Overtime pay

The Hill
Today the big issue which came to the fore again is the issue of overtime pay. Democrats want to make it so that companies hire people for more reasonable hours while Republicans claim this will indeed cost millions.

Both are wrong.

The reality of the situation is we are dealing with a free market which is more or less in equilibrium which is what the research has found. The reality is that the market will always find a way to equilibrium, and when regulations like this are put in the market then readjusts to the new situation eliminating the benefits we originally saw. Employers will end up cutting wages back to where employees work the same number of hours for the same pay as they did before. I wish it were this simple to bring people's working hours back to a reasonable level, but it just isn't.

The issue here is we need more employers competing for workers. Labor is not a very valuable commodity, which is part of why we have unemployment. Making laws is not going to change the situation.

There are three ways I know that might be able to reduce overtime hours. One way would be to completely ban overtime altogether, but this might end up reducing the salaries of the employees which would be a cost. Research is needed on this question. A quick Google scholar search does not yield many relevant results.

Another method would be to increase the number of firms. This would force them to compete more for the same number of employees driving the wages up. This will encourage more people to the profession which will fix part of the problem of not having enough people with such skills. A basic principle in economics is that if you have a deficit of a good (such as someone's time they work) than the price is probably too low and not enough people are selling the good. Increasing the wage will attract more people to such professions. An added benefit is if there are numerous firms competing for workers than they will have to offer better pay packages, better benefits, and it is a race to attract the most skilled workers. If I was looking for work as an economist and one firm required overtime and another didn't, my decision should be fairly obvious in which one I would take. We need more companies competing for workers which will effectively raise the wage and decrease overtime in an effort to attract the best workers. The advantage to this is as soon as a firm starts to require its employees to put more time in without adequately compensating them that firm will lose its ability to compete and be a place where the least competent employees will land, making it the worst decision for the firm.

Finally, unions could be useful in decreasing overtime while at the same time keeping wages high through their arsenal of tools like strikes. This is found to be a significant effect of unionization across industries.

That is how we will reduce overtime, simply requiring an increase in overtime pay in the past has not made people better off nor increased costs for employers and there is no reason it will do so this time as well.

References

Trejo, Stephen J. "Does the statutory overtime premium discourage long workweeks?." Industrial & Labor Relations Review 56.3 (2003): 530-551.

 

Trejo, Stephen J. "The effects of overtime pay regulation on worker compensation." The American Economic Review (1991): 719-740.

 

Trejo, Stephen J. "Overtime pay, overtime hours, and labor unions." Journal of Labor Economics (1993): 253-278.

 

Education, Unions, Politics, and Eating your Own

I recently came across a collection of Harper's Weekly from 1872 in the house that I live in. In it on the front page of the August 3rd issue it talks about President Grant and Education regarding the ongoing election of that year where President Grant was running against Horace S. Greeley. The issue was that President Grant (while he wasn't a perfect president) had expanded education access in the South to all people. The South had been until President Grant's term the most culturally backwards place in the Western world (to compare apples to apples) with the lowest literacy rate and the slavery being the worst in the entire world. The article talks about how Horace Greeley would reverse the policies, but looking at more detail it turns out that this was not true how Horace Greeley would change such policies and he had been campaigning for years for progressive policies. This is a classic case of media twisting the words of a politician in a way that is dishonest and misleading.

Besides the deliberate misrepresentation of Greeley the article does have some really good points. Democrats had historically been the party of racists, and the period of 1865-1909 was the period when they moved from their racist roots that extended back to 1825 when Andres Jackson became President, so it is natural to not expect a party with such deep roots in fascism to change overnight. There were also a lot of Democrats in the South who had maintained their earlier convictions all the way up until Richard Nixon courted them in 1968 in his Southern Strategy which made them realize that the Republican Party post-1968 had the policies that they have agreed with since before the founding of our nation. The opposition to that great progressive American ideal of equality of opportunity has always been a deeply held Southern tradition.

This movement in the North to expand public education by using the resources of the Federal government has been one of the great accomplishments of American Democracy. The Southern Economy is much more diverse today than it was in 1965 and the gap between Whites and African Americans is smaller today than it used to be. It is still too large, but the campaigns of Lincoln, Grant, Roosevelt, Kennedy, and LBJ have made immense progress. This is a major threat against the traditions of the South of subjugation and their goal of slavery because it proves that the federal government can be immensely successful when used appropriately at making sure everyone has the opportunities they need and when these programs are done the leaders of freedom gain more power which means that those who would turn the South back 200 years to a nation of slavery if they could is more difficult.

In response to this by 2001 the Old Southerners needed a new strategy so they proposed the No Child Left Behind Act. This misallocation and destruction of the American education system was never designed to improve education and everything in it has been disproven by professional studies of what works and what doesn't. It gives money to massive testing companies who have a stake in politics which is the short-term benefit in higher campaign funding for them but the larger long-term benefit is it helps turn teachers off of looking for a more egalitarian system where people can get a high-quality education through the state because the state's system has been severely damaged. This is working to undo almost 150 years of American policy to ensure that every American child has the ability to get as far as possible and how it shouldn't matter how much your community has you can still get a high-quality education with the latest technology, and it doesn't mater how much your family or local community has. This was what President Grant begun and has continued, which ended up with high schools and public education extending all the way through college. The highlight of the time was when in the 1950s and 1960s college was extremely affordable and it didn't matter how much your family had you could still go get yourself an education. The result was a growing middle class and a booming economy.

The issue for these people who oppose public education is that in their misguided view on the economy they think there must be someone who has to be subjugated in order for themselves to get rich. Only recently are we finally seeing them listen to the reason of economists and the voice of reality that you can be wealthy and treat your employees extremely well. With this misguided viewpoint they (the business owners and the politicians they pay) have tried to destroy our public education system. The beginning of this resurgence against education was under Ronald Reagan when we saw massive increases in tuition for college which effectively priced a large number of working poor out of the system. The latest action in this success for the Republicans at elimintating opposition to their destruction is opposition to common core without any real proposal to make certain students aren't learning creationism in science classrooms and other fairy tales. This is a direct response of the No Child Left Behind Act, which I believe was calculated, and has succeeded remarkably well at giving local school districts the ability to destroy their education systems which has resulted in a remarkable amount of doublespeak and killing of opportunities. With teacher's unions moving away from the common core which is the way to end this destruction of our education system it is a victory to people who would move our country away from science. This removal of the best advocates for our schools from the public debate and their attacking politicians who want to ensure no student leaves high school without ever touching a real science book harms everything that makes this country great. This is the classic eating of your own which I have observed the left to be so fond of doing. Teachers should be collaborating with the government to construct a common core that has the pieces that are essential and gives teachers time to work with their students without being rushed. They should advocate for policies based on research as opposed to running away from the issue and demonizing those who are proposing to end the destruction that has been done to our education system particularly by Reagan and Bush either directly or indirectly.

The next step for the Confederates is the privatization of schools which if the public schools degrade far enough should get teachers moving to private schools which will price even more students out of getting even a basic education. The ideal of education as a human right, while not codified in law, has become an important part of American politics and is being constantly targeted by these Southerners which will destroy our economy.

This will lead to a less educated work force which will push our country back in time to a place more similar to what President Grant was fighting in his advocacy of public education which did make an impact in the South (since the vast majority of African Americans can now read) and decrease our competitive advantage which is the engine of American economic growth. The decrease in civic knowledge as well will hurt our democracy.

For the racists of the South (such as Bush and Perry) they cannot speak out today in racist terms so instead they use more nuanced terms this is a great threat to the deeply held Southern Traditions of slavery and segregation. This is why they talk about privatization and other Trojan Horses, but in the end they have always been looking for the same thing for over 200 years. Nothing about these people's goals have ever changed in the history of this country.

Fortunately, not all is lost. There are still some people who are trying to ensure that students do not leave high school without a science education with President Obama and Arne Duncan pushing to make it be required that students learn science in the schools among other important topics which are frequently omitted by the truly crazy inheritors of the Stars and Bars. Hopefully in the future we will see a further resurgence of Progressivism in American with Elizabeth Warren speaking her mind and being able to make sure that the American people hear the truth and hopefully not try to whittle it all away with Compromise. President Grant's second term was marked with great compromises which destroyed many of his accomplishments and gave more power to the Confederate Democrats who wanted a return to slavery. Fortunately the first term made immense progress that not even compromise could undo, it only slowed the march to freedom for all people in this country.

Note: I unfortunately cannot get an online copy of the article that prompted this besides going past a pay wall.

Harris v. Quinn

The other major supreme court decision today was of course Harris v. Quinn, which has its own problems. I only need to point out one to show how misguided this notion is and why this is has absolutely nothing to do with economic freedom. The plaintiff was saying that requiring union dues are

First, on the complaint and why it is faulty:
If you are an employer and specifically write out that it is a union shop and that in order to work there the employer expects you to be part of a union than that is part of a legally binding contract. If you are employed by the employer you have signed the contract to be part of the union, so you need to follow your obligation. The Supreme Court fortunately did not overturn these private contracts, so requiring union dues is still legal.

This is good for employees because it has nothing to do with saving employees money since unionized employees are paid more on average in practically every profession (excluding state employees who are being slammed by regressive tax policies in a number of states and getting their wages cut annually, which I will publish soon) which means a $100 fee is totally worth it if you are getting more than $100 in added wages which most union employees certainly do! This is the government interfering with the market and interfering with private business to the benefit of none.

That's right, no one benefits from lower wages because businesses need customers to survive and when people in the lower and middle classes businesses lose revenue. Cutting employees wages shrinks the demand curve which hurts the sales of businesses, makes it harder for new businesses to form and get customers, and hurts our overall GDP. This decision is as anti-business as it is anti-union for this reason alone. Lower wages are bad for the economy. Companies can't sell items to people with no expendable income after cost of living. Companies can't stay in business if no one buys their product. This is a fact.

Now, the actual decision
This decision didn't accept every complaint by the plaintiff turned out to be a prohibition against unions from using member dues for political activities. This is the root of the issue. This is of course the same court that rules in Citizens United v. FEC that limits on campaign spending are unconstitutional, apparently this isn't the case if you are not a private corporation. Justice Kagan is absolutely right that this is overtly political, as it is going to remove union money from elections but keep the corruption influence of private corporations such as Bank of America and Koch Industries that push for deregulation. This is going to make our politics even more rigged against the middle class and has absolutely nothing to do with liberty as the majority opinion are trying to make it out to be.

It could have been better, it could have been worse.

http://www.alternet.org/labor/supreme-courts-conservatives-attack-public-sector-unions-power-cutting-dues-paying-requirement

The Ethical Investor

Across the world, there are easily 100 million people who try to be ethical in their decisions. They are environmentalists, support human rights, and want to make a difference. There are many ways to make a difference, and they vary widely in their effectiveness. I consider myself one of these people. I favor legislation allowing unions to form, protecting workers, and regulations for businesses that strike a balance between protecting the environment and workers and allowing for innovation. These are based on the idea of equal opportunity for all, and the idea to not take advantage of people in callous ways, and pay people for their work.

When it comes to implementing these values, there is a lot that can be done to further these goals, and by far the easiest and theoretically most effective method to implement them would be to use our financial capital to improve working conditions at companies that abuse workers by buying them out. It will help us, and we can then use our power to help the world.

History has shown only investing in ethical companies (while they are on average more profitable) doesn't have the same zing as ending the unethical practices in companies which I believe if practiced would make a tremendous historical difference in how the world works.

Take the world's most profitable publicly traded company in the world, Exxon Mobil, which made over $32.6 billion in 2013 alone. This implies immense power, and if we chose to purchase their shares we could redirect company decisions to be more ethical for their employees and better for the environment. The decisions would have an immense impact. Their Market Cap (for people who don't know, Market Cap = number of shares x current price) is currently around $437 billion. No one on Earth could afford to buy every share of Exxon Mobil, but if 100 million ethical investors decided to gather together and purchase half the shares each investor would only need to put in $2,200 to own half the shares as a group. If they formed a mutual fund, or just purchased the shares themselves one by one, they could vote out Rex Tillerson and change the company in large ways to help the environment and average workers. Merely standing by the sidelines won't make such a large change, but literally replacing the CEO and Board of Directors with people who care about the world and holding them accountable by keeping our shares will make a radical change in company policy that will impact the world.

Other companies would work the same way. Buying out Apple ($511 billion Market Cap) and Nike ($63 billion Market Cap) to pressure them to monitor their factories more closely would make a significant difference. These companies could have pressure in China to blackmail them to increase human rights protections or move their factories to another country that improves worker's rights. We could buy out large banks, such as Bank of America ($157 billion Market Cap) to stop their predatory lending and force them to start lending the cash they are sitting on to small businesses. This would make an immediate difference to human rights that would require no regulation and be effective very quickly without needing to even consider political reprecussions in the next election that could unravel the progress.

This is the power of capitalism practiced ethically, which no other system in the world can do as well. This is direct action that could work in a matter of months, as opposed to centuries, and increase opportunity to all. This is what is possible, as soon as we realize how we can use the system we are in to improve human rights while improving our own well-being. We just have to realize how the system works.

We don't need radical change that hasn't succeeded despite being tried many times over (the definition of insanity according to Einstein is trying something again and expecting a different result). We need rational change that will work.

Simple Argument for why Unions for public workers are necessary

When you have a group of 5000 or more people trying to negotiate with 200 or fewer employers, like in the government sector, it will be impossible for 5000 people to negotiate with 200 without a representative from the masses. Also, my Dad works in the public sector and where one of my uncles who does the same type of job (programming) can afford to go on family trips to California every few years while one trip for one of us is an extremely expensive undertaking. Without unions, thousands of workers with the same status all under one employer would never be able to negotiate. Unions are much more effective for the employer too in fact. Instead of having to deal with each employer at once they just talk to the union's elected president, elected for their speaking skills, leadership, and negotiating skills, which improves the time of the employer and the standard of living for the workers. This is why unions are necessary in the public sector, without them there would be no dialogue between the workers and employers which is an extremely unstable model because the negotiation is then replaced with strikes.