When we ignore government sleight of hand, the real number of unemployed Americans is a staggering 26.9 million. In For 15 Million Unemployed any Job is a Good Job; Questions for Pollyannas; Wishes Aren’t Fishes, Michael Shedlock (“Mish”) continues his excellent analysis of the unemployment situation. Contrary to Bernanke and Obama Administration rosy projections, Mish predicts that official unemployment will remain greater than 9 % through 2015. In a quote from Allen Sinai, chief global economist for Decision Economics, Mish describes corporate hiring behavior:
American business is about maximizing shareholder value…You basically don’t want workers. You hire less, and you try to find capital equipment to replace them.
Workers are expensive. Federal, state and local employment laws make them more so.
New Deal Labor Legislation
In the late 19th and early 20th century, rapid industrialization resulted in powerful owner/capitalists, virtually powerless workers, and deplorable working conditions. Upton Sinclair’s The Jungle dramatized the deplorable state of affairs in the meatpacking industry. In reaction, in 1935, Congress passed the Wagner Act to permit union organizing. Then it enacted the Fair Labor Standards Act to establish minimum pay, limitations on hours and pay for overtime work. Perhaps labor legislation should have stopped at that point.
Nothing Succeeds Like Excess
New Deal labor legislation was just a springboard for greater federal control over the workplace. Since 1964, there has been a flood of labor and employment legislation and Executive Orders.
- The Civil Rights Act prohibits race, color, religion, sex or national origin and pregnancy discrimination.
- The Age Discrimination in Employment Act prohibits age discrimination.
- One Executive Order prohibits all forms of discrimination and requires affirmative action. This includes training and outreach programs and other positive steps which must be incorporated in written personnel policies and a plan which must be updated annually.
- The Equal Pay Act requires that men and women in the same workplace be given equal pay for equal work.
- The Americans with Disabilities Act prohibits disability discrimination. The Rehabilitation Act requires most federal contractors and subcontractors to take extra measures to hire and promote qualified disabled individuals.
- The Occupational Safety and Health Act requires employers to meet legal health and safety standards.
- The Employment Retirement and Income Security Act (“ERISA”) sets uniform minimum standards to assure that employee benefit plans are established and maintained in a fair and financially sound manner.
- The Workers Adjustment and Retraining Notification Act requires that covered employers provide notification sixty days before a plant closing or a mass layoff.
- The Family and Medical Leave Act provides covered employees with entitlement to up to 12 weeks of job-protected, unpaid leave during any 12 months for the following reasons:
-Birth and care of the employee’s newborn or adoption or foster care of a child
-Care of an immediate family member (spouse, child, parent) who has a serious health condition
- The employee’s own serious health condition
These are the major pieces of federal labor and employment legislation, but there are additional enactments regulating the employment relationship.
Since we live in a federal system, state and even municipalities impose additional employment, benefit and labor obligations. Moreover, the courts have intervened to create doctrines such as wrongful discharge to limit an employer’s right to dismiss an employee at will.
Real World Consequences
Much of the above legislation is grounded in noble sentiment: workplace fairness and employee protection. But there are real world consequences: a loose definition of “serious health condition” allows employees to take large unpredictable amounts of time off, harming production schedules. Affirmative action programs require lots of staff and recordkeeping, extra recruitment and training, and slower hiring. ERISA imposes fiduciary liability on plan sponsors. With virtually every workplace sector protected, firing an employee is difficult, with the ever present danger of a discrimination or retaliation charge. And so the American workplace is now one of the most regulated areas of our economy.
Laws are often a hidden tax. See Ask Your Congressional Representative to Do Nothing. Allen Sinai has reached the correct conclusion: why hire expensive workers who have a host of protections and entitlements when you can substitute cheaper capital (automated machinery, robots, computers, etc)? In a globalized economy where a highly motivated, well-trained Chinese worker makes about $1 per hour, the over protected American worker may have priced himself out.
If the Obama Administration is serious about reducing the unemployment rate, it should be thinking about shelving expensive health care initiatives and the Employee Free Choice Act. More employer cost will equal less American employment.
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