tax freeze that many mayors oppose and allowing cities to file for bankruptcy, which many unions see as an attempt to allow municipalities to get out of pension obligations.

As private sector workers find themselves paying ever more for the benefits and wages of public sector workers, benefits and wages far in excess of their own, it may be hard to engender sympathy for the plight of the poor public sector workers.

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The Moral Foundations of Free Markets

James Taranto eulogizes the philanthropist Jack Templeton who died a week ago:

An evangelical Christian who graduated from Harvard Medical School, he became a pediatric surgeon, and he believed passionately in scientific inquiry. Born to wealth as the son of financial legend Sir John Templeton, Jack Templeton understood the moral foundation upon which free markets depend.

In a note published almost 10 years ago on the Web page of the Yale Class of 1962, he questioned a “tolerance” that “demands incessantly that one abandons all judgment.” He went on to ask: “Should we tolerate a public educational system with its entrenched self interest in which virtually every inner-city parent knows is destroying any hope or possibility of their children achieving meaningful opportunity in a 21st Century Economy?”

Too many scions of wealth squander it or betray the principles required to create it. Jack Templeton used his good fortune to spread those moral and economic principles for the benefit of all.

Far too many forget that a free market system can only endure within a moral context. That this moral context has been eroding should be obvious:

NEW YORK (AFP) –
Nearly half of finance industry workers suspect competitors of cheating, while over a third in the highest pay bracket have witnessed wrongdoing first hand, according to a survey seen Thursday.

Key findings include that 23 percent believe their colleagues have engaged in unethical activity to gain an edge, nearly double the level in a 2012 survey, while almost one-fourth of those making more than $500,000 a year have felt pressure to compromise ethically.

The survey of 1,200 workers in the US and Britain said many believe crossing ethical barriers to be “part and parcel of succeeding in this highly competitive field.”

A republican system can only endure within a moral context, too, as Plato pointed out millennia ago. Remember that at the time of his death Thomas Jefferson’s library largely consisted of books on ethics.

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The View from the Top

I disagree rather vehemently with Megan McArdle’s claim that America’s workers have brought the present state of the U. S. labor market on ourselves:

In a similar way, as employees, we want to have maximum freedom to take better jobs, to withhold our labor until we get a better deal, or to take time off for stuff we think is important, while enjoying maximum income stability. As customers, however, we want folks who will work cheaply with no commitments and yet show up reliably, which is why we hate the cable company so much. The institutions that intermediate these two desires are employers: governments and companies.

As with the banking system, this creates immense value: You don’t have to personally locate a cable installer every time a wire goes on the fritz. However, as we saw in 2007, it also creates risks. These risks can be mitigated by good government policy, but they can never be entirely eliminated.

I note she cites no data to substantiate her claim—just airy generalizations.

There might be some truth to it if America’s workers or consumers were capturing more of the economic surplus in the economic transactions that we’re making but we aren’t. Most is being realized in the form of producer surplus as is obvious from the empyrean heights the stock market has reached and the rates by which executive salaries are exceeding the wages of average Joe’s.

There is a wide-ranging consensus on economic policy between the two major political parties. It’s sometimes call the “Washington consensus” or neoliberalism. The American people didn’t choose our immigration policy. It’s the opposite of what most of us want to see. We didn’t choose our monetary policy, either. I seem to recall that’s made by a handful of appointed academics and bankers. To change the present trends in the American workplace (or, for too large a percentage of Americans, out of it) that policy would need to change which is another way of saying the situation will get worse before it gets better and it’s no fault of mine.

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The Hobson’s Choice

Quoting Colen Dueck’s book, The Obama Doctrine: American Grand Strategy Today, Peter Berkowitz presents as good an explanation of the president’s policies as any I’ve seen:

to secure progressive policy legacies, win domestic political victories, and preserve the strength of his center-left coalition

I don’t find his characterization of the Republicans’ alternative particularly reassuring:

bedrock support for American allies overseas, firm deterrence of U.S. adversaries, assertive counterterrorism, reinforced national defenses, and an overarching mentality of peace through strength.

Generalizations can only be contextualized when embodied in actual physical candidates who are competing for an office. In 2008 we had a choice between a candidate who vowed to win in Afghanistan by increasing the troop strength deployed there and his opponent, a man who has apparently never met a war he didn’t like. As usual I chose the lesser evil. In 2008 we had a choice between the incumbent and a challenger who didn’t differ materially from the incumbent in his foreign policy approach other than by a vow to be more aggressive.

Today most of the nineteen (!) prospective Republican candidates are vying over how hawkish they can be. Returning to “conservative American realism”, we have very few allies, a number of frenemies, a large number of clients, and no imminent threats other than our own policies. Truculence or the willingness to fight our clients’ battles for them doesn’t reassure our allies; it alarms them. And as far as strength goes, we are in the possession of overwhelming military force and there are few signs that will change any time in the foreseeable future.

The leading Democratic candidate is one of the party’s most hawkish, who has a manifest willingness to engage in humanitarian interventions without a concomitant willingness to ensure that realize humanitarian objectives.

I’ve written before that I vote for president primarily on foreign policy. Unless something changes radically in 2016 I will be faced with a Hobson’s choice which is to say no choice at all.

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The Perception of Danger

When I read this article in The Telegraph (with accompanying map) of the world’s cities that are most at risk of a terrorist attack to learn that no U. S. city is in the top 100 and U. S. cities are at very low risk indeed a number of possibilities occurred to me:

  1. Our strategy is working!
  2. We’re treating the risks of others as though they were our own.
  3. The risks here are mostly political and have been blown out of proportion.
  4. The U. S. cities at heightened risk are those where our media outlets are concentrated and consequently the risks are blown out of proportion.

I tend to think #3 is the closest to the mark although all of the above may be true in part.

I would also remind my fellow citizens that there are other ways of mitigating risk than military action or even the criminal justice system. If there’s a clearer instance of Maslow’s Hammer, I don’t know what it might be.

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Tertium Non Datur

At Slate Will Saletan mocks the Republican presidential candidates for thinking that Abu Bakr al-Baghdadi, the head of DAESH, is as good as his word:

One of the hot issues in the 2016 presidential election is how to deal with terror and slaughter in the name of Islam. President Obama and Hillary Clinton refuse to call such violence Islamic. They insist that Muslims are victims, not allies, of ISIS and al-Qaida.

The Republican candidates for president say this reluctance to associate Islam with jihadi violence is naïve, wimpy, and dangerous. “We need a commander in chief who will once and for all call it what it is, and that is that radical Islamic terrorism is a threat to us all,” says Wisconsin Gov. Scott Walker. Rick Santorum agrees: “Islam is an ideology. And we need to be honest about the American public about what the nature of our enemy really is.” Sen. Marco Rubio promises a Reaganesque crusade…

[…]

Republicans who talk this way think they’re being tough. In reality, however, they’re aiding the enemy. They’re doing for ISIS what they did for al-Qaida: assisting its recruitment, social media, and political strategy. Rhetorically, ISIS and the GOP are in perfect harmony.

He goes through the Republicans’ talking points one by one, finding support for their views in al-Baghdadi’s statements.

At Instapundit Elizabeth Price Foley retorts:

So given all these statements from al-Baghdadi, somehow this guy concludes that this is not a religious war being waged by ISIS and that we if we’ll all just chill, we can peacefully coexist with them? And more specifically, if anyone tries to suggest–such as, say, a Republican–that ISIS is waging a religious war and isn’t interested in peace, they are somehow “determined to prove Baghdadi right” and “working for” the ISIS leader?

Isn’t there some view other than these two polar opposites—on the one hand that there is no threat and on the other that we should rush in, guns blazing? Indeed there is and it’s what I think about the subject. I think that DAESH is an existential threat to the Kingdom of Saudi Arabia, worrisome to Iran, Israel, and Europe, and a nuisance to us. We can mitigate whatever threat it poses to us by other means than going to war.

If there’s anything that’s “aiding the enemy” it’s peddling the idea that there are only two points of view on this subject.

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LA Is Increasing Its Minimum Wage

I didn’t want to let this story get by without commenting on it. The Los Angeles City Council has voted to increase the city’s minimum wage from its present level of $9.60 to $15 per hour over the period of the next five years:

The Los Angeles City Council has voted 14-1 on Tuesday to increase the city’s minimum wage from $9 to $15 an hour by 2020.
Under the plan, pay will gradually increase for the lowest paid workers over the next five years and reach the top mark by 2020 for larger employers.

That’s a 66% increase over five years which is further indexed to the CPI. That will be the largest-scale experiment in increasing the minimum wage conducted by any city in the U. S. to date and I’ll be interested in seeing how it turns out.

The prevailing view among scholars is that a moderate increase in the minimum wage is unlikely to decrease the number of workers being paid the minimum wage greatly. Is 66% moderate? I guess the answer is “we’ll see”.

The issue is actually somewhat broader than just the number of jobs being offered at the minimum wage. There’s also the question going forward of whether the higher minimum wage will make it harder to create new businesses and new jobs. In addition I suspect that the higher minimum wage will increase the demand for workers being paid off the books which could conceivably incentivize illegal immigration.

The one thing that we shouldn’t expect is that employers will be able to pass along all of the increases in their costs which will result from the higher minimum wage and that consumers will be willing to pay the higher costs because they’re being paid a higher wage. That’s another perpetual motion scheme—the “cat and rat farm” I’ve warned about every so often.

Update

Peter Suderman does the literature search:

For the past few years, liberal economists and policy wonks have been increasingly vocal in arguing that that it’s not true that increasing the minimum wage costs jobs. As senior administration econ adviser Jason Furman said last year when President Obama called for a national increase in the minimum wage, “Zero is a perfectly reasonable estimate of the impact of the minimum wage on employment.” Echoing the sentiment, The New York Times editorial board wrote around the same time that “the weight of the evidence shows that increases in the minimum wage have lifted pay without hurting employment.”

The evidence for this isn’t nearly as overwhelming as boosters sometimes like to suggest. Economists David Neumark and William Wascher, for example, have surveyed the literature and found that, overall, most studies still show that wage increases cost jobs. And the Congressional Budget Office (CBO) estimated that raising the federal minimum from $7.25 to $10.10 over a three year period would probably cost about 500,000 jobs, and perhaps as many as 1 million. But the CBO also said it was possible that the number of jobs lost would be minimal, pointing to some studies suggesting that the wage floor could be increased with very little effect on jobs, at least in certain circumstances, up to a certain point.

As I’ve said before if I were writing the legislation I’d do so to stop the increase if it were clear it was having an adverse effect on jobs. The experiment will be under way soon.

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Bias

I have recently discovered that “bias” is an auto-antonym, like “inflammable”.

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Things to Come

There was an interesting observation made in my post yesterday reacting to Sean Trende’s observations about the state of the Republican Party to the effect of a prediction that Midwestern and Southern states would experience a sharp out-migration while, presumably, those on the East and West Coasts would see in-migration. If I misinterpreted that comment I apologize in advance.

The graphic above, courtesy of Governing.com, (which I suspect will play hob with my format but you can’t have everything) depicts in-migration and out-migration by state in 2011. That’s the most recent I could find. If the commenter’s prediction is coming true, it isn’t exactly coming true yet. As you can see Midwestern states are experiencing out-migration and the leader of the pack is Illinois, the most Democratic state in the Midwest. Southern states are experiencing in-migration with the most in-migration being seen in the very Republican state of Texas. The most populous East and West Coast states, New York and California, respectively, are experiencing substantial out-migration.

I do not believe that the more-or-less current patterns reflect what the commenter was implying—that Republicans would drive people out of their states. That doesn’t appear to be happening. Indeed, if you can make a simple generalization based on statistics it would be the opposite.

Before I close I want to caution against too simple an interpretation. The statistics say nothing about just who is migrating. It could be that Democrats and Republicans are equally likely to leave their home states in search of greener pastures, it might be that Republicans are more likely to leave, or it could be that Democrats are. Texas could become more Republican rather than less or vice versa. Ditto for California. It depends.

And it all depends on whether you believe in the persistence theory. I tend not to but would be more predisposed to think about equilibria. It might be that Americans are seeking some sort of equilibrium and when that is reached the present trends will slow or even reverse. It can all be summed up in two words: it’s complicated.

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Is the Republican Party a Party in Decline?

Sean Trende and David Byler attempt an empirical examination of the question and conclude:

Overall, this gives the Republicans an index score of 33.8. This is the Republican Party’s best showing in the index since 1928, and marks only the third time that the party has been above 15 in the index since the end of World War II.

It’s an interesting article that you might want to take a glance at. As far as the White House goes the only poll that matters is the one conducted on the first Tuesday of November, 2016 and no index of party strength will change.

That having been said, I believe that Democrats would do well to call a moratorium on dismissing the Republicans as the party of the past or a spent force and pay more attention to the here and now. It’s a failing that progressives frequently have. Training their eyes firmly on the horizon may result in mistaken judgments about the present.

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