Friday, August 26, 2011

Jobs and the NLRB -- Weird False Equivalence

-- Posted by Neil H. Buchanan

[Note: The fourth paragraph below has been edited in response to a comment from a reader.]

Why are so many people unemployed? Why does the economy continue to produce so few jobs, as we face the very real prospect of a renewed recession? The answers to these questions are, of course, hotly disputed. Some theories are better than others, while many ideas that have been floated are simply not serious. The silliest suggestion by far, however, comes from NYT op-ed columnist Joe Nocera. In his most recent column, Nocera argues that the National Labor Relations Board is responsible for businesses holding back on hiring. He does not, thankfully, argue that that is the whole story, but he nonetheless claims that the NLRB and the Democrats who support its decision are "paralyzing" the economy.

Nocera claims that the NLRB has overreached by filing a complaint against Boeing, preventing the company from moving some of the work for its Dreamliner jet from the state of Washington to South Carolina. The NLRB asserts that Boeing's action constitutes an illegal labor practice, specifically an act of retaliation against the company's union for refusing to agree to a moratorium on strikes. After the union's refusal, Boeing moved a significant part of the work on the Dreamliner to a new, $750 million plant in S.C., hiring 5,000 non-union workers.

Could reasonable people disagree over the legal definition of "retaliation"? Obviously, yes. That is why we have legal process. Nocera, however, admits to having become "mildly obsessed" with the case, because he is certain that this is "unprecedented," "overreach[ing]," and "a disservice to [this] country." His outrage is not based on any legal analysis, but rather on his intuitive definition of what constitutes retaliation: "But the word 'retaliation' suggests direct payback — a company shutting down a factory after a strike, for instance. Boeing did nothing like that." He then argues that Boeing's relocation decision cannot be retaliation because no worker in Washington was laid off (and some new workers were added there).

This fact, however, would be more meaningful if there were not 5000 new non-union jobs in S.C. that could have been added in Puget Sound (in a state that also has plenty of available workers). It is certainly possible to retaliate -- even in the colloquial sense that Nocera prefers -- by changing plans in a way that makes a union (and its current and future membership) worse off than it would have been without that change in plans. That is what the NLRB is claiming.

I repeat, however, that reasonable people can differ on the ultimate merits of the NLRB's action. Based on what I know of it, it seems like neither overreach nor even a likely loser. In any case, the more interesting aspect of Nocera's column is his complete loss of perspective. In an effort to say that both Republicans and Democrats do things to harm job creation, he argues that "Republicans won’t pass anything that might stimulate job growth because they are so ideologically opposed to federal spending," while the NLRB's action "should embarrass Democrats who claim to care about job creation."

My dissertation advisor, Benjamin M. Friedman, always insisted on exposing conceptual claims (essentially, "A will cause B") at least to empirical back-of-the-envelope reality checks. Just because one can tell a causation story does not mean that the story is important. Does holding open a refrigerator door waste energy? Sure, but addressing that "problem" is not going to get us very far in solving our energy or environmental crises. It is surprising just how much time economists spend talking about possible causal connections that turn out not to be empirically important.

Nocera's column is a perfect example of this problem. It is, in fact, even less plausible than the usual if-then story, because the immediate issue is not the total number of jobs that Boeing might create, but where they will be located (and whether the workers will be protected by union membership). At most, there might be an argument that there could be a few more non-union jobs in the aggregate due to lower wages and benefits (which Nocera apparently prefers not to mention), but that is even less significant in the context of the larger economy than the 5,000 jobs at issue in the NLRB case.

To his credit, Nocera apparently realizes that his example is ultimately trivial in the context of an economy that still has 14-15 million people looking for jobs (and millions of others working part-time on an involuntary basis). Needing a way to expand his hyped-up example into a big macroeconomic deal, however, he resorts to what might be called the Confidence Fairy's odd cousin. The NLRB's actions, we are told, change the rules under which businesses thought they were operating: "That is what is so jarring about this case — and not just for Boeing. Without any warning, the rules have changed. Uncertainty has replaced certainty. Other companies have to start wondering what other rules could soon change. It becomes a reason to hold back on hiring."

At best, this might be "a reason" not to hire more people. How big a reason? Nocera offers no reason to believe that it is at all an important part of the current problem. Even within the broader anti-government logic that says that regulation generally causes businesses to reduce employment (without any connection to the state of the economy), we still have no reason to believe that the NLRB's action (in an economy where the rate of unionization for private-sector workers is now significantly under 10%) will seriously spook businesses into further inaction on hiring. Moreover, have we not been told ad nauseum that the problem is with small businesses, who would be the least likely to worry about anything the NLRB might do regarding interstate manufacturing decisions? How slippery does that slope have to be?

More to the point, even without the NLRB's action, do we have any reason to believe that businesses more broadly would be adding jobs? There are no customers, so why add workers? We are stuck in a classic under-employment equilibrium. At best, Nocera is describing a speck of dust on a hair on the tail of the dog.

Actually, I have been holding off on critiquing Nocera. After years as a columnist for the business section of the Times, he is new this year to the op-ed page. His columns thus far suggest that he is a well-motivated guy, in a bit over his head, but trying hard. He started off badly, with two of his earliest columns being little more than ill-informed rants in favor of fracking. Later, he made the rather odd claim that Rep. Paul Ryan deserved a lot of credit for his plan to replace Medicare with vouchers, because even though the plan was a terrible idea, at least it was an idea.

Most recently, Nocera summed up the crisis over the debt limit with an impassioned attack on the Tea Party, calling them "terrorists" -- but then issuing an apology for using over-the-top rhetoric. Even the Times's Public Editor thought that the apology was unnecessary (but nice), and he reported that Nocera has admitted to being somewhat uncertain of how to create his persona as a columnist.

That is, however, at least a bit of a dodge. Nocera's persona as a business columnist exhibited the same kind of volatility. In March of 2009, I wrote a DoL post describing another bizarre Nocera column, in which he had managed to overstate the case against AIG (no easy task), by claiming that the very notion of insuring against losses was somehow a "scam." His column was a grab-your-pitchforks-and-torches moment, and it was completely irresponsible.

Now, mildly obsessed with the Boeing case, Nocera tells us that the Democrats who support the NLRB must share responsibility with Republicans for the continued weakness in the economy. One can only hope that he finds his equilibrium soon. As it stands, he is neither unbiased nor a centrist. He is simply a loose cannon.


michael a. livingston said...

It's nice to see Neil is back to his usual habit of making personal attacks on people who disagree with his statist ideology.

Fred Raymond said...

"This fact, however, would be more meaningful if there were not 5000 new non-union jobs in S.C. that could have been added to existing facilities in Puget Sound (in a state with a high unemployment rate), saving the company three-quarters of a billion dollars."

What basis do you have for your assertion that zero capital funds would need to be spent in WA for the accommodation of the 5000 additional workers? A Dreamliner factory in WA could very easily require much more than the 750M to be invested in SC. Consider the higher materials, labor and real estate costs. An added possible cost would be demolition / remediation of existing facility in WA to make room vs. greenfield construction in SC. You seem to assume that for no capital investment the 5000 added workers in WA could just park their cars in the Boeing lot and start building planes with their bare hands.

Neil H. Buchanan said...

In response to Fred Raymond: Good point. There is a factual question here, and we do not possess sufficient information to draw firm conclusions. I'll edit the post accordingly.