issue: Labor

Why America Needs a New Deal for Labor and Business

Posted on by The Progressive Policy Institute

Just before Labor Day, PPI’s President Will Marshall had an opinion piece in The Atlantic, in which he proposed reorienting the relationship of organized labor. Rather than adversaries, they should be partners. Here’s an excerpt:

President Obama is cobbling together a new jobs package for September, but it won’t be enough to revive the economy. Instead of offering another grab-bag of micro-initiatives, the administration needs to embrace a different model for growth that stimulates production rather than consumption, saving rather than borrowing and exports rather than imports.

This strategy emphasizes investment in the nation’s physical, human and knowledge capital–infrastructure, skilled workers and new technology. That’s a better way to raise U.S. wages and living standards than a new jolt of fiscal stimulus.

Getting consumers spending again will boost demand, but much of it will leak overseas via rising imports, stimulating foreign rather than U.S. production. In a world awash with cheap labor, where technology gaps are narrowing rapidly, a wealthy society like ours can thrive only by speeding the pace of economic innovation and capturing its value in jobs that stay in America.

The shift from a consumer-oriented to a producer-centered society won’t happen without a new partnership between labor and business–and a shift in outlook among workers themselves. Organized or not, U.S. workers should think of themselves first and foremost as producers rather than consumers. They have a compelling interest in keeping the companies they work for competitive, and in supporting a new economic policy framework that enables investment, entrepreneurship and domestic production. This reality points to new relations between workers and companies, and new political alliances.

A GRAND BARGAIN FOR LABOR

In the post-war compact of the 1950s and 1960s, workers offered loyalty and labor offered peace to companies in return for stable jobs with decent pay and benefits. But the deal between labor and capital changed as globalization took hold. Workers gave up job security; in return, they got low consumer prices and access to easy credit. Despite access to cheap foreign goods, however, real incomes fell for most households, as real wages dropped and job growth in most parts of the private sector virtually disappeared. Easy credit was used to fund consumption rather than investment in human capital.

Now, at a time when America’s economic preeminence cannot be taken for granted, the interests of workers are converging with those of companies, foreign and domestic, that want to invest in the U.S. economy. In a new compact for competitiveness, workers would pay more attention to innovation, workplace flexibility and productivity gains. Companies would invest more in upgrading workers’ skills, help them balance the pressures of work and family, and pay them middle class wages and benefits.

Two unions are pointing the way toward such a bargain: the United Auto Workers (UAW) and the Communications Workers of America (CWA).

Read the rest by clicking here to find out how. Read Marshall’s full policy briefing on the subject by clicking here.

Policy Brief: Labor and the Producer Society

Posted on by The Progressive Policy Institute

Our country is struggling to find a way out of overlapping economic crises. One is cyclical: an agonizingly slow, jobless recovery from a recession made worse by a financial crash. The other crisis is structural. Our economy suffers from a dearth of capital investment and innovation, mismatches between workers’ skills and available jobs, and unsustainable budget and trade deficits.

Even before the recession struck late in 2007, the Great American job machine was sputtering. According to a recent report by the McKinsey Global Institute, “Between 2000 and 2007, the United States posted a weaker record of job creation than during any decade since the Great Depression.” Not only are good jobs vanishing, wages have been falling for all but the top U.S. earners.

One explanation for America’s ebbing dynamism is a long pause in innovation. Since 2000, technological advances have stalled, outside of the dynamic communications industry. In particular, tighter regulation—for good or for bad—appears to be slowing innovation in the healthcare sector.

Research from the Kauffman Foundation also points to a loss of entrepreneurial verve. The number of business start ups, which Kauffman says generate most of U.S. net job growth, has plummeted by about a quarter since 2006.

If there’s a bright spot in the U.S. economy, it’s the recovery of corporate profits and stock prices since 2009. Yet these developments also highlight a stark inequity: Returns on capital are up, but returns on labor are down.

The U.S. economy seems to have arrived at an inflection point. As the Obama administration puzzles over how to rekindle growth, one thing should be clear: There can be no going back to the old economic model of debt-fueled consumption, where U.S. households borrowed to maintain their living standards, aided and abetted by government deficits.

Read the entire policy brief.

Misinterpreting Data: How the WSJ Got the Wireless Jobs Story Wrong

Posted on by The Progressive Policy Institute

On July 17 the online edition of the WSJ published a widely-cited story entitled Wireless Jobs Evaporate Even As Industry Expands. The main point of the story (my emphasis):

In May, on the heels of a record year for industry revenue, employment at U.S. wireless carriers hit a 12-year low of 166,600, according to U.S. Labor Department figures released earlier this month. That’s about 20,000 fewer jobs than when the recession ended in June 2009 and 2,000 fewer than a year ago. While the industry’s revenue has grown 28% since 2006, when wireless employment peaked at 207,000 workers, its mostly nonunion work force has shrunk about 20%.”

In addition, the Journal digs further into the official data and claims that:

The number of customer-service workers at wireless carriers dropped to 33,580 last year from 55,930 in 2007, according to the Labor Department

Seems like a pretty straightforward story, doesn’t it? The Journal is quoting directly from authoritative BLS data to demonstrate that the wireless industry has been losing jobs, despite the mobile boom. The big picture message: Innovation does not equal job growth.

Unfortunately, the reporters and editors at the WSJ fell into the same trap that has ensnared many other journalists, policymakers, and even economists. They looked at the label on a piece of official economic data, and assumed that they understood it. But as we saw during the financial crisis and subsequently, government economic data can all too easily be misinterpreted.

In this case, the article was based on the Journal’s analysis of jobs in the “wireless telecommunications carrier industry,” as defined by the BLS. However, despite the name of the data series, it turns out that:

  • The BLS definition of the “wireless” industry does not include company-owned retail stores or stand-alone company-owned call-centers.
  • The customer service numbers cited do not include company-owned retail stores or stand-alone company-owned call centers.
  • The 2007 occupational data in telecom cited in the story cannot be compared with later years, because the telecom industry classifications in the occupational data were substantially redone in 2008.

As a result:

  • The data cited in the WSJ article completely misses the growth of jobs at company-owned retail stores (see Metro PCS chart below)
  • The data cited in the WSJ article potentially misses call center job growth such as the expansion of Verizon’s Nashville call center (see example below)
  • The phrase “employment at U.S. wireless carriers hit a 12-year low” simply cannot be supported by the available data. Data from the industry trade association (CTIA), which shows wireless employment up 36% since 2000, is much more plausible (see chart below).
In my view, the WSJ article is a classic case of misinterpreting official statistics.

Before getting into the details, why am I taking the time and trouble to disassemble this particular article? Historically innovation and job creation have been closely linked, as I have argued in multiple papers and articles. With Washington now fighting tooth and nail over the budget, it’s very important for policymakers to understand that successful innovation creates jobs, not the opposite.

Second, journalists, policymakers, and economists need to understand how easily government statistics can be misinterpreted. For example, the statisticians at the BLS have reported huge U.S. productivity gains over the past decade, including the years following the financial crisis–a fact that has been duly repeated by journalists and applauded by economists. However, in a recent paper, Sue Houseman of the Upjohn Institute and I argued that these reported U.S. productivity gains could be interpreted, in part, as an increase in the efficiency of global supply chains. It matters enormously for jobs and wages whether productivity increases are coming from more efficient domestic operations, or more efficient offshoring.

Or consider consumer spending. Journalists regularly report that ”consumer spending accounts for 70 percent of economic activity.” (see, for example, this recent Associated Press story that ran on the New York Times website). However this number, calculated by dividing consumer spending into GDP, is pernicious nonsense. Nonsense, because consumer spending includes a big chunk of imports, which does not correspond to economic activity in the U.S. Pernicious, because it perpetuates the fallacy that the U.S. cannot recover without gains in consumer spending (see my blog post on the subject here).

Details

Now let me turn to the details of the WSJ’s mistake, or if you’d like, misintepretation. The WSJ analyzed BLS jobs data for the “wireless telecommunications carrier industry”, (with the NAICS ID 5172). That data looks pretty bleak (if you want to download the data for yourself, instructions are at the end of this post).

However, the WSJ apparentlydid not realize that the BLS collects industry employment by establishment, not by company. The BLS defines an establishment in this wa:y

An establishment is an economic unit, such as a farm, mine, factory, or store, that produces goods or provides services. It is typically at a single physical location and engaged in one, or predominantly one, type of economic activity for which a single industrial classification may be applied.

Whenever possible, the BLS assigns each establishment to an industry, and counts all the employment at that establishment at part of that industry.

Viewed from this perspective, a single wireless carrier, such as Verizon Wireless or Metro PCS, will typically include several different types of establishments, each of which will be assigned to a different industry.

  • Wireless operations are in NAICS 5172 (“Wireless telecommunications carriers”)
  • Company-owned call centers are in NAICS 56142 (“telephone call centers”)
  • Company-owned retail stores are in retail trade, probably NAICS 443112 (“Radio, TV and electronics stores”)
  • Mobile tower and base construction could be in NAICS 23713 (“Power and Communication Line and Related Structures Construction”)
There might even be more different types of establishments in the wireless industry…it’s hard to tell.

This has several implications. First, retail expansion by wireless providers is counted in the retail trade industry, not the BLS “Wireless Industry” numbers that the WSJ used. This is true even if the store is carrier-operated.

For example, the tremendous expansions of retail stores by Metro PCS in recent years, with added jobs, did not show up in the WSJ data (for a related example, employees at Apple stores are counted in the retail industry, not the computer industry).

Second, to the degree that wireless carriers are expanding stand-alone call centers, those additional jobs are not being picked up by the WSJ data. We don’t know exactly how many there are, but we do know that overall national employment at telephone call centers have been rising, surprisingly enough. It’s likely that the expansion of the wireless industry is a factor in that rise in call center employment.

We also know that at least some wireless telecom companies have been hiring at their call centers. For example, it took the work of five minutes to find this example of Verizon hiring workers for a call center outside of Nashville. Here’s an excerpt from the July 1, 2011 story in the Nashville Post:

Verizon Wireless has announced via Facebook and Twitter that it will expand its Sanctuary Park Center of Excellence Loyalty Retention Center by opening an office in Franklin. The company plans to add some 300 jobs in the Franklin area over the next 18 months.

“We’re excited about this expansion for several reasons. It allows us to continue to provide customers with the high quality of service they expect from Verizon Wireless,” said James Nelson, associate director of customer service. “It’s also great to be a source for new job opportunities – especially in this economy.”

Further, the company said, “Many of the thousands of calls handled by LRC representatives each month are from customers requesting to discontinue service. It is their responsibility to convert as many of those disconnect requests into satisfied customers.”

The company ran its first training sessions in May and plans to begin taking calls at the center starting July 5.

I didn’t research this example any further. But it looks like these new call center jobs are not counted in the BLS data that the WSJ was using.

Finally, those customer service figures that the Journal made such a big deal about. Let me repeat the quote from the Journal story.

The number of customer-service workers at wireless carriers dropped to 33,580 last year from 55,930 in 2007, according to the Labor Department

Actually, that sentence is not correct as it stands. The WSJ is citing occupational data pertaining to the “wireless” industry as defined by the BLS (NAICS 5172). By definition, the WSJ’s figure for customer-service workers excludes company-owned stand-alone call centers (like the previous example for Verizon Wireless). As a result, the figures cited by the Journal are absolutely useless for determining whether wireless carriers are hiring or firing customer-service workers.

Just to add insult to injury, there’s a subtle twist that no reporter could be expected to know. Buried deep in the documentation, the BLS explains that:

In 2008, the OES survey switched to the 2007 NAICS classification system from the 2002 NAICS. The most significant revisions were in the Information Sector, particularly within the Telecommunications area.

The implication is that telecom occupational data from 2007 simply cannot be compared to later years (I believe that the BLS would agree with that, if asked).

What’s the bottom line here? Let me show you again the chart of the jobs in the BLS “wireless industry” (the data the WSJ used), and compare it to the survey of wireless industry employment done by CTIA, the wireless industry association.

The industry association figures-rose by 46% from 2000 until 2008, before dipping by 7% from 2008 to 2010. By contrast, the BLS “wireless” data, which does not include call centers, retail stores, and tower construction, rose by only 8% from 2000 to 2008. Now, honestly, in the middle of a wireless boom of historic proportions, which figure do you think is more likely to reflect “employment at wireless carriers”, the phrase used in the WSJ story?

Now, that brings me to my final ethical question: Does the Journal have an obligation to run a retraction or a corrective story? The article did not slander or libel anyone, and the reporter used the government statistics in good faith. However, because the statistics did not mean what the Journal thought they meant, the story is filled with statements which leave readers with the wrong impression. The typical reader would read the story and naturally conclude that the phrase “ employment at U.S. wireless carriers hit a 12-year low” referred to the number of workers who receive paychecks from Verizon Wireless, Metro PCS, the wireless part of AT&T, and the like. But as we have seen, that phrase is based on government figures that only reflect a portion of wireless carrier employment.

More importantly, the story’s big picture conclusion–that innovation does not equal job growth–is not supported by the statistics. In this era of distrust of the press, should publications make an effort to clarify the record if their original story is faulty?

 

 

Coda: How to Get the Government Data that the WSJ used

 

Go to https://www.bls.gov/data/#employment

Click on “Employment, Hours, and Earnings – National, Multiscreen data search”

Check ‘Not seasonally adjusted’, and click on ‘next form’

Scroll to ‘information’, and click on ‘next form’

Click on ‘all employees, and click on ‘next form’

Scroll to “wireless telecommunications carriers (except satellite)”, and click on ‘next form’

Click on ‘retrieve data’

The data for customer service representatives in the wireless industry in 2007 can be found at

https://www.bls.gov/oes/2007/may/naics4_517200.htm#b41-0000

 

This piece is cross-posted from Michael Mandel’s blog “Mandel on Innovation and Growth“.

Labor Boosted by Proposed Merger

Posted on by The Progressive Policy Institute

America’s embattled labor movement hasn’t had much to celebrate lately, so it’s worth noting when a major union welcomes a business mega-merger.

The Communications Workers of America strongly endorsed AT&T’s proposed $39 billion acquisition of T-Mobile. Deals this big – the merger would create the nation’s largest mobile-phone carrier, with about 39 percent of the market – have to run a bruising, multiple-agency regulatory gauntlet. Some consumer groups worry that it will reduce competition in the lucrative telecommunication sector, dampening incentives for innovation and possibly pushing up consumer prices.

No doubt the deal merits close scrutiny. But having one of America’s largest private unions (700,000 strong) in its corner can’t hurt AT&T’s chances.

C.W.A. represents 42,000 AT&T wireless workers and regards the company as reasonably friendly to unions. The merger gives it a better shot at organizing T-Mobile workers in the U.S. and in Germany (the company is owned by Deutsche Telekom, whose stock zoomed after the announcement.) For those workers, being absorbed into AT&T will mean “better employment security and a management record of full neutrality toward union membership and a bargaining voice,” said C.W.A. president Larry Cohen.

This rare bit of good news for organized labor follows successful efforts by Republican governors in several states to curtail public workers’ right to collective bargaining. Although polls show majorities of Americans are opposed to denying bargaining rights, high profile battles in Wisconsin, Indiana and New Jersey have drawn the public’s attention to the adverse impact on state budgets of generous compensation schemes for state employees, especially pension and health care benefits.

This is a huge problem for organized labor, which in recent decades has experienced growth only in the public sector. The picture is especially dismal in the private sector, where less than eight percent of workers are unionized.

If they are going to reverse their long pattern of decline, U.S. labor unions need to redefine their economic role and relevance to American workers in a post-industrial economy. Cohen’s statement pointed to a mission that would be good for both U.S. workers and employers: building modern infrastructure to underpin America’s ability to win in global markets. “For more than a decade, the United States has continued to drop behind nearly every other developed economy on broadband speed and build out,” he said.

In fact, a big national infrastructure push represents common ground on which big labor and big business can meet. In an “odd couple” pairing last week, AFL-CIO President Rich Trumka and Tom Donahue, head of the U.S. Chamber of Commerce, showed up to endorse a new proposal for a national infrastructure bank. Drafted by a bipartisan group of U.S. Senators including John Kerry, Mark Warner and Kay Baily Hutchinson, the bank would leverage billions of private investments in new transport, energy and water projects.

If labor and business can get behind an ambitious project for “internal national building,” our equally polarized political parties surely should be able to follow their example. And that bodes well for an American economic comeback.

A Decade of Labor Market Pain

Posted on by The Progressive Policy Institute

In February 2001, nonfarm payrolls hit their business cycle peak of  132.5 million. Ten years later, the latest data pegs February 2011 payrolls at 130.5 million, a 1.5% decline. To put this in perspective, the ten-year period of the Great Depression, 1929-39 saw a 2.3% decline in nonfarm employment, roughly the same magnitude.

But even that 1.5% understates the extent of the pain for most of the workforce. I divide the economy into two parts. On the one side are the combined public and quasi-public sectors, and on the other side is the rest of the economy. Public, of course, refers to government employees.  ‘Quasi-public’, a term I just invented, includes the nominal private-sector education, healthcare, and social assistance industries. I call them ’quasi-public’ because these industries depend very heavily on  government funding. For example, social assistance includes ‘child and youth services’ and ‘services for the elderly and disabled’, which are often provided under government contract.

The chart below shows employment growth in the public/quasi-public sector, compared to employment growth in the rest of the economy, with February 2001 set to 100. We can see that public/quasi-public employment rose steadily over the past ten years, and is now up 16%. By comparison, the rest of the private sector  is down 8% in jobs over the past 10 years.

Once again, we look at the Great Depression for an analogy. From 1929 to 1939, government employment rose by about 30%. If we back that out, then private sector non-ag  jobs fell by 6%  over the Depression decade. That compares to the contemporary 8% decline in private non-ag non-quasi-public jobs since 2001.  So by this measure, the past 10 years have been worse for the labor market than the decade of the Great Depression.

Now let’s look by state. I put the chart beneath the fold, because it’s long and weird and I’m not sure if it going to come out right.

Here it is. This chart reports on the percentage change of private employment by state over the past ten years, leaving out the quasi-public sector.

The worst hit states, not surprisingly, are Michigan, Ohio, and Indiana. Massachusetts has a big decline as well, though I’m not sure that it’s fair to remove healthcare and education, which have always been primary drivers of the MA economy.  Then we have some surprises, including CT and NJ.  NY,  At the other end, some of the natural resource states show job gains over the decade, as did DC, even after removing govt jobs.

This piece is cross-posted at Mandel on Innovation and Growth

Wingnut Watch: How The Battle of Madison Became an Apocalyptic Struggle for the Right

Posted on by The Progressive Policy Institute

One of the salient realities of politics is that much of the contention revolves around efforts to get the news media and the public to focus on events that reinforce one group’s point of view over others.  There are, of course, front-and-center national and international news developments that literally command attention.  But when it comes to, say, a noisy dispute over a budget in a medium-sized state, you’d normally see one side or the other trying to “nationalize” the event to gain external allies.

But that’s what is most fascinating about the ongoing saga in Madison, Wisconsin: what began as a series of union protests against Gov. Scott Walker’s efforts to take away public employees’ collective bargaining rights, and then evolved into a national cause célèbre for unions and progressives generally, has become of equal importance to the Right, where the belief that Walker is sparking a nationwide revolt against “union thugs” is very strong.

Even as polls in Wisconsin and nationally show Walker with relatively low and flagging levels of support for his confrontational tactics, conservative gabbers are treating the events like the Battle of Algiers.  The highly influential RedState blog has become completely obsessed with Wisconsin and its political and economic implications; on Monday of this week, the site featured no less than five front-page posts on the subject.  Here’s a taste of the tone, from RedState diarist Mark Meed:

I appreciate it might seem unnecessarily provocative to compare union thugs to dogs — especially to those in the moderate attack dog community — so let me offer a “scratch behind the ears” qualification. These aren’t just any dogs, they’re the ones out of “Animal Farm”. These are the pack animals that are inevitably dispatched when socialists run out of other people’s money, and those other people finally notice.

Nice, eh?  But the focus on Wisconsin is not limited to the fever swamps of the conservative blogosphere; it’s breaking out on the presidential campaign trail as well.  Tim Pawlenty released a video with dramatic footage of the Madison protests and ending with the proto-candidate himself gravely intoning: “It’s important that Americans stand with Scott Walker, stand with Wisconsin.” Newt Gingrich recently devoted his Human Events column to a lurid characterization of the Wisconsin fight.  A sample:

In Madison, Wisconsin, we are witnessing a profound struggle between the right of the people to govern themselves and the power of entrenched, selfish interests to stop reforms and defy the will of the people.

Not a lot of nuance there.  Meanwhile, Indiana Gov. Mitch Daniels is taking some conservative heat for failing to follow Walker’s lead in declaring war on unions, compounding the hostility he earlier aroused by calling for a “truce” on cultural issues.

There is one underlying difference of opinion among conservatives about Wisconsin that’s worth noting and pondering: while some focus strictly on public-sector unionism, others view the assault on public-employee collective bargaining as just one front in a broader fight against unions and collective bargaining generally.  Most obviously, conservatives are aware of the important role of unions in Democratic Party campaign financing and voter mobilization efforts, and naturally welcome any opportunity to weaken the “other team” (even as they characterize Democratic defenders of unions as parties to a corrupt bargain that shakes down taxpayers and businesses for higher wages and benefits in exchange for political assistance).

But some conservatives are willing to go further and denounce all forms of collective bargain as either corrupt, as coercive, or as incompatible with economic growth.  Here’s Robert VerBruggen writing for the National Review site:

In reality, “collective bargaining” is when a majority of employees vote to unionize, and then the union has the legal right to represent all the employees. In other words, it forces workers to accept unions as their bargaining agents, and it forbids employers to negotiate with non-union workers on an individual basis.

A more colloquial version of this argument was made by a conservative blogger calling himself USA Admiral:

There is no real use for [unions].  If you can’t negotiate your own contracts, you need to be flipping burgers.

The larger, macroeconomic case against unions as an institution in the private as well as the public sector is mainly made by Right-to-Work agitators, but it occasionally is taken up by conservative politicians as well.  It’s probably not surprising that the most overt stance against the very existence of unions was recently made by South Carolina Gov. Nikki Haley, who appointed a corporate labor relations lawyer (i.e., someone whose job is to oppose unions and unionization) to head up the state labor department.  Haley was not shy about her motivation in taking this unusual step: “She [the appointee] is ready for the challenge,” Haley said. “We’re going to fight the unions and I needed a partner to help me do it. She’s the right person to help me do it.”

In the end, the sense that Scott Walker is fighting the ancient enemy of the conservative movement probably best explains why so many conservatives can’t resist blowing the Wisconsin saga up into an apocalyptic struggle of immense importance.  If Walker loses, it will be interesting to see if he’s treated as a martyr or just as insufficiently vicious.

Wingnut Watch: The Ideological Crusade Behind the Budget Battles

Posted on by The Progressive Policy Institute

In Washington and around the country, conservatives are going on the anti-spending warpath, delighting the Tea Party base with tough talk and confrontational tactics.  The amazing scenes from Madison, engineered by new Wisconsin Gov. Scott Walker, are emboldening GOPers elsewhere (notably in Ohio and Indiana) to go to the barricades in demanding pay and benefit concessions, if not actual suicide, from public employees and their unions.  And in Congress, a government shutdown is beginning to look like a virtual certainty, quite possibly accompanied by the drama of a debt limit collision.

The internal conservative debate on these subjects is being heavily dominated by those counseling “no retreat,” and laboring mightily to explain why a hard-core approach that threatens the daily functioning of government won’t turn out as it did for the short-lived Republican Revolution of the mid-1990s.

But amidst all the dramatics over spending, it’s increasingly obvious that conservatives have a lot of other fish to fry, and are using their demands for big cutbacks in public-sector spending to impose policies and priorities that have little or nothing to do with money.

This is most obvious in Wisconsin, where Walker’s demands go beyond pay and benefit concessions from public employees and aim at severely restricting collective bargaining rights.  Walker and his defenders, of course, claim that no path of budget austerity is compatible with the existence of strong public employee unions.  That’s another way of saying it’s possible to relate all sorts of ideological objectives as having an impact on spending. Interestingly, two Republican governors close to this particular fire, Indiana’s Mitch Daniels and Florida’s Rick Scott (the latter state is not close geographically to Wisconsin, but is similar in the scope of its gubernatorially-induced budget crisis) have conspicuously parted ways with Walker on demanding non-financial concessions from public employee unions.

An even more obvious ideological aspect of state budget “crises” is the determination of nearly all GOP governors to cut taxes and/or create new corporate subsidies even as they claim there’s just no money for spending they don’t particularly favor in the first place.  Walker, in particular, is insisting on both tax cuts and new “economic development incentives” (e.g., public concessions for companies moving into the state) that have significantly worsened the fiscal situation.  So, too, has Florida’s Scott, who is also demanding a major new private school voucher initiative.

The overlap of ideological and fiscal priorities is even more obvious in Washington.  The FY 2011 continuing appropriations resolution passed by the House last weekend is loaded with long-time conservative hobby-horses, including an end to public broadcasting, severe cutbacks in funding for bank regulators and food inspectors, plus an unprecedented assault on federal support for family planning services, including a total ban on use of federal money by Planned Parenthood and an end to the Title X program that funds many clinics dispensing contraceptives.  Echoing the confrontations in Madison, the bill also slashed funding for the National Labor Relations Board by one-third, and 176 House Republicans voted to kill the NLRB altogether.  Meanwhile, Republicans are leaving the Pentagon budget largely alone.

Since the House CR is primarily symbolic, the real tale of the tape will be in the internal priorities Republicans set in negotiations with Senate Democrats and the White House.  But GOP leaders are under intense pressure from the large majority of its Members from the arch-conservative Republican Study Group, and from Tea Party-oriented freshmen, to use budget cuts to completely change the scope as well as the size of the federal government.

Most interestingly, there is a growing sense that House conservatives and the right-wing chattering classes are increasingly favoring a federal government shutdown (which will happen on March 4 if no agreement is reached on the CR or on a short-term stopgap, which Republicans say they will oppose unless it incorporate major spending cuts) not just as a negotiating tactic, but as an end in itself.  Highly influential anti-tax lobbyist Grover Norquist has been explicit about what he sees as the political advantage Republicans would derive from a shutdown: “Obama will be less popular if — in the service of overspending and wasting people’s money — he closes the government down, as opposed to now, when he’s just wasting people’s money.”

More to the point, Republican leaders would like to get rid of the RINO label as soon as possible and earn the trust of Tea Party types. It’s even possible that they are powerless to act otherwise (particularly given the example set by Walker in Wisconsin) or will be forced to engineer a shutdown in order to head off the more economically-consequential defeat of a debt limit measure.

In any event, conservatives are busy reassuring GOP pols that a shutdown won’t produce the sort of political damage the brief 1995 shutdown incurred.  They are typically blaming the 1995 setback on Newt Gingrich’s clumsiness, Bill Clinton’s diabolical political skills, the post-Oklahoma City backlash against government-hating, the malice of the pre-Fox “liberal media”—all ingredients that are missing from today’s impending confrontation.  All these psychological factors should be kept in mind in assessing what happens before, on, and after March 4.

Twilight of Collective Bargaining?

Posted on by The Progressive Policy Institute

The Battle of Madison is in full cry, as labor and its progressive allies rally to block Wisconsin Governor Scott Walker’s plan to curb union bargaining power. The leftish Nation magazine calls it “Labor’s Last Stand.”

That’s a tad melodramatic; unions probably aren’t headed for extinction. But the traditional model of collective bargaining looks increasingly like an anachronism that may not survive this political donnybrook.

Like most states, Wisconsin is facing serious budget shortfalls. But Walker, a first-term Republican, isn’t just calling for givebacks from state employees. In addition to asking workers to chip in more for their health and pension benefits, he wants the legislature to pass a bill that would restrict their bargaining rights to the subject of wages. And he’s not alone: other GOP Governors, including John Kasich of Ohio, plan to follow suit.

Many Republicans blame states’ budget woes on generous labor contracts, which they see as creating a privileged class of public sector workers sheltered from the vicissitudes of the “real” economy. “Unionized public employees are making more money, receiving more generous benefits, and enjoying greater job security than the working families forced to pay for it with ever-higher taxes, deficits and debt,” Republican presidential aspirant Tim Pawlenty wrote recently in the Wall Street Journal.

This has incensed liberals, who note that it was Wall Street bankers and speculators, not bureaucrats, who plunged the nation into the fiscal crisis and the Great Recession. They say Walker is exploiting the fiscal crisis to aim a dagger at the heart of the only part of labor that has grown in recent decades: public sector unions. (More than 36 percent of public employees belong to unions, compared to just 7 percent of private sector workers.) Democrats view the GOP bid to strip public employees of collective bargaining rights as an attempt to topple a key pillar of the party’s progressive coalition.

In this view, what’s happening in Wisconsin and elsewhere is a political power play, pure and simple. Says Paul Krugman:

You don’t have to love unions, you don’t have to believe that their policy positions are always right, to recognize that they’re among the few influential players in our political system representing the interests of middle- and working-class Americans, as opposed to the wealthy. Indeed, if America has become more oligarchic and less democratic over the last 30 years — which it has — that’s to an important extent due to the decline of private-sector unions. Given this reality, it’s important to have institutions that can act as counterweights to the power of big money. And unions are among the most important of these institutions.

But things aren’t quite this simple, for three reasons.

First, Krugman conflates public and private unionism. Where public sector unions are concerned, the “boss” isn’t some private oligarch, it’s the government — ultimately the public. Unlike private unions, they get to pick the people on the other side of the bargaining table by funneling union dues into their political campaigns. Even if union leaders and lawmakers were saints, such an arrangement inevitably would put the public interest and the interests of government workers in tension. That is why no less a liberal paladin than Franklin D. Roosevelt opposed public sector unions, saying “The process of collective bargaining, as usually understood, cannot be transplanted in the public service.”

Second, progressives should acknowledge that many states have gone overboard in negotiating generous compensation packages for public employees. For example, the states are carrying about $1 trillion in unfunded pension liabilities on their books. Many pay a higher percentage of their workers’ health care premiums than private employers typically do. It rankles private sector workers to see states go into debt to provide public employees with pay and benefits (not to mention job stability) that are beyond their reach.

Third, progressives need to improve the quality of public services even as they reduce the cost of government. Collective bargaining agreements often impede the quest for flexibility, innovation, and higher productivity in the public sector. A classic example is teacher tenure, which makes it difficult for public school systems to get rid of ineffective teachers or to pay good ones on the basis of superior performance.

There’s no doubt that progressives must defend workers’ right to organize to protect their mutual interests. But organized labor also needs to evolve alternatives to the traditional collective bargaining model, which no longer fits the modes and organization of work in a post-industrial, globalized economy, and arguably has always been problematic in the public sector for the reasons that gave FDR pause.

Unlike private firms, high labor costs can’t drive government out of business or overseas. But running deficits to give workers what looks like special treatment can drive down public confidence in government. That’s why public employees need to develop new strategies that reconcile basic job protections with the need for a more effective, accessible, and fiscally responsible government.

A Bizarre Labor Market (with data)

Posted on by The Progressive Policy Institute

Two old coinsAs we start the New Year, we face what is perhaps the most unpredictable and bizarre labor market I can remember. This morning the Conference Board released the December Help-Wanted Online report, which apparently shows a sharp increase in labor demand over the past year in most occupations. However,  the BLS  employment by occupation data shows no corresponding gain, even in occupations with soaring want ads.  Nor does the unemployment by occupation data show any corresponding movements. I have my own thoughts about what the data means, which I’ll share below. But first let me present the full array of data, by occupation,  so you can make your own judgments. The first column of data in the table below is the Supply/Demand Rate, as calculated by the Conference Board. That indicates the ratio of unemployed workers to ads, so a small number is better.  The second column is the change in online ads over the past year, as measured by the Conference Board, so a big number shows that demand has ramped up. The third and fourth columns are the changes in occupational employment and unemployment over the past year, respectively, as measured by the BLS. The ordering of occupations by supply/demand rate feels more or less right. But when it comes to the link between changes in demand, employment, and unemployment, there’s little  consistency. We’ve got occupations with soaring demand and no gains in employment (management, transportation).  We’ve got occupations with good supply/demand ratios and no gains in demand (health practioners).  And so forth and so on. *************************************************

A Bizarre Labor Market
Supply/Demand yr/yr percentage change**
Rate* Want Ads Employment Unemployment
Healthcare practitioner and technical 0.3 2% -1% 8%
Computer and mathematical 0.4 27% -3% 21%
Life, physical, and social science 0.8 40% 4% -3%
Architecture and engineering 1.0 47% 1% -18%
Management 1.4 56% -3% -5%
Legal 1.5 -6% 1% -32%
Business and financial operations 2.1 6% 2% 10%
Community and social services 2.3 19% -8% 6%
Arts, design, entertainment, sports, and media 2.6 9% -1% 12%
Healthcare support 2.6 2% 0% 7%
Sales and related 3.5 -2% 2% -1%
Office and administrative support 3.9 21% 0% 3%
Installation, maintenance, and repair 4.0 36% 3% 3%
Education, training, and library 4.3 22% -1% -7%
Personal care and service 5.5 8% 5% 14%
Transportation and material moving 7.4 61% 2% -2%
Protective service 8.0 34% 1% 36%
Food preparation and serving 9.2 26% 2% 6%
Production 10.8 59% 10% -6%
Building and grounds cleaning and maintenance 14.1 39% -2% 0%
Farming, fishing and forestry 28.4 38% 2% 52%
Construction and extraction 29.7 31% -8% -15%
*Supply/demand rate, calculated by the Conference Board, is the number of unemployed workers
divided by number of want ads based on latest data.
**December 2009-December 2010 for online wants ads, November 2009-November 2010 for other data
Data: The Conference Board, Bureau of Labor Statistics
Calculations: South Mountain Economics LLC

************************************************* My interpretation: The labor market is getting ready for a massive rise in employment over the next year,  as companies finally start hiring for positions they’ve been advertising for. We’ll find out soon. This piece is cross-posted at Mandel on Innovation and Growth

Will 2011 Be a Banner Year for IT Hiring?

Posted on by The Progressive Policy Institute

The water is building up behind the dam.  More and more, it’s looking like 2011 could be a banner year for IT hiring…isn’t that amazing?

The key piece of evidence:  Online help-wanted ads for computer and mathematical occupations are up 56% over a year ago, and well over their pre-bust peak.  That’s according to data from The Conference Board. *

 

This category of help-wanted ads includes companies looking for the full range of IT occupations: computer software engineers, computer support specialists, network administrators, web developers, computer programmers and the like.**

On one level, this rise in labor demand is not surprising, since  the communications boom–including mobile, video, social networking, online shopping, and  all sorts of other applications–is driving a commensurate boom in IT spending.   With business spending on computers, software, and communications equipment is now almost 10% above pre-bust levels,  it’s no wonder that companies have an absolute crying need for more skilled IT workers.

So far, however, businesses have been holding off from actual hiring. Data from the BLS suggests that the number of people actually employed in IT occupations has not risen as fast as the want ads.  Employment in computer and mathematical occupations now stands at 3.4 million, well below its recent peak.

My intepretation, though, is that the hiring pressure is gotten strong enough to break the dam, especially with Obama having just signed the new tax bill. Companies have just been waiting to make sure that  the global economy doesn’t fall back into a deep funk again, and a hefty dose of fiscal stimulus is just the thing.

I’m predicting a big jump in IT hiring as soon as the new year starts…and it’s about time.

*The labor demand data is from The Conference Board Help Wanted OnLine (HWOL) data series, https://www.conference-board.org/data/helpwantedonline.cfm

This piece is cross-posted at Mandel on Innovation and Growth

Labor Backs Trade (Yes you read that right)

Posted on by The Progressive Policy Institute

Last Friday the AFL-CIO and several big unions came out against the U.S.-Korea free trade deal.  As news, this was strictly “dog-bites-man” stuff.  The bigger story is the appearance of cracks in Labor’s usually monolithic opposition to trade pacts.

Several unions, namely the United Auto Workers and the United Food and Commercial Workers, endorsed the agreement after President Obama wrung concessions from Seoul on cars and U.S. beef earlier this month. Ford Motor Company, which strongly opposed the original deal negotiated by the George W. Bush administration on the grounds that it didn’t do enough to pry open South Korea’s auto market, is also on board.

The unusual split in Labor’s ranks makes it easier for Congressional Democrats to back Obama.   Although voting treaties up or down is the exclusive prerogative of the Senate, it’s significant that the deal also has the support of Rep. Sandy Levin (D-Mich), a tireless defender of the U.S. auto industry and long the House’s leading skeptic of free trade agreements.

If the Senate approves the treaty next year, it will be a major boost for Obama’s pledge to double exports over the next five years. It may also signal a shift in trade politics within the Democratic Party. As a candidate, Obama played to his party’s anti-trade gallery, even pledging to re-negotiate the 1994 North America Free Trade Agreement. Now, as President, he recognizes that opening overseas markets is integral to economic recovery. With consumers still winding down their debts, and businesses hoarding cash, a good part of the economic demand we need to create jobs must come from abroad.

In fact, the Commerce Department reported Friday that U.S. exports rose to their highest levels in more than two years. The U.S. trade deficit (in goods and services) fell to $38.71 billion, a more than 13 percent drop over the previous month and considerably less than the $44 billion economists had predicted.  Best of all, U.S. exports to China grew nearly 30 percent to reach a record high of just over $9 billion. Along with a slight decrease in Chinese imports, that narrowed the monthly U.S. trade deficit by 8 percent, to $25.52 billion. This was the best economic news we’ve had for some time, and it sent stocks soaring.

South Korea has the world’s 12th largest economy. By lowering its high tariffs and dealing with non-tariff barriers to U.S. communications and financial services firms, the deal could boost U.S. exports to South Korea by $10 trillion annually, the administration says. Crucially, thanks to Obama’s success in getting South Korea to modify its auto provisions, it exempts up to 25,000 U.S. vehicles from Seoul’s environmental and fuel economy standards, and builds in safeguards against a surge of imported cars from South Korea.

That was enough to satisfy the UAW and Ford though not, it seems, the rest of organized labor. Intriguingly, the automakers’ union also parted company from the AFL-CIO in backing another controversial Obama deal: his tax-cut compromise with Republicans. It’s another sign that, even within the progressive camp, arguments for spurring job-creating growth are prevailing over class warfare themes.

South Korea is more than a major trading partner. It’s also a key U.S. ally. North Korea’s recent artillery attack on one of its islands – and China’s refusal to condemn it – seems to have made Seoul more tractable about negotiating changes in the treaty.  In any event, the free trade pact also offers the United States an opportunity to cement relations with an prosperous market democracy that increasingly shares our apprehensions about Beijing’s propensity for throwing its weight around in the Asia Pacific.

The U.S.-South Korea free trade agreement would be worth ratifying on foreign policy grounds alone. But unlike several previous bilateral trade pacts with small nations, this one will deliver real benefits to America’s struggling economy.

British Deal Shows Private Investment Demand for High-Speed Rail

Posted on by The Progressive Policy Institute

This week, the British government will formalize an agreement with two Canadian pension funds with enormous implications for passenger train development in the United States. In return for the right to operate a high-speed rail line linking London with the Channel Tunnel for 30 years, the Ontario teachers and municipal employee pension funds have agreed to pay the UK government $3.4 billion.

The sale not only represents a big vote of market confidence in the future of high-speed rail, but points to a route for building and operating new train lines in the U.S.

In the wake of the equities meltdown, U.S. pension funds are seeking “safe havens” to invest, while states and the federal government are looking for ways to build expensive rail infrastructure in the face of record budget deficits.

Here’s a solution: Structure high-speed rail projects to attract pension funds and other institutional investors through operating concessions and other long-term cash-generating instruments.

Making Money While Generating Jobs

Consider the $133 billion Florida State Board of Administration, currently winding down its loss-generating equities portfolio and concentrating on core fixed income.

If the Florida State pension fund invested just 3 percent of its portfolio in the state’s high-speed rail line, that would generate $4 billion. That’s enough to cover both the $500 million shortfall in the high-speed segment between Tampa and Orlando (the Obama administration has already allocated $2.05 billion for this project) and the state’s portion of a Miami-Orlando route with excellent ridership potential.

Similarly, the California Public Employees’ Retirement System (CalPERS) has adopted a new investment policy with a targeted 3 percent allocation of assets, or about $7 billion, in infrastructure.

The proposed bullet train between Los Angeles and San Francisco is expected to generate as much as $3 billion in profits by 2030. By allocating some of its funds to the $40 billion rail project, CalPERS could enjoy a stable return while providing the Golden State with an enormous job-generating public work.

Other institutional investors, such as labor unions, could be attracted to rail partnerships and concessions that diversify their pension portfolios while providing direct economic benefits to their members.

Such new-style financing would require a marketplace with transparent trading and timely data, amounting to a new source of opportunity for the investment community. In a sense, Wall Street could come full circle to its origins as the exchange place for European capital seeking profit in American railway construction in the 19th century.

High Level of Investor Interest

Back to the Brits, it is crucial to note that the $3.4 billion interest in High Speed-1, the London-Channel link, exceeded the highest hopes of David Cameron’s coalition government, which inherited the initiative from Gordon Brown’s Labor government.

In the words of one commentator, the asset sale “came as a pleasant surprise” to observers who believed the UK government “would have to settle for knock-down prices” because of the world recession.

The auction also attracted many more bidders than expected. The Ontario Municipal Employees Retirement System and Ontario Teachers’ Pension Plan, allied with Borealis Infrastructure, beat a long list of potential buyers, including insurance giant Allianz and investment bank Morgan Stanley.

Borealis already operates the Detroit River freight rail tunnel between the U.S. and Canada on behalf of the pension funds. The Borealis group will receive a revenue stream from access charges paid by train companies using HS-1. In return, it will be responsible for preserving the line as a high-speed railway and to periodically improve track and structures to state-of-the-art standards.

Eurostar fields trains between London and Paris and London and Brussels. Deutsche Bahn, the German rail carrier, has announced plans to operate from London to Frankfurt and London to Amsterdam.

In addition to these services, the Borealis group has the right to sell access to other passenger carriers and to develop freight traffic.

Setting a Monetary Value on High Speed

The British approach marks a turning point. Prior to now, high-speed lines, such as France’s TGV and Spain’s AVE, were built and operated by government or government-directed entities. The profits or losses from high-speed trains were part of the financial profile of the larger rail systems.

Nearly all experts agree that fast trains earn higher per-mile revenues than conventional-speed trains and substantially more than commuter and branch-line services.

The British concession puts a monetary value on high-speed rail that can serve as a basis for a market in future railway concessions and stock sales in equipment and infrastructure-building companies.

HS-1 was one of the most expensive rail projects in the world due to extensive bridging, tunneling and station construction. Opened in November 2007, the 68-mile line cost $8.3 billion.

The concession sale returns 40 percent of the build cost to the British treasury. When the concession ends in 2040, the railway will revert back to the government, which expects to re-bid the property for an equal or higher price.

By this means, HS-1 will continue to return a dividend to taxpayers and, over the course of its 150-year-plus lifecycle, repay its construction cost, probably several times over.

This prospect differs from the scary scenario presented by U.S. critics (including the Republican governor-elects of Wisconsin and Ohio) who charge that high-speed rail is a money pit requiring long-term government subsidies to operate.

Summing up the rap against rail as “high-speed pork,” Washington Post columnist Robert J. Samuelson recently complained, “If private investors concurred [that fast rail was profitable], they’d be clamoring to commit funds; they aren’t.”

The high-speed chase by investors for High Speed-1 shows just how off track these critics are.

photo credit: Jason Pier

Spur Job Growth By Making Business Registration Easier

Posted on by The Progressive Policy Institute

Americans love small businesses and admire the job-creating doggedness and independence of entrepreneurs and dreamers.  Then why aren’t we making it easier to start a business?  Aspiring business owners face a daunting amount of red tape and hassle.  With job creation at the top of the national agenda, the time has come to do better in making it easier to start a business

The OECD, which measures barriers to entrepreneurship (including administrative burdens to open a business, legal barriers to entry, bankruptcy laws, property rights protection, investor protection, and labor market regulations), ranks the U.S just 14th of 29 OECD countries.

We know that small businesses are the engine of job growth in the United States, accounting for 2/3 of new jobs over the past 15 years, according to the Small Business Administration. That’s why one way to spur desperately needed job creation in the United States would be to make the business registration process faster, more comprehensive and thoughtful about the needs of small businesses, and thoroughly integrated with the state business registration process.

We propose the Administration task the Federal CIO, Vivek Kundra, with redesigning business.gov and undertaking a strategic design review of the federal and state small business registration process, redesigning it to create an integrated business registration website encompassing both federal and state requirements and contemplating the entire lifecycle of needs for small business start-ups, thus creating a one-stop shop for business registration in the United States.

The portal would incorporate all states’ business registration requirements into an integrated one-stop system. The registrant would need to only visit a single website to register his or her business both with the Federal government and the relevant state government. (This would have to be done with federal leadership, with the federal government providing a framework and platform to let states add their requirements to it.)

The website would have interactive components, modeled along the lines of TurboTax, with wizards/dialogue boxes, and with the registration process asking questions, demonstrating intelligence, and providing constructive guidance and advice. It should be smart enough to recognize, “You’re registering an electricians business in Arkansas with 10 employees. We recommend a sole proprietorship as the corporate form of governance.” That is, it wouldn’t have just a bunch of links where one can learn more about different corporate forms. It could give advice based upon the information the registrant is entering—in part by tapping into a database with insights on how other similar businesses are structured.

The redesigned business registration process would also contemplate the entire lifecycle of needs and concerns for the small businesses. For example, it would bring information forward to the registrant about whether there are loan programs the business is eligible for, such as relevant Small Business Administration (SBA) or Economic Development Agency (EDA) loans, or information about lines of credit from local commercial lenders. (And the system should actually go in and automatically use the already-entered data to populate the information on that loan form – almost getting to the point where all the registrant needs to do is click “Submit.” Indeed, the system architecture would have a principle that the registrant never needs to enter the same information more than once.)

If the entrepreneur signals the company will be in the business of making products, the website should proactively present any export promotion programs the company might engage with through the Department of Commerce. Again, not just providing links to the Department of Commerce website, but recognizing, “You’re producing custom machine tools and the Department of Commerce has Program X to support it.” Thus, the business registration process would directly support the Administration’s goal to double U.S. exports in five years.

Also, the system should tie directly into the country’s statistical agencies so they can recognize, “We have a small business that just registered,” and that data should go directly and immediately to Bureau of Economic Analysis and the Census Bureau so that we get a much more real-time view of the state of the economy. Of course, implicit in this vision is the need to connect disparate and siloed federal and state databases and information technology systems so that they communicate with one another and bring to bear information in real time to support the small business.

Finally, the small business registration process should be made on an open application platform, in such a way that it could allow competition in the marketplace. So a Citibank or Bank of America, for example, could co-brand it as a “Small Business Starter Kit.” Thus, if an entrepreneur goes into a BofA location to apply for a line of credit, BofA could say, “We’ve got everything you need to start your business right here. Get set up online here now.” The point is the government should make the web interfaces to the registration process open and accessible, so other companies can integrate them with other value-added services they provide to small businesses.

One model is Portugal, where the new “Firm Online” program has completely digitalized the process of registering a business, streamlining the process from it taking 20 different forms and roughly 80 days to launch a business to creating a single website through which new businesses can register in as little as 45 minutes. Within months of launching the new service, more than 70,000 new businesses registered. Portugal’s system uses electronic (digital) signatures (which the U.S. system does not) when authentication is required. It is also responsive to the life cycle needs of a start-up business, providing suggestions for sources of capital, talent, etc. Portugal now ranks 2nd of the 30 OECD countries in online business sophistication. Other countries like South Korea enable entrepreneurs to create firms through their mobile devices.

The modern economy is marked by incredibly intense competition, both globally and domestically. American businesses need every single advantage they can get—and making the process of new business registration in the United States the very best in the world would be an excellent place to start.

Photo Credit: Muffet’s Photostream

Comparing Employment Changes During Recessions

Posted on by The Progressive Policy Institute

I keep seeing that chart that shows how employment declines in the current recession are so much worse than in past ones. You know, this one:

On many dimensions, of course, the current recession is much worse, but this chart has always seemed funny to me. And after reading Paul Krugman mock the idea that the recessions of the 1970s and 1980s were at all comparable, I decided to make my own damn chart. Because the above chart looks at employment levels, which are affected by labor force growth, I decided to look at employment rates instead (subtracting the unemployment rate for each month from 100). Because the composition of the labor force has also changed over time (lots more married women, most notably), I decided to confine to white men ages 20 and up. And because it’s unclear to me what “peak” is used in this chart (see the vague note at the bottom of Rampell’s chart) and since the relationship of the NBER business cycle peak to the unemployment rate involves a lag, I decided to measure from the peak employment level. Got all that? Here’s my chart:

I’ve labeled the lines the same way that Rampell’s chart is labeled, by the recessions that followed each employment rate peak. The figures are from BLS and are based on their seasonally adjusted series.

This approach makes clear why people were disappointed by the “jobless” recoveries from the recessions of the early 1990s and 2000s, which were no faster than after the much more severe recession of the early 1970s (though of course, the declines in employment were much smaller to begin with). More to the point, it also shows that while the current recession still looks bad, bad, bad, the decline in employment is comparable to the decline during the double-dip recession, which is apparent from the “1980” line. That’s not the most fantastic news of course, but it’s worth noting. Unfortunately, I doubt this is the chart you’ll see others use and update as things evolve in the next few months.

This item is cross-posted at ScottWinshipWeb.

Celebrating Unemployment

Posted on by The Progressive Policy Institute

It’s hardly news that state and local governments around the country are laying off workers and reducing services in the current economic and fiscal climate. But putting aside services for a moment, the sheer impact of public-sector job layoffs is becoming pretty alarming:

Cash-strapped cities and counties have been cutting jobs to cope with massive budget shortfalls — and that tally could edge up to nearly 500,000 if Congress doesn’t step up to help.

Local governments are looking to eliminate 8.6% of their total full-time equivalent positions by 2012, according to a new survey released Tuesday by the National League of Cities, the National Association of Counties and United States Conference of Mayors.

“Local governments across the country are now facing the combined impact of decreased tax revenues, a falloff in state and federal aid and increased demand for social services,” the report said. “In this current climate of fiscal distress, local governments are forced to eliminate both jobs and services.”

That’s just local governments, mind you, not the states who are themselves facing major layoffs.

Now many conservatives would celebrate this news on grounds that eliminating some of the parasites who work for government will somehow, someway, free up resources for the private sector. I’ve never understood exactly how that’s supposed to look, but as Matt Yglesias points out, it’s a really bad time to experiment with efforts to counter-act a recession by increasing unemployment:

Conservatives have largely convinced themselves that public servants are such vile and overpaid monsters that anything that forces layoffs is a good thing and the moderates in Congress seem scared of their own shadows so nothing will be done. But economically speaking, the time for local governments to try to trim the fat is when unemployment is low and your laid-off librarian, ambulance driver, or guy who keeps the park clean can get a new job where his or her skills will plausibly be more optimally allocated. But guess what produces less social welfare than driving a bus? Sitting at home being unemployed. And so it goes down the line. Dumping people into a depressed labor market all-but-guarantees an increase in idleness along with a drop in revenue for local retailers that will lead to more idleness and waste.

Higher unemployment is simply bad. Deliberately promoting it is worse.

Photo Credit: Alfcio’s Photostream

This item is cross-posted at The Democratic Strategist.

Chinese Workers Flex Muscles

Posted on by The Progressive Policy Institute

PPI Special Report

The following is a guest column from PPI friend and sometime contributor Earl Brown, Labor and Employment Law Counsel for the American Center for International Labor Solidarity.

Over the last few months, thousands of workers, toiling in the Chinese factories of Japanese car manufacturers, have struck for improved wages, hours and working conditions—autonomously, without foreign input and with astonishing tenacity and shrewdness. These strikes have attracted much international media and scholarly commentary ranging from “nothing new” to “a new era dawns.” To adequately understand these strikes, however, we need to heed to the words of the strikers themselves.

Let’s look at the strike that garnered the most international coverage; the roughly two to three week strike at the Honda transmission plant in Foshan City near Guangzhou in the industrial province of Guangdong. Although Honda’s China operations are quite profitable and a key to Honda’s overall success, workers down its supply chain remain locked in a labor regime of low wages, speed-up and long hours. Of the roughly 1900 workers at the Foshan plant, some 800 plus are classified as “interns” and thus get even lower wages.

Facing announcements of a dramatic speed-up, the workers spontaneously struck. The strike at the Foshan transmission plant idled the whole Honda “just-in-time” system — a continuous production with low inventory — as completed transmissions could not be fed into the assembly plants. At first, Honda reacted with firings of strike leaders and threats, accompanied by minimal offers of wage improvements. When this didn’t work, Honda management, local government and the local government union used muscle.

Thick thirty-year-olds, connected to local government and decked in polo shirts and yellow hats, attempted to push and herd the massed, lean twenty-year-old striking men and women back into the factory. It didn’t work. At that point, Honda was desperate to get production back up as market analysts all over the world lasered in on Honda’s inability to crank out cars in China. Having exhausted heavy-handed labor relation’s tactics that weren’t working, upper management reached out to the elected representatives of these young, rights-conscious workers and quickly hammered out an agreement and a return to work.

Direct negotiation with real plant-level worker representatives, in the glare of international and national publicity, is a telling event. China has had many strikes. In the nineties, there were protests, which aimed at recouping unpaid wages from failed factories, or challenged privatization. More recently, strikes have occurred all over China for wage improvements in the logistics sector, in public transportation and, of course, in manufacturing. But this is the first time that workers, acting on their own, have compelled a major multi-national employer to deal directly and formally with their elected grass-roots representatives, on the stage of China and the world.

Many commentators, sensing the significance of this development, have looked to Poland and Detroit in the thirties to parse these events. These young Foshan workers, however, live in the China of now. They are imbued with a new rights consciousness, buttressed by recent advances in Chinese labor law. Operating within the framework of existing Chinese law, they want a decent life, not a wholesale revisiting of China’s history or political arrangements. In their very words:

“…. [our] fundamental demands are…salary raises…for the whole workforce including interns; improvements in the wage structure and job promotion mechanism; and last but not least, restructuring the branch trade union at Honda Auto Parts Manufacturing Co.’ Ltd. Another fundamental demand… [is]…non-retaliation and no dismissal of workers participating in the strike.”

Many outsiders have confused the demand for “restructuring the branch trade union at Honda Auto Parts Manufacturing Company” with insistence on an independent union, apart from the official sanctioned union. It is not. As Chinese law provides, these workers are asking for the opportunity to elect “branch” grass roots representatives, as is their right under Chinese labor law. In short, they have not asked for an independent union but a union that acts independently! A grass-roots union that speaks for them and not the employer or local government. More wages, more and better personal life and more “industrial democracy.”

In every industrial society thus far, underpaid industrial workers, without recourse to mechanisms for negotiating with employers, have struck as a last resort. Many strikes end without gains for workers. But where industrial workers can stop production, even in complex and diffuse supply chains, they are sometimes able to compel recalcitrant employers to recognize them as partners in the production process and make economic concessions. If we listen to the words of the striking Honda and Toyota workers in China, we will discover that this industrial drama is now being played out in China at the peak of its industrial system in auto manufacturing.

There are no outside agitators here, just young, educated and patriotic Chinese workers fashioning “industrial democracy” in China, on uniquely Chinese terms. They are doing so in front of a national and international audience. Because of this international context, these Chinese workers are also affecting the global economy. They could be leading the way towards an end to the global “race to the bottom” in working and living conditions for the world’s majority — at least as far as China is concerned. Our own Justice Brandeis, who at a similar stage in our industrial story put forward the need for industrial democracy and income equity, would welcome these Chinese events and be proud.