Notes on Reforming Federal Labor Law

Proposed Stoa policy resolution for the coming year: Resolved: The United States federal government should substantially reform its labor law.

An Ethos Debate post, “The Ethos Guide to the 2017-2018 Stoa Policy Resolutions,” (April 17, 2017) addresses this resolution as one focusing on labor laws for federal government employees. A second look at resolution notes it “concern[s] the role of the US federal government in regulating both public and private employers…”

On federal workers: “Federal workers hit record number, but growth slows under Obama,” (Washington Times, February 9, 2016) notes the number of federal employees expanded under President Obama, but at a slower rate than under President Bush:

President Obama will set a record for the size of the basic federal workforce, leaving office with more than 1.4 million people collecting government salaries in the civilian agencies in 2017, according to the budget he delivered to Congress on Tuesday.

It’s a 10 percent jump from the time he took office in 2009 but less than the 17 percent hike under his Republican predecessor, President George W. Bush.

I would argue there is also an in-between category, employees federal contractors. Total federal government employment hasn’t much increased in recent decades, the the overall size and costs of the federal government has, in part through increased private firms contracting to provide goods and services to the federal government. The Congressional Budget Office (CBO) reports:

Federal agencies spent over $500 billion for contracted products and services in 2012, according to federal data. Between 2000 and 2012, such spending grew more quickly than inflation and also grew as a percentage of total federal spending.

The report (PDF) notes that the federal government doesn’t know how many people work for federal contractors in civilian and military roles, but includes 670,000 full-time equivalent positions (FTE):

ICS [ Inventory of Contracts for Services] for 2012 reports that $129 billion was spent on the covered service contracts and that those contracts paid for 670,000 FTE positions among contractors.

For readers still with me on this… one particularly important federal labor law for federal contractors is the New Deal era Davis-Bacon Act passed in 1931:

The Davis-Bacon and Related Acts, apply to contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works. Davis-Bacon Act and Related Act contractors and subcontractors must pay their laborers and mechanics employed under the contract no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area.

Critics of the Davis Bacon Act argue that it pushes costs up by requiring higher-cost union workers, especially in federal highway projects. “Davis-Bacon: The Price-Fixing Conspiracy That The Feds Mandate,” (Forbes, April 10, 2014):

In order to “protect” against the employment of lower-cost construction workers on federal projects, the law declares that on all such projects, laborers must be paid at “the prevailing wage.” So instead of simply allowing competition on that aspect of federal contracting, we have to pay bureaucrats in the Department of Labor to find out what the “prevailing wage” is for all the different kinds of construction labor. What they find to be the prevailing wage is almost always the union-scale wage in the nearest locale where there are union contracts.

And this 2016 article on Davis Bacon pushing up costs for transportation infrastructure, “Boost American Infrastructure By Repealing Davis Bacon,” (Forbes, December 19, 2016):

Research shows that requiring contractors to pay above-market, government-mandated wages costs taxpayers more money. A 2008 study by the Beacon Hill Institute found that the Labor Department sets prevailing wages 22 percent higher on average than the actual market rate for such work.

… earlier this month the Congressional Budget Office (CBO) reported that repealing Davis-Bacon would save $13 billion from government construction costs. Those funds could be used for new, more efficient projects without increasing borrowing or taxes.

So, affirmatives with the labor law resolution could address labor regulations of federal employees, private-sector employees of federal contractors, or the much wider world of all other U.S. employees. Federal minimum wage laws could be one case area and another could be federal child labor law reform.

A Constitutional case for fairly dramatic reform can be found in Liberty of Contract: Rediscovering a Lost Constitutional Right (Cato Institute, 2011), discussed in earlier labor law post here. Link to Amazon page with “Look Inside” feature.

Cato video with author. Note on book:

Liberty of Contract powerfully illuminates a key limit: the right of individuals to enter into contracts with one other.

This fundamental right was protected by the Supreme Court in the early 20th century, from 1897 until the New Deal, during what is called the “Lochner era.” Named after the historic liberty-of-contract decision by the Supreme Court, the Lochner era saw the Court strike down laws that interfered with the freedom of people to bargain over the terms of their own contracts. These included minimum-wage and maximum-hours laws, housing segregation laws, licensing laws and laws interfering with the freedom of parents to determine what kind of schooling their children receive. Then in 1937, as part of the “New Deal revolution,” the Court abandoned its protection of these vital economic and personal liberties, contributing significantly to the tremendous growth in the nation’s regulatory and welfare state over the past several decades.

……….

A benefit of federal labor laws could include harmonizing complex and counterproductive state labor laws, like those enforced by Washington State’s Department of Labor & Industries. “More evidence proving WA workers’ comp system is not “low-cost, high-benefit”” (Washington Policy Center, October 26, 2016) reports on mandatory industrial insurance employers must purchase:

Under this government-run system that allows no competition, employers have paid increasingly higher workers’ compensation taxes and injured workers have, for years, received the most generous benefits in the nation. Supporters of the government run monopoly (primarily organized labor) paradoxically insist Washington’s state-run workers’ compensation system is “low-cost, high-benefit.” The employers who have shouldered the 69% increase in workers’ compensation rates between 2000-2016 would likely disagree with that characterization.

An orchard in Cashmere, Washington had to deal with (pay for) an employee who was not working for over two years with a sprained ankle, thanks to Department of Labor and Industries bureaucracy. (This union-backed website disagrees about Washington State workers’ compensation insurance costs, and explains makes it’s case in: “For employers, Washington state is among cheapest for workers’ comp,” The Stand, updated December 1, 2014.)

“Workers’ Compensation Reform,” (November 10, 2009) calls for federal reform:

Disparities in Coverage, Care, and Compensation
Workers’ compensation systems, which are administered by each state, poorly serve the needs of many injured workers and are unpopular with many employers and health care providers.2 Although most states have similar approaches to providing workers’ compensation benefits, in covering most workers, and in paying for all necessary medical care, each state system is unique and varied in its case adjudication process, its levels of benefits, its allowance of choice of primary treating physician and treatment modalities, and its regulation of insurance companies and self-insured employers. States differ, often dramatically, on the level and scope of permanent disability and other benefits, coverage of mental health conditions resulting from work, and insurance and claims administration regulation (e.g., the maximum burial allowance in Mississippi is $2,000, compared with $6,000 in Michigan and up to $15,000 in Minnesota.).3

Connecting the labor policy topic with the current agriculture topic is “FARMERS SHOULD KNOW THEIR RESPONSIBILITIES, WORKERS THEIR RIGHTS” (Cornell Small Farms Program, July 5, 2016). Consider this regulation that seems to discriminate against not-fast-enough berry pickers:

For picking berries and tree fruit, some farmers pay “piece rate” which encourages workers to pick faster. They pay a certain amount per pound or other unit. State and federal laws require that the “piece rate” be set so that the slowest worker still makes minimum wage. Therefore, the farmer must have a good system for keeping track of each worker’s pickings, or else be at risk of being accused of wage theft. Knowing this clause, some farmers decide it’s easier to comply with an hourly wage approach.

Another federal labor law is the Occupational Safety and Health Act of 1970, launching OSEA regulation. This 2013 Mercatus Center study: “Evaluating OSHA’s Effectiveness and Suggestions for Reform,” cites research showing OSHA is responsible for modest improvements in worker safety, and recommends reforms:

OSHA should target disadvantaged groups that tend to receive smaller compensating wage differentials. The compensating wage differential varies considerably across industries and demographic groups. Compensating wage differentials appear to be smaller for disadvantaged groups, such as non-English-speaking Mexican immigrants, making these groups prime candidates for expanded attention by OSHA. [11]

OSHA should also target health hazards and small firms. The latency period of many industrial diseases makes it difficult to determine who is responsible for the payment of workers’ compensation benefits. Many small firms do not have their workers’ compensation insurance premiums experience-rated, so they do not see their premiums fall with fewer accidents. To counter the failings of workers’ compensation insurance, OSHA should direct its resources toward protecting workers in firms of all sizes from health hazards and workers in small firms from safety hazards.

Back to Liberty of Contract and related economic liberty reform proposals, federal labor law reform could include policies to block special interest state licensing restrictions. Occupational (professional) licensing regulations in each state restrict access for hundreds of different occupations, raising costs for consumers.

The Institute for Justice (IJ) Minnesota Economic Liberty page reports on a proposed state-level reform bill:

The Occupational Licensing Board Reform Act requires the government to show there is a real threat to public health and safety before it enacts future occupational regulations or enforces current laws.

The legislation recognizes that licensing laws are bad for Minnesota entrepreneurs and consumers. Entrepreneurs are hurt because such laws protect industry insiders from honest competition. Licensing reduces jobs by forcing entrepreneurs to meet expensive and unnecessary requirements before they can start working. In fact, converting licensing laws to certification laws could help create more than 15,000 new jobs in Minnesota.

Moreover, Minnesota’s consumers are worse off because licensing laws reduce the number of providers from which consumers can choose and force them to pay up to $3.6 billion more for services, while reducing economic growth in the state by up to $1.1 billion annually.

Here is a related previous post: “Federal Regulations Slow Start-ups and Health Care Innovation,” citing the example of state laws limiting hair-braiding.

Federal labor reform could better protect liberty of contract from special-interest state licensing regulations claiming to protect the public.

Also related is “Time to Rethink the Chevron Doctrine,” (Economic Thinking, updated October 27, 2016). The federal courts defer to Congress on many issues, however:

A like deference emphatically is not owed to the federal bureaucracy. It may be that it is necessary, in 21st century America, for unelected bureaucrats to write much of our legal code. But if we are to sustain the separation of powers in general, and if we are to continue to have our laws written by the people’s Representatives and Senators, we need to proceed with caution. The very logic that suggests that courts should defer to Congress cuts the other way when bureaucratic rule-making is concerned. Tenured civil servants are not the people’s representatives. The Constitution, for that reason, does not give them the authority to write our legal code. [Original quote from Law & Liberty Blog here.]