If you heard the Trump Administration Department of Labor was using legal theories developed under Barack Obama to sue some of the nation’s most successful companies, you’d probably presume it was some kind of “fake news.”
You’d be wrong. And what’s even more remarkable is that it appears to be going on without the approval of Labor Secretary Eugene Scalia who, his admirers believe, has one of the sharpest minds in Trump’s Cabinet.
A little-known agency inside the department called the Office of Federal Contract Compliance Programs (OFCCP) was created to promote affirmative action in federal contracting. Left-wing, anti-business progressives took it over under Obama and transformed it into a place that uses data collected from contractors to look for discrimination in hiring and promotion rather than complaints filed by employees.
This, say some who follow the agency’s actions closely represents a significant departure from past practices. Discrimination suits are being brought using data mined from government contractors on hiring and promotions, using statistical anomalies to manufacture discrimination claims.
This approach, which critics describe as unreliable, is nonetheless being used by the Trump administration to taint companies with bogus allegations, usually hinging on the idea a “pay gap” exists between women and men or between different racial categories. Romina Boccia of The Heritage Foundation wrote about this in 2017 saying, “The Department of Labor has sued several tech companies, including giants like Google and Oracle, for alleged gender discrimination in pay. Pay disparities reflect a wide number of variables that aren’t easily captured in overly simplistic government statistics.”
Boccia cites the fact “current research has limitations in what factors are included,” because it doesn’t include data on women’s “strong preference for in-kind benefits over cash wages” and “immeasurable components of compensation—such as flexible work schedules—likely account for the remaining gap.” The use of statistics alone without taking other mitigating factors into account is public policy malpractice that ignores the realities of the world and the workplace.
The United States Chamber of Commerce has targeted the agency as particularly hostile to businesses. In a 2017 report, it exposed OFCCP tactics like demanding employers “provide enormous amounts of data in a short time frame, rather than working with the employer to narrow the request to focus on data relating to a specific issue.” And it’s been found to have unilaterally set “dates and times for on-site investigations without an invitation to discuss legal issues or trying to work with the employer’s schedule.”
This may sound benign but these tactics amount to the bullying of business to settle unfair suits quickly rather than fight and potentially commit so-called process crimes while doing so.
The goal of the lawsuits brought by OFCCP has been to establish new legal precedent allowing for statistics alone to be the basis of a case of employment discrimination. Evidence of a hostile comment by an employer, email exchanges between hiring authorities evidencing discriminatory intent, and other direct evidence need not be provided.
This is a dangerous precedent, something a sharp and experienced attorney like Secretary Scalia would recognize immediately. It is inconsistent with the American legal doctrine that a person, or in this case a company, need not affirmatively prove they have done nothing wrong. Due process counts, as does the presumption of innocence. Liberal activists want to use case law to rewrite the statutes to shift the burden of proof to the employer based on a mere allegation. They should not be allowed to get away with this.
We already know how damaging an accusation can be, especially when it concerns issues related to racial or gender bias. Companies should not have to prove they are not guilty. The government should have to prove they are, using something more than a statistical model that paints a distorted picture of a company’s hiring or promotion policies. This sloppy legal practice should be put to an end immediately, and Secretary Scalia should make it a priority to see that this occurs.
There are free market solutions for these issues waiting for GOP support
On most of the issues highlighting the 2020 campaign, the Republicans have a great story, especially the economy, law enforcement, foreign policy (including trade), national security, energy, and job creation. The Democrats have concentrated on three critical issues, however, which are nearly ignored by most Republicans: the wealth gap, health care, and climate change
These issues are currently owned by the Democrat candidates; they have not even been addressed directly by the Republicans. This silence is a tragic mistake because current polls show that these three issues are of critical importance to significant numbers of the American electorate. If Republican candidates continue to ignore these two issues, they will suffer in the only polls that really count – the votes in November.
Today’s topic is the wealth gap, with discussions of health care and climate change to follow in succeeding columns. I use the term, “wealth gap” in preference to “wage gap” and “income inequality” because “wealth” includes assets which are relatively long range as opposed to “wages” or “income” which may fluctuate from time to time.
The Republican response to the wealth gap is the “trickle-down” economic theory: prosperity for the wealthy means incremental income to the entire workforce because the wealthy will of necessity invest in an expanding economy thus benefiting the workers who actually produce new goods and services by which the economy is actually expanded. This is the argument prominently featured by President Trump in his famous rallies.
And, measured by present and past metrics, it is true. A flourishing economy does indeed raise wages and job opportunities. When applied to a stagnant employment environment, the chief beneficiaries on a percentage basis are the lower wage workers – i.e. when a person goes from unemployed to employed, the percentage of improvement is 100%. This is, of course, a valuable trend.
The next step, however, poses an altogether different problem: in a tight labor market – which America is rapidly approaching – how does an employer retain an experienced worker? And an ancillary problem: how does the country avoid a steady inflation, as wages rise, and senior employees can seek and find ever higher wages?
There are free market solutions to both these questions. My answer may be considered by traditional economics a radical solution, namely profit-sharing. There are various ways to implement the concept of profit-sharing – e.g. stock grants or options, profit-based bonuses, or employee stock option plans (ESOP), among others.
The basic hedge against inflation is the fact that increases in income to the workers comes from profits rather than expenses, so prices do not have to increase. The operational result is that workers who have a stake in the performance of the company tend to work harder and more efficiently, and greater income leads to higher job satisfaction and loyalty.
There are other reasons to advocate profit-sharing, namely, redressing the imbalance in asset ownership in America, which currently shows that at least 80% of America’s wealth is controlled by 1% of the population. This is a frightening situation for a democracy which is founded on a prosperous middle class. Oligarchs are waiting to rule the nation (e.g. already three billionaires are running for president).
There is also a moral reason for profit-sharing which can be summarized as follows:
1) The increase in national wealth over the past 200 years is due primarily to increases in productivity, which in turn is due to new technologies.
2) The implementation of technological innovations involves a number of stakeholders – inventors, investors, managers, implementers and buyers.
3) The benefits of the new technologies are currently heavily weighted toward all the stakeholders expect the implementers – the workers who bring into actual being the ideas of the inventor – i.e. they design and build the machinery which produces the product, fabricate it, market and sell it, repair it and teach users. Without the implementors, there would be no technology – only ideas on paper.
4) All of the stakeholders should be rewarded when the product is sold; it is only fair, therefore, that each be rewarded in proportion to the value of their contribution to the success (or failure) of the product. This is called “profit-sharing”.
This idea is not as novel nor as radical as it may seem to traditionalists. In the first place, the entire history of free-market capitalism shows it ever evolving towards more and more recognition of the value of labor in the forward march of progress.
It is also true that the chief proponents of this march have historically been the organized labor movement – at least until the 1970’s. Since then American unions have shifted from ever advancing workers’ rights in the marketplace to attempting to achieve progress through government intervention, which has meant in practice an alliance with the Democrat Party and a slippery slope toward socialism.
The results have not been encouraging. We have seen the denuding of America’s manufacturing base, the disheartening imbalance of income between management and labor, and the gradual slipping of much of America’s middle class into poverty and desperation. The bureaucracy of American Labor has failed miserably in protecting and advancing the cause of America’s workers.
The most impressive advocacy for profit-sharing in today’s marketplace is called “Conscious Capitalism”. This is a rapidly growing group of companies who represent a new generation of free market businesses. It is both a movement and an organization.
As an organization, Conscious Capitalism, Inc. now numbers thousands of companies, millions of employees, with chapters in 41 countries, and a number of large firms including Federal Express, Southwest Airlines and Costco among others. (For more information, see www.ConsciousCapitalism.org).
As a movement, it counts Amazon as one of its colleagues along with many other companies, both large and small. While this group is not particularly fond of organized labor, I believe there is a place for Labor in this movement, unions which work with and not against management and represent workers who are both employees and recipients of prorated profits from their work.
The time for advancing workers’ rights is now – in the 2020 election campaign. To win back the workers of America, the GOP must move “Onward and Upward!”
Last week, the California Senate passed a new bill that will cause somewhere between one million to two million workers, perhaps even more, to lose their status as independent contractors. If California governor Gavin Newsom signs the bill, an independent contractor will have to satisfy the following legally binding criteria:
The first of these three requirements highlight just how difficult it will be to qualify as an independent contractor in California. And all three requirements taken together will make it nearly impossible to be classified as an independent contractor. The obvious intent of this worker reclassification bill is to force workers who presently work as independent contractors into old-school employer-employee contracts.
Are you looking to hire a gardener, housekeeper, handyman? Be careful, because according to this new bill, all these people may be required to be treated as your formal employees.
This is an incredibly dangerous bill, and not just for gig-economy companies such as Uber and Lyft. Following the bill’s passing in the state senate, media headlines trumpeted “Big Win for Labor,” but this is about as misleading as can be. Rather, this bill is likely to be a big loss for most everyone other than unions, politicians who are supported by unions, and the state’s unemployment and disability reserves. And the biggest losers will be those whom the bill’s “winners” claim to support: immigrants, workers without advanced education, lower-income households, and women, who often require much more flexible schedules than men.
Sharply curtailing the use of independent contractors will raise business costs, which in turn will raise prices, reduce demand, increase business failures, and depress economic activity. When analyzing economic policies, there is no more of an inconvenient truth than the laws of supply and demand, which tell us that this bill will be a huge negative for the State. But the bill’s supporters are turning a blind eye to this.
Higher business costs will not be due to businesses that previously were “exploiting workers and shirking their social responsibilities,” as has been frequently argued by supporters of the bill, including Newsom. Rather, app-based businesses will have to completely change their organizational structure and create entirely different business plans.
App-based businesses such as Uber and Lyft are rightly concerned, because forcing them to hire their independent contractors as formal employees requires them to depart sharply from what they currently do, which is to create proprietary software that matches drivers with riders, and manage how that software is used.
Instead, Uber and Lyft will now become taxi companies, in which they will need a much larger human resources department, as well as a scheduling and strategy department to figure out where to send drivers and when. They would need to deal with the myriad issues that arise when managing employees, including determining which drivers get peak-demand schedules, such as Friday nights, and which get low-demand schedules, such as Sunday mornings.
Not surprisingly, Uber and other app-based companies have pledged $90 million to fight this bill should it become law.
There is no doubt that the costs of complying with this bill will be much higher for gig-economy businesses such as Uber. An important reason this bill is so dangerous is that much of our recent economic growth is from these gig-economy businesses. Forbes estimates that roughly 36 percent of today’s workers are in the gig economy, accounting for about 57 million US jobs.
These 57 million jobs have been created in just the last 10 years. The Great Recession was kept from being much worse because the gig economy developed around the same time and created new and much-needed economic opportunities when jobs across many traditional sectors, including autos, construction, and finance, were plummeting.
Governments should be thanking those who took enormous risks, particularly at the time of the Great Recession, to create these entirely new app-based businesses. They are now a fundamental part of the US economy and are creating substantial new economic opportunities, as well as providing new services that consumers desire.
But instead, California is risking killing the goose that laid those 57 million golden eggs. It is hard to conceive of a worse state-level economic policy that realistically could become law.
So who benefits from this? It is potentially a win for unions, who want the bill because it creates a large new pool of potential union members. I say “a potential win,” because unionization in the private sector is now below six percent, and there is no reason to expect that trying to unionize gig businesses will be any different. And since unions want the bill, it is no surprise that state lawmakers, who are supported by unions, want it.
But this bill can devastate economic opportunities for those who are presently independent contractors and who would be forced to become employees. A recent Los Angeles Times column included interviews with those who presently are independent contractors but who would lose that classification if the bill becomes law.
The interviews predictably show that current independent contractors value schedule flexibility very highly and are extremely concerned about scheduling difficulties should they become employees. One Uber driver noted that his wife was fighting breast cancer, and his ability to determine his own driving schedule meant that he was able to take her to all her medical appointments. He worries about what will happen if he must become an employee and lose his ability to determine his own driving schedule.
Another Uber driver, one who supports the bill, claims that his pay is too low, and hopes that this reclassification will increase his pay. And Uber, which lost $5 billion last year and is currently laying off some of its professional staff, might agree with him that his driving services are undervalued. But what matters is the market value that riders – not rideshare drivers – place on this service. Rideshare drivers who support this bill may very well be in for a negative surprise if this bill becomes law.
Not so long ago, this bill would not have seen the light of day in California. At one time, state political leaders understood that their job was to promote freedom and economic opportunities for all. Sadly, this is no longer the case, and the most vulnerable in the state are the ones who will lose the most if this bill becomes law.
by Stephen Moore • NY Sun
What ever happened to the old-fashioned American work ethic? I ask this because Thursday’s Labor Department report for June found yet another 430,000 Americans of working age (16+) dropped out of the workforce.
Over the last year more only 1.3 million of Americans of working age have entered the workforce even as the population of this same demographic increased by more than 2.8 million. Just over 1 million of this group found jobs. That’s right—of the increase in working age population, less than 36 percent found employment! Continue reading
The Wisconsin governor has created a template for busting unions
By Matt Patterson • Washington Times
Wisconsin Gov. Scott Walker is clearly running for president.
He may or may not win the nomination; he may or may not win the presidency. Even if he never wins another election, Mr. Walker is already the most consequential Republican politician of the last quarter-century, excepting only George W. Bush.
On March 9, with the stroke of his pen, Mr. Walker pierced the heart of Wisconsin organized labor when he signed right-to-work into law. Right-to-work allows workers to opt out of union dues and is viciously opposed by unions who maintain the level of financial support they do only because many workers are forced by federal labor law to pony up.
Right-to-work changes that. It does not forbid unionization; it does not outlaw unions. Labor unions are perfectly free to organize in right-to-work states. The only difference — in right-to-work states they actually have to earn the dues money they collect.
Right-to-work has traditionally been confined to the deep-red South and West. Wisconsin now follows Michigan as right-to-work advances into the deep-blue Midwest and Upper West. Continue reading