Ending the Public Employee Union Stranglehold on State Politics

The Executive Club and Cascade Policy Institute are pleased to welcome David Nott, president of Reason Foundation, at the Executive Club’s September dinner event.

Date: Wednesday, September 2, 2015

Time: Buffet dinner begins at 6:30pm. The regular program starts at 7:00 pm.

Location: Portland Airport Shilo Inn, 11707 NE Airport Way, Portland, OR 97220

This event is free to attend. If you would like to purchase the dinner buffet, you are welcome to do so for $20 at the door.

About David Nott:

David Nott is president of Reason Foundation, a non-profit think tank advancing free minds and free markets. The foundation also publishes the award-winning and critically acclaimed national magazine, Reason. Reason Foundation hosts the annual Reason Media Awards featuring the Bastiat Prize. David created Reason.tv and the Drew Carey Project to produce and distribute internet video journalism, whose home page has reached over 200 million hits since its launch as well as the Reason.com news, which receives over 3 million hits a month. He is executive producer of the Reason Foundation 2013 film, “America’s Longest War: a Film About Drug Prohibition.”

David is an engineer by training. He received his Bachelor of Arts and Sciences with Distinction, in economics and engineering, from Stanford University. He has three children and resides in El Segundo.

Reservations for this joint Executive Club/Cascade event are appreciated but not required. We hope to see you on September 2!

Portland Rideshare Drivers Praise “The Land of Opportunity”

Call it the smartphone/mobile app economy. Call it the Free World of Ridesharing. Call it the future. Whatever you call it, Uber, Lyft, and a host of smaller innovative companies are quickly transforming the century-long, highly government-regulated transportation market in Portland and around the world. And this is just a subset of a much broader technology-enabled transformation process that paints a vivid picture of what economist Joseph Schumpeter called the essential fact of capitalism: “creative destruction.”

By far the largest of the new ridesharing companies, Uber entered the Portland market uninvited in December 2014 and then stepped back to allow the city government time to revamp its antiquated taxi regulations. In April, the city enacted a four-month pilot program that basically let Uber and its smaller rival Lyft enter the Portland market and removed many regulations from the existing taxi companies.

Now, half-way through the pilot period, the City Council received an interim report on the program’s initial results and held a public hearing on July 15. Nearly 70 taxi and ridesharing drivers were given two minutes each to either praise their newfound opportunities to make a living, or bemoan the cuts in their incomes due to competition they felt was unfair.

While the interim report was full of statistics, it was the driver testimony that really personalized the issues before the Council. Time after time, rideshare drivers explained how upset their passengers had become with traditional taxi service, because of either long wait times or poor service.

Once seen as ridesharing’s staunchest opponent on the Council, Commissioner Steve Novick noted that he thought the report showed that “the experiment was working pretty well for consumers,” but that he wanted to hear more about the impact on drivers. He specifically asked drivers to say whether they preferred to be treated as employees subject to minimum wage law, workers compensation, and unemployment insurance—or do they prefer to be treated as independent contractors?

Novick’s question to drivers was in the context of a recent decision by the California Bureau of Labor that one specific Uber driver should be considered an employee even though ridesharing companies treat all their drivers as independent contractors who are able to set their own hours, use their own vehicles, etc. Uber has appealed the ruling, and has already prevailed in at least five other states in keeping its definition of drivers as independent contractors.

The way Novick phrased his question, it seemed he was hoping to hear many drivers testify that, sure, they would prefer all the guarantees and benefits afforded to employees over being independent contractors. Not one driver gave him that response. Time after time, rideshare drivers made obviously heartfelt statements about how thankful they were for the flexibility that being an independent contractor afforded them and their families.

Some drivers were caregivers for family members and so needed to be home when required. Others had been laid off elsewhere and appreciated the flexibility of driving while having time to seek other employment. Some had other jobs and used driving for Uber and/or Lyft as a way to generate extra income to pay their mortgages and other bills.

One woman told the Council how driving for Uber let her get off food stamps and become more independent. More than one noted that they had been entrepreneurs who had fallen on hard financial times and saw driving as simply one more entrepreneurial activity affording them much needed income.

One driver urged the Council to continue allowing ridesharing, noting that “this is the land of opportunity.” Another said, “I don’t work for Uber. I work for myself!” Still another noted, “We must all adapt to the world around us….Dinosaurs did not adapt!”

When one traditional taxi driver told Novick that he, too, preferred to be an independent contractor because of the flexible hours, the Commissioner told him that employees could be offered flexible hours also. Even with that information, the driver said he would be neutral as to his employee status. Not one driver at the hearing said they clearly preferred employee status over working for themselves as independent contractors.

There surely are individuals who prefer the benefits and safeguards afforded to formal employees. But obviously, many recognize and value the opportunities and the freedom of being independent contractors, now better enabled by smartphone technology. Let’s hope that Portland City Commissioners and Oregon’s Labor Commissioner all recognize these preferences and are willing to protect them. Otherwise, we risk going backward to the government-protected monopoly taxi industry that stopped working for many passengers long ago.

Oregon’s Minimum Wage Debate: Disadvantaged Youth Are Crucial Issue

The Oregon legislature is considering raising the minimum wage over the next few years from $9.25 per hour to as much as $15. What the minimum wage means for disadvantaged youth should be the central question of this controversial topic. Plenty of middle- and upper-class teenagers take their first jobs at the minimum wage, working part-time or summers. I don’t much care whether they make five dollars an hour or ten or fifteen. They’ll be fine.

There are also some older people working at low-skilled jobs. A higher minimum wage doesn’t really solve their problem, which is low skills. However, many people parlay on-the-job learning into higher-paying jobs. Combine that with some more education and these folks should be all right.

Disadvantaged teenagers and youth in their early 20’s concern me, however. For them, the minimum wage is a big issue.

When my own kids were going out to their first job interviews, their mother and I prepped them well. We both had experience in job interviews and we helped our kids succeed at theirs. Many disadvantaged youth lack parents with good work experience themselves, so they go into their first job interview with no coaching. Which kid do you figure gets the job? It’s usually not the teenager who stares at his shoes instead of the manager’s eyes, who stammers and is unsure of himself and is surprised by simple questions.

Put this into a business context. Suppose you are trying to sell a product that looks inferior on the outside. You are sure that your product’s functionality is as good as the better-looking competitors, but yours doesn’t present itself as well. What would you do?

A business manager’s first thought might be to cut the price. Other approaches are to offer free samples, introductory discounts, special coupons, and so forth. These marketing techniques could get buyers to try your product.

The disadvantaged youth is not allowed to do any of these things. The wage cannot be lower than the legal minimum, no unpaid work is tolerated by our laws, no discounting or trial offers are allowed. The kid who interviews poorly is in trouble.

This is the worst kind of trouble for both society and the young person. We need disadvantaged youth to get jobs and learn the soft skills every employer wants: following instructions, getting along with others, serving customers. The first job is vital for learning those skills. (I recall learning a lot in my first job: to get along with people I didn’t much like, to take direction from a boss I didn’t respect, and to accept that I had to do the worst tasks because I was the newest employee. These were all valuable lessons.)

To help disadvantaged youth, we need to let them compete. That means a low or zero minimum wage. Employers will provide more coaching and help for workers just starting out if that’s what it takes to get workers at a low wage. And that is exactly what will help disadvantaged youth in the long run.

Government-Imposed Minimum Wage Increases Don’t Work for Oregon Small Businesses

The concept that everyone should earn at least some government-mandated minimum wage is politically very appealing. It’s almost the classic example of taking from the few and giving to the many. “The few” in this case are portrayed as rich businessmen who could never spend all the money they have, so what’s wrong with making them pay their workers a little more? Now, proponents of raising Oregon’s minimum wage are trying to convince us that somehow such policy is actually good for small business owners.

A recent report from the Oregon Center for Public Policy claims that a higher minimum wage works for small businesses by giving them “more of what they need most: customers with money.”

In reality, raising the minimum wage would only benefit small businesses if owners didn’t mind depleting their own savings or investment funds in order to support higher labor costs. Otherwise, they would have little choice but to raise prices, which would harm all their customers, especially those on the lower rungs of the economic ladder.

And, because minimum wage laws actually cut off those lower rungs on the economic ladder, younger, less educated, and less experienced workers will be even less likely to get or keep the very jobs they need to be customers in the first place. They may spend their unemployment checks, but those checks won’t go as far once prices are raised to cover the higher labor costs that a boost in the minimum wage imposes.

The argument that a higher minimum wage pumps more money into the economy assumes that the resulting pay increases are somehow “new money.” In reality, much if not all of that “new money” will be offset by a corresponding loss of savings or investment funds that otherwise would contribute to more economic growth and hiring more workers.

Just because low-wage workers are likely to quickly spend any wage increases doesn’t mean that on balance that’s good for small business. Taken to its logical conclusion, that would mean small business owners, and everyone else, should never save and invest for the future, but immediately spend every dollar they earn also. If this behavior really benefitted the economy, why are we seemingly so concerned about the dismal rate of saving and investing for retirement among Oregonians? Couldn’t small businesses benefit even more by encouraging everyone to spend all their income right now?

Another set of arguments for raising the minimum wage include the assumptions that higher wages “motivate employees to work harder;” “attract more capable and productive workers;” “lead to lower turnover, reducing the cost of hiring and training new workers;” and “enhance quality and customer service.”

While higher wages may lead to the benefits stated above, if business owners believe that is the case then they should be willing and eager to raise wages whenever possible. The fact that minimum wage proponents want to force business owners to reap these benefits weakens their case.

Finally, there is a real irony in the campaign to boost Oregon’s minimum wage. Minimum wage laws conspicuously leave out a class of individuals who don’t get a paycheck from someone else, but hopefully get one from themselves. Self-employed people, small business owners, and entrepreneurs trade a steady paycheck for the opportunity to be their own boss. They often risk everything―their homes, their savings, all their assets―to build a business that might someday earn them a much higher paycheck than they could ever earn working for someone else.

But, while building a business, many entrepreneurs actually earn less than the minimum wage. They may actually have negative earnings, dipping into savings or borrowing money to keep their doors open and pay their employees. And yet, if these risk-takers hire anyone to help them make their dreams come true, government says they must pay those workers at least $9.25 per hour in Oregon today, and perhaps as much as $15 per hour in the near future.

So, while business owners are free to do a lot of things, and take a lot of risks, one thing they cannot do is hire anybody for less than the minimum wage, even if they are earning less than that themselves. Of course, this may not be a winning argument politically.

It’s easier to demonize supposedly “rich” business owners than to tell workers and job seekers the uncomfortable truth that to be employed in a successful business they must produce as much or more value than they wish to be paid.

Proponents of raising the government-mandated minimum wage know that they have little to lose and much to gain politically by telling young, less educated, and less skilled workers that they deserve to be paid more, and it’s only greedy business owners standing between them and the higher wages they desire.

Let’s just hope that if another bump in Oregon’s minimum wage results in some workers losing their jobs and others not getting hired in the first place that they place the blame for their troubles where it belongs―not on employers, but on those who promised them higher wages but couldn’t deliver because economic reality stood in the way.

“Gainful Employment” Regulations Will Hurt Private Colleges

Ever since John Kenneth Galbraith published The Affluent Society in 1958, American liberals have been striving to build a full-fledged European welfare state in America. President Lyndon Johnson’s Great Society program was inspired by the same ambitions to socially and economically engineer the United States. Inspired in good part by the vision of an ideologically remade America, governments have expanded enormously over the half century that has passed since then. From the federal level all the way down to school boards and town councils, governments have gained new taxation, spending, and regulatory powers in almost every conceivable direction.

Despite this massive growth, there are still areas where government in America has not yet reached European size. One of them has to do with general income security. We should be thankful for that, for reasons I explain in my book Remaking America: Welcome to the Dark Side of the Welfare State. However, liberals keep pushing the ideological idea that every man and woman in America has some kind of inherent right to a certain income. Inspired by such concoctions as government being some kind of employer of last resort, and the basic income guarantee idea, liberals have made significant political and legislative gains in establishing the notion that people have the right to a certain income regardless of their own choices and efforts.

This move away from personal responsibility has accelerated under the Obama Administration. A good example is the regulatory conglomerate known as “Gainful Employment.” In a nutshell, this is an effort by the federal government to dictate to the private sector how much a person “should” make at certain points in his or her career. The implication―obviously not spelled out in the regulations―is that if a person does not make as much as the federal government thinks he or she should make, then some private entity somewhere, other than the person in question, bears responsibility for the insufficient earnings.

On March 14, 2014, the U.S. Department of Education explained how these regulations can be applied:

“The Obama Administration announced today new steps to address growing concerns about burdensome student loan debt by requiring career colleges to do a better job of preparing students for gainful employment—or risk losing access to taxpayer-funded federal student aid. The proposed regulations released by the U.S. Department of Education will help to strengthen students’ options for higher education by giving all career training programs an opportunity to improve, while stopping the flow of federal funding to the lowest-performing ones that fail to do so.”

In order to determine how much a student “should” make after having attended a so-called career college, in 2012 the federal government produced an Excel spreadsheet with more than 7,900 rows of earnings guidelines. The guidelines specify the maximum share of a person’s income that should go to paying back student loans. While this sounds like a misguided but ultimately inconsequential bureaucratic product, in reality it becomes an instrument for dictating the income trajectory for college graduates.

The loans used in the regulations are federal; and since the federal government controls the rates, repayment requirements, and all other financial aspects of the loan, it is easy to use the “Gainful Employment” regulations to establish minimum salaries for people who owe the government on such loans. All the government has to do is, again, to determine the maximum share of a person’s income that can go to paying back loans. If a person pays a larger share, then according to the regulations, she is not making enough money.

But what can the federal government really do if someone does not make what she “should” make? Well, as the quote above indicates, these regulations can be used to go after the educational institutions that a person graduated from. Andrew Quinlan, president of the Center for Freedom and Prosperity, elaborates:

“The Obama administration has consistently sought to eliminate education choices and reduce opportunities, particularly for the poor. The president has repeatedly tried to eliminate funding for the D.C. Opportunity Scholarship Program, despite the fact that the limited school-choice program costs less per pupil than public schools and has seen positive results for poor students. His Justice Department has even misused and misapplied old or irrelevant laws to assault local school-choice programs. Now, the Department of Education is targeting private-sector colleges through so-called ‘Gainful Employment’ regulations. The rules not only punish an entire business model…but by closing one of the best avenues for working class adults to improve their education and increase employability, they also threaten jobs and the economy. The proposed rules would cut off federal loan and financial-aid eligibility for programs that fail to meet certain federal standards, such as graduates with high student-loan debt relative to their earnings in the first few years after graduation. This is a deeply flawed approach for reasons both practical and philosophical.”

Career colleges help millions of Americans advance or reinvent their careers. They are a private-sector invention, responding to a need by others in the private sector, and they operate entirely at the mercy of the free market. If a school provides inadequate education, its graduates make less money than graduates from other schools. Prospective students quickly pick up on such differences and make a free-market, independent choice to avoid low-performing schools.

It seems, however, that this application of the “Gainful Employment” regulations has created a perfect storm of statist intentions: The desire to regulate people’s incomes has merged with a deeply held negativism toward private education.

America has a proud, centuries-old private education tradition. We also have a centuries-old, well-working free-market economy where people can both fail and succeed. The very pursuit of happiness, prosperity and a satisfying career is often as rewarding as reaching the goal. The “Gainful Employment” regulations, and all other regulations aimed at socially and economically engineering our society, rob people of that very reward. Fewer people become productive, independent citizens and more people become dependent on government for their progress through life. The welfare state wins.

Join a Union or Pay? Not So Fast, Say Oregonians

A public opinion poll released this week reveals that 84% of Oregonians agree that employees should have the right to decide, without force or penalty, whether to join or leave a labor union.

The poll of 500 Oregon adults was conducted for National Employee Freedom Week, a grassroots campaign of 77 organizations in 44 states dedicated to helping union employees learn about their right to leave their unions.

The Oregon results are slightly higher than the national average. Nationwide, 82.9% of respondents support allowing union employees to leave their union without force or penalty, a concept known as Right to Work.

Currently, 24 states have passed Right to Work laws. Because of a deal struck by Governor John Kitzhaber in March, Oregonians won’t have the opportunity to end forced union dues in the public sector this year.

Unions often do as little as is required by law to inform their employees that they have the right to opt out. But as previous polling illustrates, over 33 percent of those in union households want to leave. Therefore, educational efforts like National Employee Freedom Week are needed to inform and educate union members about their workplace rights and empower them to make the decision about union membership that’s best for them.

You can learn more at Cascade Policy Institute’s new Oregon Employee Choice website, OregonEmployeeChoice.com.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

Eight Out of Ten Oregonians Agree: Let employees choose whether or not to join a union or pay union dues

Because of a deal struck by Governor John Kitzhaber, Oregonians won’t have the opportunity to end forced union dues in the public sector this year. However, a just-released public opinion poll makes it clear that if the Public Employee Choice Act had been on this November’s ballot, most voters likely would have supported it.

The poll, conducted for National Employee Freedom Week (August 10-16) asked adults across America:

“Should employees have the right to decide, without force or penalty, whether to join or leave a labor union?”

Nationwide, 82.9 percent of respondents answered Yes. Of the 500 respondents in Oregon, a resounding 84 percent answered Yes.*

These results are significant because Oregon and twenty-five other states require workers to pay so-called “fair share” dues even if they decline union membership and refuse to pay the political portion of union dues. The other 24 states have taken advantage of federal Right to Work law that lets workers choose not to pay any dues at all if they decline to join a union. The federal government also prohibits forced union dues in its own workplaces; yet unions still represent some federal workers, and they represent workers in Right to Work states who voluntary choose to join.

Forced union dues are on the political front burner this year because of the recent Harris v. Quinn U.S. Supreme Court decision. It favored certain Illinois home care workers who don’t want to join a public employee union or pay dues just because their services are paid for with state funds. While the ruling may be narrowly interpreted, it did cause two of Oregon’s largest public employee unions to stop collecting fair share dues from some ten thousand home and child care workers in this state who have chosen not to join their ranks.

Unions claim that such workers should pay fair share dues because the unions are currently required to bargain for and represent them even if they decline union membership. But that is not the fault of those workers, and the unions haven’t seemed to mind as long as their dues money kept flowing.

Unions also claim that without their representation, workers would see their pay and benefits decline. But, after union stronghold Michigan became the latest Right to Work state in December 2012, per-capita personal income actually rose from $38,291 in 2012 to $39,215 in 2013, according to the U.S. Department of Commerce’s Bureau of Economic Analysis. That was the ninth highest increase in the country.

Why do workers want to opt out of union membership and all union dues? Some think they have better uses for their own money. Some want to “vote with their feet” against what they see as poor union service or negotiating results. Still others oppose their unions’ political agendas. They simply don’t want to support any organization that doesn’t share their political beliefs, whatever those might be.

The right to work without third-party interference is more than an economic issue; it is a profoundly moral one as well. No one should be compelled to pay union dues in order to hold a job. Hopefully, Oregon will soon grant true employee choice to every worker in our state.

* Last year’s National Employee Freedom Week poll asked union households, “If it were possible to opt out of membership in a labor union without losing your job or any other penalty, would you do it?”

The results were released in this June 2013 Cascade Commentary: More than thirty percent of Oregon union households want out.

Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

New Poll Shows 84% Percent of Oregonians Support Employee Choice

Eighty-four percent of Oregonians support allowing union employees to leave their union without force or penalty, a concept generally referred to as Right to Work. That’s the finding of a new poll, released today by Cascade Policy Institute as part of National Employee Freedom Week, which runs from August 10 to 16. NEFW is a grassroots campaign of 77 organizations in 44 states dedicated to helping union employees learn about their right to leave their unions.

The poll, with a sample size of 500 Oregon residents, asked this question: “Should employees have the right to decide, without force or penalty, whether to join or leave a labor union?” Of the respondents, a resounding 84 percent answered Yes.

The coalition also released a poll showing 82.9 percent of Americans nationwide support the Right to Work principle. Currently, 24 states have passed Right to Work laws which allow workers to leave their union without penalty or having to pay dues to an organization they choose not to belong to. Because of a deal struck by Governor John Kitzhaber, Oregonians won’t have the opportunity to end forced union dues in the public sector this year.

The poll results are significant because Oregon and twenty-five other states require workers to pay so-called “fair share” dues even if they decline union membership and refuse to pay the political portion of union dues. The other 24 states have taken advantage of federal Right to Work law that lets workers choose not to pay any dues at all if they decline to join a union. The federal government also prohibits forced union dues in its own workplaces; yet unions still represent some federal workers, and they represent workers in Right to Work states who voluntary choose to join.

Cascade Policy Institute founder Steve Buckstein notes, “Most Oregonians now support letting workers decide whether to both join and pay any dues to a union. Cascade research finds significant economic benefits if Oregon becomes a Right to Work state, but employee choice is more than an economic issue. It’s a profoundly moral one as well. No one should be compelled to pay union dues in order to hold a job.”

Unions often do as little as is required by law to inform their employees that they have the right to opt out. But as previous NEFW polling illustrates, over 33 percent of those in union households want to leave. Therefore, educational efforts like NEFW are necessary to inform and educate union members about their workplace rights and empower them to make the decision about union membership that’s best for them. More information is available at www.EmployeeFreedomWeek.com and at Cascade’s new website, www.OregonEmployeeChoice.com.

The poll was conducted by Google Consumer Surveys, between July 11 and July 31, 2014. It surveyed adults nationwide, including roughly 500 Oregonians and has a margin of error of approximately 3.76 percent.

Cascade Policy Institute is Oregon’s free market public policy research center. Cascade’s mission is to explore and promote public policies that advance individual liberty, personal responsibility, and economic opportunity.

U.S. Supreme Court rules that freedom of association trumps public sector union demands

The U.S. Supreme Court today ruled in Harris v. Quinn that home health care workers in Illinois cannot be forced to pay public sector union dues because that violates their freedom of association as protected by the First Amendment. The decision should help similar workers in Oregon who are being forced to pay dues to the state’s largest public sector union, SEIU.

The Court ruled that requiring in-home health care workers to pay so-called “fair share” fees for public sector union collective bargaining costs violates their constitutional rights by compelling them to associate with the union. The Court has previously found that freedom of association is an essential part of Freedom of Speech, which is protected in the First Amendment.

Even though it is narrowly crafted, today’s decision should apply to other states like Oregon in which public sector unions are allowed to force in-home health care workers to either join their union or pay “fair share” dues. And, the arguments used by the Court to uphold the constitutional freedom of association rights of home health care workers should be expanded in future cases to workers in general who object to being forced into paying fees for union services they don’t want.

In Oregon, for example, more than 30 percent of union households would opt if they could, and some 30 percent of SEIU public employees have already opted out of membership but are required to pay “fair share” dues for collective bargaining costs. While today’s Court decision may not free them from that financial burden, it will bolster the case that their freedom of association is being violated. At some point, the Court will need to further clarify who can and who cannot exercise their First Amendment rights when faced with paying fees to an organization they would choose not to support.

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