Jobs are leaving California and our elected officials should focus on how to bring them back. I wrote about this issue in Wednesday’s inaugural edition of LA’s new daily newspaper – the Los Angeles Register. I’m not the only one who believes it’s time to encourage the private sector to create jobs for all LA citizens. In my LA Register op-ed, I point to the UCLA Anderson School of Management 2014 Forecast report that states “the most alarming economic problem facing Los Angeles is its anemic job growth.”
The massive government-run health insurance program known as ObamaCare is impacting Americans everywhere. The more people find out what is in the new law, the more questions they have about it.
As Honorary Co-Chairs of the American Freedom and Enterprise Foundation, Senator Jim Talent and I are hosting an Online Town Hall on ObamaCare on Tuesday, April 8, at 12:00 pm central time to answer your questions and listen to your concerns about ObamaCare.
We have invited two special guests to join us. Lanhee Chen, a Hoover Institution Research Fellow and a former policy advisor for Governor will be online as our policy expert. And Dr. Chuck Willey, the CEO of Innovate Health Advocates will be with us to answer your questions on how ObamaCare is impacting patients, doctors and America’s health care system as a whole.
We hope you will join us and help spread the word by sharing this event with your personal and professional networks.
Most media outlets today posted “good news” based on the Bureau of Labor Statistics’ (BLS) March jobs numbers report. I took a look at the survey that BLS uses to calculate the unemployment rate and found a few interesting facts. The bad news: We’re still down where we were in 2008 and the unemployment rate is still flatlining.
Part time vs. Full time:
1. The total number of people employed increased by 476,000
2. The number of people employed part time for economic reasons (slack work conditions or could only find a part-time job )increased by 225,000
3. The number of people employed part time for noneconomic reasons increased 189,000
4. So, the economy created 476,000 total jobs 87% or 414,000 of which were part-time and 13% or 62,000 of which were full-time.
Labor force participation:
1. Unemployment peaked in October of 2009 at 10%. At that time, the labor participation rate was 65%.
2. If the labor participation rate were 65% today, the unemployment rate would be 9.3%
3. All but 0.7% of the improvement in the labor market has come from a decline in the number of people participating in the labor force
Number of people employed vs. the population:
1. Since March of 2008, the population has increased by 14,263,000
2. Since March of 2008, the number of people employed has decreased by 344,000
3. Since March of 2008, the number of people unemployed has increased by 2,664,000
The U-6 Unemployment Rate:
1. The U-6 rate does not include as employed the 225,000 people working part time for economic reasons but does include people who have looked for a job in the past 12 months as opposed to the past 30 days.
2. The U-6 rate, the broadest measure of labor market health, increased from 12.6% to 12.7%.
The number of people not in the labor force who want a job now increased by 86,000 to 6,146,000.
Charles Koch really did a great job in this Op-Ed earlier this week in the Wall Street Journal about American values.
I have devoted most of my life to understanding the principles that enable people to improve their lives. It is those principles—the principles of a free society—that have shaped my life, my family, our company and America itself.
Unfortunately, the fundamental concepts of dignity, respect, equality before the law and personal freedom are under attack by the nation’s own government. That’s why, if we want to restore a free society and create greater well-being and opportunity for all Americans, we have no choice but to fight for those principles. I have been doing so for more than 50 years, primarily through educational efforts. It was only in the past decade that I realized the need to also engage in the political process.
A truly free society is based on a vision of respect for people and what they value. In a truly free society, any business that disrespects its customers will fail, and deserves to do so. The same should be true of any government that disrespects its citizens. The central belief and fatal conceit of the current administration is that you are incapable of running your own life, but those in power are capable of running it for you. This is the essence of big government and collectivism.
More than 200 years ago, Thomas Jefferson warned that this could happen. “The natural progress of things,” Jefferson wrote, “is for liberty to yield and government to gain ground.” He knew that no government could possibly run citizens’ lives for the better. The more government tries to control, the greater the disaster, as shown by the current health-care debacle. Collectivists (those who stand for government control of the means of production and how people live their lives) promise heaven but deliver hell. For them, the promised end justifies the means.
Instead of encouraging free and open debate, collectivists strive to discredit and intimidate opponents. They engage in character assassination. (I should know, as the almost daily target of their attacks.) This is the approach that Arthur Schopenhauer described in the 19th century, that Saul Alinsky famously advocated in the 20th, and that so many despots have infamously practiced. Such tactics are the antithesis of what is required for a free society—and a telltale sign that the collectivists do not have good answers.
Rather than try to understand my vision for a free society or accurately report the facts about Koch Industries, our critics would have you believe we’re “un-American” and trying to “rig the system,” that we’re against “environmental protection” or eager to “end workplace safety standards.” These falsehoods remind me of the late Sen. Daniel Patrick Moynihan’s observation, “Everyone is entitled to his own opinion, but not to his own facts.” Here are some facts about my philosophy and our company:
Koch companies employ 60,000 Americans, who make many thousands of products that Americans want and need. According to government figures, our employees and the 143,000 additional American jobs they support generate nearly $11.7 billion in compensation and benefits. About one-third of our U.S.-based employees are union members.
Koch employees have earned well over 700 awards for environmental, health and safety excellence since 2009, many of them from the Environmental Protection Agency and Occupational Safety and Health Administration. EPA officials have commended us for our “commitment to a cleaner environment” and called us “a model for other companies.”
Our refineries have consistently ranked among the best in the nation for low per-barrel emissions. In 2012, our Total Case Incident Rate (an important safety measure) was 67% better than a Bureau of Labor Statistics average for peer industries. Even so, we have never rested on our laurels. We believe there is always room for innovation and improvement.
Far from trying to rig the system, I have spent decades opposing cronyism and all political favors, including mandates, subsidies and protective tariffs—even when we benefit from them. I believe that cronyism is nothing more than welfare for the rich and powerful, and should be abolished.
Koch Industries was the only major producer in the ethanol industry to argue for the demise of the ethanol tax credit in 2011. That government handout (which cost taxpayers billions) needlessly drove up food and fuel prices as well as other costs for consumers—many of whom were poor or otherwise disadvantaged. Now the mandate needs to go, so that consumers and the marketplace are the ones who decide the future of ethanol.
Instead of fostering a system that enables people to help themselves, America is now saddled with a system that destroys value, raises costs, hinders innovation and relegates millions of citizens to a life of poverty, dependency and hopelessness. This is what happens when elected officials believe that people’s lives are better run by politicians and regulators than by the people themselves. Those in power fail to see that more government means less liberty, and liberty is the essence of what it means to be American. Love of liberty is the American ideal.
If more businesses (and elected officials) were to embrace a vision of creating real value for people in a principled way, our nation would be far better off—not just today, but for generations to come. I’m dedicated to fighting for that vision. I’m convinced most Americans believe it’s worth fighting for, too.
The following originally appeared on the WSJ.com on March 25, 2014.
President Obama on March 13 signed an order directing the Labor Department to expand the class of employees entitled to overtime pay. Currently, if a salaried employee makes more than $24,000 a year and is part of management—if he manages the business, directs the work of other employees, and has the authority to hire and fire—that employee is exempt from overtime coverage. The president wants to raise this salary threshold, perhaps as high as $50,000, demoting entry-level managers to glorified crew members by replacing their incentive to get results with an incentive to log more hours.
At issue is a growing inequality problem in the United States. Increasingly, Americans don’t have the career opportunities most took for granted a decade ago. Many are withdrawing from the labor force, frustrated because they’re unable to find a job and lured to depend on government rather than on themselves.
Rewarding time spent rather than time well spent won’t help address this problem. Workers who aspire to climb the management ladder strive for the opportunity to move from hourly-wage, crew-level positions to salaried management positions with performance-based incentives. What they lose in overtime pay they gain in the stature and sense of accomplishment that comes from being a salaried manager. This is hardly oppressive. To the contrary, it can be very lucrative for those willing to invest the time and energy, which explains why so many crew employees aspire to be managers.
As the chief executive officer of CKE Restaurants—the parent company of Carl’s Jr. and Hardee’s, among other chains—for the past 13 years, I’ve seen this phenomenon in action every day. I’ve watched young men and women enter the labor force in our restaurants. I’ve seen the pride and determination that leads to success in their careers and lives. Some move on to other jobs and challenges equipped with the experience you can only get from a paying job. Others stay, aspiring to move up to managerial positions. There’s nothing more fulfilling than seeing new and unskilled employees work their way up to managing a restaurant.
On average, our general managers each run a $1.3 million business with 25 employees and significant contact with the public. They’re in charge of a million-dollar facility, a profit-and-loss statement and the success or failure of a business. If that business succeeds, they benefit just as the owner of a small business would.
Our company-owned restaurant general managers earn a management-level salary starting around $36,000 and going as high as $65,000—the average is around $45,000—plus benefits. They also have the potential to earn a substantial performance-based bonus, up to 28% of their salary. They can progress through our management ranks as high as their ambition may take them. Our executive vice presidents responsible for Carl’s Jr. and Hardee’s both started as crew employees who worked their way up to general managers. Rather than overtime pay, they got an opportunity to prove themselves.
Many businesses offer incentives for managers. Public companies may have stock options or stock-purchase programs. The idea isn’t to squeeze labor by compelling managers to perform physical tasks and work long hours without overtime pay. The idea is to encourage managers to increase their compensation and improve their lives by running profitable businesses as if they owned them—regardless of the hours or tasks required.
Mr. Obama claimed that the individuals covered by the Labor Department change in overtime coverage would include employees who “mostly [do] physical work like stocking shelves.” This assertion is, at best, misleading.
To be exempt from overtime, the Fair Labor Standards Act requires the employee to be a “bona fide executive” whose “primary duty” is “managing” the business, according to a Labor Department fact sheet. Managing the business must be the “principal, main, major or most important duty that the employee performs.” The employee must also supervise “two or more full-time employees” and have authority to “hire or fire” employees. Stocking shelves won’t make you a manager and won’t exempt you from the law’s overtime requirements.
Managers may help their employees stock shelves or perform other “physical work” while performing their “primary duty” as a manager, which is hardly something to disdain. Each manager is entitled to decide whether to perform such tasks, just as small business owners may decide to perform nonmanagerial “physical work” to increase their profits or to show the crew that they too can perform those tasks. That’s what effective owners and managers do.
Perhaps this misunderstanding is what led Mr. Obama to believe that government should compel employers to pay managers hourly overtime. Unfortunately, the move would hurt the very managers he intends to help by turning them into hourly employees, depriving them of the benefits that come from moving into management. Overtime pay has to come from somewhere, most likely from reduced hours, reduced salaries or reduced bonuses. It’s easy to attack businesses when they employ these cost-cutting measures. But, unlike government, businesses must generate profits to grow.
Mr. Obama did say that in pursuing the rule change the administration was “going to do this the right way” and would “consult with both workers and businesses.” Maybe he should begin the process by asking managers who make below the new threshold whether they would prefer to keep their current salaries and incentive compensation or, in exchange for this overtime “opportunity,” go back to being hourly employees without bonus potential or equity incentives. Their answer might surprise him.
The following originally appeared on The Washington Examiner on March 10, 2014.
With a degree of candor rare even for the Congressional Budget Office, Director Douglas Elmendorf recently testified that reduced labor force participation (the number of people either working or looking for work) was “the central factor in slowing economic growth.”
Appearing before the House Budget Committee, he further stated that “later in this decade and beyond, the principal reason why we think the economic growth will be less than it was for most of my lifetime will be a slower rate of growth by the labor force.” On our current course, Elmendorf is absolutely correct.
Both slow growth and a decline in the percentage of people working or actively looking for work condemn our youth to economic stagnation and deprive them of the opportunities that come with prosperity and a job. The Bureau of Labor Statistics defines the labor participation rate as the percentage of the population over 16, available for work and either employed or actively seeking employment. As the somewhat terrifying chart above demonstrates, labor participation has been declining at an unprecedented and precipitous rate since President Obama assumed office. For the last five months, it has been at or slightly below 63 percent, the lowest rate since April 1978 during the Carter administration.
The president’s defenders argue that this disconcerting decline is due to baby boomers retiring rather than the president’s economic policies. This argument simply misses the point.
The CBO attributes the labor force participation rate’s decline 50 percent to economics (poor job prospects in the current economy) and 50 percent to demographics (the aging of the population). Whatever the reason, the fact that we can explain the decline doesn’t mean we have to accept it. To the contrary, unless we reverse it, future generations will never experience the level of economic opportunity past generations have experienced.
We can reverse it by implementing policies that encourage private-sector job creation, which will increase the demand for labor and incentivize people to join the labor force. But Obama’s economic policies consistently limit the ability of businesses to create jobs and discourage people from working.
Entrepreneurs create jobs when they’re able to expand or create businesses. They do so when they can develop business models that show a profit. It’s difficult to develop profitable business models when government policies keep increasing costs.
By increasing marginal tax rates on high-income earners, the president has decreased the profits small business owners can invest in growth, as most are organized as sole proprietor or S corporations. Navigating the increasingly complex government regulatory maze has forced businesses to spend money they could otherwise have invested in growth. Fighting a war on carbon fuels has increased energy costs, further decreasing growth.
Even anticipated costs affect business models that, by definition, forecast the future. Despite promises to the contrary, Obamacare is increasing medical insurance expense and labor costs. The Obama administration’s questionable delays and amendments to Obamacare’s employer mandate have given businesses a reprieve. But entrepreneurs know these delays are politically motivated and temporary — they know Obamacare’s increased costs are coming and they must factor such costs into their business models.
Now the president is advocating a significant federal minimum-wage increase that would further increase labor costs. As anticipated labor costs increase, businesses decrease labor, favoring reduced hours or automation as an alternative. If you increase the cost of something, businesses will use less of it. If you decrease the cost of something, businesses will use more of it. The CBO recently reported that the president’s proposed increase would result in a loss of 500,000 jobs by the middle of 2016.
It’s easy to attack businesses when they employ these cost-cutting measures. But unlike government, businesses must generate profits to grow. Businesses that consistently fail to make a profit go bankrupt. Even more disturbing, businesses that are unable to forecast a profit never open.
As the costs of doing business rise, profits supporting investment and growth become more difficult to model. Businesses can only absorb so many costs and consumers can only absorb so many price increases. At some point, business models no longer work, and growth stagnates or ceases. Absent investment and growth, there is diminished job creation and the labor participation rate declines or stagnates. It’s really that simple.
Businesses have been warning that the president’s policies are placing our economic future at serious risk. The CBO recently revealed the other side of that coin. It reported that over the next 10 years, Obamacare will cause our economy to lose the equivalent of about 2.5 million full-time jobs because Obamacare encourages people to voluntarily lower their incomes or stop working to be eligible for increased government health insurance subsidies. Testifying in front of the House Budget Committee, Elmendorf stated that “by providing heavily subsidized health insurance to people with very low income and then withdrawing those subsidies as income rises, the act creates a disincentive for people to work — relative to what would have been the case in the absence of [Obamacare].” To the extent these individuals stop working, they reduce our labor force.
As the chart at the beginning of this article clearly shows, you can’t increase labor force participation when your economic policies discourage entrepreneurs from creating jobs and your social programs discourage Americans from working.
The solution to declining labor force participation is to reduce the burdens government has placed on growth and release America’s job creating entrepreneurial energy. America’s private sector is ready, willing and able to create jobs for those still seeking the dignity, self-respect and experience that come with a job. But government must get out of the way.
More government is not the answer to a declining labor force. As history demonstrates, too much government is the problem.
The following originally appeared in the Orange County Register on February 23, 2014.
There are few tasks more difficult than convincing those who believe they are doing something generous and compassionate that they are, in reality, inflicting harm and injustice. The debate over the Affordable Care Act is a prime example of this struggle. We are all sympathetic to the plight of those who are unable to obtain adequate medical care. It’s difficult to imagine a class of people more in need of our sympathy and support. These were the individuals we were told Obamacare would benefit.
For many, this was sufficient justification to create a massive government run health insurance system regardless of the actual content of the law or the political means employed to guarantee its passage. In fact, our elected representatives responsible for Obamacare’s passage admittedly never read it and clearly had little understanding of what was in it. Health insurance reform was more about passing this seemingly compassionate law than knowing what it was going to accomplish or how.
The result was a truly terrible piece of legislation that is incomprehensively complex making it impossible to implement as written and requiring repeated amendments by questionable executive fiat. Its provisions were deceptively timed and have been repeatedly delayed so that it’s most burdensome provisions would have the least negative political impact on the party that passed it. While intended to help the American people, Obamacare is proving to be more damaging than helpful with its only remaining defense being that things should improve sometime in the future; a promise made with its most onerous and questionable provisions yet to take effect.
For months, businesses have been warning that Obamacare is discouraging full-time employment and economic growth by materially increasing the cost of employees who work more than 30 hours per week. Last week, the nonpartisan Congressional Budget Office revealed the other side of that coin. In a report to Congress, the CBO projected that, over the next 10 years, Obamacare will cause our economy to lose the equivalent of 2.5 million full time jobs as people will voluntarily lower their incomes or stop working altogether so as to be eligible for increased government health insurance subsidies.
Testifying to the House Budget Committee, CBO Director Douglas Elmendorf stated that “by providing heavily subsidized health insurance to people with very low income and then withdrawing those subsidies as income rises, the act creates a disincentive for people to work – relative to what would have been the case in the absence of [Obamacare].”
The individuals Obamacare is disincentivizing are not the helpless and underprivileged individuals whose plight the Democrats used in their effort to sell health insurance reform. These are people with both jobs and health insurance who will choose to reduce their hours or leave their jobs so they can retire or pursue other interests, such as their hobbies or, as House Democratic leader Nancy Pelosi stated, they can become a “photographer,” a “writer,” a “musician” – or “whatever.”
Arguing that people should be freed from the obligation to have a job ignores as much about economics as it does about human nature. First, to the extent some will be better off without having to work, there will be those working to support their families who would prefer to keep what they earn as opposed to subsidizing those who can work but choose not to.
We’re going to lose income and payroll tax revenue equivalent to what 2.5 million employed individuals would have paid over a 10-year period; tax revenue we could have used to cover the expense of providing health insurance for those who are actually unable to get it. In addition, we’re going to provide these formerly insured individuals with government subsidized health insurance, increasing the tax burden on those who continue working in our now depleted labor force. This burden will inevitably fall on the middle class that Obamacare’s supporters so vigorously claim to be protecting. There is real injustice in requiring that people with jobs subsidize those who choose to be unemployed.
Perhaps more importantly, while those who Obamacare encourages not to work are arguably better off in terms of what they pay for health insurance, are they truly better off without the independence, dignity and self-respect that comes with a job? Is it better to take from them the opportunity to succeed, raise their incomes and join the middle class? Is it better to put them in a position where they can only improve their lives by voting for those who will continue to increase their government benefits funded by the efforts of others?
I’ve watched young men and women enter the labor force in our restaurants. I’ve seen the pride and determination that leads to success in both their careers and their lives. Some stay, moving up to managerial positions. Others move on to other jobs and challenges, equipped with the experience you can only get from a paying job. There is a hunger for these opportunities that is dying as fewer and fewer full or part-time jobs are available. It is impossible to create jobs when the government discourages businesses from hiring and incentives people not to work.
As is clear to anyone paying attention, this is exactly what Obamacare is doing. It’s time to stop defending and lawlessly amending this poorly structured law and come up with a bipartisan solution that might actually work. More broadly, as Americans we need to decide what kind of country we want – one that incentivizes work and initiative or one that doesn’t.
Neil Cavuto and I discuss the past weeks newest revelations about Obamacare.