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Wednesday, January 31, 2007

Labor Law Reform

Can the labor movement be revived by trading labor law reform for repeal of elements of Sarbanes Oxley? I'm doubtful, but the author sees a glimmer of hope:

Fair Trade: What the left should offer business in order to revive the labor movement, by Thomas Geoghegan, American Prospect: What can the left "trade off" to get labor law reform? Organized labor's down to 7.4 percent of private sector workers. The big split, between the AFL-CIO and Change to Win, failed to bring on a new golden age of organizing. It seems the only hope is a new labor law.

And labor has a dream bill: the George Miller-authored "Employee Free Choice Act." It has more than a dozen Senate sponsors -- Kennedy, Clinton, Obama, all the party's big guns. It might really work. ... It would let employees get unions just by signing cards -- without having to run what can be a four- to five-year gauntlet of lawsuits, firings, intimidation, and all the bells and whistles of union-busting campaigns.

How big would it be for the left? How about, it's the last chance to rein in the plutocracy and curb inequality. How about, nothing else but this bill will help out working families -- not more college loans, not more college B.A.'s, nothing but a change in the way we set wages. (In Working Under Different Rules, two Harvard economists showed a correlation between union wage setting and income equality in a study of twenty developed countries.) If it's all true, wouldn't it be worth a lot to get?

I know, it seems hopeless. In the Senate, Democrats are far short of a "60-vote" majority. ... Even if it passed, Bush would veto any bill.

So there is no way to cut a deal -- unless business itself wants one. Of course, at first glance that seems even more impossible. What could business ever want so badly in return?  ... [I]t turns out that, by wild good luck, there is now something that every CEO, every CFO, every global high-flyer ... really, really wants. It's to call off Sarbanes Oxley. Not necessarily repeal the whole thing; just the part of it that might throw these guys in jail. ...

Now, it's true it's also about money. Treasury Secretary Hank Paulsen is worried that with Sarbanes Oxley in place, Wall Street (New York) is losing to its evil twin The City (London). It turns out the Russians and others who are flush with oil money don't want to pay for the audits of the books that Sarbanes Oxley now requires. Even more, they don't want to sign the financial forms that say, under penalty of perjury, that they swear everything is true..., and if they're wrong they agree to go directly to jail. Under Sarbanes Oxley, ... CEOs have to take an oath that all their numbers are honest...

The law is so onerous that even the Democrats will cut it back, at least to some degree. And while the changes being proposed are moderate and even sensible, they will of course end up much more sweeping when the doors close and they draft the final bill...

So this bargain would really be a new social contract: we let you do what you did in the 1990s, and we get to do what we did in the 1950s.

Barney Frank in the House has actually indicated he might be interested in a potential grand bargain along these lines -- so it's not completely crazy. Still, I can hear the chorus on the left: "Oh, but Sarbanes Oxley is a great reform." ... It would be a tragedy to gut Sarbanes Oxley, as I propose. But I'd do it gladly to get a labor movement back.

There are other objections...

Sarbanes Oxley does have excesses, and a good argument can be made (even from the left) for getting rid of that oath requirement. But that barely even matters given what this bargain might offer for labor and the left. ...

Do they really want to go on signing those statements every year under penalty of perjury? I think I'm an honest guy, but I'd hate to swear an oath.

"But they'll never agree to a swap; they'll just walk away." Maybe they will. But ask Skilling and the rest. There are worse things in life than dealing with a union.

I've never been a zealous supporter of unions, but I'm not convinced the balance of power in labor markets between workers and firms approximates a competitive outcome, so something is needed to rectify the market power imbalance. The situation is surely different for a single parent struggling to maintain health benefits, support a family, etc. as compared to workers at the top end of the income scale, e.g. CEOs who, at least from what we are told, have unique talents that result in limited supply and very high levels of compensation.

    Posted by on Wednesday, January 31, 2007 at 10:19 AM in Economics, Market Failure, Unemployment | Permalink  TrackBack (0)  Comments (5)

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