How Cor­po­ra­tions are Re­mak­ing Amer­ica, One State at a Time

Trillions - - In This Issue - Dr. Gor­don Lafer

In his new book, The One Per­cent So­lu­tion: How Cor­po­ra­tions Are Re­mak­ing Amer­ica One State at a Time (Cor­nell Univer­sity Press, 2017), Dr. Gor­don Lafer out­lines yet an­other of the ugly truths about how the con­cen­tra­tion of eco­nomic and po­lit­i­cal power in cor­po­rate Amer­ica is re­shap­ing the coun­try.

This time the story builds on the 2010 Supreme Court’s Cit­i­zens United rul­ing as a trig­ger point for the lat­est waves of change, with it now be­ing pos­si­ble for cor­po­ra­tions to pour vir­tu­ally un­lim­ited amounts of money into lob­by­ing to sup­port their in­ter­ests and into elec­tion ma­nip­u­la­tion. Those cor­po­ra­tions and their var­i­ous in­dus­try as­so­ci­a­tions are now mak­ing much of that power felt not just at the fed­eral level but also at the state level in ways never seen be­fore.

Those cor­po­ra­tions are now us­ing the fact that most peo­ple pay very lit­tle at­ten­tion to what is be­ing pro­posed and passed in their state leg­is­la­tures, com­bined with ma­jor shifts in re­cent years in the power of eco­nomic con­trol to the states, to make ma­jor changes in the rules under which all of us must live and work. Even more con­cern­ing is that they are mass-pro­duc­ing sim­i­lar leg­is­la­tion in a num­ber of some­what cen­tral­ized “shadow or­ga­ni­za­tions” and then de­liv­er­ing that leg­is­la­tion across the states with sim­i­lar re­sults in many lo­ca­tions.

In the interview be­low, Dr. Gor­don Lafer goes into de­tail about how this all works, who the play­ers are and the ef­fects it is al­ready hav­ing on cit­i­zens vir­tu­ally ev­ery­where in the United States. Dr. Gor­don Lafer is an as­so­ciate pro­fes­sor in the Univer­sity of Ore­gon’s La­bor Ed­u­ca­tion and Re­search Cen­ter. His work fo­cuses on in­dus­trial and pol­icy re­search, a topic he has writ­ten widely about for many years. His back­ground in­cludes serv­ing as Se­nior La­bor Pol­icy Ad­vi­sor for the U.S. House of Rep­re­sen­ta­tives’ Com­mit­tee on Ed­u­ca­tion and La­bor from 2009-10 and a po­si­tion that he has held as a re­search as­so­ciate of the Eco­nomic Pol­icy In­sti­tute in Wash­ing­ton, D.C., since 2011. He cur­rently teaches ex­ten­sion classes on con­tract ne­go­ti­a­tions and la­bor pol­icy at the Univer­sity of Ore­gon. He is also cur­rently head­ing up the launch of the univer­sity’s La­bor Re­search Col­lo­quium, an in­ter­dis­ci­pli­nary re­search fo­rum for fac­ulty and grad­u­ate stu­dents at the univer­sity.

Dr. Lafer has a PHD in po­lit­i­cal sci­ence from Yale Univer­sity, which he re­ceived in 1995.

Tril­lions spoke with Dr. Lafer at his of­fice in Eu­gene, Ore­gon.

Tril­lions: The ti­tle of your book, The One Per­cent So­lu­tion: How Cor­po­ra­tions Are Re­mak­ing Amer­ica One State at a Time, is an in­ter­est­ing one in many re­spects be­cause it im­plies that there is al­most a work-around over the fed­eral gov­ern­ment

that is be­ing used, on a state-by-state ba­sis, to ma­nip­u­late, to change laws and ev­ery­thing, that is ef­fec­tively mak­ing a lot of dif­fer­ent types of changes.

Can you give us an over­view of what you mean by this, about how cor­po­ra­tions are chang­ing the coun­try “one state at a time”?

Dr. Lafer: It is like you said, that a lot of the most im­por­tant is­sues in re­cent years are be­ing de­cided at the state level, rather than at the fed­eral level. And that’s for a num­ber of rea­sons. Part of it is that the fed­eral gov­ern­ment moves very slowly and [is] of­ten po­lit­i­cally dead­locked. An­other part of it is that, over 30 to 40 years, a lot of re­spon­si­bil­i­ties that had been fed­eral re­spon­si­bil­i­ties have been [given] to the states. The states have a lot more au­thor­ity now. Even over fed­eral fund­ing agen­cies, it gets de­cided by the state how to do it. Be­cause there’s no fil­i­buster in state leg­is­la­tures, it’s much eas­ier to move bills, to get bills passed, in state leg­is­la­tures. And be­cause state [po­lit­i­cal] races are much cheaper, the power of money goes much fur­ther.

Speaker of the House Tip O’neill fa­mously said that “all pol­i­tics is lo­cal.” So that, you know, even if you’re run­ning for Congress, you’re ba­si­cally run­ning on fix­ing pot­holes and tak­ing care of lo­cal prob­lems.

We’ve kind of seen that stood on its head, where state pol­i­tics has be­come na­tion­al­ized. And that’s through the big­gest, best-funded and most pow­er­ful cor­po­rate lob­bies in the coun­try, the Cham­ber of Com­merce, the Na­tional Fed­er­a­tion of In­de­pen­dent Busi­ness, the [Na­tional] Association of Man­u­fac­tur­ers, in­dus­try as­so­ci­a­tions. Most im­por­tantly, at the state level, they’re work­ing it through the Amer­i­can Leg­isla­tive Ex­change Coun­cil [(ALEC)], which counts as its mem­bers hun­dreds of the largest cor­po­ra­tions, a lot of in­dus­try as­so­ci­a­tions and the Cham­ber of Com­merce. What ALEC does, in brief, is about a quar­ter of mem­bers of state leg­is­la­tures are mem­bers, they pay about $50 a year in dues, all the other ex­penses are paid by the mem­ber cor­po­ra­tions. They meet sev­eral times a year in re­sorts, where they sit in com­mit­tees where they’re com­posed half of state leg­is­la­tors and half of cor­po­rate lob­by­ists. They write model bills, which have to be ap­proved by an all-cor­po­rate board [and] which are then in­tro­duced in cookie-cutter fash­ion in state after state across the coun­try. Which is how you see the same laws pop­ping up in very dif­fer­ent places.

And then the com­pa­nies which help to write the laws fund those same can­di­dates’ cam­paigns, fund in­de­pen­dent ex­pen­di­ture cam­paigns on is­sue ads or can­di­date ads and fund state-level think tanks that pro­duce white pa­pers and ex­perts to be on TV for those is­sues. So it’s a very well­co­or­di­nated, well-funded, smart, very am­bi­tious 50-state cam­paign to try to re­make a lot of the laws gov­ern­ing eco­nomics, gov­ern­ing pub­lic ser­vices, gov­ern­ing tax­a­tion and gov­ern­ing em­ploy­ment.

Tril­lions: The Amer­i­can Leg­isla­tive Ex­change Coun­cil that you spoke about there is one of those “al­most shadow” or­ga­ni­za­tions that the gen­eral pub­lic doesn’t hear much about. They work in the back­ground for the most part, and I’m sure that’s in­ten­tional.

Dr. Lafer: That’s right. And we learned a lot about ALEC in 2010-11 be­cause there was a whis­tle-blower in­side who dumped thou­sands of doc­u­ments into the pub­lic do­main. So they’re not as in the shad­ows as they used to be. But I think one of the im­por­tant points is that since Cit­i­zens United, the Supreme Court’s 2010 de­ci­sion that al­lowed for un­lim­ited cor­po­rate spend­ing in pol­i­tics, also made it much eas­ier for money to be spent se­cretly on pol­i­tics in ways that no­body can trace on where it comes from.

The other thing that’s in the shad­ows is that al­most no­body’s pay­ing at­ten­tion to state pol­i­tics, which is an­other rea­son that the power of money is am­pli­fied there. There is a fa­mous study by a po­lit­i­cal sci­en­tist at Prince­ton – Martin Gilens is his name. He looked at fed­eral leg­is­la­tion and com­pared how politi­cians vote with what the pub­lic thinks, bro­ken down by in­come level. What his big con­clu­sion was [is] that the opin­ions of the bot­tom 90% of Amer­i­cans don’t re­ally mat­ter. If there’s an is­sue where the rich­est 10% think one thing and the bot­tom 90% think some­thing else, in gen­eral the politi­cians vote with the rich­est 10%. The one time that that changes and there’s more at­ten­tion paid to the ma­jor­ity of the peo­ple is when

a lot of peo­ple are pay­ing at­ten­tion to some­thing, which is usu­ally dur­ing the Pres­i­den­tial elec­tion years.

So, at the state level, less than a quar­ter of Amer­i­cans even know who their state leg­is­la­tor is. Less than half know which party con­trols the leg­is­la­ture. So, for the most part, ex­cept for the very small num­ber of ac­tivists, things hap­pen at the state that prob­a­bly couldn’t hap­pen [in] Congress or the Se­nate, be­cause more peo­ple are pay­ing at­ten­tion to Wash­ing­ton, D.C., be­cause, for the most part, no­body’s pay­ing at­ten­tion.

Tril­lions: One of those “poll” cat­e­gories that’s been a hot topic of yours for years is the whole is­sue of “right to work” laws. “Right to work” laws have that de­light­ful char­ac­ter­is­tic that I al­ways love about leg­is­la­tion, how it gets re­named so it sounds good. Things like the Clean Wa­ter Act ac­tu­ally al­lowed more pol­lu­tion, but it sounded good. And the Pa­triot Act, which I don’t want to get into here… that was ob­vi­ously framed in a spe­cific way. And so are the “right to work” laws. For the pur­poses of this group, and keep in mind you’re talk­ing to Amer­i­can busi­ness, who hear about this stuff all the time, what ex­actly is it that is go­ing on with “right to work” laws, what’s the logic that is used to try to push them through and why are they a prob­lem for us as cit­i­zens?

Dr. Lafer: First of all, as you men­tioned, “Right to Work” is a mis­lead­ing name. “Right to Work” laws un­for­tu­nately have noth­ing to do with any­body hav­ing a right to a job if [they] are will­ing and able to work. They also have noth­ing to do with hav­ing to be a mem­ber of a union. It’s al­ready law that no­body in Amer­ica can be forced to be in a union or forced to pay even a penny to so­cial and po­lit­i­cal causes that they pro­pose. What is le­gal in states like Ore­gon is [that work­ers] and em­ploy­ers [who] agree to ne­go­ti­ate a con­tract which in­cludes a clause that re­quires that ev­ery­body who ben­e­fits from the terms of the con­tract [have] to pay their fair share of the cost of ne­go­ti­at­ing that con­tract and en­forc­ing it. What “right to work” laws do is make it il­le­gal to have a clause like that.

So that puts you in the po­si­tion where, by law, a union is re­quired to cover ev­ery­body under the terms of the con­tract and to pro­vide all of its ser­vices for free, even for some­body who doesn’t pay dues. For ex­am­ple, on na­tional av­er­age, if you take two peo­ple who work in the same in­dus­try, same oc­cu­pa­tion, same age, same ed­u­ca­tion, one has a union, one doesn’t, the per­son with the union makes about 15% more in wages and has a 20 to 25% bet­ter chance of get­ting health in­sur­ance or pen­sions through their job. If some­one in a “Right to Work” state says “I don’t want to pay dues,” they don’t get paid the non-union rate for their in­dus­try; they still get paid ev­ery­thing the union ne­go­ti­ated. And if they have trou­ble, [say] they’re sup­posed to be paid a dol­lar an hour more for work­ing the grave­yard shift and they don’t get it, and they want to file a griev­ance, the union has to rep­re­sent them, in­clud­ing pro­vid­ing an at­tor­ney for free, if they would do that for a dues-pay­ing mem­ber.

So that cre­ates an in­cen­tive for peo­ple to not pay dues. It’s like, if the gov­ern­ment would say “The part of your taxes that goes to pay for the fire depart­ment is now op­tional,” they’ll still come out to put out the flames if your house catches on fire. I don’t have to be anti-fire depart­ment to not pay that. I just have to be “times are tight, and some­body told me that one of my bills is op­tional.” So when fewer and fewer peo­ple pay dues, ob­vi­ously that or­ga­ni­za­tion be­comes less fi­nan­cially sta­ble and less able to do a good job rep­re­sent­ing peo­ple, [which] ul­ti­mately leads to the dwin­dling of or ex­tinc­tion of la­bor unions.

I think that’s the real goal of the bill. What it gets pro­moted as is “this is go­ing to bring jobs to a given place.” And the ba­sic logic is that, by un­der­min­ing unions, you’re go­ing to drive down wages and there­fore make a given state more at­trac­tive to, pri­mar­ily, man­u­fac­tur­ers. This is the key claim that’s made in ev­ery state leg­is­la­ture where it’s been pro­moted. Un­for­tu­nately, the ev­i­dence shows that it suc­ceeds in low­er­ing wages for both union and non-union work­ers, but it does not do any­thing to at­tract jobs.

It might have at­tracted jobs in the 1960s or 1970s, when a lot of com­pa­nies were mov­ing from the up­per Mid­west to the South and South­west for a va­ri­ety of rea­sons, in­clud­ing cheap la­bor. But big man­u­fac­tur­ers whose de­ci­sions are de­cided by low wages pre­dom­i­nantly now are go­ing to China or Viet­nam or Pak­istan or Mex­ico. They’re not

go­ing to Ari­zona or North Carolina.

When you look at non-po­lit­i­cal sur­veys of man­u­fac­tur­ers – Area De­vel­op­ment Mag­a­zine is the premier mag­a­zine of the site lo­ca­tion in­dus­try – and they ask peo­ple, the ac­tual de­ci­sion mak­ers, not the lob­by­ists, what are the key rea­sons [they used to se­lect a site], “Right to Work” is not among the top 10 rea­sons, his­tor­i­cally. It’s things like how close am I to my sup­pli­ers or cus­tomers [and] how close am I to an air­port or a high­way? So it doesn’t work to at­tract jobs.

I think the ultimate hypocrisy is where you can see that that’s not re­ally the goal, is that all the busi­ness lob­bies that are push­ing for “Right to Work” in states, say­ing “Hey, you need this in Illi­nois, be­cause you will at­tract jobs” and “You need this over here,” are also push­ing for a fed­eral “Right to Work” law. If a fed­eral “Right to Work” law passes, that means no state will have a com­pet­i­tive ad­van­tage over any other state, and ev­ery­body’s wages will be lower. Clearly, I hope we’re not go­ing to lower our wages to the point where we’re go­ing to try to com­pete with Mex­ico or China.

So, I think the real goal is just to un­der­mine the pos­si­bil­ity of work­ers or­ga­niz­ing in unions. And one thing I would say to the kinds of com­pa­nies which read your pub­li­ca­tion is that this is one of many is­sues of which there is a di­vided in­ter­est be­tween small busi­ness and big busi­ness. Al­most all of the big cor­po­rate lob­by­ists that I’m talk­ing about in this book, they like to say they rep­re­sent small busi­ness. But re­ally they’re dom­i­nated by a small num­ber of very large cor­po­ra­tions. When you talk about small busi­ness – small busi­ness that is not in the po­si­tion of say­ing “Do we want to be in Ari­zona or do we want to be in New Hamp­shire?” but is rooted in the com­mu­nity that it is in, and de­pends on, above all, lo­cal peo­ple hav­ing dis­cre­tion to buy food and cloth­ing and hous­ing and all the other things that peo­ple spend lo­cally, or is de­pen­dent on healthy tax rev­enues to have a healthy gov­ern­ment – those com­pa­nies suf­fer when wages go down. The big com­pa­nies that are just try­ing to play ev­ery­body off against each other, that are in­vested else­where in the world, may make out bet­ter. I think this is one of the places where you see a di­vi­sion. In some states, there has been a mo­bi­liza­tion by small busi­nesses against “Right to Work.” Par­tic­u­larly in New Hamp­shire, that was one of the things that stopped “Right to Work” from pass­ing. [Those busi­nesses] con­vinced mod­er­ate Repub­li­cans to op­pose “Right to Work.”

Tril­lions: The sur­prise to me is not that “Right to Work” will drive wages and ben­e­fits down, and of course busi­nesses aren’t go­ing to ad­mit that that’s what they’re do­ing. It’s that, some­how, they’re go­ing to be talk­ing in­stead about the great things this means for the peo­ple and all. It’s an in­ter­est­ing, ma­nip­u­la­tive thing.

You ac­tu­ally talked about that in some of the other ex­am­ples you gave. [One] was a big shock to me, in part be­cause time has passed. Things like paid sick leave, which used to be around for a while, are now be­ing elim­i­nated, with var­i­ous games and tricks be­ing done. And yet on the other hand, this is the sort of thing that unions would have stood be­hind, that this is only rea­son­able that peo­ple do that. Be­cause what hap­pens when you don’t have paid sick leave, sick peo­ple come to work. That’s what hap­pens. It’s ac­tu­ally the op­po­site of what you want, be­cause you have some­body car­ry­ing the plague come in and you’re all “down for the count.”

[Please] talk about some of these other things that are hap­pen­ing. Ex­am­ples that I had were ev­ery­thing from paid sick leave go­ing away to things like the child la­bor laws that look like they’re do­ing great things for al­low­ing chil­dren to ex­pe­ri­ence the won­der of work­ing and yet they ac­tu­ally ben­e­fit busi­ness by do­ing so. There are is­sues of the min­i­mum wage laws; there are is­sues of “re­clas­si­fi­ca­tion wages.” And there are things like how the ser­vice charge on your restau­rant tab, which I al­ways thought and still think was one way of pro­vid­ing money [nor­mally] in the form of tips back and [now] know it’s just an­other way to add a fee to your bill that gets dis­trib­uted back to your em­ployer. The leg­is­la­ture takes care of [this re­dis­tri­bu­tion] and you [as the cus­tomer] have no clue that this just hap­pened. How is it that these get passed?

Dr. Lafer: I’ll start with the first one that you raised, which is sick leave. It used to be a norm that peo­ple

had a cer­tain amount of paid sick leave. Now there are over 40 mil­lion Amer­i­cans who don’t have a sin­gle day of paid sick leave, ei­ther for them­selves or their kids or par­ents. The la­bor move­ment does not rep­re­sent a lot of those peo­ple. There have been ef­forts in some places to pass laws to say ev­ery­body has a right to three days a year, five days a year, some min­i­mal num­ber, of paid sick leave. These have been very forcefully op­posed by the big cor­po­rate lob­by­ists.

So, I agree that this is some­thing that is kind of shock­ing, that you could op­pose that. And I think that this is some­thing again that could fall par­tic­u­larly hard on small busi­ness – be­cause, if you’re a large com­pany, you can de­cide to do this. Cer­tainly, if you’re the gov­ern­ment, these peo­ple have sick leave. If you’re a small busi­ness and you’re in a very com­pet­i­tive in­dus­try, you usu­ally can’t af­ford to be the only one who is of­fer­ing paid sick leave. And the way to make it pos­si­ble to of­fer paid sick leave, to [do] right by your em­ploy­ees and be able to com­pete for the high­est-skilled em­ploy­ees who might oth­er­wise go to gov­ern­ment or big com­pa­nies, you need to have a law passed so that you and all of your com­peti­tors are do­ing the same thing and you’re not put­ting your­self at a com­pet­i­tive dis­ad­van­tage by do­ing right.

The way in which pass­ing the laws lev­els the play­ing field in com­pet­i­tive busi­nesses, when there’s no law like that, ev­ery small busi­ness is at the mercy of the per­son who’s will­ing to have the most [ben­e­fits]. One of the things that sur­prised me was that, in a num­ber of places, there were ci­ties in states that passed laws that said “We want to have a right to paid sick leave.” And then the state leg­is­la­ture, which again is the place where the cor­po­rate lob­by­ists ex­ert the great­est in­flu­ence, more than ei­ther the fed­eral gov­ern­ment or the lo­cal gov­ern­ments, came in and said, “No, you’re not al­lowed to vote to have a right to have paid sick leave.”

The first place this hap­pened was in Wis­con­sin. In 2009, in the city of Mil­wau­kee, the peo­ple voted by ref­er­en­dum on the right to paid sick leave. In 2011, leg­is­la­tors in the state of Wis­con­sin over­turned that and said that’s il­le­gal and it’s il­le­gal for any other city or county within Wis­con­sin to have a right to paid sick leave. Sim­i­lar things have hap­pened with min­i­mum wage. One of the things that is im­por­tant is peo­ple vote for can­di­dates for a whole lot of rea­sons. But across both par­ties there’s very strong bipartisan sup­port for a right to paid sick leave, for a higher min­i­mum wage and for a few other things.

As you’ve said, the in­creased use of child la­bor… Ev­ery­one knows that pol­i­tics is a realm where there’s a lot of ly­ing, a lot of spin; and, as you’ve said, the pol­luters’ in­dus­try is al­ways called some­thing [like] “Cit­i­zens for a Green Econ­omy” or some­thing like that. But this was one where, at the na­tional level, ALEC is on record for op­pos­ing any in­crease in the min­i­mum wage. One of the rea­sons that they give, of­fi­cially, is if you in­crease the min­i­mum wage, it’s go­ing to in­duce high school kids to work more hours dur­ing the school week. And that’s ter­ri­ble, be­cause they won’t do well in their school then.

Then, when they had the chance, in Wis­con­sin, Michi­gan and a few other states, to ex­pand the use of teenage la­bor, they said, “Hey, this is great be­cause it will get kids work­ing and gives them the great ex­pe­ri­ence of a first job.” Apart from the is­sue of hav­ing high school stu­dents work more hours and la­bor at night dur­ing the school week, which is what those laws made pos­si­ble, there’s also the is­sue of re­plac­ing adult la­bor with teenage la­bor. In Michi­gan, at the height of the re­ces­sion, when there was 10.5% un­em­ploy­ment, the restau­rant association went into the leg­is­la­ture and said, “We can’t find enough adults to work in restau­rants.”

So, I think when we see a lot of the same big cor­po­rate lob­by­ists that are lob­by­ing for the ex­panded use of teenage la­bor [and] are also lob­by­ing for ex­panded use of guest work­ers on H-2B visas to come into the coun­try, these are com­pa­nies that can’t phys­i­cally move to China or Mex­ico and are try­ing to move those kind of la­bor con­di­tions into Amer­ica – and to un­der­cut paid adult jobs.

One of the other things that I found among the most out­ra­geous is wage theft. Wage theft is about when peo­ple are not paid wages that ev­ery­body agrees that they de­serve. They’re not paid min­i­mum wage, they’re not paid over­time, and many peo­ple are in a sit­u­a­tion where they’re not paid at all. They

work for a restau­rant [and] they’re not paid their last check. They work on a con­struc­tion site for a month, and they’re not paid their last check, or the com­pany goes out of busi­ness and hasn’t paid them. Ev­ery­body ac­cepts that this hap­pens, but for the most part if you see your re­course is to go to court and it could cost you $500 or $1,000 for a lawyer and you’re only out $300, go­ing to court is not a real rem­edy.

Start­ing in 2010, in Mi­ami-dade County in Florida, [they] cre­ated a lo­cal wage-theft mech­a­nism that works kind of like small-claims court. Very quick, it’s an ad­min­is­tra­tive pro­ce­dure, there’s no cost to the tax­payer and they started re­cov­er­ing mil­lions and mil­lions of dol­lars in wage theft. In re­sponse to that, the Cham­ber of Com­merce and other big busi­ness lob­by­ists started pass­ing bills that make it il­le­gal for any city or county within a state to es­tab­lish a mech­a­nism for wage theft [re­cov­ery]. They passed that in Michi­gan, they passed that in Ten­nessee, they passed it in Iowa.

So that, to me, is among the more out­ra­geous things. To say ev­ery­body agrees you’ve earned this money, [and] if you be­lieve in any eco­nomic prin­ci­ple, [that] has to in­clude the right to get what you’ve [earned]. So that was one of the shock­ers for me.

Tril­lions: Here’s a re­lated thing. I re­mem­ber when I was in Sil­i­con Val­ley, one of the things that you ran into all the time was what I be­lieve you phrased as “mis­clas­si­fi­ca­tion of work­ers” as in­de­pen­dent con­trac­tors, which is ba­si­cally play­ing the game that you don’t need to be paid ben­e­fits be­cause you’re re­ally an in­de­pen­dent con­trac­tor. That’s in spite of the old [line] “If it looks like a duck and walks like a duck, it prob­a­bly is a duck.” Em­ploy­ers would pro­vide an of­fice. They would pro­vide com­put­ers. They would pro­vide email sys­tems. A place to park. Things like that which make it look like you’re an em­ployee. And maybe this is the only per­son who you work for all year long. You’re en­ti­tled to ben­e­fits, in many places, when you are a full-time em­ployee. And if you’re an in­de­pen­dent con­trac­tor, you don’t get those at all. So it was a bit of a game, and there would be law­suits that would hap­pen on a reg­u­lar ba­sis where some­body would fi­nally stand up and say “No, this is not right.” But the prob­lem is, they risked los­ing their con­tract when they did that.

Dr. Lafer: There have been laws on in­de­pen­dent con­trac­tors. Each state has a law that de­fines the line that de­fines the dif­fer­ence be­tween an in­de­pen­dent con­trac­tor and an em­ployee. You might take the risk of los­ing a con­tract by fil­ing suit, and will [the per­son] win or not? Most states have very clear def­i­ni­tions of what it takes for some­body to be an in­de­pen­dent con­trac­tor. For in­stance, one of the re­quire­ments is, you have to have more than one client. If you’re re­ally an in­de­pen­dent busi­ness, then you don’t just work for one place. If you’re an in­de­pen­dent con­trac­tor, you have to do work that is not the core work the busi­ness does. [But] then, lob­bies have been pass­ing laws that undo that – [laws that say] no, you can be an in­de­pen­dent con­trac­tor even if you only work for one client and you do work that is the core work of their busi­ness. Which gets to the point that some­one can be brave enough to lose in court.

Al­most all these things are in­vis­i­ble. You’re prob­a­bly one of the, I don’t know, 1 or 2% of Amer­i­cans who are pay­ing at­ten­tion to these kinds of things, and there are things you didn’t know about. Al­most no­body knows about these un­til you get to the point where you need it. Your life runs into it, and sud­denly you dis­cover you don’t have rights that you thought you had.

An­other one of these is un­em­ploy­ment in­sur­ance. Which, apart from the amount of un­em­ploy­ment in­sur­ance that you get, a num­ber of states have been pass­ing laws that de­fine who’s el­i­gi­ble for un­em­ploy­ment in­sur­ance. Tra­di­tion­ally, what the law al­ways said is that if you quit, you’re not el­i­gi­ble. But if you’re fired, you’re el­i­gi­ble, even if you’re fired for do­ing a bad job. [Like] you’re in­com­pe­tent so you got fired, you’re now un­em­ployed [and] you can get un­em­ploy­ment in­sur­ance. The only thing that you couldn’t get un­em­ploy­ment in­sur­ance for is if you were fired for a will­ful, in­ten­tional re­fusal to do your job. Some­one says “You need to do this,” you refuse, you’re fired [and] then you’re not el­i­gi­ble.

The states have been rewrit­ing those laws to say if you’re fired for break­ing any rule of the work­place, then you’re in­el­i­gi­ble for un­em­ploy­ment in­sur­ance.

If they have a “no ex­cuse” at­ten­dance pol­icy, where you have no days off and you have to be there, if they say there’s no so­cial­iz­ing with co­work­ers out­side of work and you so­cial­ize with co­work­ers out­side of work, any rule of the work­place gets de­fined as the equiv­a­lent of a will­ful re­fusal to do your job. And then you’re in­el­i­gi­ble for un­em­ploy­ment in­sur­ance. That both threat­ens to leave peo­ple stranded in a time of need, with no sup­port what­so­ever, and to ex­ert more discipline and in­tim­i­da­tion over peo­ple while they’re on the job. If you feel like any lit­tle thing that I’m told to do, if I don’t do it ex­actly as I’m told, I could make my­self in­el­i­gi­ble for un­em­ploy­ment in­sur­ance, God for­bid I’m in that po­si­tion, is also ex­ert­ing more discipline over peo­ple while they’re on the job. And this is an­other thing that no­body knows about un­til it hits your own life.

Tril­lions: I re­mem­ber we would reg­u­larly have con­ver­sa­tions when I lived in your city of Eu­gene, be­cause unions were con­stantly work­ing to talk with peo­ple in the pro­duc­tion area [at my com­pany there] about or­ga­niz­ing. I was one of the hand­ful of ex­ec­u­tives who ran the place, and the is­sue was al­ways, [if the unions get in], this is go­ing to cost [the em­ploy­ees] to be part of this, and yes it could cost us as a com­pany. One of the things that I ar­gued was that you need to un­der­stand that if the unions weren’t there, the very good ben­e­fits that we do have for our em­ploy­ees might not be there in the first place. Be­cause they’re there in part not just be­cause they’re the right thing to do but be­cause some of the peo­ple that set this [com­pany] up felt that this was a way to keep the unions from be­ing able to get a foothold. Be­cause those things are in there. So, it was a kind of back­wards kind of logic.

Dr. Lafer: It also cre­ates a kind of com­pet­i­tive stan­dard in the la­bor mar­ket. Here in Eu­gene, as you know, the sin­gle big­gest em­ployer is the univer­sity. The sec­re­taries of the univer­sity have health in­sur­ance be­cause they have a union. That cre­ates pres­sure on the non-union em­ploy­ers in the pri­vate sec­tor in the Eu­gene area to ei­ther match the union stan­dard or come close to it if they want to at­tract the best cler­i­cal work­ers or else the best peo­ple will go work for the univer­sity.

That’s why the data shows that when “right to work” get passed, it re­sults in lower wages for both union and non-union work­ers. It’s true in places where union­ized em­ploy­ers are one of the big­gest em­ploy­ers in the lo­cal la­bor mar­ket. When you knock down that wage rate, it has the fol­lowon ef­fect of al­low­ing other em­ploy­ers not to have to com­pete for the same stan­dard. It’s just the nor­mal work­ing of the mar­ket. I think some­times non-union work­ers or pri­vate-sec­tor work­ers are en­cour­aged to feel like “Damn those pub­lic-sec­tor work­ers who are liv­ing high off the hog on my hard-earned tax dol­lars” and think, when they get cut down, “I’ll have more money in my pocket.” In­stead what hap­pens is that when they get cut down, “I get cut down in some fol­low-on way.” But most peo­ple don’t con­nect those dots.

Tril­lions: This seems like a jug­ger­naut that is so well-or­ga­nized, so well-struc­tured, [with] so much money be­hind it that it’s a dif­fi­cult thing to re­verse or fight. Do you hope for push­ing back against this? On an in­di­vid­ual ba­sis [and in spe­cific cases], per­haps. But na­tion­wide it looks like we’re go­ing in the wrong di­rec­tion – fast.

Dr. Lafer: I agree. I was not hope­ful, but I’m not hope­less, ei­ther. The key thing is that on an is­sue-by-is­sue ba­sis, a lot of this agenda is broadly un­pop­u­lar. Why [do] they end up in the po­si­tion of pass­ing laws say­ing “It’s il­le­gal to vote on this. We’re not go­ing to let you vote on sick leave, on min­i­mum wage or other things”? Be­cause they see the same polling ev­ery­body sees, that a ma­jor­ity of Repub­li­cans sup­port these things as well. The abil­ity of these lob­by­ists to pass laws that, I would say, shrink democ­racy by re­duc­ing the num­ber of things that cit­i­zens are al­lowed to vote on, is very con­cern­ing.

But it’s also a sign that there’s kind of a strug­gle go­ing on, be­tween cor­po­rate lob­by­ing’s power in the state leg­is­la­ture and pub­lic opin­ion, at a time when the econ­omy’s got­ten grad­u­ally, steadily harder for the ma­jor­ity of the peo­ple in the coun­try. I don’t think it’s a done deal.

I would say, too, that, for what­ever it’s worth, small busi­ness may have a crit­i­cal role to play in weigh­ing one way or the other. I as­sume that most busi­nesses would pre­fer not to have unions and not to pay higher wages. [Those are some of] the things you’re try­ing to aim at [when] run­ning a

busi­ness. But one of the things that’s im­por­tant to see is that there are ways in which the big cor­po­ra­tions are kind of dis­in­vest­ing in Amer­ica. And I think this has to do with their be­ing driven by some very big forces that play out very dif­fer­ently in big cor­po­ra­tions than small.

One of those is the ex­tent of glob­al­iza­tion. That for many, many com­pa­nies that re­main ma­jor po­lit­i­cal ac­tors, like ALEC and the Cham­ber and other things, a ma­jor­ity of their earn­ings are made over­seas and Amer­i­cans are not unim­por­tant but are less im­por­tant than ever be­fore – ei­ther as work­ers or as con­sumers.

The sec­ond is the fi­nan­cial­iza­tion of big cor­po­ra­tions. Over the last 30 years, [it has] turned al­most all pub­licly traded cor­po­ra­tions into a sit­u­a­tion where they’re re­ally driven by very short­term share­holder re­turn. The amount of re­tained earn­ings that are rein­vested in com­pa­nies has dropped dra­mat­i­cally over the last 40 years. Ev­ery­thing goes into div­i­dends or share buy­backs. And so when you come up with things that might be in the ob­jec­tive long-term in­ter­ests of com­pa­nies but they have a long time hori­zon, like re­build­ing the elec­tri­cal grid or ed­u­ca­tion, you’ve got peo­ple say­ing it would be bet­ter for you. [But] when you have com­pa­nies which are op­er­at­ing with an av­er­age CEO tenure of 2, 3 [or] 4 years, and look­ing at very short-term time hori­zons, they’re mak­ing very dif­fer­ent kinds of de­ci­sions. And those end up be­ing de­ci­sions that drive di­vest­ments in the coun­try, both in pub­lic ser­vices and mak­ing gov­ern­ment not have enough tax rev­enue to con­trol the qual­ity of wa­ter, not hav­ing 40 kids in a class­room, as well as for in­fras­truc­ture.

That is an­other place where small busi­ness and big busi­ness are two dif­fer­ent tra­jec­to­ries in the things that they serve. To some ex­tent, I think your read­ers [here at Tril­lions], on some of these is­sues, may have a crit­i­cal role to play as com­pa­nies who have a longer-term in­ter­est in lo­cal com­mu­ni­ties. They’re not think­ing if ev­ery­thing goes down the drain, “I’m set in Shang­hai” or some­thing.

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