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Labor

Labor. G406, Regulation, ch. 9 Eric Rasmusen, erasmuse@indiana.edu March 30, 2014. An Idea from Last Time People make a lot of stupid mistakes, but they learn with experience how to protect themselves against many of them.

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Labor

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  1. Labor G406, Regulation, ch. 9 Eric Rasmusen, erasmuse@indiana.edu March 30, 2014

  2. An Idea from Last Time People make a lot of stupid mistakes, but they learn with experience how to protect themselves against many of them. http://sacramento.cbslocal.com/2014/03/31/covered-california-sends-deaf-callers-to-hotline-offering-hot-ladies/

  3. An Idea from Last Time dfgdfggfdgfd

  4. Labor and Other Inputs What if the price of capital, r, rises? How does that affect the quantity demanded of labor? Compl e ments— not compl i ments or Substitutes? There are many classes of labor, and they too can be complements and substitutes. Doctors, computers and nurses.

  5. Inequality of income in America is rising. Why? Skilled labor (high income-earners) and high-risk capital’s return is growing faster than unskilled labor’s. Why? Thomas Piketty (Paris School of Economics), Capital in the Twenty-First Century(Harvard University Press, 2014): Some reviews from the Left: http://equitablegrowth.org/2014/03/25/2366/dialogue-ten-so-far-worthwhile-reviews-of-and-reflections-on-thomas-pikettys-capital-in-the-twenty-first-century-wednesday-focus-march-26-2014#DowntonAbbey

  6. Changes Favoring Capital Returns 1. Immigration. 2. Increase workforce participation of women. 4. Imports of goods from low-wage countries. 4. Export of capital to low-wage countries. 5. The high government deficit. 6. Higher taxes on capital. 7. Technical change making capital more productive.

  7. Restrictions on Labor Supply 1. The minimum wage 2. Licensing 3. Unions

  8. Supply and Demand for Labor What story can you tell that would give us this shape of supply curve? What story can you tell for why the demand curve shifts?

  9. Setting the Minimum Wage

  10. The Minimum Wage and Recession

  11. The Workers’ Ideal if Qd=18-L But this will create unemployment too. Some workers get paid more, but some don’t get a job at all. Or, maybe L does not change, but each worker works harder than is efficient.

  12. The Minimum Wage 1938: Fair Labor Standards Act (FLSA) established a federal minimum wage. Now $7.25/hour. $8.00/hour in California, $9.19 in Washington State. http://en.wikipedia.org/wiki/Minimum_wage_in_the_United_Stateshttp://www.dol.gov/whd/minwage/america.htm The FSLA also bans child labor and says pay must rise 50% for any hours beyond 40/week. Current discussion: Making it illegal to have one’s children work on farms. The Chick-Fil-A example: A son can’t help his Dad there, even for free.

  13. Who Benefits from the Minimum Wage? Labor unions support higher minimum wages, even though their mem- bers already earn well above the minimum wage.hIt is sometimes said that this is because their wages are tied to the minimium wage in contracts, but those seem to be only low-wage contract. http://www.unionfacts.com/article/wp-content/uploads/2013/02/Union_Minimum_Wage_report.pdf There is a public-interest argument: helping the poor. But many minimum-wage workers are young or new to the workforce. A subminimum wage is a lower minimum wage for young people. Ireland: minimum wage is $11.94. Workers under 18 can be paid just 70% of that and the minimum wages in the rst and second year of employment after age 18 are at 80% and 90% to give employers incentive to hire workers new to the labor force.

  14. In the long run, consumers bear more of the burden The minimum wage raises prices, but not by as great a percentage as the wage. Why? In the short-run, firms have upward-sloping goods-supply curves and producer surplus there and in the employment market. Firm PS falls. Prices rise--- so CS falls too. In the long run, that quasi-rents pays for fixed costs, so producers are hurt less and consumers more. Consumers are rationally ignorant and so will not notice this consequence of the minimum wage.

  15. Interns and the Minimum Wage Steve Cohen: Minimum Wage for Interns? It Misses the Point Yes, I did unpaid grunt work. But guess what: It was also an invaluable experience. Conde-Nast ends program:

  16. Licensing: Marriage Counsellors IC 25-23.6-3-1 Unlawful practices Sec. 1. (a) An individual may not: (1) profess to be a licensed marriage and family therapist; (2) use the title: (A) "licensed marriage and family therapist"; (B) "marriage and family therapist"; or (C) "family therapist"; (3) use any other words, letters, abbreviations, or insignia indicating or implying that the individual is a licensed marriage and family therapist; or (4) practice marriage and family therapy for compensation; unless the individual is licensed under IC 25-22.5, IC 25-23.6-8-1, or IC 25-33. 9

  17. Licensing Occupations: http://www.in.gov/pla/boards.htm People: https://mylicense.in.gov/eVerification/ Litigation: http://www.in.gov/apps/pla/litigation/advancedsearch.aspx Indiana Criminal and Civil Records: http://mycase.in.gov/default.aspx

  18. Useful Licensing? Fake Dentists: Astrue on Obamacare “Navigators” ...HHS decided to build political support for the Affordable Care Act by pouring money into supportive organizations so they could launch poorly trained workers into their communities without obtaining criminal background checks or creating systems for monitoring their activities. As a practical matter, these navigators are unaccountable, and yet they will be asking people for Social Security numbers... NY Post: “A convicted felon could be a navigator and could acquire sensitive personal information from an individual unbeknownst to them?” asked Sen. John Cornyn (R-Texas). Sebelius responded flatly: “That is possible.” Sebelius, the sole witness at the Senate Finance Committee hearing, said that states could require a background check for navigators, but the federal ObamaCare law doesn’t.

  19. The Coffin Case (2013) http://www.nola.com/crime/index.ssf/2012/10/federal_court_rules_in_favor_o.html http://www.scribd.com/doc/131502115/St-Joseph-Abbey-v-State-Board-of-Embalmers-and-Funeral-Directors Supreme Court leaves 5th Circuit decision intact: http://www.ij.org/saint-joseph-abbey-et-al-v-castille-et-al

  20. Labor Law During the New Deal, the National Labor Relations Board (NLRB) was created in the Wagner Act to regulate unionized firms and unions. For example, the employer cannot: Threaten to fire employees who join a union. Threaten to close the plant if the employees form a union. Reject union offers without reading them (they must“bargain in good faith”) The union cannot: Strike on issues unrelated to employment Threaten or assault non-striking workers.

  21. Single Unions A big principle of U.S. labor law is EXCLUSIVE REPRESENTION: if one union gets a majority of workers to sign up, it has the exclusive right to bargain on behalf of all the employees. The default federal rule is that all employees must then join the union and pay union dues. But states are now allowed to pass “right to work” laws, under which workers are not forced to join the union. (Taft-Hartley Act, more conservative, in 1947) Indiana passed Right to Work in 2012. Michigan followed.

  22. Right to Work States in Green, 2013

  23. Market Power in Labor

  24. Union Lobbying Unions are influential in state politics, as sources of votes, information, campaign workers, and contribution. Of the top 20 political action committees for federal contributions in 2011-2012, 6 were unions, almost as many as the 7 corporations. Opensecrets.org:

  25. Which Jobs Are Unionized? In 2011, 12% of wage and salary workers were unionized, down from 20% in 1983. 7.6 million were in the public sector (work for government) and 7.2 million in the private. 37% of public-sector workers are unionized, and 7% of private-sector. The job category with the lowest rate is Sales (3%). Why do we see this pattern? http://www.bls.gov/news.release/union2.nr0.htm

  26. Employer Mandates An employer mandate is a regulation requiring the employer to provide something desirable to the worker. The government doesn't pay for the mandates. Wages fall.

  27. Escaping Mandates- Incentive A major consideration in setting mandates is that they eliminate some kinds of jobs, causing substitution to other kinds. Suppose we require health insurance for full-time employees. What can the employer do?

  28. What can the employer do? 1. Shifts to high skill (if the mandate is a fixed cost per worker) or capital. 2. Shifts to producing abroad. 3. Break up into one-man or family operations. 4. Break a 40-hour job into 2 20-hour jobs. 5. Fire the employee and rehire him as a contract temp.

  29. Workmen’s Compensation: Replacing Tort Lawsuits Compensation Schedule, U.S. Code, x8107(c), Chapter 81 of Title 50 (in weeks of wages) (1) Arm lost, 312 weeks (2) Leg lost, 288 weeks (3) Hand lost, 244 weeks (4) Foot lost, 205 weeks (5) Eye lost, 160 weeks (6) Thumb lost, 75 weeks (7) First finger lost, 46 weeks (8) Great toe lost, 38 weeks (9) Second finger lost, 30 weeks (10) Third finger lost, 25 weeks (11) Toe other than great toe lost, 16 weeks

  30. Unemployment Insurance Employers must buy unemployment insurance. $300/week, on average (states, jobs, differ), about $15,000/year. It lasts 26 weeks in ordinary times. During the recession it has been extended to 99 weeks. http://economix.blogs.nytimes.com/2011/11/02/how-unemployment-benefits-became-twice-as-generous/

  31. Fringe Benefits: 20% EMPLOYER COSTS FOR EMPLOYEE COMPENSATION – JUNE 2012 Private industry employer costs for noncash benefits was 30% of compensation (30% of pay + benefits) in 2012. This does not include mandates such as “family leave,” handicapped worker access, etc. Legally required benefits (Social Security, Medicare, unemployment insurance, workman’s compensation): 8.2 percent. Insurance (life, health, and disability): 8.1 percent. Paid leave (vacation, holiday, sick leave, and personal leave): 6.8 percent. Supplemental pay (overtime and premium, shift differentials, and nonproduction bonuses): 2.9 percent. Retirement and Savings: 3.5 percent. (it’s 8.5% for govt.—why?) Paid leave and supplemental pay shouldn’t count, since they are cash. Subtracting them, we get 20 percent.

  32. Health Insurance as an Efficient Fringe Benefit Employers: If the wage dropped by x, they would be as happy as originally. The wage drops more than x, and L increases too. Workers: If the wage fell by less than y, they would be as happy as originally. It drops less, and L increases too. by workers by employers

  33. An Inefficient Fringe Benefit: Free Haircuts Employers: If the wage dropped by x, they would be as happy as originally. It drops less, and L falls too. Workers: If the wage fell by less than y, they would be as happy as originally. It drops more, and L falls too. by workers by employers

  34. Mandates http://www.in.gov/legislative/igareports/agency/reports/IDOI20.pdf

  35. The Cost of Mandates Texas: Cost = 3.8% of premiums for 20 mandated benefits in 2005. http://www.ncsl.org/portals/1/documents/health/MandatesCauchi09.pdf Massachusetts: Cost = 12% of premiums for 26 mandates in 2008 --MA Division of Health Care Finance & Policy July 2008 maternity 3.73% mental health 2.21% home health 1.93% preventive care for children 1.12% infertility .89%

  36. Obamacare and Romneycare These are mandated fringe benefits. Romneycare is just for Massachusetts. Obamacare is for the whole country. Obamacare was challenged in court as being unconstitutional, beyond the powers of the federal government. The Individual Mandate says that each person must buy health insurance of a particular kind. The Supreme Court upheld it. One justice asked whether the federal government could require everyone to buy broccoli. It seems it can.

  37. Insurance Mandates: Birth Control Part of Obamacare has come into effect. One part says that all employers must offer certain kinds of insurance coverage. All of them must cover birth control, for examples, though they do not have to cover abortions. Already, most or all states have this kind of requirement. Indiana requires mental health coverage for autism-related problems, for example.

  38. Workplace Danger: Radium

  39. Unperceived Workplace Danger

  40. Job Danger: Downward Sloping Demand

  41. End-of-Chapter Readings 1. “Minimum Wage for Interns? It Misses the Point” The Wall Street Journal (2013) http://online.wsj.com/news/articles/SB10001424127887323476304578197520954865406. 2. “OSHA Targets Shooting Range,” David Kopel Volokh Conspiracy blog (2012) http://www.volokh.com/2012/06/23/osha-targets-shooting-range/ 3. “Denny’s to charge 5% ’Obamacare surcharge’ and cut employee hours to deal with cost of legislation,” The Mail Online (2012) http:// www.dailymail.co.uk/news/article-2233221/Dennys-charge-5-Obamacare-surcharge-cut-employee-hours-html. 4. “A License to Shampoo: Jobs Needing State Approval Rise,” The Wall Street Journal (2011) http://online.wsj.com/article/SB10001424052748703445904576118030935929752.html. 5. “The Brothers Who Busted Philly Unions. For Good,” Philadelphia (2012). http://www.phillymag.com/articles/busting-philly-unions-pestronk-brothers/.

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