This week is Daniel’s turn on the soapbox, and he has a few things he’d like to say about the enforcement of our nation’s workplace laws:
A recent review of American Compass’s The New Conservatives: Restoring America’s Commitment to Family, Community, and Industry, published in Jacobin magazine, tries to throw cold water on the notion that a conservative labor movement is taking form or is even possible. The author takes issue with our emphasis on immigration law enforcement—through proposals such as mandatory E-Verify—arguing that such an approach “empower[s] capital,” “threatens to eliminate any remaining vestiges of New Deal–era industrial citizenship,” and undermines “the protections of political citizenship for working people.” In short, the author says our agenda “offers narrowly targeted measures to select workers while terrorizing immigrants and maintaining management’s control over the workplace and politics.”
I want to address these charges. But before I do, I think it’s worth providing a brief overview of three separate legal regimes that govern the American workplace.
Employment law regulates the individual relationship between businesses and workers and establishes baseline terms for pay, safety, and treatment. Labor law governs collective action by workers, protecting their right to organize, bargain collectively, and engage in concerted activity. Immigration law determines which workers are authorized to work at all. Together, these bodies of law decide who can work, on what terms, and how workers can exercise power in their workplace.
The author of the Jacobin review is correct that many of the adherents of “pro-worker conservatism,” including we here at American Compass, place a special emphasis on enforcing (and reforming) our immigration law. However, we do so for good reason. Although robust immigration enforcement is not a substitute for the robust enforcement of our employment and labor laws, it is a necessary precondition for all three legal regimes to function well and for maintaining tight labor markets in which workers can exert power.
Porous border enforcement that allows large numbers of foreign nationals to enter the country illegally, combined with lax workplace enforcement that allows businesses to employ workers who are not authorized to work, creates ripple effects that distort the labor market. Workers who fear deportation are less likely to report wage theft and unsafe working conditions, leaving violations unaddressed. That same fear provides businesses a potent tool of retaliation: the threat of firing or “calling ICE”can silence complaints and crush labor organizing efforts before they begin. Over time, these distortions reward businesses that build business models on illegal employment models and substandard pay while undermining the individual or collective bargaining power of American workers and the competitive position of firms that do play by the rules.
The sheer volume of illegal immigrants that entered the U.S. labor market during the Biden administration—and the weak protections available to temporary visa holders—creates severe power asymmetries that benefit business at the expense of workers, regardless of status. These structural imbalances undermine the promise of all three regimes by making it harder for workers to assert their rights and for agencies to deter violations. In other words, it creates conditions that “empower capital”—the exact dynamic the Jacobin author decries.
Given the limited enforcement capacity of the Department of Labor and the National Labor Relations Board, the most effective way to address these asymmetries is through vigorous front-end enforcement of our immigration law. Strong, consistent enforcement—through border controls, a reliable workplace verification mechanism such as mandatory E-Verify, and tighter oversight of visa programs—prevents the creation of a shadow labor market in the first place. By ensuring that everyone working in the United States is authorized to do so, immigration enforcement removes the leverage businesses gain from a large pool of uniquely exploitable labor. That, in turn, makes it easier for employment and labor laws to function as intended: workers can assert their rights, agencies can investigate violations, and businesses are left to compete on the productivity of their labor rather than exploitation of it.
American workers deserve a government that enforces the laws on the books—employment, labor, and immigration—together and with equal devotion. Any labor movement worth its name—whether it be conservative or progressive—must advocate for such enforcement. Treating any one of them as optional invites disorder into the nation’s labor market that falls hardest on American workers and law-abiding firms. — Daniel
A TALE OF TWO RETAILERS
You may recall the recent Wall Street Journal story on Walmart’s plans to deploy artificial intelligence across its workforce, maintaining headcount but transforming roles.
Keep that in mind while reading this week’s stories from the Journal and the New York Times, respectively, on “Walmart, Once a Byword for Low Pay, Becomes a Case Study in How to Treat Workers” and “Amazon Plans to Replace More Than Half a Million Jobs With Robots.”
Walmart, the Journal explains, made the decision a decade ago to become a high-road employer:
As [CEO Doug] McMillon started his new job and talked to workers he heard that they needed higher wages, steady schedules, less inventory clutter in backrooms, consistent low prices and more middle managers in the stores, he said. He crafted a plan to raise wages. He brought in a new crop of Walmart leaders including new U.S. chief executive and chief operating officers. Their proposal would reduce employee turnover, which would improve operations in the stores and warehouses. They could invest in more training to get workers to stick around with promotions. Stores would be more organized. Sales would increase, and Walmart would be better positioned for e-commerce, the argument went. The board approved—and said they needed to move faster than proposed.
When Walmart announced the plan publicly in October 2015, necessitating more than $2 billion of investment and reducing the following year’s profit forecast by as much as 12%, the stock plunged 10%, its largest one-day drop in almost two decades. From the low hit a couple of weeks later, the company’s value has increased by more than 500%, offering returns similar to Amazon’s cloud- and AI-fueled gains.
By contrast, Amazon’s latest plans offer a case study in how not to think about a workforce’s value. “Amazon’s automation team expects the company can avoid hiring more than 160,000 people in the United States it would otherwise need by 2027,” implying a 10 to 15% productivity gain. But Amazon doesn’t envision translating that gain into higher-wage jobs for workers, rather “that would save about 30 cents on each item that Amazon picks, packs and delivers to customers.”
Of course, it was only a few years ago that Amazon was worrying it would run out of available labor entirely by about now; “only a series of sweeping changes to how the company does business and manages its employees will significantly alter the timeline, Amazon staff predicted.” Immigration enforcement is further reducing the prospective supply of warehouse workers. So, high levels of automation, increased productivity, and rising wages would seem entirely necessary, all to the good, and exactly the way a well-functioning capitalist economy is supposed to operate.
Not that any of this stops the typical predictions of doom and exercises in missing the point. Investment manager Vitaliy Katsenelson visited an Amazon warehouse and then rushed to the Wall Street Journal opinion page to ponder: “Today, this facility employs 3,100 people. Fully automated, combining robotics with AI-driven coordination, it may need only 100. What will the other 3,000 do?” Never mind that labor reductions on that scale are contemplated nowhere in Amazon’s plans. Elon Musk’s reaction was “AI and robots will replace all jobs. Working will be optional, like growing your own vegetables, instead of buying them from the store,” to which Senator Bernie Sanders responded, “I don’t often agree with Elon Musk, but I fear that he may be right when he says, ‘AI and robots will replace all jobs.’” It’s bad enough when people say these things with no evidence whatsoever. It’s appalling when they say it in response to real-world examples illustrating the opposite.
For a more rational assessment, cleanse the palate with this Washington Post column from Google chief economist Fabien Curto Millet and University of Cambridge professor Diane Coyle, in which they observe, “The 1950 U.S. Census listed 271 occupations, but only one — elevator operator — has since disappeared as a result of automation. We think the lessons from history are likely to apply to AI.” As we’ve long argued at American Compass, they see programs that support on-the-job training as the key:
Since most of our 2030 workforce is already employed, we should meet people where they are and provide opportunities to acquire new skills mid-career. There is economic evidence that appropriately designed reskilling support can be highly effective.
The private sector has a major role to play in this area. Employer-led retraining efforts — including apprenticeships and on-the-job training — have scored successes in the past, as they tend to involve training in transferrable skills most valued by employers and can reduce employment barriers for nontraditional workers in high-wage sectors.
THIS WEEK IN THE WONDERFUL WORLD OF MARKETS…
The labor market continues to amaze, performing as a sensible person, not blinded by ideological commitments, would expect it to. Checking in on Walmart again, Bloomberg reports: “Walmart Pauses Job Offers to Candidates Needing H-1B Visas.” Three cheers for price signals!
In trucking news, the Trump administration has been cracking down on non-domiciled commercial drivers’ licenses. I know what you’re thinking: those foreign truck drivers are also consumers of trucking services… this won’t affect the market-clearing wage at all. Well, you’d be wrong. Trucking spot rates are rising for legal American drivers. Three cheers for tight labor markets!
Another fascinating article in the Journal highlights Provalus, the company bringing otherwise outsourced and offshored jobs to rural America. You won’t believe it, but, get this: “Instead of locating its service and technology jobs in a metro area or sending them to countries such as the Philippines, Provalus seeks out small towns, mostly in the South, looking for places where the average individual income hovers around $30,000. There, according to company executives, Provalus finds people who are eager for jobs that will teach them 21st-century skills but who have few opportunities.” Three cheers for mobile* capital! (*Constrained by some preference for domestic investment, as Adam Smith foresaw.)
With American workers, “Time zones line up, data is easier to protect, and site visits don’t require overnight flights.” American workers also deliver “higher productivity and quality.” Three cheers for jobs Americans would do!
The challenge, of course, is that services from India, the Philippines, and so on “can cost 20% to 30% less than Provalus. The simple reason, of course, is wages.” It’s almost as if the problem with American workers is less their willingness and ability to work and more their nation’s overvalued currency and long-time insistence on free trade with other nations that lack basic labor protections. If only there were policies that could counter these imbalances.
And one more fascinating read, from Treb Allen, Winston Chen, and Suresh Naidu, on “The Economic Geography of American Slavery.”
We find that the economic impacts of emancipation are substantial, generating welfare gains for the enslaved of roughly 1,200%, while reducing welfare of free workers by 0.7% and eliminating slaveholder profit. Aggregate GDP rises by 9.1%, with a contraction in agricultural productivity counteracted by an expansion in manufacturing and services driven by an exodus of formerly enslaved workers out of agriculture and into the U.S. North.
Three cheers for eliminating exploitative labor relationships that some people think improve consumer welfare by reducing prices, but really lead to misallocations of resources while suppressing investment and innovation!
FINANCIALIZATION AND GAMBLING NEWS
But then, we repeat ourselves.
Popular Leveraged Funds Shock Investors With Huge Losses. Surprise, surprise: buying derivative instruments designed to lever up your risk without reference to the quality of the underlying asset is not a great way to generate strong returns.
The Loyalty Trap: How Loyalty Programs Hook Us with Deals, Hack our Brains, and Hike Our Prices. Excellent paper from (Oren’s 1L section-mate!) Sam Levine and Stephanie Nguyen on the consumer-harming flotsam of loyalty programs. Oren recalls fondly his dinner at a financial regulation conference, seated next to a credit card executive who insisted that people love their loyalty programs and would be outraged if caps on credit card fees led to their elimination. “But a cap on fees wouldn’t eliminate loyalty programs,” Oren insisted. “Wouldn’t it be easy for you to just offer them as an opt-in? Instead of collecting a 3% fee on every transaction and giving back half of it in rewards, you could just offer customers an option to pay an extra 3% on top of their bill each month, in return for continuing to receive the rewards. Hey, what share of your customers do you think would go for that?” The friendly executive spent the rest of dinner speaking to the person seated on his other side.
Bonus read: They Got to Live a Life of Luxury. Then Came the Fine Print. Once you can get past the Times’s absurd framing, that actually having to make the buy-now-pay-later payments is “fine print” rather than an extremely obvious commitment understood by anyone opting for the service, this is a good description of how the programs work, make money, and harm consumers.
Well that aged poorly. NBA Commissioner Adam Silver: “Legalize and Regulate Sports Gambling.”
Tweet of the year?
AND BEFORE WE GO, YOUR REINDUSTRIALIZATION HEADLINES OF ZEN
The Pentagon’s Office of Strategic Capital is becoming an Industrial Bank – Michael McNair
What to do about rare earths?
Everyone’s getting in, even the Wall Street Journal editorial board, which has discovered the need for public policy to counter Chinese mercantilism! “China has made it difficult for producers in developed countries to compete,” says the Journal. Apparently, “U.S. government support may be needed.”
The trade wagon rolls on…
Bloomberg: “White House Weighs Fresh Nicaragua Tariffs Over Human Rights,” in a striking example of targeting labor abuses directly.
Wall Street Journal: “GM Shares Surge 15% on Raised Guidance,” offering strong support to Stephen Miran’s thesis that the administration’s agenda across tax, regulatory, trade, etc., is on balance decisively beneficial to domestic investment.
New York Times: “After an ICE Raid in Rural Georgia, Hyundai Keeps Betting on America.” Hyundai plans to spend $26 billion in the United States through 2028, including an additional $2.7 billion in Ellabell at the plant where immigration law enforcers raided over the summer. Why would they do that? Surely, America’s aggressive actions would drive a company like Hyundai straight into China’s arms! “The carmaker has little alternative. As Chinese brands become increasingly popular elsewhere, the United States market is not only Hyundai’s biggest, but one of its best growth opportunities, regardless of who sits in the White House.” Ohhh. We leave you with this:
Between very high tariffs and other restrictions, Chinese cars have in effect been shut out of the United States. “My top three priorities are U-S-A,” José Muñoz, chief executive of Hyundai Motor Company, the car-making subsidiary, said at the company’s annual investor gathering after the raid in New York, pausing for effect after each letter. “If we do well here, it’s very good for Korea. It’s very good for the company.”
Enjoy the weekend!
I WILL enjoy the weekend - reading into all the great stuff linked here! Thanks for the always-useful roundup!
Relatively cheap robots equipped with artificial general intelligence will completely upend the issue of income inequality, especially if government intervenes to provide them to every family as a way to counter the mass unemployment that they will cause. Every family with such a robot will, in effect, become the equivalent of an antebellum slave owning southern one. Imagine everyone living without having to do the day to day drudgery of food shopping, cooking, dish washing, cleaning, laundry and childcare. Even relatively poor people would live like today’s millionaires. At least until the robots rebel and kill us all.