Does Right To Work Actually Lead to More Jobs?
A study by two economists sheds doubt on whether right-to-work laws are all they’re cracked up to be.
Most people watching the Super Bowl last night probably had no idea that only a few days before, in the same city of Indianapolis, Governor Mitch Daniels signed a law that will cripple unions. As I’ve written before, Indiana is the first Rust Belt state to pass a right-to-work law, which prohibits both mandatory union membership and collecting fees from non-members. The news, however, has hardly gotten the attention the labor-minded might have expected. Blame it on the big game or the GOP presidential primary. Or blame it on the loss of union power that allowed the law to pass in the first place.
Whatever the reason, this lack of stories has meant little discussion of the actual impact of right-to-work legislation. Daniels, along with many proponents of such measures, argues that companies choose to locate in right-to-work states rather than in states with powerful unions. And the Indiana governor says he’s already seeing the fruits of the newly passed law. Union advocates, meanwhile, say the laws decrease not only union power but also wages and workplace protections. According to conventional wisdom, it seems, the choice is between fewer good jobs and more cruddy jobs.
But according to Gordon Lafer, an economist at the University of Oregon’s Labor Education and Research Center, that’s a false choice. In fact, he says, there’s no evidence that right-to-work laws have any positive impact on employment or bringing back manufacturing jobs.
While 23 states have right-to-work legislation, Lafer says that to adequately judge the law’s impact in today’s economy, you have to look at states that passed the law after the United States embraced the North American Free Trade Agreement (NAFTA) and free trade in general. “Anything before the impact of NAFTA started to be felt in the late ’90s is meaningless in terms of what it can tell us,” he says.
Because of free-trade agreements, companies can go to other countries and get their goods made for a fraction of the cost. Even in the most anti-union state in the country, there are still basic worker protections and a minimum-wage law to deal with. Such “roadblocks” to corporate profit can disappear if the business relocates overseas. “The wage difference that right to work makes … is meaningless compared to the wage savings you can have leaving the country,” Lafer says.
Only one state has passed right to work since NAFTA: Oklahoma in 2001. (Before that, the most recent was Idaho in 1985.) About a year ago, Lafer and economist Sylvia Allegretto published a report for the Economic Policy Institute* exploring just what had happened in the decade since Oklahomans got their “right to work.” The results weren’t pretty.
Rather than increasing job opportunities, the state saw companies relocate out of Oklahoma. In high-tech industries and those service industries “dependent on consumer spending in the local economy” the laws appear to have actually damaged growth. At the end of the decade, 50,000 fewer Oklahoma residents had jobs in manufacturing. Perhaps most damning, Lafer and Allegretto could find no evidence that the legislation had a positive impact on employment rates.
“It will not bring new jobs in, but it will result in less wages and benefits for everybody including non-union workers,” says Lafer.
*Full disclosure: I was a writing fellow at the Economic Policy Institute in 2008.
By: Abby Rapoport, The American Prospect, February 6, 2012
The GOP’s Economic Sabotage
It was somewhere between hilarious and pathetic to watch Republicans respond to the positive jobs report last Friday. Some friends and I were counting the minutes until some Republican started casting aspersions on the Bureau of Labor Statistics (BLS), which compiles and releases the data. Sure enough, by early Friday afternoon, Tea Party Congressman Allen West was saying (on the basis of no evidence of course) that “Americans need truth, not these number games.” West’s comment suggests a desperation that will spread if future reports are as good as last week’s, which raises the question of what the Republicans will do next to try to wreck the economy.
I know, one isn’t supposed to talk like this. I know, it’s evil to suggest that politicians would put their electoral fate this fall ahead of the conditions of the people. And, I know, it’s just . . . ooooh, it’s so mean!
But the record shows clearly that all the Republican Party can do is destroy. First, Republicans destroyed the economy. We don’t speak much these days of George W. Bush, which I’ve always felt, from January 2009, was a big tactical error on the Democrats’ part. They should have been doing with Bush all this time what the Republicans did with Jimmy Carter. He was as bad a president. Actually worse. In terms of job creation, far, far worse. Check it out—Carter’s job-creation record was in fact rather enviable. So they spent eight years taking the humming economy they inherited and asphyxiating it. Bush handed Obama three huge messes—the biggest meltdown in 80 years, plus Iraq and Afghanistan.
Then Obama tries to clean up mess number one, and they do everything they can to block every step he’s taken. It’s worked pretty well for them politically because the jobless rate has been high, and as long as that was the case, they could say no, choosing whatever weapon was handy and wagging their collective finger at the president.
But what do they do now? What if the economy keeps creating 200,000-plus jobs a month? Economists, a pessimistic lot by training and nature, are now rethinking their pessimism. Just two weeks before the jobs numbers came out, the Congressional Budget Office released a report (PDF) showing, under one scenario, that unemployment would be 8.9 percent this fall and still higher in the last quarter of 2013, at 9.2 percent. These numbers received a massive amount of attention, as they fed the trouble-for-Obama story line that will yield the close election that political reporters are desperate to have. The report sent every Democrat in Washington into a funk.
But for now anyway, it’s looking as if these CBO numbers, found in a chart on page 30 at the link above if you’re interested, might turn out to be the worst prediction of 2012. After the jobs numbers came out last Friday, James Bullard, head of the St. Louis Fed, said that the Fed’s own unemployment projections—lower than the CBO’s, but still between 8.2 percent and 8.5 percent at the end of this year—now seemed too high to him, and that “sub-8 percent is a reasonable prediction.”
If the February numbers come in resembling the January ones, the whole collective psyche will change for the better, and the story line will be one of definite rebound. What will the Republicans do then? Rhetorically, they’ll feed us more of what Mitt Romney dished out Saturday night in his Nevada victory speech: “This week [Obama is] trying to take a bow for 8.3 percent unemployment. Not so fast, Mr. President. We welcome any good news on the jobs front. But it is thanks to the innovation of the American people in the private sector and not to you, Mr. President.” So Obama gets the blame when the unemployment is north of 9 percent but not the credit when it drops. Sure, guys. Keep using that one.
And the Allen West line will gather steam. The talk-radio right will start to lay into the BLS and try to discredit it. They go out and interview 60,000 households every month (plus more—read about the methodology here). They do not cook numbers. But reality never made any difference to these people anyway.
What’s more worrisome is what the Republicans on Capitol Hill will do in policy terms to try to blunt the recovery. They’re doing little things as they can manage them. Last week, the House Budget Committee approved a bill that would inflate the cost of federal programs. But what about the big things? Let’s watch what happens on the payroll tax-decrease extension the White House wants. The current reduction expires February 29. It would not exactly shock me to see Republicans start throwing new poison pills into the final negotiations.
Why? On the same “the sky is green and the grass is blue” logic that dominates today’s GOP on virtually all matters. They say publicly, as Senator Jon Kyl does in this clip, that the reduction has not had a stimulative effect. They must know that that is preposterous. Putting $1,000 back in the pocket of your average $50,000 wage earner is, economists agree, money she is likely to spend, and spent dollars are by definition stimulative dollars. They know full well that the stimulative effect of the reduction creates jobs, too. Will they really be so blatant as to try to kill it?
There are decent and honorable individual Republicans. Probably many of them. I even know some. But as a collective entity—as a party and a movement that includes the media wing and the base that boos a gay soldier at a debate and cheers executions—they are toxic destroyers, their minds infected by the idea that any cooperation with the president for the sake of the country is the moral equivalent of Munich (yes, with all that analogy implies). They will do anything. Nothing could be more just than to see a surprisingly low unemployment rate come November, with Republicans still insisting that black is white and that governance equals capitulation, and the public rewarding them accordingly.
By: Michael Tomasky, The Daily Beast, February 6, 2012
“Trying To Make The Economy Worse”: Last Friday The GOP Had A Really Bad Day
Last Friday the GOP had a really bad day. It didn’t come in the form of new polling results — or some new political scandal. It was delivered to them by the economic statistics:
Private sector jobs up 243,000 — almost 100,000 more than expected.
Unemployment rate down to 8.3 percent.
Twenty-three straight months of private sector jobs growth.
But you say, this is not bad news — this is good news. Not for the GOP and its chances of ousting President Obama, seizing control of the Senate or maintaining its majority in the House.
As Senate Republican leader Mitch McConnell made ever so clear early last year, the Republican Leadership — and their backers on Wall Street — have one and only one goal: to defeat President Obama next fall. To do that, the GOP is betting against the American economy.
For the last two years they have done everything in their power to slow America’s recovery from the greatest economic meltdown since the Great Depression.
They have opposed virtually every element of the president’s American Jobs Act.
They brought the economy to the brink by threatening that they wouldn’t allow America to pay its bills during the debt ceiling standoff last year.
They tried their best to prevent extension of the payroll tax holiday and unemployment benefits that are so critical to maintaining buying power momentum as the economy begins to pick up speed.
And, of course, they advocate returning to the regulatory and fiscal policies that caused the Great Recession in the first place.
But the most significant thing they have done to stall the economic recovery has been their refusal to continue federal aid to state and local government.
In the last 23 months, the economy has created 3.7 million new private sector jobs. But during the same period, it has created only 3.165 net total jobs. That is because government — mainly state and local government — laid off a net of about 535,000 people.
If the Republicans in Congress had not refused to continue providing aid to state and local governments, it is likely that unemployment would be in the mid 7 percent range and the economy as a whole would have at least another half million jobs.
And we would also be more likely to have more private sector jobs as well, since the additional teachers and firefighters and policemen who the Republicans basically fired, would have had money to spend on the products and services produced by private businesses.
As much as they like to pretend they don’t agree with “Keynesian” economics, many Republicans completely understand that by refusing to provide aid to state and local government, they are hurting the economic recovery — and that is exactly what they are trying to do.
They have been perfectly willing to allow our kids to have fewer teachers and bigger class sizes, and to allow our cities to have fewer policemen and firefighters all to advance their political goal of slowing the economic recovery.
But despite their efforts to the contrary, the economy is beginning to gain traction. That is very important to the prospects of everyday Americans — and it is critically important politically.
Anyone who has ever tried to move a car that is stuck in the snow — or in the mud — knows what I mean. As long as the car just keeps spinning its wheels, there seems to be no hope. But after you’ve shaken and pushed, and put sand under the tires and the car finally begins to get the smallest amount of traction — everyone’s spirits change. Suddenly there is hope that you’re finally going to get the car moving again.
That’s what’s beginning to happen to the economy — and it will have an enormous effect on the attitudes of voters. It begins to give them hope that the president’s policies are, in fact, moving the economy in the right direction — that it actually is beginning to build up steam — that there is hope that middle class Americans are actually going to see their prospects begin to improve.
And it gives lie to the ridiculous statements of Mitt Romney, who continued to claim as late as last Friday that Barack Obama has made the economy “worse.”
The definition of “worse” is “not as good as it was before.” The economic disaster that was caused by the policies of the Bush administration — the same policies that Romney wants to bring back to the White House — caused the destruction of 8 million jobs. In fact, George Bush was the first president in modern American history to preside over net zero private sector job growth.
As soon as President Obama took office he put into place policies that reversed those jobs losses. Monthly private sector job losses declined continuously and finally turned positive — and the economy has added private sector jobs continuously for the last 23 months. In the last two months alone, the economy has added 446,000 new jobs. That is not worse. In fact, that is commonly known as better. And that is a huge problem for the GOP political narrative this fall.
In the next several weeks, Congress will rejoin the battle over the extension of the payroll tax holiday and unemployment benefits for those who are out of work for no fault of their own. Recall that this was the fight that involved the complete surrender of GOP opposition in the week leading to the Christmas holidays. Then, they agreed to a two month extension that guaranteed that the battle would be renewed — a fight that will once more highlight just how, when it comes to jobs, President Obama and the Democrats are doing battle with a “do nothing Republican Congress.”
There will likely be ups and downs in the jobs numbers over the next eight months. But as long as the economy continues to gain traction — and as long as Democrats continue to battle for jobs legislation in Congress — there will be many more bad days ahead for the GOP’s strategy of making themselves look better by trying to make the economy worse.
By: Robert Creamer, The Huffington Post, February 5, 2012
Why Wall Street Hates A Healthy Labor Market
It’s simple: When workers gain some leverage, it gets a little harder to generate totally obscene profits.
It’s always such a shame when the interests of labor don’t match up with the priorities of capital. The Bureau of Labor Statistics reported on Thursday that new claims for jobless benefits fell again last week. But in a Wall Street Journal roundup of reactions to the news, one economist found reason for concern.
Deutsche Bank’s Alan Ruskin observed that the rate at which productivity — the amount of goods and services produced per worker — is growing is beginning to slow down in the United States.
We are at the point in the cycle where squeezing any more output from the existing labor force, with the current capital stock, becomes more difficult and attempts to raise output, force an increase in employment or at least employee hours. The good news is that we are closer to the point where a virtuous cycle of increased demand, driving increased employment and income, generating more demand, is in place. The flip side is that the rise in wages relative to output pushes up unit labor costs and undermines productivity, and could chip into the record profit share of income with some negative implications for equities.
In other words, stock prices could slump because an increase in the demand for labor will put upward pressure on wages. For the vast majority of Americans, this is fantastic news. For the 1 percent, not so much.
The news inspires memories of the go-go days of the dot-com boom, when the stock market greeted every new monthly release of gangbuster job growth numbers with a sharp sell-off. Wall Street doesn’t like it when American workers are in demand. That’s either the most heartening news yet about the nascent economic recovery, or the most maddening.
By: Andrew Leonard, Salon, February 2, 2012
Adam Smith’s “Invisible Hand” Picking Our Pockets
Now that Newt Gingrich has torn the mask off the ugly face of predatory corporate capitalism, it’s clear why defenders of the status quo such as AEI President Arthur C. Brooks were so eager to frame the debate after the Wall Street collapse in 2008 as an existential clash between “entrepreneurship” and “European-style statism” in which freedom itself was endangered by “expanding bureaucracies, a managed economy and large-scale income redistribution.”
Trickle-down, supply-side capitalism sold itself for decades to a gullible public as the comforting belief that a rising tide raises all boats. There was no need for class warfare, the rich assured us, since giving them more money meant more jobs for us. That was the implicit bargain when America agreed to cut the taxes of the rich in half.
Yet, the most important economic story of the last 30 years has been the growing income gap brought on by the radical transformation of the American economy from one that makes things to one that packages debt – and does so by enhancing the purchasing power of the masses at the expense of the predictable wage growth that supplies the foundation of a stable and broadly-based middle class society.
Denied the utilitarian argument that trickle-down capitalism works best for everyone, defenders of laissez faire have more recently turned to metaphysics and morality in order to build their firewall against what they can all see coming: a Second New Deal.
This helps explain the peculiar, desperate and almost frenzied explanations we’re hearing from plutocrats like Mitt Romney, who is being forced (thanks to Occupy Wall Street and now Newt Gingrich) to explain to us in greater detail just how he came by all those millions.
Romney’s reliance on the fall-back reactionary politics of “envy” and “class warfare” shows it’s a story he’s not keen on telling.
As Charles Blow wrote in the New York Times, Romney “lambasted” his Republican opponents Newt Gingrich and now Rick Perry for poking about into what Romney did as head of the private equity firm Bain Capital. Obviously targeted for a friendly Republican audience rather than a more skeptical general election one, Romney’s only comeback seemed to be a tactical one — that attacks against him and his performance as a latter-day Robber Baron were playing right into the hands of President Obama, who Romney charges with dividing America through the “bitter politics of envy.”
On NBC’s Today show Romney went further and said the entire debate about income inequality was out of bounds, even telling host Matt Lauer that questions about whether those palatial fortunes of the rich were fairly won should be entertained — if they are entertained at all — only “in quiet rooms” where opposition to out-sized fortunes could either be safely reasoned with or bought off.
Listen carefully because Romney’s is the authentic voice of the New American Aristocracy.
And that’s the problem, says Blow. With all due respect to Romney’s “quiet rooms,” says Blow, Americans have been quiet for far too long about a reward system that unfairly favors the few.
Notes Blow, a report released last week by the Pew Research Center found that about two-thirds of Americans perceive a “strong conflict” between rich and poor. That is up 19 percentage points from 2009. Another report cited by Blow showed that the United States ranks near the bottom among Western countries in the social mobility it provides its citizens.
“This has nothing to do with envy and everything to do with fairness,” says Blow.
Indeed, as all those Tea Party Republicans who’ve been brushing up on their early American history can no doubt tell us, it’s precisely the power of concentrated capital to re-create a British aristocracy wearing colonial blue that was at the heart of the bitter rivalries and antagonisms that separated Federalists from Anti-federalists, Hamiltonians from Jeffersonnians.
More recently, conservative apologists for Big Monied interests were quick to label Elizabeth Warren as a leftist radical who hates all that is decent and holy about American rugged “individualism,” while harboring the typical Harvard elitist’s contempt for the simple desire of average Americans to get ahead. Yet, even conservatives had to concede that when Warren spoke about the American Social Compact she was articulating the commonplace truth that “nobody in this country got rich on his own. Nobody.”
Nevertheless, the starkly elitist and anti-government writings of Ayn Rand are enjoying an Indian Summer among America’s plutocracy largely due to the flattering portrait Rand paints of them as society’s only “productive class” and upon whom the rest of us parasites must feed. These are the members of America’s superclass, says Rand, who have it within their power to bring civilization itself to a halt should they decide to “Go Galt” – go on strike – in order to resist the taxes imposed on them to support the lassitude of the greater idle masses.
Warren articulates an alternative view in which the resources of these wealthy job creators are nothing but worthless paper in the absence of the critical collective investments society makes in the human and economic infrastructure necessary to build the kind of economy where all that paper can be profitably put to use.
You can see now why Warrren’s alternative narrative about the value of investments in roads, research and schools made by a government Rand’s superclass is so intent on dismantling would be seen as destabilizing to the self-serving mythology plutocrats have constructed for themselves that unregulated private capital is solely responsible for wealth creation and the jobs that go with it. And this is why conservatives were so determined that Elizabeth Warren and her subversive ideas be knocked down, and now — and even by social conservatives who believe birth control is immoral and should be illegal who nevertheless lined up to attack Warren on her imagined assaults on “individualism” and “personal autonomy.”
Recently, I wrote about the arbitrage Republicans have used to great effect in recent decades to profit from the gap that exists between the way the public thinks about how the economy works and how it really does. The public thinks the same old rules still apply about people being rewarded for the risks they take and the contributions they make within a competitive “free market,” where taxing away the fruits of those labors in order to give rewards to others less prudent or hard-working is thought to be both unfair and unjust.
That in a nutshell is the basic concept called The American Work Ethic to which most American voters subscribe.
But there is a huge gap between the facts and fictions of our economic existence that Blow helps to illuminate when he writes about an older Contract with America that the wealthy in this country have now broken.
The old “social symbiosis,” says Blow, was one where Americans working together “create a society in which smart, hard-working people can be safe and prosper, and the rich in turn reinvest a fair share of that prosperity back into society for posterity.”
It’s an arrangement in which everyone benefits, says Blow. “But somewhere along the way this got lost. Greed got good. The rich wanted all of the societal benefits and none of the societal responsibilities. They got addicted to seeing profits go up and taxes go down, by any means necessary, no matter the damage to the individual or the collective. Those Maseratis weren’t going to pay for themselves. And the resulting income inequality helped to stall economic mobility.”
The values of “freedom,” “individualism,” “entrepreneurship” – and the corresponding attacks against “envy” and “class warfare” – which the Republican Party and its wealthy benefactors are feverishly putting forward to protect their privileges and vested interests, are predicated on public belief in what Blow calls the “idea of equal opportunity” that is central to this country’s “optimistic ethos.”
But income inequality and “corporate greed,” he says, “are making a lie of that most basic American truism. The rich and their handmaidens on the political right have consolidated America’s wealth on the ever-narrowing peak of a steep hill and greased the slope. And they want to cast everyone at the bottom as lazy or jealous, without acknowledging the accident of birth and collusion of policies that helped grant them their perch.”
A Republican Party whose agenda is now so wholly At One with America’s One Percent thinks nothing of passing laws to dismantle unions in order to prevent average workers from gaining economic leverage by means of pooling the one resource they possess – their labor. Yet, at the same time, Republicans define as “persons” those legally incorporated enterprises that are nothing more than creatures of the state and of those laws which allow the wealthy to pool that resource which they have in such abundance – their capital.
And once this basic inequity receives the attention it deserves, that low roar you hear gaining volume in the distance will be the sound of Americans waking up to fact that for far too long the plutocrats in this country have been using Adam Smith’s famous “Invisible Hand” to pick their pockets.
By: Ted Frier, Open Salon, January 15, 2012
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