Americans around the country recently marked another Labor Day; in addition to enduring the summer heat, we also had to endure another cycle of big labor activists—and a vice president—falsely giving big labor credit for various benefits enjoyed by American workers. Vice President Kamala Harris is not the first executive branch official to make this ahistorical claim; three years ago, in celebration of Labor Day, the director of the Office of Labor-Management Standards in the Department of Labor, Jeffrey Freund, published an embarrassing blog post thanking unions for Labor Day and “so much more” and patting his own agency on the back for administering various “government-provided benefits.” The claim falsely attributes the first workplace retirement plans and length of the work week, among other benefits, to collective bargaining. Like Harris’ claim that “you better thank a union member” for the five-day work week, paid leave, sick leave and vacation time, Freund’s claim also does not hold up to history.

Employee Benefits

When it comes to non-wage benefits, historical records from the Department of Labor (DoL) itself make clear that these benefit programs pre-date their inclusion in collective bargaining agreements and were already well established by the time they were wrapped into union contracts. One DoL Bulletin noted that: “Between 1900 and 1930, the number of welfare plans sponsored by employers increased substantially. Organized labor, because it had no voice in the administration and was not protected by contractual obligations, never whole heartedly endorsed such plans.” These plans included health coverage, life insurance and even pension plans. The first pension plan dates all the way back to 1875, implemented by American Express. Other companies soon followed, voluntarily offering such benefits to their employees. Notably, organized labor remained skeptical of such plans and viewed them as attempts to pull worker support from a union toward management.

In fact, the first collective bargaining agreement to include such employee benefit programs was not negotiated until 1926 in New York. It wasn’t until the late 1940s, following several decisions from the National Labor Relations Board, that such benefits were even necessarily subject to collective bargaining. Take the example of Con Edison. The company’s employee benefit plan included health and medical care with sick pay, life insurance and retirement benefits. The benefit plan was established in 1891, more than 45 years before the company began engaging in any collective bargaining with employees in 1937.

The historical record related to paid vacation time similarly points to a benefit that was primarily available to nonunion workers before it was later incorporated into union contracts. Vacation time was considered a prerogative of—largely nonunionized—office workers for years before gaining acceptance in the union workforce in the early 1940s. In 1940, only one quarter of all union workers had paid vacation benefits, but by the end of 1944, that number had risen to 85 percent, nearly matching the portion of the nonunion workforce with similar benefits. Even with those gains, in nonmanufacturing industries—the majority of the workforce—vacation time was still more prevalent among nonunion workers.

Excluding the obvious reasons, why did nonwage benefits like health plans, pension plans and paid vacation leave surge in popularity at this time? Because during World War II, FDR set wage controls limiting the pay for workers across the economy. With wages frozen, nonwage benefits became one of the only ways for companies to reward both nonunion and union employees. Additionally, following expansions of the income tax, nonwage benefits and pension plans in particular grew more popular because of their favorable tax treatment.

40-Hour Work Week

While the record on employee benefits is clear, the record related to work days/hours is more mixed and very controversial. An eight-hour workday was unquestionably a cornerstone of early union efforts, and the fight was one of the key precipitants of the 1886 Haymarket Riot. However, the concept of an eight-hour workday was not new and dates back three centuries earlier to a law in Spain requiring it.

Henry Ford, one of the most successful and influential businessmen of the early 20^th century, was among the first to voluntarily adopt the eight-hour workday in his factories, notoriously raised wages well above his competitors, and even employed men with criminal records. More importantly, Ford pioneered the shift to a five-day work week as early as 1922, and fully implemented in 1926. Ford’s workers were already working eight-hour shifts, making him the most notable employer to implement a 40-hour work week, “without labor agitation”, and well over a decade before any federal law required it. Big labor activists refuse to give Ford his credit, but his influence in these important areas is undeniable, and their movement would have been much more difficult if Ford had opposed it rather than paved the way.

The bottom line is, did unions popularize some of these benefits? Yes, for their members, after they were already available. They also turned around and pushed for laws protecting their contracts and requiring benefits already being offered, not due to altruism, but because it strengthened their bargaining position. They no longer had to demand a benefit because it was now legally required, setting a negotiating floor and leaving room for them to ask for more. Activists treat industrialists like Ford as greedy businessmen out to exploit their employees, but these entrepreneurs knew that success in the free market requires incentivizing the best employees to stay at the company.  

The US is in the midst of a years-long housing affordability crisis largely due to a significant shortage of housing supply. Estimates of the shortage suggest it’s at least 4-7 million homes. What can be done to address this shortage? If you ask Vice President Kamala Harris, the answer is apparently to stimulate housing demand with taxpayer money.

Fresh off her foray into socialist price controls for groceries, Harris released a housing plan to subsidize first time homebuyers to the tune of $25,000 each in government giveaways. It should come as no surprise that juicing demand for housing in the middle of a supply shortage is a terrible idea and would only make the problem worse, likely increasing prices by that amount. Studies have shown that stimulating the housing market with similar interventions leads to price increases and just pulls forward future sales into the present rather than increasing homeownership overall. If this plan sounds familiar to Arizonans, it’s because Governor Katie Hobbs has implemented a similarly ill-advised plan.

How bad of an idea is it to subsidize additional demand? In 2009, the left-of-center Brookings Institution advocated against extending or expanding a similar homebuyer credit. The credit in question was less than 1/3 the size of Harris’ proposal and was implemented during the Great Recession when the housing market had a supply glut and a shortage of demand—the opposite of the current market. Given the details relative to the current situation, Harris’ plan is even worse.

To be fair, though not the headliner of her plan, Harris did propose a series of policies aimed at improving supply, but the policies amount to federal subsidies for construction and billions of dollars in giveaways to states. The housing shortage—or any other problem, really—isn’t going to be solved by spending more federal dollars on distortionary subsidies, despite what so-called progressive policymakers may claim. Housing in particular is a poor fit, given that many of the biggest obstacles to new home construction, like zoning or land-use restrictions, are largely state and local concerns.

To the extent that the federal government can help alleviate the housing shortage, it can do so by getting out of the way, which will lower costs and spur construction. For single-family homes, nearly one quarter of the average home price is due to government regulations (federal, state and local), accounting for more than $93,000. For multi-family developments, government regulations are responsible for a whopping 40 percent of the cost.

Like other inflation induced by trillions in new federal spending, the cost of building materials has skyrocketed. As a result, building materials cost 40 percent more than they did pre-pandemic. Government-imposed tariffs on imported lumber also continue to make prices higher. To make matters worse, the Biden-Harris Administration just raised the taxes even higher by nearly doubling the rate. If Harris were actually serious about addressing the housing shortage, she could start by opposing this tax increase from her own administration.

The great free market economist Thomas Sowell once noted:

Nothing is easier, or more emotionally satisfying, than blaming high prices on those who charge them, rather than on those who cause them.…People with no experience in business, no knowledge of history, and utterly ignorant of economics do not hesitate to leap from high prices to greedy profit-makers. Many of these ignorant people are on nationwide television and some are in Congress.

Today, the ignorant people Sowell identified are not just on TV or in Congress; instead, they’re in the White House and, most recently, on the campaign trail, when Vice President Kamala Harris recently called for a federal ban on so-called corporate price gouging on groceries. Despite the spin, it quickly became clear that this is just a new name for a failed policy straight out of the socialist playbook: price controls.

On its face, and separate from the effect it might have, a socialist policy is bad for the simple fact that it undermines freedom and empowers the government to interfere in the free enterprise system. Dig into the details and, like all socialist policies, price controls are not just antithetical to free enterprise but also exceptionally harmful to the people and the economy. Why are they so harmful? Because they lead to shortages by creating an imbalance of supply and demand and disincentivizing suppliers from producing enough to meet consumer demand.

Milton Friedman warned about these dangers nearly 50 years ago:

We economists don’t know much, but we do know how to create a shortage. If you want to create a shortage of tomatoes, for example, just pass a law that retailers can’t sell tomatoes for more than two cents per pound. Instantly you’ll have a tomato shortage.

Friedman is, of course, correct, but he’s also not alone. CNN warned “Harris’ plan to stop price gouging could create more problems than it solves,” and a Washington Post columnist who is typically not shy about supporting Democrat policies stated “It’s hard to exaggerate how bad Kamala Harris’s price-gouging proposal is.”

History is littered with examples of similar failed price control policies. Americans suffered through hours-long gas lines for years thanks to price controls under Presidents Nixon, Ford and Carter. Destructive rent control in San Francisco reduced the supply of rental housing and actually caused a city wide increase in rents. Similar examples stretch back for thousands of years, because price controls simply do not work.

Harris’ team has defended the policy, in part, by pointing to existing antitrust laws and claiming this plan would simply increase enforcement and penalties. For those keeping track, these are the same laws that have led to embarrassing recent federal investigations into sandwiches, luxury purses, and the “social stigma of green text bubbles.” Of course, the federal government would need to look in the mirror in order to find the party responsible for inflation, since the evidence is overwhelming that corporate greed is not what drove up prices. It’s clear that when all you’ve got is a government hammer, everything looks like a nail.

If policymakers are interested in taking on monopolies, they could start with the host of existing federal laws that prevent competition and raise prices for consumers. This is nothing new, as government restrictions protecting politically favored groups or existing businesses from competition frequently lead to monopolies, distort markets, and make it difficult for new firms to enter the market. Like taxes, government-imposed business requirements raise compliance costs, with little added consumer benefit. worse, it will all be at the expense of California’s taxpayers and small business owners.

Loans for illegal immigrants have become a priority for activists recently. As part of that push, last year, Joe Biden’s Consumer Financial Protection Bureau (CFPB) and Department of Justice leaned on banks and other financial institutions to start making loans to illegal immigrants. The CFPB warned lenders that denying a loan due to “unnecessary” reliance on the borrower’s immigration status would be illegal discrimination, despite the Equal Credit Opportunity Act (ECOA) not prohibiting lenders from taking immigration status into account. Given the CFPB’s penchant for overreach, the threat was clear, make loans to illegal immigrants or else. The CFPB faced pushback from every Republican member of the Senate Banking Committee, but the CFPB has not backed down.

A few months later, a bill (AB 1840) was introduced in the California State Assembly to provide illegal immigrants with taxpayer-subsidized, interest-free home loans. Fast forward six months and AB 1840 has now passed the State Assembly and last week was passed by the Senate Appropriations Committee. While the bill would not create a new loan program exclusively for illegal immigrants, it opens up the California Dream for All Shared Appreciation Loan, making interest-free down payment loans of up to $150,000 available to illegal immigrants in the state.

There are numerous problems with this bill and the loan program itself. At a time when housing prices have skyrocketed because of low supply and excessive demand, one of the worst possible policies would be to further juice demand by subsidizing downpayments (cc: Katie Hobbs & Kamala Harris). Juicing housing demand with interest-free loans to illegal immigrants while the state is cash-strapped and facing a significant deficit is particularly reckless.

San Diego County Supervisor Jim Desmond noted:

California is in dire financial straits, yet lawmakers continue to prioritize programs that incentivize illegal immigration and strain local resources….Expanding this program to include illegal immigrants is not just another handout — it’s a massive overreach that shifts the financial burden onto law-abiding taxpayers.

Desmond smartly notes that this bill would further incentivize illegal immigration at a time when resources are already slim and struggling to keep up. Importantly, the bill also suffers from the same problem as the CFPB’s pressure on banks: an abandonment of fundamental principles of sound lending in favor of illegal immigration. Loans should be made, and interest rates priced, based on the risk associated with making the loan and the likelihood that it will be paid back.

For loans to illegal immigrants, there are concerns about their ability to legally work in the United States or the stability of their employment, which increases the risk of losing their income and defaulting on the loan. There is also the risk that the federal government may finally enforce our immigration laws and remove the illegal immigrant from the country, making it unlikely the loan will ever get paid back. In fact, the CFPB itself acknowledges these risks in its rules implementing the Equal Credit Opportunity Act noting that “the applicant’s immigration status and ties to the community (such as employment and continued residence in the area) could have a bearing on a creditor’s ability to obtain repayment.”

If the California Legislature does move forward with AB 1840, the state will exacerbate an existing housing crisis and abandon the principles of sound lending. To make matters worse, it will all be at the expense of California’s taxpayers and small business owners.

Arizona’s Office of Economic Opportunity (OEO) just released the state’s latest monthly employment report, with updated numbers for July. The new numbers are a mixed bag for Arizonans and the state’s economy, with the unemployment rate increasing and non-seasonally adjusted employment dropping by 9,400 jobs, coupled with a good boost in construction. Other sectors continue to struggle, which should not come as a surprise to anyone who’s followed our recent posts, and private sector growth is not where it should be.

Two months ago, we took a deep dive into Arizona’s jobs data. As Governor Katie Hobbs claimed credit for jobs created in the state since taking office, we rang alarm bells about concerning trends, namely losses in the manufacturing, construction and hospitality sectors and the rapid growth of government jobs. Our initial report was met with denials and gaslighting from the governor’s staff and their media defenders, but the next monthly jobs report (for May), again, confirmed our concerns about a weak private sector, with disproportionate growth of government jobs.

Fast forward one month to the June jobs report, and for the second straight month, Arizona shed thousands of private sector jobs. Notably, manufacturing and construction had their respective weakest June numbers in at least 10 years. While other industries may seasonally struggle, June is usually a stronger month for both industries. Construction recovered its losses in July, but manufacturing plummeted further.

Most importantly, in the first seven months of the year, government employment grew 66 percent faster than the private sector. In fact, under 80 percent of new jobs this year were in the private sector, despite the private sector making up 87 percent of all jobs when Hobbs took office.

Several months of poor jobs results, on their own, might not be immediate cause for alarm, but there are warning signs popping up elsewhere. For instance, the monthly jobs reports discussed above are preliminary estimates of the data, with revised more accurate data released the following month by the Bureau of Labor Statistics (BLS). This year, Arizona’s jobs numbers have been revised downward three straight months, and four out of six months this year, to the tune of 4,600 fewer jobs than originally estimated.

To make matters worse, last week BLS released revised data for private sector job gains and losses from growing or contracting businesses in the fourth quarter of 2023. In Q4 last year, Arizona yielded a net employment loss of 9,980 jobs, and gross job losses exceeded gross job gains in 8 of the 11 industry sectors in the state. For context, Arizona had not had a negative quarter since Q2 2020, in the middle of the pandemic. To make matters worse, from April to May, Arizona had the biggest drop in job openings of any state.

All of this comes on the heels of multiple high profile layoff announcements by major employers that could affect Arizonans. The Hobbs administration can trumpet her jobs record through endless press releases[1], but the trendlines for private sector employment aren’t anything to cheer for. And if Governor Hobbs is in denial about the problem, how can we trust her not to make it worse?

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[1] August is historically a stronger jobs month than July, with school year hirings reflected in the data and other seasonal factors, so we expect the governor’s office will have a press release ready touting the topline numbers. The real question will be what the underlying data shows.