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Category: Employment Law

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The Dignity of the Minimum Wage?

[A brief note of apology: it's been a terrible blogging summer for me, though great on other fronts.  I promise I'll do better in the coming academic year. In particular, I'd like to get back to my dark fantasy/law blogging series. If you've nominations for interviewees, email me.]

WorkDetroitThis is one I’ve been meaning to write for a while.

One of the major lessons of the cultural cognition project is that empirical arguments are a terrible way to resolve value conflicts. On issues as diverse as the relationship between gun ownership and homicide rates, the child-welfare effects of gay parenting, global warming, and consent in rape cases, participants in empirically-infused politics behave as if they are spectators at sporting events. New information is polarized through identity-protective lenses; we highlight those facts that are congenial to our way of life and discounts those that are not; we are subject to naive realism.  It’s sort of dispiriting, really.  Data can inflame our culture wars.

One example of this phenomenon is the empirical debate over minimum wage laws. As is well known, there is an evergreen debate in economics journals about the policy consequences which flow from a wage floor.  Many (most) economists argue that the minimum wage retards growth and ironically hurts the very low-wage workers it is supposed to hurt. Others argue that the minimum wage has the opposite effect. What’s interesting about this debate -to me, anyway- is that it seems to bear such an orthogonal relationship to how the politics of the minimum wage play out, and the kinds of arguments that persuade partisans on one side or another. Or to put it differently, academic liberals in favor of the minimum wage have relied on regression analyses, but I don’t think they’ve persuaded many folks who weren’t otherwise disposed to agree with them. Academic critics of the minimum wage too have failed to move the needle on public opinion, which (generally) is supportive of a much higher level of minimum wage than is currently the law.

How to explain this puzzle?  My colleague Brishen Rogers has a terrific draft article out on ssrn, Justice at Work: Minimum Wage Laws and Social Equality. The paper urges a new kind of defense of minimum wages, which elides the empirical debate about minimum wages’ effect on labor markets altogether. From the abstract:

“Accepting for the sake of argument that minimum wage laws cause inefficiency and unemployment, this article nevertheless defends them. It draws upon philosophical arguments that a just state will not simply redistribute resources, but will also enable citizens to relate to one another as equals. Minimum wage laws advance this ideal of “social equality” in two ways: they symbolize the society’s commitment to low-wage workers, and they help reduce work-based class and status distinctions. Comparable tax-and-transfer programs are less effective on both fronts. Indeed, the fact that minimum wage laws increase unemployment can be a good thing, as the jobs lost will not always be worth saving. The article thus stands to enrich current increasingly urgent debates over whether to increase the minimum wage. It also recasts some longstanding questions of minimum wage doctrine, including exclusions from coverage and ambiguities regarding which parties are liable for violations.”

I’m a huge fan of Brishen’s work, having been provoked and a bit convinced by his earlier work (here) on a productive way forward for the union movement. What seems valuable in this latest paper is that the minimum wage laws are explicitly defended with reference to a widely shared set of values (dignity, equality). Foregrounding such values I think would increase support for the minimum wage among members of the populace.  The lack of such dignitary discussions in the academic debate to date has level the minimum wage’s liberal defenders without a satisfying and coherent ground on which to stand. Worth thinking about in the waning hours of Labor’s day.

 

 

Martin Luther King, Labor Day, and Surveillance

Interesting to see how the three topics converge. First, an excerpt from King’s December 1961 speech to the AFL-CIO Convention:

Less than a century ago, the laborer had no rights, little or no respect, and led a life that was socially submerged and barren. . . . American industry organized misery into sweatshops and proclaimed the right of capital to act without restraints and without conscience. . . . The children of workers had no childhood and no future. They, too, worked for pennies an hour and by the time they reached their teens they were worn-out old men, devoid of spirit, devoid of hope and devoid of self-respect.

Second, from Tom Geoghegan’s analysis of King as a labor leader: “It is said that just after this speech, J. Edgar Hoover was more determined to wiretap King.”

Treating someone working for the betterment of the many, as an enemy of the state, is a core harm of politicized surveillance.

364 CEO Days

SaluteLaborLynn Parramore observes that exploitative practices do little to help US productivity, or even the position of firms engaging in them:

[America's] cult of endless toil doesn’t really help the bottom line. Study after study shows that overworking reduces productivity. On the other hand, performance increases after a vacation, and workers come back with restored energy and focus. The longer the vacation, the more relaxed and energized people feel upon returning to the office. Economic crises give austerity-minded politicians excuses to talk of decreasing time off, increasing the retirement age and cutting into social insurance programs and safety nets that were supposed to allow us a fate better than working until we drop.

That doesn’t seem very economically rational: why not respect Brandeis’s basic insight that “I can get 12 months of work done in 11 months, but not in 12″? One clue lies in an observation from Polish economist Michal Kalecki:
Read More

King’s Economic Legacy

Joey Fishkin highlights a very important part of Martin Luther King’s march on Washington:

Threaded through the demands of the March on Washington for Jobs and Freedom were calls for economic justice. The marchers demanded a nationwide minimum wage of “at least” $2.00 (it was then $1.25, so a 60% raise), in order to “give all Americans a decent standard of living.” They demanded a “massive federal program to train and place all unemployed workers — Negro and white — on meaningful and dignified jobs at decent wages.”

The legacy lives on. As David Dayen observes, “fast food and retail worker” strikes reflect the original marchers’ demands. An entity like “McDonald’s is so vast and lucrative that it could easily survive a major wage increase.” Such increases are desperately needed. As worker Willietta Dukes puts it:

I make $7.85 at Burger King as a guest ambassador and team leader, where I train new employees on restaurant regulations and perform the manager’s duties in their absence. . . . I’ve worked in fast-food for 15 years, and I can’t even afford my own rent payments. . . .My hours, like many of my coworkers, were cut this year, and I now work only 25 to 28 hours each week. I can’t afford to pay my bills working part time and making $7.85, and last month, I lost my house.

Dukes is one of the millions of faces behind aggregate statistics that suggest grotesque unfairness at the heart of the American economy. They won’t get much of a hearing in a mainstream media obsessed with the problems of the fortunate. But there is hope that a critical mass of actions by them, like the Washington civil rights march of 1963, will eventually force those at the top to take notice.

Challenging the WalMart Model

There was a good piece in Businessweek earlier this summer on Costco, a large retailer which pays workers far better than WalMart. Why the success of Costco and firms like it?

Many conscientious companies such as Costco are performing well financially. Over the last few years, Nordstrom (JWN), the Container Store, Sephora, REI, and Whole Foods Market (WFM), all of which are known for treating employees well, have outpaced rivals. “This is the lesson Costco teaches,” says Doug Stephens, founder of the consulting firm Retail Prophet and author of the forthcoming The Retail Revival. “You don’t have to be Nordstrom selling $1,200 suits in order to pay people a living wage. That is what Walmart has lost sight of. A lot of people working at Walmart go home and live below the poverty line. You expect that person to come in and develop a rapport with customers who may be spending more than that person is making in a week? You expect them to be civil and happy about that?”

Labor strife involving “Our WalMart” has enveloped Costco’s low-pay rival. Of course, things aren’t bad for the people who really matter at the company: “In 2012, three members of the Walton family each made over $4 billion just from stocks and other investments.” Yet for customers shocked by empty WalMart shelves, and taxpayers effectively subsidizing WalMart workers who need to apply for food stamps and Medicaid, the low-wage model isn’t working.

From Status to Contract to Fealty

“Consent” can be a near-universal solvent in employment law, eviscerating rights that would be considered basic outside the workplace.  Soon after Independence Day, Alana Semuels reported a new twist on the trend: contracts to tie even low-wage employees to a given workplace, on penalty of not working at any competing business for months or a year afterward:

Mazhar Saleem is bound to his employer by a number of contracts that made it hard to earn enough money to live, but also hard to go work anywhere else. He drives a town car for a company in New York as an independent contractor, rather than as a full-time employee. That means he doesn’t get benefits, never gets overtime, and isn’t guaranteed set hours.

But he also signed a non-compete contract when he started working, meaning he can’t drive a car for anyone else in New York. So even if his employer doesn’t give him any work, he’s not allowed to go find it elsewhere. . . .

In a recent case in Worcester, Mass., three women working at a hair salon tried to leave after their conditions at work deteriorated. All three received cease and desist letters when they started working elsewhere, because they had signed non-compete clauses. They had to wait a year for the clauses to expire before they could work in the area again.

In fact, these exclusivity clauses even extend to the hunt for temporary, no-benefits work, as Fed governor Sarah Bloom Raskin found out at  a job fair:

‘So what I need to do is put in my resume and then I’ll be able to get this job?’ And she said ‘yes.’ And I said: ‘while I’m waiting can I go to some other firms and throw my resume into their databases as well?’  And she said ‘oh no, you can’t do that, because you’re going to sign a letter of intent.’ And that letter of intent is basically an exclusivity agreement that says that by putting your resume in here you agree to not put your resume anywhere else.

Corey Robin explains the tricky issues these cases raise for advocates of “freedom of contract.”  Libertarians often point out a paradox of democratic theory: a dictatorial party could win an election, then decide “no more elections.” Is not something similar happening when bosses, emboldened by a terrible job market and a near-infinite supply of cheap labor, bind employees like the hair salon did?  If workers have neither voice (no union) nor exit (no chance to seek better employment), what’s left but loyalty? Or, to put it feudally, fealty?

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Gently Nudging with Liability Rules?

No Smoking symbolWhy have sexual harassment and anti-smoking laws been so successful in changing entrenched social norms in the U.S. over the past few decades? In a 2000 U. Chicago Law Review article, Dan Kahan observed that combatting these ills took the approach of “gentle nudges,” imposing moderate remedies that were within the range of what decisionmakers (e.g. judges and juries) thought was reasonably proportional to the violation. Because these moderate remedies were enforced, norms shifted, and lawmakers could ratchet up the remedies. By contrast, Kahan observed that “hard shoves” imposing remedies substantially exceeding social norms fail to be enforced or to change norms. For example, France tackled sexual harassment by making it a criminal offense, which French society saw as vastly disproportionate. As a result, French sexual-harassment law went unenforced against conduct that would have easily incurred liability under U.S. law, and French norms barely shifted.

There is an underexplored connection between Kahan’s “gentle nudge” vs. “hard shove” dichotomy, and Calabresi & Melamed’s “property rule” vs. “liability rule” dichotomy. Calabresi & Melamed observed that remedies are either (1) liability rules, such as compensatory damages, or (2) property rules, such as injunctions or prison, which aim to deter. Liability rules generally overlap with “gentle nudges” in that they aim for proportional compensation. Property rules largely overlap with “hard shoves.”

The debate over the relative merits of property rules and liability rules has raged in academia and the courts. Bringing Kahan’s observations into the mix weighs in favor of liability rules, which are more likely to be enforced – and to shift norms.

I explore the relationship between these two dichotomies in sections II.C.3 and IV.C of a forthcoming article looking at IRS enforcement (or lack thereof). But their interrelationship is promising for anyone interested in either the property-rule/liability-rule debate or in altering social norms.

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The Contraception Mandate Part I

The Affordable Care Act is changing the health care landscape. Among the changes is that employers that provide health insurance must cover preventive services, including contraception. Although the requirement does not apply to religious organizations, it does apply to religiously affiliated ones. This “contraception mandate” has generated a huge outcry from some religious leaders, most notably the United States Conference of Catholic Bishops. They insist that forcing Catholic hospitals, schools, or charities to include contraception in their employee insurance plans violates religious liberty.

It doesn’t. It certainly doesn’t violate the Free Exercise Clause. After Employment Division v. Smith, neutral laws of general applicability are constitutional, regardless of the burden they may impose on religious practices. Indeed, the law upheld in Smith banned a religious sacrament. But it was neutral, in that it did not intentionally target religion, and it was generally applicable, in that it was neither riddled with exceptions nor grossly underinclusive. The regulation requiring employers who provide health insurance to include contraception in that coverage is likewise a neutral law of general applicability.

While a recent Supreme Court decision (Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC) carved out an exception to this “neutral-generally-applicable-laws-do-not-violate-the-Free-Exercise-Clause” rule, it does not apply here. This exception — which holds that religious institutions are immune from neutral, generally applicable anti-discrimination laws when they are sued by their ministers — was designed to protect churches’ ability to pick their leaders without interference from the state. However, the provision by religiously-affiliated organizations of health insurance to their employees, many of whom do not belong to the same faith as their religious employer, clearly does not involve ministers or internal church governance. In short, there is no valid Free Exercise Claim.

What about the Religious Freedom Restoration Act? Stay tuned.

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Stanford Law Review Online: Dahlia v. Rodriguez

Stanford Law Review

The Stanford Law Review Online has just published a Note by Kendall Turner entitled Dahlia v. Rodriguez: A Chance to Overrule Dangerous Precedent. Turner argues that the Ninth Circuit has an opportunity to make an important change to the rules governing the application of First Amendment protections to the speech of public employees:

In December 2007, Angelo Dahlia, a detective for the City of Burbank, California, allegedly witnessed his fellow police officers using unlawful interrogation tactics. According to Dahlia, these officers beat multiple suspects, squeezed the throat of one suspect, and placed a gun directly under that suspect’s eye. The Burbank Chief of Police seemed to encourage this behavior: after learning that certain suspects were not yet under arrest, he allegedly urged his employees to “beat another [suspect] until they are all in custody.”

After some delay, Dahlia reported his colleagues’ conduct to the Los Angeles Sheriff’s Department. Four days later, Burbank’s Chief of Police placed Dahlia on administrative leave. Dahlia subsequently filed a 42 U.S.C. § 1983 action against the Chief and other members of the Burbank Police Department, alleging that his placement on administrative leave was unconstitutional retaliation for the exercise of his First Amendment rights.

She concludes:

Dahlia offers the Ninth Circuit an opportunity to overturn Huppert and articulate a narrow understanding of Garcetti. This narrow understanding accords with the reality of public employees’ duties—for the duties they are actually expected to perform may differ significantly from the responsibilities listed in their job descriptions. A narrow reading of Garcetti is also essential to ensuring adequate protection of free speech: The answer to the question of when the First Amendment protects a public employee’s statements made pursuant to his official duties may not be “always,” but it cannot be “never.”

Read the full article, Dahlia v. Rodriguez: A Chance to Overrule Dangerous Precedent at the Stanford Law Review Online.

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The Correct Word is Desource, Not Outsource.

Everyone thinks jobs are being outsourced; they are, in fact, being desourced. When Mitt Romney claims he will create jobs, when Barak Obama claims the same, when Google, Apple, or Amazon assert they build out the economy, they all overstate. Worse, they ignore the reality that both manufacturing and service jobs are dying. Robots, artificial intelligence, and the new information-at-scale industries all but assure that outcome. The ability to build and sell without humans is already here. I am not saying that these shifts are inherently bad. They may even be inevitable. What we do next is the question. To answer that question, we need to understand the ways humans will be eliminated from manufacturing and service jobs. We need to understand what I call desourcing.

Focus on manufacturing is a distraction, a sideshow; so too is faith in service jobs. A recent New York Times article about Apple, noted that manufacturing accounts for only about eight percent of the U.S. labor force. And, The Atlantic’s Making It in America piece shows how manufacturing is being changed by robots and other automation. According to some, the real engine is service labor “and any recovery with real legs, labor experts say, will be powered and sustained by this segment of the economy.” That is where desourcing comes in. Many talk about the non-career path of service sector jobs. A future of jobs that have low pay and little room to rise is scary and a problem. Amazon explains why that world might be heaven.

The world of low wage, high stress service work is being replaced by automation. Amazon gave up its fight against state taxes, because it is moving to a model of local distribution centers so that it can deliver same-day delivery of goods. According to Slate, Amazon will spend more than $1 billion to build centers all over the U.S. and hire thousands of people for those centers. The real story is that like any company Amazon wants to reduce operation costs; it must automate or perish as Technology Review put it. It will do that, in part, by using robots to handle the goods. Self-driving cars and autonomous stocking clerks are the logical steps after ATMs and self-serve kiosks at movie theaters and grocery stores. I am always amazed at the folks who line up at movie theater ticket windows rather than use the kiosks. A friend said to me that we should walk up to the window to keep those jobs. It is a nice idea, but I think untenable. We all want to move faster and pay less. Welcome to desourcing.

Desourcing means reducing or eliminating humans from the production or service equation. Humans are friction points. More and more we can reduce those points of contact. We no longer need to send work to other humans.

There are many economic questions that are beyond what can be addressed in a short piece. But here are some ideas on which to chew. The returns from this approach are tremendous for the companies that desource. For example, by one account, Apple makes $473,000 per employee; yet “About 30,000 of the 43,000 Apple employees in this country work in Apple Stores, as members of the service economy, and many of them earn about $25,000 a year.” So we may satisfy our need for instant gratification as companies reduce their costs, but that money will go to corporate bottom lines. Whether it will really reach the rest of the economy is not so clear precisely because a smart company will invest in desourcing. I suppose at some point companies will have to realize that they need masses who can buy stuff. Yet I think some studies indicate that serving the upper end of the economy works better than serving the masses. In theory, a company may offer goods at lower prices but to do that, it will need lower production costs. And less workers means lower costs.

I am not saying I know what will solve this riddle. I offer desourcing, because I have not seen a satisfying answer to the issue. There may not be one; for we may be stil sorting what to do as the digital age takes full hold. As the computer science folks say in early training, “Hello world.”