Thursday, November 22, 2012

Neither Management Nor Labor Killed The Twinkie: We All Did

Neither Management Nor Labor Killed The Twinkie: We All Did

by: Jim Karger

I came close to avoiding the Twinkie-topic entirely, if only because so many have already taken it on in animated, breathless fashion. The right-wing has firmly laid the blame on the union, those greedy bastards. After all, had they convinced their members to give up more of their pay, 18,000 would still have a job and all would be making far more than the average American worker. (

The left has indicted, convicted and is ready to execute all Hostess executives, those high paid greedy bastards. ( After all, they were making millions, even giving themselves pay increases while the little guys were shaking in their boots, dreading the very day that came last week.(

On its face, it seems there is a disagreement here, but fundamentally, both sides agree: greed is the problem. They just can't agree on who is greedier. Unions often secure wages far beyond what the market would demand for unskilled and semi-skilled labor and featherbed jobs making the incumbent less than productive, while management secures the same for the psychopaths who, due to their incapacity to feel empathy, are capable of wiping out thousands of jobs and livelihoods without so much as a thought.

Both sides point their fingers at the other as evidence of why America is failing, and both seek to eliminate what they see as unjustifiable greed (translated, not their own greed), by legislating away the right of others to be, well, human. The right wants to eliminate the poor man's attempt to collectivize, to join forces to maximize their economic power, while the left wants to put hard limits on profits, salaries, and the perquisites of capital, thereby killing the proverbial goose that laid the golden egg.

The answer, both sides believe, is to correct a manufacturer's defect in mankind. Yet, for longer than anyone can remember, no amount of shrill, whiny moralizing has changed man's desire for more, and both sides are willing to force their beliefs on the other at gunpoint, urging government to enforce what they consider to be the "greater good," on one side the cheerleaders of crony capitalism and on the other, detractors of capitalism, regardless of brand. In both cases, the otherwise invisible hand of the market suddenly appears with a gun in it. Both seek a State-enforced solution.

Both sides make compelling arguments that they have the moral high ground, but neither does. And the real question is not "who is right," but rather, "to whose benefit?" As Charles Hugh Smith observes in his new book, Why Things Are Falling Apart - And What We Can Do About It, "[every] policy is sold as being “good for the country,” but underneath the happy-story public relations, some vested interest is benefiting directly. We don’t know who cooked up the policy, but we know a vested interest bought political power to make it law." (


Just as the labor laws passed as a part of the New Deal have transmogrified market forces into Government Motors and the soon to be resurrected Employee Free Choice Act, the Federal Reserve’s zero interest rate policy has decimated savers while making corporate America happier than a pig in shit, allowing business to borrow cheaply while forcing individuals who have acted prudently to jump into and bid up a risky stock market in a desperate bid for yield and return.

The battle rages on, each side looking for the next legislative fix that will give it an advantage. Neither side ever considers fewer laws or less regulation (especially ehen those laws serve their interests). And so, as politicians are bought and paid for by corporate America and big labor, the legislative patchwork continues ostensibly to right the wrongs of the market. Nonsense. They are righting the (perceived) wrongs of the last legislative incursion that didn't go their way.

The only alternative neither has considered is to permit the market, unfettered supply and demand, to sort it all out. Employees via unions have plenty of weapons to enforce their will if they had the guts to use them, with strikes and boycotts topping the list. Without government involved, they would have a lot more weaponry, such as a strike for recognition (picketing an employer until they recognized the union), secondary boycotts (picketing the customers, vendors and banks of the offending employer) and hot cargo agreements (allowing employees refuse to handle goods of companies designated as unfair.) These economic weapons and others are now prohibited by law and limit the power of organized labor. Absent government incursion, unions would would also be empowered because they would not have to take on a corporate America financed at lower-than-market interest by their banker buddies. Bain Capital and the private equity industry would be no industry at all, if only because the market would not permit massive amounts of capital to be transferred from banks by leveraging questionable assets. Without government and Fed involvement, there would be no fractional-reserve banking, no creation of money from thin air, no ZIRP. Banks would exist but they would loan prudently and never more than they could afford to lose since no one would ever be too big to fail in a purer version of a market economy.

Corporate America, admittedly downsized without government largesse, likewise would not have to play by rules now cut from whole cloth when it came to dealing with unions. Don't like unions? In a free market, any employer that didn't want a union would simply refuse to recognize a union, at least not until it was in their best interest to do so. Hostess, herein, would have simply enforced its will. "This is what we pay. Stay or leave, your choice." Individually or collectively, but without government protection, each employee would have had the choice to come to work or not. Those who did not come to work might be terminated and new employees hired to take their place, and Hostess would soon find out whether the wages they offered could attract the quality of employee they sought. Having fought government's largess to organized labor for 35 years, I am the first to admit that some businesses run better with unions if only because it is easier for unskilled, untrained managers to read a contract and apply the rules than it is to make good management decisions and to make their employees' jobs more than just paychecks. My guess is Hostess was one of these businesses, but they never knew it. They never considered it.

The game would be played much differently if government stepped out of the way, a fact to which the do-gooders respond, "It would be so confrontational that way," as if confrontation should be avoided at all cost. It shouldn't. The workplace, the market, isn't a laboratory. It is tough. Wear a cup. But the workplace is also a place where we come, or should come, together, not for the common good, but for our good, the good of each one of us. If we are fortunate, we learn early that the best part of work isn't injecting animal fat and sugar into a sponge cake made of, well, animal fat and sugar for a paycheck. It is in the relationships we develop working with others, the friendships that develop naturally from that other part of human nature - care, compassion, and concern - that is likewise sublimated by government-intrusion. It is easy for an employer to justify not doing the right thing vis a vis employees if government has already defined the right thing as the minimum required.

In the end, while left and right mistake the market as a cause of the problem rather than a victim of the State, Brad Spangler reminds us that "a deeper libertarian analysis . . . points to the role of the state in artificially concentrating capital in the hands of state-allied big business — giving statist plutocrats far more bargaining power in the labor market than is their natural due. Injustice happens to play out in the marketplace, but the cause is the state." ( I suggest that this injustice is on both sides of the aisle - crony-capitalism and crony-labor, two sides of the same coin.

The unacknowledged irony of it all is that both sides are fighting for something not worth the conflict, not if they knew the truth. And the truth is our insatiable desire for more, achieved or not, doesn't make us any happier. To the end of applying that truth to the workplace, Fritz Aldrine and I wrote the book, "Why Work Isn't Working Anymore" in 2002. ( We dutifully recited the overwhelming evidence that once basic needs for food, shelter and clothing are met, there is no evidence, none, that the continued search or achievement of more does anything to increase one's life satisfaction. Our admonition that "endemic change in the ethos of what work is, what work can become, and how our jobs should fit into our lives is essential if half of the American workforce, currently dissatisfied and discouraged with work, is to salvage any joy and satisfaction from their waking hours," was roundly criticized but mostly ignored. Now, ten years later, nothing has changed. Indeed, the long-inculcated western fascination with money makes our work not an end, but a means to an end, even as its advocates become progressively less satisfied. And, its advocates, also known as "us," management and labor, can never assume the noble pose until each of us stops seeking government intervention to line our pockets at the expense of others.

In America, we talk of ‘growing up to be what you want to be,’ but what we really mean is ‘growing up to have what you want to have.’ Having, not being, is the American Dream, and work is the distasteful cost of the ticket in the minds of most. That dynamic has been, is, and will remain, dysfunctional, but no amount of government intrusion will lead to fairness, a concept that will always remain in the eye of the beholder. Nor will it expose the myth of more that has destined more to dissatisfaction than any other fiction around. Rather, government encourages the myth to live on by putting its finger on the scale of the market and thereby choosing winners who never feel like winners for long, but just try harder to fit the square peg into the round hole.

Breaking free of the myth that binds us into the never-ending rat race can only be accomplished by looking within even while others want to fight over who should get the last Twinkie. In the meantime, the only reasonable way to continue the battle is to take the government's finger off the scale.


Sunday, November 11, 2012

Want a part-time job? Well, you may get one anyway . . .

By: Sean Hackbsrth, Free Enterprise

"The October job numbers showed that the recovery remains weak, and the unemployment rate remains stubbornly high. According to a JPMorgan economist, if we create 175,000 jobs per month, slightly more than the 171,000 created in October, it'll take 15 years to recover. That economist also points out that 8.3 million people are working in part-time jobs even though they'd prefer full-time work. Unfortunately, because of President Obama’s health care law, the Patient Protection and Affordable Care Act (PPACA), workers in the hotel, restaurant, and retail industries could be pushed into part-time jobs working less than 30 hours per week.

"The Wall Street Journal story reports:
Pillar Hotels & Resorts this summer began to focus more on hiring part-time workers among its 5,500 employees, after the Supreme Court upheld the health-care overhaul, said Chief Executive Chris Russell. The company has 210 franchise hotels, under the Sheraton, Fairfield Inns, Hampton Inns and Holiday Inns brands.

"CKE Restaurants Inc., parent of the Carl's Jr. and Hardee's burger chains, began two months ago to hire part-time workers to replace full-time employees who left, said Andy Puzder, CEO of the Carpinteria, Calif., company. CKE, which is owned by private-equity firm Apollo Management LP, offers limited-benefit plans to all restaurant employees, but the federal government won't allow those policies to be sold starting in 2014 because of low caps on payouts.

"Home retailer Anna's Linens Inc. is considering cutting hours for some full-time employees to avoid the insurance mandate if the health-care law isn't repealed, said CEO Alan Gladstone.

"Mr. Gladstone said the costs of providing coverage to all 1,100 sales associates who work at least 30 hours a week would be prohibitive, although he was weighing alternative options, such as raising prices.

"Why would companies consider shifting to part-time workers? Under the health care law, if an company has more than 50 “full time equivalent” workers, a combination of full and part-time employees, but doesn’t offer “affordable” coverage that meets the government’s minimum value standard, the company will have to pay a penalty. This penalty is determined by the number of full-time employees minus 30 full-time employees. So to reiterate a very important point: part-time workers are not part of the penalty formula. The health care law creates a perverse incentive to hire part-time versus full-time workers.

"Smaller companies in other industries are in the same situation, and over the last few years, many business owners have warned the public that they’re making similar calculations.

"This summer, Mary Miller, CEO of JANCOA Janitorial Services, Inc., in Cincinnati, OH told a House committee [emphasis mine]:

"One of the few options that I am now forced to consider is reducing the majority of my team members to part-time employment in order to reduce the amount that I will be penalized. This, in effect, will put an end to our very successful Dream Manager program. Regrettably, for me and my employees, the new health care law is a dream killer.

"In 2011 before another House committee, Brian Vaughn, a Georgia Burger King franchisee said:

"Prior to the law’s enactment, my goal had always been to hire fewer people for more hours. Now, because of what Washington has mandated, it seems to make more practical business sense for me to hire more people for fewer hours.”

"Scott Womack, owner and president of a 12-unit IHOP franchise in Indiana and Ohio told the House Ways and Means Committee in 2011 that his choices are to pay the $2,000 per employee penalty under the PPACA or reduce employees’ hours and shift full-time workers into part-time status.

"On a press call in 2011, Brett Parker, vice chairman and CFO of Bowlmor Lanes said the health care law backed his company into a corner:

"[T]o minimize losses sustained due to this mandate, we will have to keep employees part-time, not allow them to work 30 hours a week. We will be forced to do this as much as possible in order to reduce the number of full time workers.

"Not every company will suddenly shift to having all part-time employees. Each company has to weigh the costs of increased training and higher turnover that comes with more part-time workers against the costs of fines. As I wrote in June:

"However, with this sort of perverse financial incentive, companies in many industries–-particularly those with low-skilled, low wage employees – will “do the math” and hire part-time workers over full-time workers. While this may keep human resource departments busy, it will cause many businesses to miss out on some economies of scale, as they devote more time and effort to hiring and training part-time workers. Think about managing 100 part-time workers each working 20 hours weekly, versus 50 full-time workers each working 40 hours weekly. And this certainly won’t be good for those people who want to work full-time but can’t because of this perverse incentive.

"The last thing we want to do is discourage businesses from hiring full-time workers. But as things stand, the health care law would do just that, generating frustration for many in an already tough job environment. The answer is to enact real reforms by repealing the employer mandate (along with other provisions that discourage job growth) and work toward reducing health care costs, expanding coverage for the uninsured, and improving health care quality."