President Obama in Michigan proved again he doesn't understand economics. He said, "This isn't about economics, it's about politics. It's about the Right to Work - your right to work for less money." The President has a great capacity for empathy, but unfortunately his empathy doesn't include the capacity to tell the truth about the real world. Michigan had laws very generous to unions. In good years, the unions negotiated generous terms with the auto companies. But in the lean years, those terms bankrupted the companies until Detroit and Flint are virtually ghost towns. No large company is going to locate a plant in Michigan if it has to deal with unions on the same terms. They locate in states with Right to Work laws.
The President says, "You have the right to work for less," as if unions could still negotiate the terms they negotiated 50 years ago. But we have 7-plus percent unemployment. That means in economic terms those working are getting 7-plus percent more than their fair share of the wage pie. And where unions operate - mainly in the public sector, unions are working hard to get members even more of that share. So cities like San Bernardino are bankrupt.
We need to learn the lesson of Mexico. It has very generous laws regarding employment and unions, but in spite of NAFTA, few companies are willing to open plants there because the rules make labor too expensive. Likewise Spain and Greece where generous employment laws discourage companies from taking advantage of their 25 percent unemployment.
We need to learn the lessons of economies like Japan, Taiwan, Singapore, Hong Kong, and Korea. Sixty years ago they were virtually economic basket cases, but they exploited their cheap labor and reinvested their earnings until now they are part of the First World. We don't have to go all the way back to their conditions because we have the infrastructure, educated work force, and markets to sustain a First World economy. But we need to realize it is sustained not by upholding the price of labor until it is uneconomic to use but by keeping the price of labor low enough to encourage full employment. We have had four years of slow growth in employment because we have not learned that lesson.
Unfortunately, the President is encouraging his followers to believe it is not economics, but politics.
Richard A. Davis