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Home Publications Blogs Beat the Press NPR Exposes Structural Unemployment: Managers Who Don't Have a Clue

NPR Exposes Structural Unemployment: Managers Who Don't Have a Clue

Thursday, 18 August 2011 16:31

National Public Radio reporters need to do a bit more homework before they do pieces on the economy. Today they had a piece on a Precision Iron Works, a specialty steel company. The piece told listeners that Precision relies on highly skilled workers. It also told us that it has a hard time finding new workers.

"finding workers like him [the experienced worker interviewed in the piece] is difficult. For months, the company has been advertising several job openings without much success. The company says there's not much interest in gritty, physically demanding work."

But the main point of the story is to tell listeners how government regulations are impeding the growth of business. The piece continues:

"And staffing is just one of many challenges facing Precision Iron Works as it tries to double its revenues from about $10 million to $20 million a year.

A state law that's been on the books for more than a half-century requires Washington companies to pay their workers a prevailing wage — or an hourly rate set by the government — on state-funded projects.

But as Precision's Leighton explains, companies in states like Idaho and Utah, which don't have prevailing wage laws, can pay their workers less.

'It puts us at such a disadvantage,' he says. 'There could be a project right out on our backdoor out here that I can't get because a company in Utah gets such a competitive advantage by not having to pay these rates.'"

Okay, now let's just review what we have been told. Precision Iron Works "has been advertising several job openings without much success." This would imply that the wage it is offering is too low. Higher wages attract more workers [econ 101]. If Precision Iron Works can't get workers, then it needs to offer higher wages.

But then the piece tells us that the real problem is that an outdated Washington state law requires Precision Iron to pay higher wages than its competitors. Okay, but the piece just told us that the market is telling Precision Iron that it has to pay higher wages than it is already paying.

This means that it is not the law that is requiring Precision Iron to pay higher wages, it is the market. If the piece's assertion that Precision Iron can't attract workers is true, then it's claim that the government regulation is hurting business is false. 

[Thanks to Jonathan Lundell.]

Comments (16)Add Comment
written by anthrosciguy, August 18, 2011 6:24
Someone correct me if I'm wrong, but a quick look at Washington State's prevailing wage regulations do not state that out of state businesses are exempt from this regulation.

For instance: "This Act is applicable to all “public work” involving state
agencies or local governments."

"Obtain an approved Statement of Intent to Pay Prevailing Wages form from each and every contractor and subcontractor at all tiers of subcontracting prior to any payment."

"All contractors and subcontractors at all tiers must file the Intent and Affidavit forms on public work."
written by Jay, August 18, 2011 6:51
Good catch anthrosciguy. It is amazing they post an article like this without even including the wages. But then again it doesn't really shock me either.
written by bluetaco, August 18, 2011 7:26
You are correct. Washington State law applies to out of state contractors bidding on public works projects just the same as if they were in-state, on the part of the job performed in the state. That was an extraordinarily ignorant, and gullible piece of journalism by NPR.
written by anthrosciguy, August 18, 2011 8:22
The other obvious (to all but NPR, it seems) thing is that Precision Iron is free to pay its people less (assuming people will work for less) and not take taxpayer-funded jobs, just like that "company in Utah" can.
written by Ben, August 18, 2011 9:40
I was saying the same thing to my wife in the car. Prevailing wage rate laws almost always apply to public works projects. Therefore it doesn't matter where the company is headquartered the wage applies to where the public works project takes place. This is an incredible screw-up by NPR.
written by Ben, August 18, 2011 9:53
Update...from reading the comments o the NPR site there is a loophole in the Washington prevailing wage law that does not apply to out-of-state fabricators. So there is the possibility that some jobs are lost on fabricated parts but the law applies to the installation on site. The concern is interference with interstate commerce. The NPR report is still horribly misleading.
Structural Unemployment Drives Wages Down - Not Up
written by izzatzo, August 18, 2011 10:50
This means that it is not the law that is requiring Precision Iron to pay higher wages, it is the market.

This is the same phony canard used against minimum wage laws - that when the market wage is higher than the minimum wage then the latter is claimed redundant and irrelevant.

NPR obviously knew that Precision could not attract workers due to a structural shortage of skilled workers who would prefer to work at lower wages for someone else in order for their employer to win the bid over Precision.

This is consistent with structural shortages that drive wages down until the market clears after enough skilled workers are induced to work for less for winning bidders than work for more for losing bidders but for less hours due to the lost bids.

Stupid liberals.
written by Jerry Jones, August 18, 2011 11:46

Move to Idaho where you'll love the low, low wages.

Stupid Looneytarians.
written by leo from chicago, August 19, 2011 12:03
I heard this one earlier in the day and just figured the Chamber of Commerce had put it together for distribution on NPR.
Wendy Kaufman, reporter, does not seem to have economic background
written by Anon, August 19, 2011 2:50
I love NPR, and Planet Money usually does a masterful job. And I get the point about trying to explain "complex and boring" economics to a lay audience. But it is irritating how they keep sending unqualified journalists on the Business and Economics beat. According to this bio, http://www.sanjuan.edu/webpages/rhaak/files/Wendi Kaufman Biography.pdf , has a Masters of FINE ARTS.
Disconnect from reality.
written by evil is evil, August 19, 2011 7:12
I responded to a post on a blog in Ohio. Cry baby boss was appealing to import workers from India because he couldn't get qualified workers for what he wanted to pay.

I asked what he wanted to pay for what. Radiologic technicians for $8 per hour, no benefits.

I paid $12.00 in the late 80s with a full boat of benefits.

Trying to low ball business and import cheaper workers seems to have become a common meme among those not qualified to manage.

They used to be called sleaze ball hustlers, now they seem to be Republican "entrepreneurs."
Reporter problem
written by Scott ffolliott, August 19, 2011 10:51
Reporter problem: untrained reporters that know little about anything continue to present competing narratives as if that were good reporting.
Perhaps newspapers, radio and television stations ought to hire trained reporters with area of expertise and knowledge so they can report factually to the public. Hire them at the prevailing wage so the positions will be filled. We have the false belief that public benefit comes from private profit when in fact they are antithetical.

Cui bono?

“If they can get you asking the wrong questions, they don’t have to worry about the answers.” - Thomas Pynchon
written by PeonInChief, August 19, 2011 11:16
There have been a spate of these pieces lately. See http://www.msnbc.msn.com/id/21...8#44196418

And they never report what the wage rates are.
written by kharris, August 19, 2011 11:38

Alan Blinder wrote a piece a couple of years ago in which he offered the notion that "education" as a path to employment was misleading. "Non-tradable" is the path to employment. (The idea is not unique to Blinder.) The idea is that working in education and health care and the like will shield US workers from competition from low-wage countries. That is, or course, only true if managers don't do what you describe. Radiology techs are in Blinders protected group only if we don't allow immigrants merely because US wages are higher than the immigrants would ask.
written by anthrosciguy, August 19, 2011 2:50
Update...from reading the comments on the NPR site there is a loophole in the Washington prevailing wage law that does not apply to out-of-state fabricators. So there is the possibility that some jobs are lost on fabricated parts but the law applies to the installation on site. The concern is interference with interstate commerce. The NPR report is still horribly misleading.

Assuming that loophole really is there (given the history of things like this I always wonder) then Precision iron's position should be to strenously lobby to have that loophole closed, since doing so would be good for its business... if the problem is what Precision Iron said it is.

However, it really is basic econ -- and basic common sense -- that if you're offering jobs when there is high unemployment and you're not getting qualified applicants for those jobs, you are not offering a reasonable salary/benefits package. There really is no way around that.
written by Jonathan M. Turner, August 27, 2011 1:33

To Anthrosciguy and Jay -- I get that the Washington law does not expressly exempt out of state business, but it may have the effect of doing so in some cases such as the one presented in the NPR article. The law has a provision for offsite fabrication of “nonstandard” items, which I take to mean “customized” items for the state funded project. Under that provision, nonstandard items produced for a public works project is subject to Washington’s prevailing wage law; however, the inference is that standard or non-customized items are not subject to the law. See Washington Revised Code section 39.04.010. More importantly, the law defines prevailing wage as “the hourly wage and usual benefits and overtime paid in the largest city in each county, to the majority of the workers…performing work in the same trade or occupation.” If the offsite fabrication occurs out of state – say in Idaho – the odds are that the work can be performed at lower costs than if the offsite fabrication occurred in Washington. Right? See Washington Revised Code section 39.12.010, and 39.12.015.

To Jonathan Udell – unless I'm missing something, the assumption that Precision is having a difficult time attracting workers ( even if the reason is that it doesn’t pay high enough wages) is not inconsistent with the assumption that it still is losing out to out-of-state employers who pay lower wages.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.