Posts tagged with: Labour relations

overtime-on-clocks-KATHY-CAPRINOIn announcing the Obama administration’s new overtime rule (for more on this news, see this explainer), Vice President Joe Biden says companies will “face a choice” to either pay their workers for the overtime that they work, or cap the hours that their salaried workers making below $47,500 at 40 hours each work week.

“Either way, the worker wins,” Biden said.

Biden has held political office for more than four decades, and yet he has still not learned one of the most basic and important concept in economic and political policy: consider that which is unseen.

As Frederick Bastiat explained 125 years before Biden first took office,

In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause—it is seen. The others unfold in succession–they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference—the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee.

If Biden, President Obama, and the others in the administration were better economists, they might have forseen the following five consequences of this disastrous policy:
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no-signWhat just happened?

On May 18, the Obama administration announced the publication of a new Department of Labor rule updating and expanding overtime regulations.

Why did the overtime rule change?

Since the 1930s some white collar jobs (i.e., those performed in an administrative setting) have been exempt from the overtime requirement. The white collar exemption salary level was adjusted in 2004 to $455 per week or $23,660 a year. The new rule will entitle most salaried white collar workers earning less than $913 a week ($47,476 a year) to overtime pay.

The rule also updates the total annual compensation level above which most white collar workers will be ineligible for overtime. The final rule raises this level to the 90th percentile of full-time salaried workers nationally, or from the current $100,000 to $134,004 a year

The salary threshold will also automatically be updated every three years, beginning January 1, 2020. Each update will raise the standard threshold to the 40th percentile of full-time salaried workers in the lowest-wage Census region, estimated to be $51,168 in 2020.

How is overtime pay determined?
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What just happened?

Earlier today the U.S. Supreme Court split 4-4 on a legal challenge to a California law that forces non-union workers to pay fees to public-employee unions.

What was the case about?

California law requires every teacher working in most of its public schools to financially contribute to the local teachers’ union and that union’s state and national affiliates in order to subsidize expenses the union claims are related to collective bargaining. California law also requires public school teachers to subsidize expenditures unrelated to collective bargaining unless a teacher affirmatively objects and then renews his or her opposition in writing every year.

In the case of Friedrichs v. California Teachers Association, several plaintiffs, including Rebecca Friedrichs and the Christian Educators Association International, challenged the law claiming that this agency shop provision is a form of state-compelled speech. The Supreme Court was asked to decide:

1. Whether Abood v. Detroit Bd. of Ed., 431 U.S. 209 (1977), should be overruled and public-sector “agency shop” arrangements invalidated under the First Amendment.

2. Whether it violates the First Amendment to require that public employees affirmatively object to subsidizing nonchargeable speech by public-sector unions, rather than requiring that employees affirmatively consent to subsidizing such speech.

What is a “public-sector” union?

A public-sector union is a trade or labor union that represents the interests of employees within public sector or governmental organizations, such as teachers, firefighters, federal government employees, etc.

What is an “agency shop”?
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Blog author: jcarter
Monday, July 28, 2014
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Labor unions can be a force for good, especially in protecting the interest of workers against exploitation. But as with any human institution, unions can become harmful to the common good. That is particularly true with teachers unions, which often promote the self-interests of their members even when they are antithetical to the interests of students.

In this 5 minute video, Terry Moe, Professor of Political Science at Stanford University, outlines the problem of teachers unions and offers solutions to how it can be fixed.

gaplogoThe furniture store Ikea has announced they will begin to base their minimum pay on what’s considered to be a “living wage” in each local area, rather than on what competitors are paying. Similarly, the clothing retailer Gap says it will set $9 as the minimum hourly rate for its United States work force this year and then establish a minimum of $10 next year.

This makes good business sense — but will lead to a lot of bad economic reasoning.

A prime example is the latest column by Slate’s business and economic writer, Jordan Weissmann:

Notably, Ikea isn’t raising prices on its furniture to pay for the raise. Instead, the company’s management says it believes the pay hike will help them compete for and keep talent, which is of course good for business. The Gap used a similar justification when it announced it would raise its own minimum to $10 by 2015.

Which I think hints at something about what would likely happen if the U.S. raised the federal minimum. Conservatives who argue that higher pay floors kill jobs tend to assume that businesses are already running at pretty much peak efficiency, and so forcing them to spend more on labor will lead to less hiring. But left-leaning economists see it differently. They tend to argue that increasing wages can lead to savings for business by reducing worker turnover, for instance, and forcing managers to make better use of their staff.

Both the conservatives and the left-leaning economists are largely correct. Higher pay floors do tend to kill jobs and increasing wages can lead to savings for business by reducing worker turnover. But where Weissmann and other liberals go wrong is in assuming that businesses can still prevent worker turnover when the minimum wage is increased.
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mcdonalds“Clean up your own mess. Your mother doesn’t work here.”

That was a sign, printed on dot matrix printer paper, which hung in the breakroom of the McDonald’s where I worked. While that was nearly thirty years ago, I suspect that same sign is still there (though probably reprinted on a laser printer). But the idea behind it has changed. Your mother may not work at McDonalds, but the company—and others that hire low-skilled employees—are increasingly taking on the role of in loco parentis.

Lessons in basic life skills that were once taught by parents—such as punctuality, self-direction, basic personal hygiene—are increasingly being provided by the shift manager at the local fast food restaurant. That is why it’s absurd to claim that companies that are willing to hire people who are unqualified for the labor force are somehow getting over on the American taxpayer.

As Reihan Salam,
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Blog author: jcarter
Thursday, February 21, 2013
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“[He] belongs more in an insane asylum than at the head of a multinational corporation.”

beret-on-cowboyThat was the reaction by a French union official to an amusingly harsh letter by Maurice Taylor, chief executive of tire maker Titan. Taylor was initially interested in buying the French tire factory, which is facing closure following five years of unsuccessful negotiations with unions to enhance its competitiveness. However, after visiting the plant three times, he wrote a letter to France’s industry minister Arnaud Montebourg, saying: “Sir, you would like to open discussions with Titan. You think we’re that stupid?”

Taylor says the plant’s 1,173 workers “have one hour for their lunch, they talk for three hours and they work for three hours. I said this directly to their union leaders; they replied that’s the way it is in France.” The Titan CEO added:

“Titan has money and the know-how to produce tyres. What does the crazy union have? It has the French government. The French farmer wants cheap tyres. He doesn’t care if those tyres come from China or India and these governments are subsidising them. Your government doesn’t care either: ‘We’re French!’

Titan is going to buy a Chinese tyre company or an Indian one, pay less than one euro per hour wage and ship all the tyres France needs. You can keep the so-called workers.

Taylor isn’t exaggerating the problems caused by French unions. In his new book, Becoming Europe, Acton’s Director of Research Samuel Gregg writes,
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