Musings on the Wall Street Journal today

The Wall Street Journal is a great newspaper. I don't read a lot of the business news, but much of their regular news coverage is very informative.

Today's Journal (8/9/14) had several interesting articles that I wanted to highlight and comment on. They are somewhat interrelated.

First, there was a lengthy story on the problems of young and some older workers (say ages 18-45) in Europe. Because Europe has so many socialistic protections for workers, companies are very nervous about hiring permanent full-time workers. It is impossible for them to get rid of any "dead weight" on their payrolls now.

So instead they are hiring young people by contract, which offers no long-term job security, fewer benefits, and less room for advancement. Youth unemployment is as high as 50% in some of these countries and there is a generation of people who need to live with their parents in order to survive.

That 50% number is also very scary because many of them are these contract workers. With the job uncertainty comes delays in getting married, buying a home, and having children.

It appears the socialist support of their people "cradle to grave" (which some in our government also believe) has some very dire unintended consequences that took years to manifest and are now being felt.

This systemic employment problem does not seem to be directly related to their economic downturn, so even if their economy picks up, full-time permanent job hiring may not. And with a stagnant economy, it could get worse. What is going to happen when the 50- and 60-year-olds retire and then need to be supported in their retirement by a large group of unskilled and underemployed people who can't get permanent jobs?

Does having kids move back in with their parents because they can't find a good-paying job sound at all familiar?

The second story involved a surge in lawsuits around the parental leave act. One story was about a woman who took off for her 12 weeks of unpaid leave, and then had to take more time off, so she did and the company fired her. "What else could I do, I'm a single mom," she argued as she filed her lawsuit. The company said they granted her leave for the statutorily required 12 weeks and then she didn't come back to work so they terminated her. Her theory appears to be that they "retaliated" against her. If she is successful, I guess that would mean that any worker who takes time off can file a lawsuit if they are ever terminated in the future because, who knows, it could be in retaliation for "exercising their rights."

The article mentioned that these lawsuits are growing fast but are still well below the number of other employee-rights lawsuits like firing people because of discrimination. I'm sure the lawyers who have specialized in those "wrongful termination" suits can't wait to sink their teeth into these "newest abuses of our working population by unscrupulous corporations."

(I knew someone who worked in the legal department of a large corporation and he told me the unofficial policy was to settle all lawsuits based on things like discrimination claims. The costs would just be passed along to the consumer and the risks of litigation and the negative publicity were not worth the legal fight, even though this tended to encourage more such suits to be filed each year.)

The third story was about waiters and waitresses who are earning just above the minimum wage because what they get paid at a low hourly rate plus sporatic tips are just barely reaching the minimum. The article claims that a high percentage of these workers are poor, more so than workers in most other fields.

Of course, servers are notorious for underreporting tip income, but even if this story is true, they can always quit and find a better job. We do not have a "caste" system in America. No one is forced to work as a waiter if they are unhappy with the pay, hours, or benefits.

Bringing food from the kitchen to the table can be hard work, much like cleaning toilets, flipping burgers, making deliveries, mowing lawns, or working retail can be hard work. But most of these jobs do not require extensive training or college degrees. If you want to move up and make more money, get a degree, work hard, get experience (maybe in an unpaid internship if necessary) and then get hired into something that pays more and has a better career path.

Or start your own business, get loans, find investors, and create your own company. Nothing prevents anyone from doing this if they desire.

The point of this WSJ article was to highlight efforts to raise the minimum wages of restaurant servers. But as I have argued before, this would lead to higher prices to eat out (reducing patronage, which will hurt everyone in the industry), loss of some jobs (restaurants may cut back on staff or may even have to close if they are marginally successful), and less opportunity for new people to break into the profession, learn it, excel, make money, and perhaps move on to something else if they wish.

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My fear is that America may one day face some of the negative economic problems that Europe now faces. While, at least so far, we haven't been forcing private companies to retain workers (although unions have been working to do this forever), we are making it more and more difficult for companies to escape the threats and high costs of lawsuits, additional government regulations, minimum wages, and unionization.

If we don't carefully monitor how much regulation and costs our private businesses like restaurants can bear, we also may end up with a "lost generation" of potential workers in this and other industries. Perhaps we have already exceed what they can bear and we just don't know it yet. But with the rise in poverty, increase in food stamp use, higher national debt, high unemployment rate (12-13% is the real number at a minimum), and low economic growth, we could be raising the next generation to be food preparers and servers and not engineers and scientists.

The last article said that work in restaurants is growing faster than in other parts of the economy, which was troubling because these are mostly low-paying jobs. So what will happen when we start raising minimum wages? Will higher food prices lead to more restaurant patrons? Will more restaurants open up because their operating costs will be higher? Will our rising sales and meals tax increase the dining out frequency of customers?

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