Reinventing America’s Unions for the 21st Century

Critics have suggested that leaders of the labor movement suffer from economic illiteracy that has made them the architects of their own demise. The unwillingness of unions to make concessions in the face of global competition starting in the 1960’s was a major factor in Americans losing millions of union jobs. In the present day, unions push for minimum wage hikes well beyond what inflation might justify (about $9.00 to $10.00 per hour), with “fight for fifteen” campaigns which, if successful, will carry the unintended consequences of higher unemployment and accelerated small-business failures. Today only about 7% of America’s private sector workers belong to unions.

One can also make the case that unions are becoming irrelevant because much of what they fought for is now enshrined in law. Labor laws protect workers from wrongful termination. OSHA standards ensure workplace safety. Social Security, Medicare, Medicaid, and a host of other social welfare programs all provide a safety net for the aged, disabled and unemployed. The Affordable Care Act, fraught with flaws that will hopefully either get repealed or replaced, at least guarantees anyone can purchase health insurance. Has the justification for unions in America largely withered away because of their successes?

What role, if any, should unions play in 21st century America?

The most difficult challenge to finding a consensus model for unions in 21st century America is the polarizing rhetoric that passes for discourse. Among pundits who are rewarded by the size of the audiences they can attract, or analysts [...] Read More

How to Create Affordable Abundance in California

California has one of the highest costs of living in the United States. California also is one of the most inhospitable places to run a business in the United States. And despite being blessed with abundant energy and an innovative tradition that ought to render the supply of all basic resources abundant and cheap, California has artificially created shortages of energy, land and water, and a crumbling, inadequate transportation and public utility infrastructure.

The reason for these policy failures is because the people who run California are the public sector unions who control the machinery of government, the career aspirations of government bureaucrats, the electoral fate of politicians, and the regulatory environment of the business community. To make it work, these unions have exempted government workers, along with compliant corporations and those who are wealthy enough to be indifferent, from the hardships their policies have created for everyone else.

Here’s just a taste of what California’s middle class, too rich to qualify for government handouts and too poor to be indifferent, has to endure compared to the rest of the United States:

CALIFORNIA’S PREMIUM, 2014 – HIGH PRICES FOR THE BASICS

It’s not hard to estimate how these premiums, 13% for gasoline, 42% for electricity, and 72% for homes, translate into the necessity to work and earn tens of thousands of dollars more each year in order to live in California instead of almost anywhere else in America. As for the tax and regulatory environment, [...] Read More

California’s Green Bantustans

One of the core barriers to economic prosperity in California is the price of housing. But it doesn’t have to be this way. Policies designed to stifle the ability to develop land are based on flawed premises. These policies prevail because they are backed by environmentalists, and, most importantly, because they have played into the agenda of crony capitalists, Wall Street financiers, and public sector unions. But while the elites have benefit, ordinary working families have been condemned to pay extreme prices in mortgages, property taxes, or rents, to live in confined, unhealthy, ultra high-density neighborhoods. It is reminiscent of apartheid South Africa, but instead of racial superiority as the supposed moral justification, environmentalism is the religion of the day. The result is identical.

Earlier this month an economist writing for the American Enterprise Institute, Mark J. Perry, published a chart proving that over the past four years, more new homes were built in one city, Houston Texas, than in the entire state of California. We republished Perry’s article earlier this week, “California vs. Texas in one chart.” The population of greater Houston is 6.3 million people. The population of California is 38.4 million people. California, with six times as many people as Houston, built fewer homes.

And when there’s a shortage, prices rise. The median home price in Houston is $184,000. The median price of a home in Los Angeles is $530,000, nearly three times as much as a home in Houston. The Read More

The Unholy Trinity of Public Sector Unions, Environmentalists, and Wall Street

Taken at surface value, there ought to be minimal identity of interests between these three special interests. But if you follow the money and power instead of the rhetoric and stereotypes, you will find this unhealthy alliance is alive and thriving. For example, unions use “greenmail,” the threat of a lawsuit on environmentalist grounds, to block developments until the businesses involved concede to union demands. Once they back down, the environmental problem magically disappears.

California’s much vaunted high-speed rail and delta tunnel proposals are also examples of the unhealthy rapprochement between unions (public and private) and environmentalists. Because the construction unions, God bless ’em, want thousands of good new construction jobs, and the only big projects that are environmentally correct are these monstrosities. The unions have a choice – fight the environmentalists in order to lobby for public works that actually yield economic benefits to society, or enjoy their considerable support for a couple of misguided mega-projects.

Beyond obvious examples, how unions, environmentalists, and America’s overbuilt financial sector collude – often unwittingly, does not lend itself to emotionally resonant, simple narrative. It can’t be expressed in a few declarative sentences. But because this web of collusion is stunting the economic growth of America and systematically destroying its middle class, it is a story that must be told. Here are some points that all exemplify the chain of cause and effect, linking the interests of public sector unions, environmentalists, and Wall Street.

Public sector unions demand, and get, over-market compensation and [...] Read More

Construction Unions Should Fight for Infrastructure that Helps the Economy

One primary reason California has the highest cost-of-living (and cost of doing business) in America, combined with a crumbling infrastructure, is because California’s construction unions have allied themselves with environmental extremists and crony “green” capitalists, instead of fighting for what might actually help their state.

California’s construction unions ought to take a look around the rest of the country, where thousands of jobs are being created in the energy industries – really good jobs – doing something that actually helps ordinary people. Because the natural gas revolution unleashed in North Dakota, Texas, Wyoming, Colorado, Utah, New Mexico, Pennsylvania, West Virginia, and Ohio is creating thousands of jobs in those states at the same time as it lowers the cost of energy for consumers who struggle to make ends meet.

More generally, construction unions should remember that it is not only how much their own members earn that matters, but how much things cost everyone. If things cost less, you can make less yet enjoy the same standard of living. When unions fight for high paying jobs on projects that are useless, they only help themselves. When they fight for projects – such as natural gas development – that lower the cost of energy, they are helping everyone.

The California Public Policy Center released a new study this week entitled “The Benefits and Costs of Oil and Gas Development in California,” written by Dr. Tim Considine, an energy economist with the University of Wyoming. In the study, Considine estimates [...] Read More

Pension Funds and the “Asset” Economy

“You can’t build a society on artificially inflated asset values, because that accelerates the class division. Immigrants know that even if they work in a low-paying job in a hotel in Houston the chances they can save and buy a house are infinitely better than in California. If you want to have an asset based economy then accept we’re going to have feudalism because the price of entry is just too high.” – Joel Kotkin, CPC Interview, January 4, 2014

What Kotkin is referring to is the result of decades of increasing legislative restrictions on cost-effective land and energy development, combined with Federal Reserve policies designed to minimize the cost of borrowing. In the first case, prices for land and energy, the building blocks of a healthy economy, are artificially inflated through constraints on supply. In the second, the supply of borrowed money is artificially increased via ultra-low interest rates.

This so-called “asset economy” might also be called a “bubble economy,” because it cannot be sustained indefinitely. For a while, inflated values of real estate, privately owned natural resources and business inventories provide collateral for additional borrowing at low interest rates, which puts even more money into circulation, bidding the price of assets up even further. Meanwhile, environmentalist legislation of increasing severity continues to restrict supplies of land and energy, driving prices of marketable land and energy higher still. And the bubble grows.

This is the real reason California is unaffordable for working families. Anywhere within 100 miles [...] Read More

Bipartisan Solutions for California

When examining policy options that might help restore a financially sustainable public sector, reformers tend to focus on what may be politely referred to as austerity programs. And no effective package of reforms can ignore austerity measures; cutting government programs, cutting government staff, and cutting government employee compensation. At the same time, an essential element in such an austerity program would be new rules to change the political landscape – in particular, legislation to curb the power of public sector unions whose agenda intrinsically favors bigger government.

Focusing on austerity alone, however, not only condemns many useful government programs and virtually all government workers to an unpalatable fate, but it is insufficient to revitalize overall economic growth. Accompanying any package of austerity measures must be a package of prosperity oriented measures. These include, predictably, creating a more business-friendly regulatory environment. But they also should include public/private infrastructure projects, strict new laws designed to break up monopolies and promote competition among very large corporations, and a relaxed permitting process for land, energy and resource development. All of these prosperity measures must share a common priority – to lower the cost of living. This not only makes austerity measures affordable, but it frees up public capital to reduce debt and make smart infrastructure investments, and it frees up private capital to innovate and invest in entirely new industries.

Here, in more detail, are solutions for California that combine both austerity and prosperity:

(1) Balance State and Local Government Budgets:

(a) Lower the [...] Read More

What Unions Should Be in 21st Century America

The role of unions in the United States has historically been to pool the collective power of workers to negotiate an end to exploitative work conditions and elevate rates of compensation. During the late 19th and early 20th century, unions fought courageously and successfully to raise the standard of living for workers and to push for systemic legislative reforms. While union spokespersons today may overstate their role in the creation of a middle class in America, their legacy is one of undeniable heroism and accomplishment.

In the aftermath of WWII, when the United States had an economy that was larger than the rest of the world combined, and a uniquely intact industrial base, unions flourished as never before. As America’s manufacturers enjoyed a near monopolistic position on world markets, and exported products to the recovering and developing nations, record profits amid minimal foreign competition enabled management to grant request after request to union negotiators, and a middle class was established that enjoyed an unprecedented level of broad prosperity.

Today the status of unions, and workers, is very different. The recovery of Europe and Japan, followed by the rise of great manufacturing nations throughout the world, has disrupted if not destroyed entire industries in the U.S. The American consumer can purchase a dazzling array of products at incredibly low cost, but the price for this has been the decimation of private sector unions. And into this void, public sector unions have emerged as the new voice of labor in the United [...] Read More

How Construction Worker Unions Can Save California

The California Labor Federation has a membership of more than 1,200 unions, representing over two million workers. And the first of seven key issues they list on their legislative agenda for 2012 is supporting high speed rail. As they put it, “Building high speed rail will grow our economy and create long-term jobs. An estimated 450,000 jobs in operations, maintenance, ticketing, and services will be needed to keep HSR up and running.”

It is difficult to imagine economic thinking more well intentioned yet fundamentally flawed. What private sector unions want, ideally, is to work cooperatively with government and industry to help create well paying jobs. But high speed rail will incur far more economic costs than economic benefits. Massive construction projects, using public/private financing mechanisms, have to benefit the economy. Otherwise they are examples of private gain – high paying jobs for workers who happen to belong to unions involved in the construction and maintenance of the project – in exchange for socialized loss – higher taxes that lower the disposable income of everyone else.

Policy activists who are critical of unions must understand that there are two crucial debates they are engaged in with unions. The first one is an economic argument – convincing union leadership that encouraging free market competition will lower the cost of living for everyone, and that when this happens all workers benefit. This is a tough sell, despite being entirely accurate. But the second debate, which regards what projects unions should be [...] Read More

Senator DeLeon’s Universal Retirement Security Act

The challenge of providing retirement security to all citizens is the broader issue behind the debate over what level of public sector pension benefits are both equitable and financially sustainable. California Senator Kevin De Leon’s proposed legislation, SB 1234, will hopefully further this debate.

As reported in the Sacramento Bee by Jon Ortiz on February 24th “California Democrats push pension plan for nongovernment workers,” and in the Los Angeles Times by Mark Lifsher on February 23rd, “Private-sector retirement savings plan proposed for California,” DeLeon’s bill will require every employer in the state with five or more employees to participate in the plan. If employers already offer a pension plan or 401K plan, they would be exempt.

Plenty of commentators have already weighed in with sobering missives on the many problems with DeLeon’s bill. You can read them in the San Bernardino Press Enterprise, the Pleasanton Weekly, CalWatchdog, CalWhine, and elsewhere. But when DeLeon says his bill “is designed to supplement Social Security retirement benefits,” he is on to something bigger than he may realize.

The goal of taxpayer funded retirement security, whether it is for a retired government worker or a retired private sector worker living on social security, is not to support an affluent lifestyle. A taxpayer funded retirement pension should be a modest amount, better than social security – but not some huge amount that enables an affluent lifestyle. To have an affluent lifestyle [...] Read More