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Archive for September 5th, 2011

President Obama may have a buddy-buddy relationship with big labor, but he’s no friend to ordinary workers. Here are four damning pieces of evidence.

1. The unemployment rate remains above 9 percent according to the Labor Department data released on Friday.

This is about 2-1/2 percentage points higher than Obama promised if would be at this stage if we adopted the failed stimulus.

This is a spectacular failure.

2. Black unemployment has jumped to 16.7 percent.

I’ve already commented on how Obama has produced bad results for the African-American community, and the joblessness numbers are rather conclusive.

What makes that figure especially remarkable is that the black unemployment rate during the Obama years is more than 50 percent higher than it was during the Bush years.

3. More than 40 percent of the unemployed have been out of work for more than six months.

These bad numbers almost certainly are caused, at least in part, by the unemployment insurance program – as even senior Democrat economists have acknowledged.

4. Millions of people have dropped out of the labor force, dropping the employment-population ratio to the lowest level in decades.

Here’s the chart I posted last month. It hasn’t changed, and it’s perhaps the clearest evidence that Obama’s policies are crippling America’s long-run economic outlook.

All four of these charts are bad news. But the economy periodically hits a speed bump. The real problem is not bad numbers, but the fact that bad numbers have persisted for several years.

And the really bad news is that there is little reason to expect a turnaround given the current Administration’s affinity for bigger and more burdensome government.

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Labor Day is a good opportunity to consider whether unions help or hurt ordinary workers in America.

The answer is yes and no, depending on circumstances, but that’s actually the wrong question. The real issue, at least from a public policy perspective, is whether government should be a neutral referee in labor matters.

The union bosses reject that approach. They want the government to tilt the playing field, which is why the Obama Administration is using the National Labor Relations Board to promote the interests of Big Labor.

In this short interview on Larry Kudlow’s CNBC show, I argue that government should not have a thumb on the scale.

To elaborate, here’s what I wrote last year about labor unions and the role of government.

In a free society, people obviously should be free to join unions and companies should be free to negotiate with unions. But that also means that companies should be free to resist union demands and hire non-union workers. There is no right or wrong in these battles, just as there is no right or wrong when McDonald’s decides to sell french fries for a particular price. The market will reward good decisions and penalize bad choices. The only appropriate role for policy in this area is to enforce contracts and protect public safety.

I then make what should be an obvious point about what happens if unions use the coercive power of government to push wages – when adjusted for productivity – above a competitive level.

…above-market wages (at least in the private sector) are not sustainable in the long run. Workers ultimately get paid on the basis of what they produce and if it costs $25 per hour to employ a worker and that worker produces $23 per hour of output, that ultimately is a recipe for unemployment. A good example is the American auto industry, which has declined in part because of a compensation system that is not matched by productivity. This does not necessarily mean that wages are too high. It could mean that productivity is too low. Some of that, to be sure, is the fault of government policies such as a corporate tax system that penalizes investment (thus making it more difficult for workers to boost productivity). But unions also have used their government-granted power to insist on absurd workforce practices.

The important point in that passage is that unions may be hurting workers, not with demands for unsustainable wages, but instead by imposing work rules that undermine productivity.

That’s an empirical issue, to be sure. But here’s the bottom line. Government favoritism may help workers in the short run by temporarily pushing wages higher, but may hurt them in the long run by making companies – or, as I mentioned in the Kudlow interview, entire industries – uncompetitive.

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