Category Archives: jobs

When Greed Meets Tinker Bell

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State pension funds are another time bomb of malaise (to the tune of a $1.4 trillion shortfall) waiting to explode, and Rhode Island provides an example of the difficulty we each, in our own state, face in defusing it.

Rhode Island passed a massive overhaul (as such things go; they have a long way, yet, before they’ve completely cured their problem) of their state retirement system last year, including such unheard-ofs as raising the retirement age, suspending pension increases for several years, and generating a hybrid retirement plan that combines traditional pensions with 401(k)-like accounts.  Rhode Island’s General Treasurer, Gina Raimondo, says that this reform will save Rhode Islanders $4 billion over the next 20 years (compared to a 2013 budget that proposes spending $8 billion in that year alone, small potatoes, indeed, but a critical start).  This minor reform also seeks to redress astonishing conditions that include 58 percent of retired teachers and 48 percent of state retirees receiving more in their pensions than in their final years of work.

But it’s too much change for some.  The public “service” unions (service: you service me) object: it’s somehow wrong for their members to be responsible for their own retirement funding.  Even a little bit.  Instead, these public “service” unions protest that it’s all unfair.  Rhode Island is reneging on promises to workers, they say.  Bob Walsh, Executive Director of the National Education Association of Rhode Island, goes so far as to insist

What they did was illegal.  We’re deep into a real assault on labor.  It worries me that people who purport themselves as Democrats do this.

Never mind that there’s nothing at all illegal about these changes.  It’s a well-established principle in American jurisprudence that when the conditions extant when a contract was agreed (stipulating arguendo that the agreement was made in good faith by all parties) no longer exist, or have so radically changed that the terms can no longer be met, the contract can be abrogated and either a new one negotiated or the parties involved go their separate ways.  In extreme cases, this is what bankruptcy achieves; although, when the conditions have changed as radically as these have, bankruptcy isn’t necessary.

Never mind, also, these are promises that couldn’t be kept in any event, and both the state government and the public “service” unions at the time knew they could not be kept.  Or they blindly believed real hard in government’s ability to keep collecting funds from…somewhere.  Tinker Bell is alive and well in Public Service Land.

Never mind, finally, that this public “service” union greed at the expense of taxpayers makes “labor” a valid target.

One tear-jerker that the unions are trotting out is this:

North Providence retiree Jamie Reilly left her job as a secretary at age 50 [remember that raising of the retirement age?], thinking her 30 years of state employment would mean good benefits during her later years.  But now she said she may be forced to re-enter the workforce at age 55 because the state has put off pension increases.

“I counted on that money,” Reilly said….  “You work all your life and you plan, and they take it away from you.”

Worked all her life?  She worked 30 years and wanted to be retired for 40.  Workers in the private sector don’t get it that easy; they work until they’re in their mid-60s—a working life 50% longer.

And this one:

Cranston firefighter Dean Brockway said higher retirement ages mean he will have to work several years longer than he expected, and he wonders how he’ll climb stairs in heavy gear in his 60s.

“Could I do something else? I don’t know,” he said. “A lot of us chose to dedicate our lives to public service because to us it’s an honor.  Could I be a carpenter?  I don’t think so. This is what I do.”

Brockway has a legitimate concern, but it’s no different from the concerns of a private sector employee whose work is primarily physical labor.  But if he’s not going to look for alternatives, if he’s not going to try to retrain into something less physically demanding (certainly no stroll in the park for a middle-aged or older person, but assuredly not impossible), he loses sympathy for his plight, which begins to be self-imposed.  Certainly, there’s no more obligation for Rhode Island’s citizens to indemnify him against the outcomes of his choices than there is for them to indemnify similarly situated private sector employees.

Raimondo understands this in all its practicalities—how affordable are the existing programs:

These problems won’t go away.  The longer you wait, the bigger the problems get.  People looking for easy, short-term solutions. … Well, there are none.

Raimondo doesn’t believe in Tinker Bell.

Unemployment Numbers and Jobs

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In the aftermath of last week’s reported headline number of 7.8% unemployment, Democratic Presidential Candidate Barack Obama was out on the hustings bragging about how his policies had created some 5,000,000 jobs since the end of the Panic in 2009.  Like that’s a good performance.

Let’s look at that.  He promised in 2009 a 5.5% unemployment rate by now.  How many new jobs would have been created had we actually reached his promised number?  In December 2009 (some six months after the nominal end of the Panic of 2009), the civilian labor force was 153,059,000, of which 137,792,000 Americans were employed, a 10% unemployment rate, according to BLS statistics, and using round numbers.

In September 2012, again using BLS numbers, the civilian labor force was larger, at 155,063,000 (and it had a smaller participation rate than in 2009, but we’ll gloss over that).  There were some 142,974,000 Americans actually employed—that increase of 5,000,000 of which Obama is so proud.

However, a 5.5% unemployment rate corresponds, if my 1st grade arithmetic serves me well, to 94.5% of the civilian labor force actually employed: 146,535,000 Americans.  Again consulting my 1st grade arithmetic book, there are some 3,561,000 Americans that should be employed but aren’t—because Obama’s proudly proclaimed policies have come up short, and we aren’t anywhere near 5.5% unemployment.

Let’s look at this another way.  It’s been widely reported that this “recovery” is the weakest, most anemic post-recession recovery in our nation’s history.  Those reports aren’t far wrong.  A normal recovery coming out of a downturn as deep and steep as was the Panic of 2009 typically sees growth rates of 5%-6% per year, or more.  This Obama recovery has been 6.7% over the entirety of his term in office—nearly four years.  Had we seen a normal recovery (and using a pessimistic 5%/year growth rate), we would have reached today’s unemployment rate after a shade over one year—in 2010—and we would have been back to full employment (in the range of 4.8%-5.5%) in just under 2 years—by last year.

Obama says his policies are working.  Sure.

A Tax for a Health Fiscal Cliff

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It joins Democratic Presidential Candidate Barack Obama’s enormous tax hike he has taking place at the start of the new year, and it also creates a health cliff for the nearby future as it actively stifles medical innovation in the US.  “It” is the 2.3% tax that will be charged to American medical device manufacturers—on top line revenue—sales—not on profit.  Former Governor and US Senator from Indiana, Evan Bayh (D, IN), offered some thoughts on this problem in a recent Wall Street Journal op-ed.

As a result of this problem,

For a typical company, a 2.3% tax on revenues equals a 15% tax on profits.  When combined with a 35% corporate tax and state corporate taxes, the tax rate for the medical-device industry will exceed 50% in most jurisdictions.

[This inflicts an] added cost of $30 billion—according to the Congressional Budget Office—to the industry.  This tax comes straight out of a company’s bottom line.  Because many devices are sold to hospitals, physicians and other providers through multiyear contracts, the prices are already locked in, so the tax cannot be passed on to the buyer.

Think about the effects this will have on medical innovation.  Governor Bayh did:

America is a global leader in medical-device production and sales.  Last year the US device industry earned $5.4 billion more in exports than we spent on imports of such devices.

Even more important to the average American is the industry’s role in saving and sustaining life.  Medical devices have contributed to remarkable advances in numerous areas: artificial hips and knees, and devices used in the treatment of cancer, and for angioplasty, vascular surgery and in-vitro fertilization, to name a few.  Many of these devices have not only improved the quality of life for patients, but also produced health-care cost savings—for instance, each time an angioplastic balloon made open-heart surgery unnecessary.

and

Especially hard hit could be the hundreds of small companies developing medical software applications. These apps promise to revolutionize the practice of medicine—for instance, by delivering blood-sugar test results for diabetics.

But now

Thirty billion dollars must be taken out of operations or R&D.  Who knows what lifesaving devices that might have been developed will fall victim to this tax?

What about jobs?

Many US device companies, in response, have already announced layoffs, canceled plans for domestic expansion and slashed research-and-development budgets.  This month, Welch Allyn—a maker of stethoscopes and blood-pressure cuffs—announced that it will lay off 10% of its global workforce over the next three years, but all of the jobs being cut are in the US[]

and

In my state of Indiana alone, Cook Medical has canceled plans to build one new US facility annually in each of the next several years, and Zimmer plans to lay off 450 workers, while Hill-Rom expects to lay off 200.  Stryker, based in Michigan, anticipates having to lay off 1,000 workers[]

and

[P]roduction is moving overseas, good jobs are going to Europe and Asia, and cutting-edge medical devices will now be produced elsewhere for import into the US.

Of course Obama and his Progressive Congressmen knew this when they wrote the tax; it’s part of why the entire bill was written behind closed doors in the back of Harry Reid’s office suite, and why Nancy Pelosi was so anxious to get the bill passed before “we can find out what is in it.”  So much for Obama’s concern for the little guy.  So much for Obama’s concern for the health of Americans.  So much for Obama’s concern for America’s innovation leadership.

Update: added the actual name of the man in the first paragraph.

A Thought about Unions

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Perry Chiaramonte, of Fox News, noticed this bit a few days ago.

The International Union of Painters and Allied Trades (IUPAT) was carrying signs and chanting slogans in front of the future site of the United Food and Commercial Workers federal credit union in downtown Pittston.

Because UFCW is using non-union labor for the construction of this future site.  The reasons for both the picketing and the use of non-union labor is made clear by the IUPAT’s spokesperson:

Bob Griffiths said he never expected a fellow union to bypass organized labor to save a buck.

Doesn’t a business improve its chances of succeeding—and of keeping its employees employed—by holding down its costs?

Griffiths also said, without any irony,

It’s about the principal, not losing the work[.]

Never mind that those who got the work would be out of work if the union took the job.  Never mind that, as Griffiths has already bragged, that job would be done at higher cost, which can only be passed on to the credit unions’ customers.  Never mind that those customers include union members.

I have to ask: are unions for the working stiff, generally, or just the chosen few?  Are businesses just jobs welfare programs for unions?

More About Jobs

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Last week, in a presage of the nearby future, Alpha Natural Resources, a major coal producer, announced that it would be forced to reduce production by 16 million tons of coal per year, which will force the closure of eight mines in Virginia, West Virginia, and Pennsylvania, and the elimination of some 1200 mining jobs—400 of these miners right away.

There are two reasons for this trouble.  One is long-run beneficial and is simply part of the creative destruction that a free economy goes through—quickly and with greater strength on the other side, including for those whose jobs are lost in the near-term, if the economy is free from government interference.

This reason is the improving technology that makes natural gas more cheaply extractable than coal.

But the other reason is government interference.  Kevin Crutchfield, ANR’s CEO, puts it plainly and simply at the feet of the government’s

regulatory environment that’s aggressively aimed at constraining the use of coal.

And make no mistake about it; this is a deliberate policy.  Here’s what the then-and-now Democratic Presidential Candidate had to say about coal production back in 2008:

If somebody wants to build a coal-powered plant, they can, it’s just that it will bankrupt them[.]

It’s important to note that Obama’s policies really are anti-coal—and so, intended or not, anti-job—and not just ANR’s bad fortune or failure to operate cleanly.  As Congresswoman Shelley Moore Capito (R, WV) points out,

The president’s extreme policies are crippling entire towns and making it harder for workers to find jobs.  Because of  the president’s War on Coal, thousands of West Virginia families have to worry about where their next paycheck is going to come from.

Is the EPA well-intended, but misguided?  Not a bit of it.  The timetable for meeting its new standards is virtually impossible to meet, and the standards themselves unattainable.

But it’s alright.  All those unemployed coal miners will have clean air.  Just no money for food on their families’ tables, or for rent/mortgage payments with which to keep roofs over their families’ heads.