Wednesday, October 24, 2007

We need right to work laws

Some Lansing unionists are clamoring for a local "prevailing wage" rule. They don't like non-union people making $25 an hour when they are making $35.

The Lansing State Journal reports on this issue:

Proposal for prevailing wage in city faces hurdles

A proposed prevailing wage ordinance that would require contractors to pay union wages generated a storm of controversy when it was suggested to the Lansing City Council earlier this month.

But it will have to clear two hurdles before it can become law.

First, it remains doubtful if the ordinance, which essentially would require contractors to pay union wages for projects receiving city aid, has the legal muster to stand as proposed.

A similar ordinance was recently struck down by a court in Wayne County.

Second, supporters will have to demonstrate the ordinance will help, not hinder, the local economy. [This is impossible, of course.]

...The notion of a prevailing wage is nothing new. The city already has a prevailing wage ordinance, passed in 1992, but that rule only applies to construction work done for the city. [Your taxes already pay above market wage for all City of Lansing construction projects. The proposal is to force private developers to pay a 30% premium.]

Michigan has a similar law, passed in 1965.

The proposed ordinance, should it pass, would expand the scope. Any project costing more than $50,000 that receives assistance from the city - whether in the form of tax breaks, grants or other aid - would fall under the prevailing wage rules.

That would include projects such as the proposed $182 million Ottawa Power Station renovation for Accident Fund Insurance Co. of America's new headquarters and the redevelopment of the City Market.

...Prevailing wages - the rate of pay stipulated in union contracts for organized workers - can be considerably higher than pay for nonunion counterparts. On average, union wages, including benefits, on construction sites are 30 percent to 40 percent higher than nonunion pay and benefits.

...Requiring a prevailing wage for all workers likely would kill projects such as the nearly $60 million Ball Park North and Market Place developments announced last week, developer Pat Gillespie said. Gillepsie wants to build housing, retail and office space north of Oldsmobile Park and on the site of the Lansing City Market.

"It will probably hurt it to the point where it does not make economic sense to do," he said. "There aren't enough tax incentives to make up for it."

Developer Shawn Elliott estimates the prevailing wage requirement would add $600,000 to the cost of a proposed $22.4 million downtown condominium high-rise he's working on.

"But that makes the project fail," he said, because profit margins become too small to meet bank financing requirements. He said he already expects the project would be 80 percent union labor without the ordinance.
For the record, I would prefer a regulation prohibiting any and all government "tax breaks, grants or other aid" to any developer, business, charity or cause whatsoever. That corporate welfare is deemed necessary merely shows that taxes are at least high enough to allow government to grant favors. That is - too high. Worse, whether in the form of tax breaks or enforcement of inflated wages, the smaller entrepreneurs will never have access to any substantial loot taken from taxpayers. The way to level the playing field is to stop all of it. An ancillary benefit would be the cessation of lobbying, which would be given up as futile under an appropriately limited government.

Today, a desire for limited government is considered utopian, or delusional. In defense of that desire, I will say the Founders did not consider it so, and up until just after the time of Calvin Coolidge limited government worked quite well. So, I plead innocent at least to the charge of utopianism.

But, back to the main question. If nothing else, a prevailing wage represents a special, hidden tax targeting Lansing developers. "Prevailing wage" is just a tax that goes directly into the pockets of Lansing based union members without passing through a government bureaucracy. Worse, it is a regressive redistribution of Lansing taxpayer's money in an economy that can no longer support such privilege. It's union monetary welfare, and corporate regulation welfare.

It's not as if the developers are actually going to pay this Lansing area closed shop dues stealth-tax anyway. Business doesn't pay taxes. We do. Either we'll pay more for the fruits of the project, or we'll forgo the benefits it would have brought when it's canceled. On the approximately $180 million development proposed by the Accident Fund (assuming 60% is labor) the increased cost would be around $30 million. This is money that cannot go, for example, to current Accident Fund employees, or to new hires. It cannot be used to reduce insurance premiums. Facing that large increase, it may even be that a 180 million dollar project would be canceled.

Daring this possibility, the Lansing unions are saying, "At least none of those non-union people would get any money." It reminds me of this joke about the difference between the attitude of Russians and Americans:
An American farmer lives next door to another farmer with a prize cow.
A Russian farmer's nearest neighbor also has a prize cow.
The American farmer dreams that he has a better cow than his neighbor.
The Russian farmer dreams that his neighbor's cow dies.
The idea that businesses do not pay taxes is a difficult concept for many to grasp. It is worth a small digression so that we may learn something about taxes, regulations and prices from our neighbors north of the 49th parallel.

The Canadian dollar is lately worth more than the US dollar. This is quite a turnaround. In the last 10 years the Loonie has been as low as 68 cents US$. The last time it reached its current heights was in the early 1970s.

Canadians have long been aware that it's quite a bit cheaper to shop in the US for many items, even with an unfavorable exchange rate. With a strong Canadian dollar, US goods are even cheaper to shopers crossing the border. You might even expect prices to go down in Canada in response. You'd be disappointed. The Loonie's surge has not resulted in a reduction in Canadian prices. Canadians want to know why.

They are getting reasonable explanations, even if they don't like them. Summed up, it's this simple: Businesses don't pay the cost of regulation and they don't pay taxes - their customers do.
Price parity with U.S. an 'economic impossibility
DAVID FRIEND
The Canadian Press

Shoppers might be hoping the strong dollar will push down prices of goods in Canada to par with what's in U.S. stores, but industry watchers say consumers can keep dreaming because there's more than just the loonie to consider in the price of everything from cameras and TVs to fruits and vegetables and clothing.

"Historically, there has been a perception that there are only price differentials between Canada and the United States because of a different currency exchange, but there are a lot of other underlying costs that tie into that," says Elizabeth Evans, director of the Ted Rogers School of Management at Ryerson University in Toronto.

...Yesterday, John Williamson, the federal director of the Canadian Taxpayers Federation, fired off a letter to [Federal Finance Minister Jim] Flaherty saying that price parity between Canada and the United States isn't realistic.

"Our economy has more costly regulations and higher taxes and until this is changed, Canadians cannot expect price parity with the U.S., which has a more dynamic, lower taxed, less regulated and therefore less costly market," he wrote.

"As such, Canada cannot have radically higher minimum wages, higher business taxes and more costly regulations and suppose prices will be the same on both sides of the border - it is an economic impossibility."
Many Canadians want to achieve price parity without having cost parity. Our local unions want to enforce cost parity and insist it has no effect on prices. That is simply impossible.

To see how much attention you've been paying, TOC presents a multiple choice question on prevailing wage statutes.

A prevailing wage rule is:

1) A hidden tax increase on employers.
2) Stealth redistributionism.
3) Inflationary.
4) A way for a privileged class to restrict access to jobs.
5) A way to increase construction costs by 15% to 30%.

This is truly a multiple choice question. Pick any five.

The only advantage a prevailing wage statute has over a straight 15 to 30 percent tax on developers of major Lansing projects is that it does not waste as much in bureaucratic overhead as would administration of a more honest tax.

"The natural function of a trade union and the one for which it was historically conceived is to represent those employees who want collective representation in bargaining with their employers over terms of employment. But note that this function is perverted the moment a union claims the right to represent employees who do not want representation, or conducts activities that have nothing to do with terms of employment (e.g. political activities), or tries to deal with an industry as a whole instead of with individual employers." -Barry Goldwater

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