Month: August 2013

Welfare Pays More Than Entry-Level Work in Most States

Welfare currently pays more than a minimum-wage job in 35 states, according to a new study by the Cato Institute. In 13 states, including Oregon, being on welfare can pay more than $15 per hour. That’s over $31,000 tax-free dollars a year. This decreases welfare recipients’ incentive to accept entry-level work and increases their chances of long-term dependence.

Studies show a crucial key to escaping poverty is work, beginning with a low-wage, entry-level job if necessary. But in many states, welfare pays more than being a starting secretary or even a first-year teacher (and in three states, an entry-level computer programmer). With incentives like this, it’s hard for people with few skills to give up the security of a welfare check for any kind of paid work. Welfare benefits are tax-free, so they can exceed the take-home pay a typical recipient could expect to earn entering the workforce. This traps welfare recipients at the bottom of the economic ladder.

Many welfare recipients do want to work and are trying to find employment. But many others make the rational choice to stay on welfare if that pays more than the work for which they are qualified. If Congress and state legislators want to reduce dependence and reward work, they should strengthen welfare work requirements and resist allowing the cumulative benefits of welfare to continue outpacing the benefits of earning income.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

Read Blog Detail

Surprise! Mandatory Paid Sick Leave Has Real Costs

By Erin Shannon

In March, Portland’s City Council unanimously voted to enact mandatory paid sick leave for Portland businesses. While the law sounds well intentioned, it is poised to hurt the very employees it’s meant to help and may damage the businesses that employ them. A recent survey by the Employment Policies Institute (EPI) reveals that Seattle’s 2012 paid sick leave ordinance is increasing the cost of doing business there. Our law could have similar results in Oregon when it takes effect in January.

The Seattle survey targeted service industry employers, such as restaurant and retail businesses that would be newly providing paid sick leave to employees as a direct result of the new law. More than 56% of these employers said the new mandate would increase their cost of doing business, with over one quarter of those saying the increase would be “big.”

Proponents of paid sick leave argue employers will offset those increased costs through reduced employee turnover. But the EPI survey shows two-thirds of Seattle employers who have started providing paid sick leave do not believe the law will reduce turnover, and one third of Seattle employers think the law will increase unscheduled absences among employees taking advantage of the benefit even though they are not sick.

These employers are likely not off the mark. A survey by the Urban Institute in San Francisco found few employers reported reduced employee turnover as a result of that city’s paid sick leave law. As one business owner noted in that survey, if every employer is required to provide the benefit of paid sick leave, turnover becomes a moot point because that benefit is no longer an incentive for an employee to remain with one employer over another.

Regardless, many employers are not relying on offsetting increased business costs with reduced employee turnover, because they are offsetting those costs in other ways. In Seattle, employers reported that in response to the new paid sick leave mandate they had taken one of the following cost-cutting measures:

  • 15.7% of employers raised prices in response to the paid sick leave law.
  • 18.3% of employers reduced hours and staff.
  • 17.3% increased the cost to employees of current benefits, or eliminated benefits they used to offer.

These survey results are not unusual. Surveys in San Francisco and Connecticut, which both mandate paid sick leave, revealed similar results.  A survey of San Francisco employees by the Institute for Women’s Policy Research found nearly 30% of the lowest-wage employees were laid off or given reduced hours after passage of that city’s paid sick leave mandate. The Urban Institute survey similarly found some San Francisco employers had cut back employee bonuses, vacation time, and part-time help to absorb the new costs. In Connecticut, employers reported that state’s paid sick leave law forced them to raise prices, reduce hours and wages, and sometimes eliminate jobs.

There is no arguing that mandatory paid sick leave increases the cost of doing business. It is a fact. Employers are forced to pay the wages of the worker who has called in sick, while paying another worker to fill in for the sick worker. Alternatively, the employer can opt to let the sick employee’s work go unfinished and sacrifice service, productivity and sales (while still paying the sick worker). Either way, it is a cost to the employer.

Some employers, especially the larger ones, can absorb the increased cost. Others, like restaurants, already allowed employees to trade shifts with sick workers without the law, thereby costing no one. But many employers, especially those running small businesses, operate on a shoestring profit margin. When the costs to run their business go up, they simply cannot afford to absorb them. They have no other choice than to pass those costs on to consumers, or to the very workers paid sick leave is designed to protect.

Erin Shannon is Director of the Center for Small Business at Washington Policy Center in Olympia, Washington. She is a guest contributor at Cascade Policy Institute, Oregon’s free market public policy research organization.

Read Blog Detail

Hotel Proposal Is Pouring Good Money After Bad

Last week the Metro Council unanimously approved two resolutions in favor of subsidizing a Headquarters Hotel near the Oregon Convention Center in Portland. The original idea behind the Convention Center was that with the right package of amenities, people would come to Portland and spend money eating and shopping when not attending meetings. When the Convention Center didn’t generate the hoped-for revenue, it was expanded. When occupancy rates still dropped, Portland officials started planning a hotel.

Other cities have tried this strategy, and it hasn’t worked. Subsidized convention hotels elsewhere have had disappointing results. Not only have they not increased convention business significantly, but they haven’t made their occupancy projections, either. Now those cities are saddled with money-losing convention centers and money-losing hotels.

In 2007, the Portland Development Commission (PDC) rejected the only hotel proposal that didn’t require government subsidies. The Grand Ronde Indian Tribe offered to build a hotel with private money if they could include a casino. After the PDC turned them down, a tribal spokesman said, “We refuse to raid taxpayer dollars for any project.”

The core functions of government are to protect our lives, liberty, and property, not to provide our entertainment and build convention venues. Instead of throwing more taxpayer money at the Convention Center, Portland officials should consider the advice of management guru Peter Drucker, who warned: “There is nothing so useless as doing efficiently that which should not be done at all.”

Steve Buckstein is founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Read Blog Detail

Mayor Hales’s Environmental Vision Lacks Grounding in Reality

Recently, Mayor Charlie Hales gave a speech welcoming out-of-town dignitaries visiting Portland as part of “World Environment Day.” Speaking before an obviously friendly audience, Mayor Hales made a number of claims that show a lack of critical thinking about environmental issues. Four in particular deserve comment.

First, the Mayor said that the city “must urge” the Oregon State Treasurer to divest of all state holdings in fossil fuel. This might be a harmless gesture if the Mayor did that with his own personal portfolio, but forcing public investment managers to sell off holdings for strictly political reasons would be a violation of their fiduciary trust to those whose funds they manage. Arbitrarily selling assets would increase transaction fees and could reduce total returns to beneficiaries by disposing of securities at discounted prices (relative to true market values).

Moreover, divesting fossil fuel assets would have no effect on any measurable environmental problem.

The Mayor also invoked the tired “Peak Oil” argument that companies managing fossil fuel assets must inevitably fail because oil, gas, and coal are finite resources. But that prediction has been wrong for over 100 years and will continue to be wrong for the foreseeable future. Indeed, at least one international energy statistical agency has predicted that the United States likely will be energy-independent by 2020 due to technological innovations in oil and gas exploration that are causing large increases in production.

Mayor Hales further warned that we must act before the “carbon bubble bursts.” While it is true that we currently have a carbon bubble, it’s not the one he is thinking of. It is a government-created buying binge in carbon offsets, renewable energy credits, and green tags. These products, which exist primarily to satisfy regulatory mandates, have no underlying assets backing them and represent one of the largest Ponzi schemes in history. When the fraud is finally exposed, holders of these worthless securities will be forced to write off billions of dollars in losses.

If the Mayor is really concerned about avoiding the subprime carbon market, he should publicly instruct his staff to quit buying renewable energy credits.

Second, Mayor Hales pledged to begin implementation of the resolution passed last year requiring 100% of city electricity from politically correct “renewable sources.” Unfortunately, the Mayor is more than a decade late to this party, and the beer is stale. Back in 2001, the City Council pledged the very same thing, to be implemented by 2010. When that deadline passed, the city had managed to reach only about seven percent of the goal.

Not only is this goal unachievable for the city, it’s not even desirable. Since large-scale hydroelectric projects and nuclear power plants are typically excluded by green power advocates as “renewable” energy sources, the only way to achieve 100% renewable energy purchasing in the short term would be through massive expenditures for utility-scale wind energy. But since wind is guaranteed to fail randomly, it must be backed up at all times by base-load sources such as hydro, natural gas, and coal. If hydro steps in when wind fails, there is no net environmental gain. It’s one renewable substituting for another. If coal and gas are used, there is a net environmental loss, since these sources must be kept running even when not needed.

The Mayor’s vision is akin to forcing a rental car company to buy a large percentage of cars that randomly stop working, and then maintaining a back-up fleet that is kept idling 24 hours a day to rescue the stranded cars on a moment’s notice. Nobody would propose such a policy for an auto fleet; and environmentally conscious politicians should not advocate it for the electricity grid, either. Wind power is an expensive nuisance to the grid and should be discouraged, not mandated.

Third, the Mayor pledged that within 10 years, the bike “will be the preferred mode of transportation for all trips under three miles in Portland.” While politicians love to make outrageous predictions―since no one can disprove them―there is nothing in the recent past that suggests bicycling will come anywhere close to meeting this forecast. Bicycling has achieved a healthy market share for commuter trips into the central city, but over a 24-hour period for the entire city, cycling is minimal. Even in the South Waterfront district, a massively subsidized high-density neighborhood with a vibrant cycling population, 79% of all daily passenger-trips to and from the district are made in motorized vehicles.

Finally, Mayor Hales pledged that over the next 20 years, the Council will identify new revenues that will allow the city to turn every street in Portland into a “Complete Street” with pervious surfaces, street trees, and sidewalks. Given that the condition of Portland streets has been declining for years and been the subject of several scathing reports by the Portland City Auditor, I’d suggest a much more humble goal for the Mayor. He should stop the pork-barreling of massive amounts of tax dollars on streetcars, light rail, and “traffic calming” projects (the primary cause of our current road system embarrassment) and begin allocating most transportation dollars to fixing and maintaining what we have.

One of the great success stories of the last century has been the steady improvement in environmental quality due to market-driven technological change. The best way Portland politicians can help continue this trend is to focus on the fundamentals of making the city a great place for entrepreneurs.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

Read Blog Detail

Testimony in Opposition to the Oregon Convention Center Headquarters Hotel deal

On August 15, 2013 the Metro Council unanimously approved two resolutions that move the discussion forward toward subsidizing a Headquarters Hotel near the Oregon Convention Center in Portland.

Metro’s news article about the meeting (which quotes from Steve Buckstein’s testimony below) is here. Read his testimony below:

For the record my name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute, a free-market think tank here in Portland.

Originally, the idea behind the Oregon Convention Center was that if we put together the right package of amenities, then everyone would come to Portland and spend lots of money eating and shopping when they weren’t attending meetings.

That same idea occurred to people in other cities, and it sparked an ambitious municipal competition that began back in the 1980s and is still going strong.

First, we built a new convention center to attract the convention business. When the original center didn’t generate the revenue we’d hoped for, we decided to expand it. When occupancy rates dropped after the expansion, we turned our attention to the need for a headquarters hotel. That was the magic ingredient we were missing.

Of course, no one wanted to listen to the critics like Professor Heywood Sanders who came here in 2005 to tell us that other cities had already tried what we wanted to try in 2007, and it didn’t work. Big convention center hotels were built in other cities with disappointing results. Not only didn’t they significantly increase convention business, but they didn’t make their occupancy projections either, and now those cities are saddled with money-losing convention centers and money-losing hotels. The fact that the private sector wouldn’t put up much of its own money for such facilities somehow didn’t matter in other cities.

The question you have to answer now is: Does it matter to us?

We like to tell ourselves that Portland is different, but are you willing to risk your taxpayers’ money on that difference, knowing that the competition for convention business is only getting more intense?

As you may remember, in 2007 The Portland Development Commission (PDC) rejected the only Convention Center hotel proposal that didn’t require government subsidies.

The Grand Ronde Indian Tribe said it could do the project with all private money if it were allowed to include a gambling casino. After they were turned down, a tribe spokesman said, “We refuse to raid taxpayer dollars for any project.” He could have added, “especially for hotels which are not core functions of government.”

Rather than deciding today if you want to double down by subsidizing a headquarters hotel, I suggest you do the politically incorrect thing and consider whether you really want to be in the convention center business at all. If the answer to that question is No, which I believe it should be, then consider selling the Convention Center and cut your losses.

[Metro Council] President Hughes, you have correctly pointed out that if you look for a project that’s been scrubbed of all the risk, you will never do anything.

But I hope you will also consider the advice of management guru Peter Drucker who warned:

“There is nothing so useless as doing efficiently that which should not be done at all.”

The core functions of government are to protect our lives, liberty, and property. Providing our entertainment and convention venues should not be done by government at all.

Ironically, in October the Convention Center will host another Scam Jam event where the state attorney general and others will help Oregonians avoid being ripped off by financial con artists. I wouldn’t be surprised if some day in the future publicly funded convention centers and headquarters hotels are listed along with stock swindles as financial transactions to be avoided at all costs by the public.

Further information

The Unseen Costs of Ribbon Cutting: Losses from Economic Development Programs, William B. Conerly, Ph.D., Cascade Policy Institute, June 1998.

Read Blog Detail

When a Progressive Magazine Pays Less Than Walmart

The age-old misunderstanding over minimum wage laws may finally be resolving.

The Nation magazine is asking Walmart, to pay its workers at least $12 per hour. Never mind that according to Walmart its average worker already earns more than that.

In any case, Walmart turned the tables on the progressive political publication by exposing the fact that it pays its own interns much less than it demands of greedy capitalists. In an email labeled “people who live in glass houses…,” a Walmart executive points out that The Nation has paid its full-time interns below the federal minimum wage for the last 30 years.

Not taking this revelation lying down, The Nation shot back that starting this fall it was upgrading its intern pay to the federal minimum of $7.25 per hour. Of course, that’s still less than what the magazine itself cites as the average Walmart worker’s wage, but who’s counting?

The economic lesson here is hard to miss when the magazine’s intern program director says, “We are not yet certain how [our new higher wage policy] will work out long term, but for the fall we are anticipating hiring ten interns rather than twelve.”

As Reason magazine — on the other end of the ideological spectrum — noted, “One could forgive Walmart for being tempted to reply with something along the lines of: ‘No s**t.’”

Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Read Blog Detail

Northwest Employee Freedom One Night Event

On Thursday, September 5 Cascade Policy Institute will be partnering with the Freedom Foundation to host the Northwest Employee Freedom One Night Event. National labor policy expert Vincent Vernuccio of the Mackinac Center for Public Policy will share the story of how Michigan passed historic labor reform last year, becoming the 24th right-to-work state. Join us with other labor experts to learn more about the local efforts to increase employee freedom in Washington and Oregon.

In Oregon, signatures may soon be solicited to place Initiative Petition 9 (the Public Employee Choice Act) on the November 2014 General Election Ballot. It would allow anyone to become or remain a public employee without being required to join a labor union or pay dues or “fair share” fees.

F. Vincent Vernuccio

Vernuccio is director of labor policy at the Mackinac Center for Public Policy. He is a graduate
of the Ave Maria School of Law in Ann Arbor, Mich. Under President George W. Bush he served as special assistant to the assistant secretary for administration and management in the Department of Labor. Vernuccio has published articles and op-eds in such newspapers and magazines as Investor’s Business Daily, The New York Times, The Washington Times, National Review, Forbes and The American Spectator. He has been cited in several books, and he is a frequent contributor on national television and radio shows, such as “Your World” with Neil Cavuto and Varney and Company. Vernuccio is a sought-after voice on labor panels nationally and in Washington, D.C. A regular guest on Fox News channels, Vernuccio has been described by Stuart Varney as a “top union watchdog.” He has advised senators and congressmen on a multitude of labor-related issues. He testified before the United States House of Representatives Subcommittee on Federal Workforce, Postal Service and Labor Policy. Vernuccio lives in Ann Arbor, Mich.
Read Blog Detail

New York Times Calls Catholic Schools “A Lifeline for Minorities”

The New York Times recently published a feature story about the closure of inner-city Catholic schools, as the Archdiocese of New York consolidates the school system to shore up its finances (“A Lifeline for Minorities, Catholic Schools Retrench,” June 20). Among the 26 urban schools to close this year is Blessed Sacrament in the Bronx, once attended by Supreme Court Justice Sonia Sotomayor.

“The worst thing is, these kids could lose their faith in the adults around them,” [Justice Sotomayor] said in an interview inside her old fifth-grade classroom. “Children need to feel secure. This makes it worse. These kids are going to carry this trauma with them for the rest of their lives.”

Justice Sotomayor’s emotions are shared by a generation of accomplished Latino and black professionals and public servants who went from humble roots to successful careers thanks to Catholic schools. But they fear that a springboard that has helped numerous poor and working-class minority students achieve rewarding lives is eroding as Catholic schools close their doors in the face of extraordinary financial challenges and demographic shifts….

“The Catholic schools have been a pipeline to opportunity for generations,” said Justice Sotomayor….“It gave people like me the chance to be successful. It provided me…with an incredible environment of security. Not every school provides that.”

It is no secret that a substantial hurdle faced by independent private schools across the country is raising the money to operate without charging tuition that could not possibly be paid by the families they serve. Generous voluntary, private support plays a large role in sustaining faith-based private schools. In many cities a majority of students in some schools do not even belong to the institutions’ faith; they and their parents simply crave the good education they offer. But as the situation in urban New York illustrates, modest tuition plus charitable giving are not enough to keep schools open in neighborhoods that need them most.

New York spends $19,000 in taxpayer money per student in the public school system. If children are failed by public schools that do not successfully educate them (as happens to many kids), parents have no “money back guarantee.” If parents want to choose a private school to make up for the deficiencies of the public system, they must pay out of their own pockets. If parents could control only a few thousand dollars of what the public system already spends on their child, they could afford tuition at most private schools.

Today, the school choice movement recognizes the outstanding job faith-based and other independent private schools do to provide a quality education to children who are routinely failed by public schools, especially in low-income communities. “School choice” legislation empowers parents like those in the Times article to choose whatever school serves their children best through options like education tax credits, educational savings accounts, and public scholarships (vouchers).

These options allow parents to control a small portion of the education dollars that would be spent on their child in public schools. If the goal of public education is to educate the public, it shouldn’t matter where the learning takes place. What matters is that every child learns.

As of 2012, 32 publicly funded school choice programs exist in 16 states and the District of Columbia, serving close to 250,000 children. Oregon does not have such a program yet, but the state has made incremental gains in increasing parental choice within the public system. Oregon has about 115 charter schools (including online options that are especially helpful to rural and special-needs students) and an inter-district transfer law that allows students to enroll in public schools outside their district of residence.

Educating children who are most in need has been a priority of Catholic and other private schools since a New York widow named Elizabeth Ann Seton opened the first free school for girls in the U.S. in Baltimore in 1808. More than six million children attend 34,000 private schools today. If The New York Times can praise Catholic schools for educating “a generation of accomplished Latino and black professionals”―and mourn the closing of those schools―hopefully it will soon take the next logical step. The Times should connect the dots between the dreams of millions of low-income parents like the Sotomayors and practical, constitutional legislation that helps parents choose “the springboard” to success that may be just down the street.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute, Oregon’s free market public policy research organization. CSF-Portland provides privately funded scholarships to low-income Oregon children to attend the private, parochial, and home schools of their parents’ choice.

Read Blog Detail

Can We Correct Oregon’s High Corrections Costs?

By Brandon Maxwell

Behind Oregon’s cultural mystique lies a troubling truth: Compared with similar-sized states, we have one of the fastest growing prison populations in the nation and spend 7.5 percent more per inmate than the national average. Of the fourteen states with populations between two and five million people, ten of them spend less per inmate than Oregon. Where is the money going?

According to the Legislative Fiscal Office, entry-level correctional officers in Oregon take home 24 percent more annually than surrounding states. Likewise, Oregon is the only state that doesn’t require union correctional workers to contribute to their own health plan premiums. As a result, taxpayers carry the burden.

Union wages and benefits aren’t the only things rising―so is the average age of inmates. $21,000 in outside health care costs can be attributed annually to the average inmate over 46. Oregon taxpayers are not only footing the health care bills for aging union members, but for aging prisoners.

Making Oregon a right-to-work state would open the door to performance-based pay through competition, and medical parole reform would curtail Oregon’s aging inmate population. Both could save taxpayers money while arguably improving efficiency in the correctional system.

Oregon taxpayers have a right to be concerned about high prison costs. But until we confront and remedy the causes behind the costs, Oregon’s financial burden will only continue to rise.

 Brandon Loran Maxwell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

Read Blog Detail

More Money, Same Problems for Oregon Schools

By William Newell

Oregon’s 2013 legislative session ended with the passage of the largest education budget the state of Oregon has ever seen. At nearly $6.75 billion, the budget has been hailed both as a renewed effort to prioritize education and as a weak attempt to reinvest in a lagging school system. The purported decade of underinvestment looks confirmed by the fact that Oregon’s school system was given a “C” by Education Week and a “D-” by Students First, two respected education research institutions. But is it true Oregon’s government has spent too little and thus neglected its duty to provide a quality education system? The answer might surprise you.

Instead of investing too little, Oregon schools have failed to invest their scarce resources in the right places, namely students and teachers. A major part of the problem lies in the hiring of an ever-increasing number of administrators and non-teaching support staff who are soaking up highly valuable but limited funding. A report released by the Friedman Foundation for Educational Choice shows that Oregon had a 47.3 percent increase in the number of administrators and non-teaching support staff from 1992 to 2009. This astounding growth more than triples that of students and teachers, which only grew by 15.4 percent and 12.7 percent respectively. Oregon schools now employ more administrators and non-teaching support staff than they do teachers.

At the same time, student achievement has stagnated with small increases and even decreases in national reading and mathematics scores. Looking at statistics from the National Assessment of Educational Progress, Oregon fourth-grade students have improved their scores in mathematics by 14 points but have fallen below the national average score at the same time. Eighth graders, once well above the national average in math, have regressed back down to the national average. In reading, fourth graders are below the national average and have only seen a two-point score increase. For eighth graders, their reading scores have fallen by two points and have also regressed to the national average. All in all, Oregon students have not reaped the benefits of additional administrators and support staff.

If the growth of administrators and support staff had risen in line with that of students, Oregon could have saved $302,612,947 per year according to the same Friedman Foundation report. These savings could have meant reducing taxes or employing new teachers and keeping young teachers from being fired due to district cuts. A little math shows that if Oregon spent that $300 million on employing teachers compensated at $80,000 (salary plus benefits), the state could have employed almost 3,782 more teachers than it does now.* Instead, Oregon maintains the third largest class sizes in the entire U.S., according to the National Education Association, with a 20.2 student-to-teacher ratio. Instead of creating a larger, more inefficient education bureaucracy with its new money, Oregon schools should refocus on those who matter most: students and their teachers.

*Teacher compensation was calculated by taking the average Oregon K-12 teacher salary of $57,000 plus 40% for benefits.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

Read Blog Detail