One small step for deregulation

Deregulation is harder than it looks, but the Trump administration did take one significant step this past Wednesday:

Outside of a $15 minimum wage, the fast-food industry’s big mortal fear when it comes to labor law is over classifying companies with franchise business models as “joint employers” along with their franchisees. Their fear increased substantially in 2016, following news that President Obama’s Labor Department had issued guidelines recommending precisely this classification. It’s probably no surprise, then, to learn that yesterday the new Labor Department came to those giant corporations’ rescue by deleting the Obama-era guidelines entirely.

This will continue to be fought over in the courts:

The DOL’s withdrawal doesn’t necessarily translate to an immediate win for fast-food employers, though. The guidance it removed wasn’t technically law, so judges weren’t obligated to defer to it, former Labor deputy secretary Seth Harris tells the L.A. Times. He feels, “If anything, it makes it harder for employers, because they don’t know clearly what standards they should apply.”

And it would help if they staffed the NLRB:

The NLRB has recently taken workers’ side in several joint-employer cases. The big one to watch, though, involves McDonald’s, and it’s still being challenged in court. In the meantime, there are currently two vacancies on the NLRB that President Trump gets to fill, assuming he ever gets around to it.

They also need to roll back the Obama overtime rules, which are also tied up in court.

PS.  On a sad note, one of the great innovators of the 20th century passed away:

Sam Panopoulos, considered to be the creator of the Hawaiian pizza, died on Thursday at the age of 83. A Greek immigrant to Canada, Panopoulos and his two brothers ran a number of restaurants in Ontario. Satellite Restaurant, where Panopoulos started serving pizzas in the 1960s, is the spot where he came up with the controversial assemblage of toppings. Depending on whom you talk you, it was either in a moment of divine inspiration or devilish blasphemy that Panopoulos first put pineapple on pizza, telling the BBC just this year that the crew did it “just for the fun of it.”

I say “divine inspiration”.

PS.  I also have a new post on labor shortages at Econlog.




18 Responses to “One small step for deregulation”

  1. Gravatar of Benjamin Cole Benjamin Cole
    13. June 2017 at 19:14

    “Labor shortages.”

    Yes, I am sure there is some anecdotes to be told.

    An employer in Indiana might also have a reputation as a terrible place to work, for reasons unrelated to pay. Maybe a toxic environment, or known to quickly fire after a earnest workplace disagreement, etc. Even sexual harassment. Who knows why one employer in Indiana says he cannot find workers? It is an anecdote.

    But there are still more Americans looking for a job than job openings, by about a 1.2 to 1.4 ratio.

    Macroeconomic policy has to be made, well, macro-economically.

    From BLS: “Over the 12 months ending in April, hires totaled 62.9 million and separations totaled 60.7 million, yielding a net employment gain of 2.2 million. These totals include workers who may have been hired and separated more than once during the year.”

    Seems like a tremendous amount of churn in the US labor force. The total labor force is 159.7 million.

    With so much churn, and literally tens of millions of people switching jobs annually, and more people looking for work than job openings, can there really be a general “labor shortage”?

    And even if should some spot labor shortages appear, should not higher wages solve the problem?

    Of course, some feeble businesses with poor business models may fold. Thin profit margins, and wages go up. I have run small businesses on thin margins. Rising rents end many businesses in L.A.

    Ask business operators who quit, and you sometimes hear, “My lease came up.”

    Are we to make macroeconomic policy based on the weakest employers, those with poor business models?

    The “labor shortage” story seems a bit on hysteria side, like the fear of being killed by a terrorist.

  2. Gravatar of Benjamin Cole Benjamin Cole
    13. June 2017 at 19:25

    From, here are the first several job listing in Indiana. I did not editing or selecting, Check for yourself.

    United States Postal Service – 10,141 reviews – Indianapolis, IN
    $15.12 an hour
    Please ensure you can receive email messages from our test vendor and follow instructions carefully so you can be. Weigh incoming sacks;…
    USPS – 18 hours ago – save job – more…

    Small Parts Packer – Warehouse – new
    Keystone RV – 53 reviews – Goshen, IN 46526
    $13 – $17 an hour
    We are looking for hard working candidates to pack small parts in our warehouse. Position includes packing small parts in our warehouse. Requires moderate
    8 days ago – save job – more…
    Prime Now Associate – new

    Amazon HVH – 14,911 reviews – Indianapolis, IN
    $12 an hour
    You can select your own hours and set your own schedule (subject to business needs). You like to be busy, own and manage your responsibilities and keep the day…
    17 days ago – save job – more…

    Warehouse Associate – FIRST SHIFT (7:00 AM – 4:00 PM) – new
    Covance – 257 reviews – Indianapolis, IN
    Assists all internal customers with help in answering any questions pertaining to Warehouse stock items. Through its nonclinical, clinical and commercialization…
    6 days ago – save job – more…
    Customer Care Specialist I – new

    Duke Energy – 456 reviews – Plainfield, IN 46168
    $15 an hour
    Yes, you’ll be on the phone taking hundreds of inbound calls weekly. Yes, your primary responsibility will be to answer questions and provide accurate…


    Looks like $15 an hour for unskilled or semi-skilled labor in Indiana, although Amazon is offering $12 an hour.

  3. Gravatar of Brett Brett
    13. June 2017 at 21:36

    I think McDonald’s is pretty guilty of stepping over that “joint employer” line. When you effectively control every aspect of your ostensible franchises through tying agreements on supplies and a standard computer system aside from the number of hours worked and employees working, it’s fair to say you’re heavily entangled with the decision-making (and supposedly they were even going as far as to guide the franchisees on the number of hours worked).

    Same thing with Uber and the “independent contractor vs employee” divide.

  4. Gravatar of Benjamin Cole Benjamin Cole
    14. June 2017 at 02:33

    On “labor shortages”

    “The U.K. released data that saw unemployment remain at a 42-year low on Wednesday, but real wage increases continued to ease, causing concern over Britons’ purchasing power as the gap widens between earnings and inflation.”


    Gee, do anyone see a pattern here? Japan, UK and the US?

    Japan has more job openings than people seeking work…and no inflation.

    The UK sees soft wages, despite a 42-year-low on unemployment.

    The US still sees non-inflationary wages (well, only for the last 30 or 40 years, but hey, this is still new to us….)

    So the threat?

    “Labor shortages” will lead to inflation!

  5. Gravatar of Major-Freedom Major-Freedom
    14. June 2017 at 04:30

    As the US continues to deregulate under fascist leader Trump, look at what is happening in France under newly appointed co-holder of the title “leader of the free world”:

    Let me know when reality starts to feel like what you don’t believe it is today.

  6. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    14. June 2017 at 04:38

    ‘… former Labor deputy secretary Seth Harris tells the L.A. Times. He feels, “If anything, it makes it harder for employers, because they don’t know clearly what standards they should apply.”’

    That’s a man who needs to acquaint himself with Hayek. Especially “The Use of Knowledge in Society.”

  7. Gravatar of Major-Freedom Major-Freedom
    14. June 2017 at 04:40

    House Majority whip has been shot at a Congressional baseball game:

    In possibly related news, Scalise is in favor of the proposed temporary travel ban (that has recently been again rejected by the 9th circuit).

    Given the number of suspicious murders over the last few months of those who are fighting against political globalization, and/or investigating criminal activity within the deep state, especially left wing power centers, I would not be surprised at all if this was a targeted hit.

  8. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    14. June 2017 at 12:16

    Ah, finally someone notices the obvious flaw in James Comey’s drama;

    ‘The hard question is why Comey allowed the ambiguity to ride by his evasive response that Flynn was an honest man. The entire incident would have gone away if Comey had sought to clear the matter up, then and there, by asking the President flat out whether he was ordering Comey to stop the investigation of Flynn.’

    But, of course, Comey didn’t want to clear the matter up. He had an agenda of his own to pursue.

  9. Gravatar of Benjamin Cole Benjamin Cole
    14. June 2017 at 16:43

    Not quite an anecdote, but….

    The official unemployment rate in Indiana is 3.6%. That is supposed to be “low.”


    Trader Joe’s, the large national grocery-store chain, is running job ads. They are offering $10 an hour.

    Crew Member
    Trader Joe’s – Indianapolis, IN
    $10 an hour
    Like shopping at Trader Joe’s? What do we do? At Trader Joe’s, you can find both. Trader Joe’s is your favorite neighborhood grocery store!…
    2 days ago – save job – more…


    The BLS does not seem to track inflation in Indiana.

    The closest I could find is the “Midwest Region” which is not a great fit.

    In any event, the CPI in the Midwest region is 1.8% in April YOY. Marginally below the national rate, in other words.

    We saw the same thing, roughly, when the Dakotas and parts of Texas were in the shale oil boom. No inflation much above or below the national norm.

    The “unemployment is too low” bugaboo surely should be retired.

  10. Gravatar of Benjamin Cole Benjamin Cole
    15. June 2017 at 01:35


    “Japan closes output gap, but prices fail to budge
    Supply drops below stagnant demand as weak pay growth dampens consumption

    Despite Japan’s acute labor shortage, construction companies and others are finding ways to adapt without raising wages. © Reuters

    TOKYO — Japanese demand has surpassed the nation’s output capacity in two straight quarters for the first time in three years, yet the economy still lacks a spark as stubbornly low wages block the government’s long-awaited virtuous cycle.

    The difference between actual and potential gross domestic product — in other words, total demand for goods and services versus total output capacity — is known as the GDP gap, or output gap. Cabinet Office data released Wednesday shows a positive GDP gap of 0.1% for October-December 2016 and January-March of this year, signaling higher demand than supply.

    But this latest report introduced changes to the calculation method that lowered Japan’s estimated production capacity, shifting the GDP gap by about 0.5 percentage point. The previous method pegged the gap for October-December at minus 0.4%, an 11th consecutive quarter of supply outstripping demand. The streak dated to April-June 2014, when demand fell off after a spike ahead of an April consumption tax hike.

    The gap for fiscal 2016 as a whole came in at zero, escaping negative territory for the first time in three years.

    The excess capacity hampering businesses, due to the bursting of Japan’s economic bubble in the early 1990s and last decade’s global financial crisis, is believed to have contributed to the ensuing deflation. Conversely, higher demand should benefit the economy, weakening deflationary pressures and buoying prices.

    A positive GDP gap is one of the government’s four criteria for beating deflation. If demand consistently outweighs supply, sellers of goods and services find it easier to raise prices. Higher profits should encourage businesses to boost wages, fueling consumer spending and driving further price hikes.

    Bank of Japan Gov. Haruhiko Kuroda has expressed confidence that such a virtuous cycle is in progress. The central bank said in April that by its reckoning, the GDP gap turned positive in the July-September quarter. This alignment with the government’s view suggests that “a declaration of victory against deflation is getting closer,” said Takuya Hoshino of the Dai-ichi Life Research Institute.


    Imagine (John Lennon singing)

    A federal government in which the central bank and federal officials were actively seeking higher wags for employees, and upfront about it. That is the case in Japan. Abe says he wants higher wages, and they browbeat corporations to raise wages…

    Then we have the U.S., where there is squeamish hysteria anytime unemployment even begins to broach a level where there might—might—be wage gains.

  11. Gravatar of ssumner ssumner
    15. June 2017 at 05:12

    Patrick, Let’s see, do I put more trust in Comey or Trump? Decisions, decisions . . .

  12. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    15. June 2017 at 06:26

    Not exactly responsive to Epstein’s argument–which has the logic correct–Scott. Do you have any substantive point to make?

  13. Gravatar of Lorenzo from Oz Lorenzo from Oz
    15. June 2017 at 21:38

    Pineapple on pizza is an abomination before the Lord.

  14. Gravatar of Becky Hargrove Becky Hargrove
    16. June 2017 at 13:01

    Lorenzo, LOL I don’t care much for it either.

  15. Gravatar of Massimo Heitor Massimo Heitor
    16. June 2017 at 15:58

    Did Sumner say something positive about Trump here? Am I missing some sarcasm or backhanded compliment here?

    On the same topic of rolling back bad regulations, in 2014, the Grumpy Economist blogged:

    “If you believe cronyism is the problem, why is the first item on your agenda not to repeal the Dodd Frank act and Obamacare, surely two of the biggest invitations to cronyism of our lifetimes? And move on to the rotten energy section of the corporate tax code.”

    Trump is doing exactly those things.

  16. Gravatar of ssumner ssumner
    17. June 2017 at 12:59

    Massimo, I was not aware that Trump was doing those things, But I am aware that he’s reducing our freedom to travel to Cuba.

  17. Gravatar of Massimo Heitor Massimo Heitor
    19. June 2017 at 10:35

    Cuba foreign policy seems like a complete separate topic from deregulation. But on the Cuba issue, do you care to debate or explain your counter argument to The National Review, which strongly backs the action of the Trump administration on Cuba:

  18. Gravatar of Scott Sumner Scott Sumner
    21. June 2017 at 05:57

    Massimo, That’s so idiotic it’s not even worth commenting on. Since when does the US ban travel to repressive countries?

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