The Deception of the Reduced Employee Share of Payroll Tax

I am sure there are many employees who are delighted that the government has decided to make the total 2.0% reduction in the rate of the Social Security tax in the employee's contribution and not in the employer's contribution.  In fact, this is a nearly meaningless distinction, except that it plays well with those who have not thought the problem through.  I can tell you from my experience with mostly quite intelligent employees that very few people have thought this issue through.

In view of this ignorance, the ploy makes great political sense.  First, there are many more employees than there are employers, so it wins more votes for the politicians.  Second, the disappointed Progressive Elitists who so badly wanted to raise taxes on those guilty of being productive enough to earn more than $200,000 or somewhat less or couples earning more than $250,000 together or somewhat less are likely to feel that the reduction of the Social Security tax only on employees making less than $106,800 helps to equalize their disappointment in not getting to soak the rich.  They are also getting even with those rich, exploitative employers by not letting them have a share of the tax break for 2011 offered by this Social Security tax reduction.  Progressive Elitists hate business, profits, and businessmen, so this plays well.  But then this little triumph is entirely based on their own ignorance of employee compensation, which they display in many ways in addition to the present case.

Why is the distinction of employee and employer shares of the Social Security and the Medicare taxes meaningless?  On one level, it is because they are both paid by the employer.  The employee does not take his paycheck home and then send his Social Security withholding of 6.2% and his Medicare withholding of 1.45% in to the IRS.  His employer does that, unless he is self-employed, in which case he sends 12.4% in Social Security tax and 2.9% in Medicare tax.  But while this fact is important, it is not the hard part to understand.  Let us get to that.

An employer hires an employee because he wants the employee to help him produce goods and services and hiring the employee is calculated to produce enough more goods and services that the employer can cover all the costs of hiring the additional employee and make some profit as well.  The employer and the employee make a deal that the employee will be so productive that the employer can rationally afford to keep him employed.  There are two sides to this issue that need to be considered.  What will the employee add in company income and what he costs the employer.  For our purposes here, we will mostly consider what the employee costs the employer.

Adding an employee will generally require more work space and more equipment.  Workman's Compensation Insurance payments will go up.  The company may need to do more advertising to bring in more customers for the employee to provide goods or services for.  There will be an incremental increase in liability insurance in many cases.  There will be generally added expenses for business cards, office supplies, pollution controls and other regulation compliance, and the materials and goods the employee must use to make the company's finished goods or provide services.  There will also be overhead expenses due to the added work in doing payroll and keeping records for the IRS and reporting to them and other government agencies on tax and labor issues, and to provide and keep track of benefits.

Finally, there is the matter of providing the compensation package to the employee.  His compensation cannot rationally be greater than his additions to the company's income minus the many expenses of the previous paragraph.  If they are, for more than a brief training period, he should be fired.  Now every company is also in a bidding war with every other employer and even with the employee's potential thoughts of being self-employed, so that he has little leeway on the downside as to what he can offer in a compensation package.  He may increase that leeway somewhat by providing a nice work environment, good people to work with, good customers to work with, extra freedom in hours worked, and interesting work to do.  But one way or another, he is still in a stiff competition to keep desirable employees, who are likely to be desirable to other employers as well.  But most important of all, the employee's total compensation has a strict upper bound determined by what he adds to the company income minus the expenses associated with his doing so.

The compensation package is usually considered to be his wages or salary plus the costs of his benefits such as health insurance, retirement plans, vacation, sick leave, etc.  One could say that the employer's share of the Social Security tax and the Medicare tax, that state and federal unemployment taxes, and Workman's Compensation costs are all overhead expenses.  But if you do, the employer still needs to consider them as part of the costs of adding an employee and the employee still has to cover those costs or lose his job.  But, unlike added equipment, office or warehouse space, advertising, and other common overhead expenses, these taxes, which Workman's Compensation also is for all intents and purposes, are very easy to attribute to each particular employee and most rational employer's will do just exactly that.  They are part of your compensation package then.  Sure, most employees do not think of them as such, but that is the real case.

Why is this?  It is because the employer would have been just as happy to have given these tax monies to you as to give them to various governments or insurance companies.  If you are employed, you are worth the sum of these taxes, your take-home pay, the other taxes fictionally paid by you though he pays them for you, and all of your benefits.  In fact, if the employer could hand all of this money to you he should be happier.  He probably likes you and he would surely be very happy not to have go to all the trouble of separating the amount you are worth into separate piles with all the associated record keeping, report filings, and payments needed to

• Withhold income taxes for the state.
• Pay unemployment insurance to the state.
• Withhold income taxes for the federal government.
• Withhold Social Security taxes for the federal government.
• Withhold Medicare taxes for the federal government.
• Pay unemployment insurance to the federal government.
• Pay Workmen's Compensation insurance.

I can certainly vouch for the fact that I would love to give all this money to my employees and if any of these taxes had to be paid, I would be delighted if they would relieve me of all the tedious work involved and do it themselves.  Of course, I have a devious motive.  I know that that would create so many very angry voters that we would soon have a much simpler tax system and much smaller governments.  Many more people would pay more attention to how much they were paying in taxes.  The present system is designed to fool them into underestimating the amount of taxes they pay.  That deception works with most people.

Now, let us consider the case of a tax increase.  It does not matter a bit whether the tax increase is designated as paid by the employer or the employee.  The employer is still the one who is actually going to make the payments, though the employee is involved in some minor adjustments on the income tax.  Let us suppose that either the Social Security or the Medicare tax goes up.  If it does, the employer will have to do one of a few things:

• If he has many employees, he can easily fire one or more of the least productive employees to compensate for the cost increase.
• He may crack the whip and say all employees must work harder.
• He may defer pay increases until increases in worker productivity match the increased tax cost.
• He probably will be loathe to take on new workers who will not be able to match their cost of employment for an initial period of time as they learn the job.
• He may cut back on benefits.
• He might have to decrease wages or salaries, though this is usually psychologically a tough choice for everyone.

The employer has options and he will have to exercise them.  Losing money is not a choice he can handle for long.  But, you should note that such compensatory actions are harder on small businessmen than on big companies.  If your costs go up 2% and that wipes out your profit, but you have four employees, firing one causes you to lose 25% of your income.  That is most often not an option.  So you have to use the remaining options or go out of business altogether.  The going out of business option is very frequently exercised by small businesses, especially since they are usually already working very hard and productivity increases are often harder for them to come by.

Now let us return to the 2% decrease in the employee share of the Social Security tax.  Each employee gets to now take that 2% home and spend it as he wishes.  But, what would have happened if the 2% decrease had been in the employer's share of the Social Security tax?  Well, perhaps for a few weeks the employer might have had a few extra dollars to reinvest in his company or to call net income and to be taxed, but there would be a very rapid readjustment in the marketplace in which employers found that they must offer employees 2% more to retain them or to get them to come to work for them.  Why?  Because the worker in question has already proven that his labor is worth that extra 2%.  That is why he had a job in the first place.

Good, productive employees are a scare resource.  There is always an active bidding process for their services, just as there is a market for plumbers, accountants, gold, wheat, pork, televisions, and other goods and services.  The inescapable Law of Supply and Demand applies here as it generally does in life.  Governments often pretend that they are above the Law of Supply and Demand, but all they do is shift the equation is some way, usually some bad way, but some new Supply and Demand equilibrium ensues.

In the case of the 2% reduction from 6.2% to 4.2% in the employee share of Social Security, there will be more money available in the short run for people to spend.  Generally, I favor reductions in taxes.  However, this reduction is going to make the financial straits of the Social Security system all the worse.  The Baby Boomers are about to start retiring in large numbers.  The politicians have been unwilling to face that program's severe underfunding.  The Ponzi scheme is about to collapse upon us all.  The best solution is simple, but few will yet accept it.  The problem is the size of the Baby Boomer wave and the fact that retirees are living a long time.  The life expectancy of the 65 year old in 2006 was 18.5 years.  That is a long time in retirement, particularly given that many people aged 70 are now in good enough health to be working.  The retirement age should be at least age 70.  I expect to work at least until I am 75 and longer if my health allows, which it probably will.

Given that the federal government has long been using Social Security tax revenues to generally pay for the obscenely excessive spending of the government, either major retirement age increases or major tax increases will be required.  Taxes are already much too high and they are already very much degrading the health of the private sector.  What we generally need are massive government spending decreases.  They are coming because the People will not put up with higher taxes and they are coming to understand the fatal nature of government deficit spending.  The process by which the necessary spending decreases will occur is going to be very interesting to observe.  Because a simple problem has so very long been ignored, its solution will now be all the tougher and may be catastrophic for some.

U.S. State Dept. Tells U.N. We Are Guilty of Many, Many Human Rights Violations

In an early move to placate the international community, Obama had the U.S. join the U.N. Human Rights Council.  The current member nations of this august body of human rights exemplars include:

Angola
Egypt
Nigeria
South Africa
Zambia
China
Kyrgyzstan
Pakistan
Saudi Arabia
Russian Federation
Argentina
Bolivia
Cuba

The U.S. just delivered a 29-page report to the Human Rights Council in which the State Department said that some Americans were still victims of discrimination.  In particular, blacks, Latinos, Muslims, South Asians, Native Americans, and gays are victims of high unemployment, hate crimes, poverty, poor housing, lack of access to health care, and discriminatory hiring practices.

The report welcomed "observations and recommendations that can help us on that road to a more perfect union."  The American Civil Liberties Union approved of the Obama administration's submission to the U.N. Human Rights Council, but decried the fact it did not address the issues of "inhumane prison conditions, racial disparities in death penalty cases, and abuses in the immigration system."  The director of the ACLU's human rights program said, "It is time for the U.S. to match its human rights rhetoric with concrete domestic policies and actions and create a human rights culture and infrastructure that promote American values of equality and justice for all."

OK, you have been wondering when I was finally going to step in here and punch this Progressive viewpoint in its sniveling nose.  Did you notice that human rights are always referred to by statists and not individual rights?  They ought to be the same thing, but somehow they never are.  Human rights are always take to include the obligation of some individuals to serve others, usually in some collective group.  So, to be clear and differentiate my viewpoint from the Progressive idea of human rights, I will address these issues on the basis of our individual rights.

Individuals have the right to freedom of association and they have the right to discriminate.  They are not required to choose who they associate with or how they discriminate on a rational basis.  What is more, government would hardly be the agent anyone rational would turn to for the purpose of determining who each individual shall associate with and to dictate to each individual how they should discriminate.  These issues are much too complex for government, which is incredibly simple-minded and totally lacks the knowledge of how each American individual is differentiated and what their values are.  Individuality and those differing values require individuals to discriminate among those with whom they will choose to associate.  What is more, we should have learned long ago that no good comes of individuals forfeiting their own independent judgment to government beyond those basic protections which government provides by preventing itself and individuals from initiating the use of force against one another. 

If I were to refuse to hire any black Adventist person, let us say, that is within my rights, as long as mine is a private company.  The government, on the other hand, cannot refuse to hire Adventist blacks.  Why?  First, because government must treat every individual equally before the law.  Second, government is the only agent in our society allowed to use force against individuals.  That use of force must be tightly controlled to prevent its abusive use.  One of the most important controls is that it must be applied equally to all citizens, so that the majority of citizens will be inclined to feel the need to protect those who have become the victims of government discrimination on the basis of race, religion, peaceful creed, employer or employee, income, or property.  It is government that proves to be the monolithic rights violator because it has a monopoly on the use of force in a society.  Therefore, legitimate government, as defined in our Declaration of Independence, has the sole function of protecting the equal, sovereign rights of every individual to life, liberty, and the pursuit of happiness.

That being the case, it is very irrational that this report did not bemoan the fact that the government discriminates against people who are more productive and those who earn more income.  When the ACLU calls upon the American values of equality and justice, where is their outcry against the progressive income tax code?  Or, where is the acknowledgment by the government that it has no right to discriminate against hiring white males for government positions.  Where is the acknowledgment that government cannot claim to treat Americans equally and with justice when it discriminates against firms owned by white males when it lets contracts for goods and services?  Where is there condemnation of the fact that employers are forced to keep employee income and tax records and submit reports to governments without just compensation?

While these awful infractions of unequal and unjust discrimination by the U.S. government go unmentioned, the ACLU bemoans the conditions of prisoners, who are treated better here than almost anywhere in the world.  And what are the immigration abuses they are talking about?  Apparently, our policy is only to deport people who are felons, while illegal border crossings and misdemeanors are ignored.  Where is the abuse in that?  When we provide most government services and force many private companies to provide free charity work to illegal immigrants, it is a puzzle to me that we can be said to be abusive.

It may be true that more blacks receive the death penalty, but that may be less because they are black than because of a combination of the nature of the crimes and their likely being poorer and less able to obtain the services of the better lawyers.

We shall have to wait with bated breath for the constructive comments to come from Cuba, China, the Russian Federation, Zambia, Egypt, Saudi Arabia, and Pakistan on how the U.S. might achieve an admirable human rights record.  Do you suppose any of them will do what the ACLU failed to do?  Will they point out that the primary abuses of human rights in the U.S. are due to our government's failure to govern in accordance with our own Declaration of Independence and our Constitution?  Will they point out that our progressive income tax system is a violation of every individual's equal rights to life, the pursuit of happiness, and property?  Do you suppose they will demand that the U.S. government stop its baleful discrimination against the white male minority or the employer minority?

Obama's Job Creation Summit

This is really a funny event.  Obama has gathered together some executives from large companies, government Labor and Commerce Department people, and his ever popular labor union leaders for a jobs creation conference.  After taxing small business owners to death and wanting to tax them still more beyond the grave, after threatening everyone with energy restrictions under the ridiculous claim that CO2 is a pollutant causing catastrophic man-made global warming, after telling businessmen in industry after industry that he has a Marxist hatred for them, after threatening to saddle companies with new health care expenses, after a Stimulus Package that creates no private sector jobs, after threatening business contracts and property, and after making all investment decisions a roll of the dice, Obama is having a job creation conference.  Is he admitting finally that he who sits at the feet of every Marxist professor he can find in college has no idea how the economy works?

Indeed, he does not.  Including labor union leaders in such a meeting flies in the face of its purpose: job creation.  Labor union leaders are experts in one thing related to jobs: killing them.  This is why private sector employees have been avoiding labor unions now for decades.  They have come to understand this.  This is also why the labor union bosses so badly need card check.  Without intimidation, they cannot force private sector employees to join the unions.

The executives of large businesses are not really interested in spurring job creation either.  The large businesses do not hire many people.  It is small businesses that hire most people.  So, if a large business executive were to spur more jobs in the economy in general, he is doing more to grow his competition, the lean and mean small companies who are always trying to make inroads in his product and service areas.  The big businessman usually fears small business.  The last thing he wants to do is to help them grow.

With 15.7 million Americans unemployed, this jobs summit should have an easy job creating new jobs.  There are plenty of sufficiently skilled and interested potential employees available for hire.  All we need is for large numbers of small business owners to gain the means and the confidence to hire them.  Within a framework of Marxist theory, there is no way to motivate the small businessmen to hire.  No, it would require Capitalist theory to understand what government actions and inactions are needed to spur job creation.  The answers are tried and true.  Most small businessmen can tell you what is needed.  They just need these very simple encouragements:

• No new payroll taxes.
• No threats to take down their businesses when they die with a death tax.
• Lower individual income taxes for higher income brackets.  Finally come to understand that the net government revenues increase with lower upper bracket income tax rates than those we presently have, while encouraging growth of the economy.  The onlyreason for higher rates is to punish the rich.
• Remove the minimum wage laws or at least lower the minimum wage.
• Stop increasing unemployment insurance rates.
• Control Workmen's Compensation Insurance costs with tort reform.
• Do not raise the cost of health insurance as ObamaCare will certainly do.
• Do not increase energy costs and lower energy reliability as carbon cap and trade or the EPA's plan to declare CO2 a pollutant will do.
• Do not threaten businesses with union takeovers as card check will do.
• Cut back on government spending so investment capital is available for the private sector.
• Lower corporate income taxes, so American companies can compete with companies abroad, almost all of which now have lower taxes than do American corporations.
• Reduce barriers to trade.  Simplify both import and export laws and regulations.
• Understand that Medicare and Social Security will both be turning in their IOUs in just a very few years and that increasing payroll taxes on them at that time will kill many jobs.
• Reduce the burdens of government regulations, instead of constantly increasing them.
• End subsidies that distort the markets into inefficient activities.
• Allow the drilling of oil and gas fields in the US and its offshore waters.
• Sell off much of the federal lands which are not being used productively, so that private owners can use them productively.  Use the income to reduce government tax rates.
  
• Encourage the states to stop business discouraging activities, such as those common in California, New York, Michigan, and Ohio to name a few.

OK, so if we saw Obama and the Democrat Congress doing these things, rather than the opposite in every case, we small businessmen would be hiring people instead of firing them.  As long as Obama and his cadres of comrades refuse to recognize these basic factors in the economy, there is simply no justification for companies to hire.  It is all very simple, if you are not a childish, Marxist blockhead.

The Real, Really High Unemployment Rate

The media has been happy to report to us that the unemployment rate in July 2009 was slightly improved to 9.4%, compared to a 9.5% rate in June. They also reported that the number of jobs lost was fewer than in most prior months. But this is an odd combination. For the real unemployment rate to drop, some number of net new jobs must be created, yet another 247,000 net jobs were lost in July. Some time ago, I remember that for the unemployment rate not to go up, 154,000 new net jobs had to be created in a month. So, the net number of new jobs appears to be about 401,000 jobs fewer than used to be needed to keep percent unemployed static.

Is this anything to crow about? Apparently it is not as bad as earlier in the year, but is it not awful nonetheless? Well apparently it is good if you are Obama and his Democrat Congress. It is improvement. Or maybe not. What if the recession long ago weeded out the worst employees and companies are simply reluctant to let their better employees go? And, what if the real unemployment rate is being very badly understated?

The unemployment rate does not count the underemployed or those who are involuntarily working fewer hours than they would like. It also does not count those "who have not searched for work in the last 4 weeks." In reality, no one really knows how many people want a job, but have not searched for it for 4 weeks. The government assumes that people who had been telling them they were searching for work while they were collecting unemployment benefits, but stopped doing so when their unemployment benefits ran out, are not searching for work. So they are not counted as unemployed. But, would you go down to an unemployment office looking for work for more than 26 weeks when they were not going to give you any money for doing so and when they had done nothing in 26 weeks to get you employed? Of course not. Thus, when things really get bad, the unemployment rate falls even when the number of really unemployed workers increases!

The number of people who were looking for work a while back, but have not done so recently, though they are still unemployed is estimated at 2.3 million. Adding them to the number in the official unemployment count at 9.4% unemployed, raises the real unemployment rate to 10.9%. So, Obama and the Democrat Congress now have a real unemployment rate of 10.9% and this rate is not going down!

Or, we could add in the 8.8 million workers who are on involuntary part time work. The total unemployed or underemployed would then be 16.6%. Nothing for the Democrats to crow about and hardly good evidence that the Stimulus Package is accomplishing much of anything.

In the 4th Quarter of 2008, the GDP shrank by 5.4%, in the 1st Quarter of 2009 by 6.4%, and in the 2nd Quarter of 2009 by 1.0%. Construction and manufacturing sectors have been hit very hard. They totaled 15% of jobs, but they account for 40% of the unemployment. 9.8% of adult men are unemployed, while 7.5% of adult women are unemployed. Asians are 8.3% unemployed, while whites are 8.6% unemployed, Hispanics are 12.3%, and blacks are 14.5% unemployed. All of these numbers are for the usual, under-reported statistics giving the 9.4% total unemployment rate.

Great job Obama. You really have been great at putting it to those terrible employers and wealthy investors. You scared the tar out of them even during the presidential campaign and with the known desire of the already Democrat Congress for increasing taxes and piling on regulations on businesses and investors, you made the recession worse long before you took office. Since then, your constant bad-mouthing and threats combined with those of the leadership of the House and Senate, has done a great job of keeping employers uncertain and scared. In such times, they are pulling themselves back into their shells. This is hardly surprising.

Guess what? It is all about being able to believe you will be allowed to make a reasonable profit, stupid! If you tell businessmen that they are going to taxed much more, but do not even tell them how they will be taxed, they cannot calculate whether a business operation can make money. If you tell them they will be more heavily regulated, but they do not know how they will be regulated, they cannot tell whether they can make money in those operations which may be restricted. If you tell them you will dictate management compensation, they do not know why they should bother to undertake new operations or even continue working hard on older operations. The value of the dollar is very uncertain, thanks to you. Increasing taxes and regulations are likely to make it harder for U.S. operations to make money relative to overseas operations. Besides, where will the energy come from for manufacturing and transportation and heating buildings in the U.S. with Waxman-Markey type carbon cap and trade? What on Earth are employee health insurance costs going to be when you have finished mandating many benefit additions?

It is unreasonable to expect employers and investors to hire workers under these circumstances. You must allow employers some reasonable level of certainty, but you, like FDR, love uncertainty, experimentation, and socialist redistribution and equalization. It is you who have given us 10.9% unemployment. Take credit for it and live up to it.

Union Representation Card Check Legislation

Labor unions are doing very well in the public sector, where they have been very successful in organizing government workers. In the private sector, they are in deep trouble. In the 1950s they had 35% of private sector workers organized, but now they have only 7% in the private sector. Consequently, they have become desperate to find a way to improve their numbers in the private sector. The card check legislation, which was passed by the House in 2007, but defeated in the Senate, is once again Labor's number one lobbying priority.

Presently, if a labor union persuades 30% of the non-management employees of a company to check a card saying they are interested in labor union representation, the company must either accept the union as the sole bargaining agent of all of its non-management employees or call for a secret ballot election managed by the National Labor Relations Board of the Labor Department. Currently, labor unions win more than 50% of such secret ballot elections. This system is one full of injustice. First, it is wrong to require a company to negotiate labor contracts against its will with anyone or any organization. Company owners are not obliged to provide a job to anyone, except by their choice. When they are forced to do so, they have become slaves to their employees. Second, it is wrong to force those employees who do not wish to join a labor union to do so, unless the management freely chooses to make that a condition of employment, which they do have the right to do.

But this already union-skewed system is not enough for the labor unions. Clearly, workers have seen that unions are often very effective in destroying companies, which makes their continued employment very dubious. A very good illustration of this presently is the need for General Motors to go bankrupt, so an organization can emerge from its ruins which is not chained to many extremely uncompetitive concessions made to the labor unions. Many employees in the private sector have clearly understood the risks of joining a labor union and have chosen not to do so.

The union answer was to have Rep. George Miller (D of CA) introduce the so-called Employee Free Choice Act once again, which in the best tradition of Congress is anything but what its title suggests. This is more commonly called the card check legislation. It will require a company to recognize a union as the sole bargaining representation of all of its employees if 50% of them check off a card saying they want union representation. A union may be forced upon a company and those employees who do not want union representation even before they know that an attempt is being made to organize the workers of the company. There may never be an opportunity for the company and uninterested workers to make any counter arguments. It is also very clear that union organizers can put very great pressure on the last few employees they need to reach the 50% critical number for unionization. The secret ballot need no longer stand in their way.

This process of unionization is so easy that it can be readily applied to very small companies, which will be especially vulnerable to being taken over before they even know they are under attack. There is nothing to prevent the unionization of even very small Mom and Pop businesses. These businesses do not have the legal resources to contend with the unions. These small-time entrepreneurs have often suffered through years of personal privation to build a stable company and to get to the point where they could hire a few employees. In many cases, the lowest paid employee in such a company may be the founder of the company, who is still foregoing salary income in order to build his business. Yet, this struggling owner/manager is now forced to employ employees backed by hordes of lawyers from the union and to pay them still greater multiples of pay and benefits relative to his own pay. He may be providing them with health benefits already, which law does not allow him to provide for himself.

This proposed legislation further imposes the requirement that the company must enter into negotiations with the union within 10 days of the union getting the 50% check-offs needed. Then if no agreement is reached between the company and the union within 120 days, the government provides an arbitrator who will dictate the wages and benefits the company will provide the workers for a two-year contract. Given that the Labor Department will designate the arbitrator and given its generally pro-labor union stance, you can see why labor unions have written these provisions into the bill.

Meanwhile, a February 2007 McLaughlin Associates poll of 1000 respondents found that 79% opposed this bill and only 14% were in for it. Among just Democrats, 78% opposed the bill and 16% were for it. A 2004 Zogby poll found that 78% of union workers oppose any measure that denies them a secret ballot vote on union representation. Despite this opposition by voters, the Democrat Party obligation to the labor unions is so great that the Employee Free Choice Act, or abomination, may well pass Congress when it is considered soon. President Obama voted for it when it failed to pass the Senate last time and swore during the election that he would sign it into law as President.

Soon not only GM and U.S. Steel will be having difficulties being competitive, but your corner independently owned gas station and the local diner will be struggling even harder than normally to stay in business. Small business owners who relished doing it their way instead of opting for the safety and easier life of working for a large company, will find themselves slaves to a labor union. What a life!

Unions to Destroy Entrepreneur's Creations

Labor unions have been having a hard time in the private sector in the United States. Only 7.5% of private sector workers are union members. In the 1980s, union membership was about 20% of the private workforce. The unions are desperate to reverse this trend. They spent $450 million electing more Congressmen in this last election in an effort to get changes in the laws to help them unionize more and smaller businesses.

Unions are a major factor in making unionized companies less competitive. Unionized workers are paid in accordance with seniority, not with respect to productivity. In many other ways, unions make companies less competitive. Promotion by seniority saps the incentive to work hard and to think on the job. Work rules may cause a great loss of multi-functionality in employees and may simply have them taking unnecessary breaks. Union-imposed rules may make little sense in many contexts, but management cannot bend them to accommodate the Big Picture or the complete, rationally evaluated context of a particular situation. Unions also push for wage and benefit increases which many companies cannot sustain. Consequently, unionized businesses are a vanishing bred of business in the highly competitive American marketplace. With global markets more and more competitive also, unions are more and more a disaster for many businesses and for their employees.

The premier legislation that unions are seeking to reverse their loss of private sector membership is card checks. They and their Congressional allies are calling this The Employee Free Choice Act. This is really legislation designed to keep employers from ever speaking to their employees before their companies are unionized. It is also designed to make it easy for the union organizers to intimidate workers wherever they wish to corner them to get them to check a card that they are interested in being represented by the union. It is very revealing that union members do not like card check. They want union representation to be chosen by secret ballot. In union households, 69% oppose The Employee Free Choice Act! 76% of union voters say that the secret ballot is the best way to determine if workers want to be unionized or not.

Entrepreneurs create most of the jobs in America. In particular, small businesses create most of these jobs. The owners of these small businesses face a very daunting task in trying to build and maintain a business. Of the businesses started in 1992, 25% died in the first year. 50% were gone in 4 years. In the 10th year only 29% were still in existence. Yet, most of the owners of these businesses worked incredible long hours and did their best to try to make their companies a success. Most of these companies died even without the added burden of being unionized.

A great many small business owners went into business in good part because they had had it with working for others. Many of them are independent-minded people who want to work their way. The unions want to boss them around when they have built a business just large enough for the unions to be able to milk it of some significant resources. With the take-over of more and more small businesses, the unions will try to build up their membership. This will then give the unions more income they can use to try to bribe the politicians into giving them ever more power. The union bosses will be able to live high on the hog in money and power, while ever more small businesses are ground into oblivion.

This is a huge attack on wealth and property in America. It is a serious threat to small businesses and the huge investment that most small businessmen have put into those businesses. It is an overt expropriation of wealth. It is also an attack upon innovation and the determined spirits who have created wealth out of nothing with years dedicated, focused effort. Since the secret ballot is the most accurate way to determine whether the employees of a company want to be unionized, it is also an attack upon their livelihoods. Many of them do have long time horizons and want to work for a company that will exist in 10 years. Many employees do not want to see their union dues given to politicians they do not even want to vote for, let alone fund. This activity by the labor unions is hugely immoral and should be very roundly condemned by everyone.

A worker has a right to choose to be represented by a union. An employer has the right to then fire him rather than to have to negotiate with a labor union representative. Both employees and employers have the right to make choices. But, ultimately, an employee has his job at the discretion of the employer. If the employee does not wish to meet the conditions of employment of the employer, then the employee may leave and find another employer or he may start his own business. No employer is responsible against his will for the employment of anyone. To the degree that the law claims he is and forces him to provide jobs, the employer is simply a slave of the state and of the employee. There is no reason any employer should put up with this injustice. No one should be a slave, most especially not because he is productive and innovative enough to create jobs for others.