The Flaw of Unintended Consequences

By: Carl Graham, President, Montana Policy Institute

Epiphanies are rare, especially those of the mass variety. More people are opening their eyes, though, to the fact that actions, even well-meaning ones, do have consequences; most of them unintended, and many of them bad. So begins our climb back up to the shining city on the hill.

What Frederic Bastiat called “The seen versus the unseen” is being seen by more and more people. Our tendency towards feel-good short term policy solutions has resulted in unsustainable and, more importantly, unfair and even immoral costs that are often borne by those we’re trying to help. We could fill a book with examples, but here are just a few.

Take the minimum wage…please. It’s basic economics that if you increase the price of something people will buy less of it. That applies to labor as much as it does to, oh I don’t know, let’s say grapefruit. Except that since most grapefruit are interchangeable the decreased demand applies to all of them equally. Not so with the minimum wage. People at the lower end of the wage scale are predominantly young, less educated, unskilled, and minorities. If you arbitrarily raise the cost of hiring them, it’s just simple logic that fewer will be hired since not all of them can add as much value to a product or service as the minimum wage that’s set. So we’ve seen teen unemployment rise to about 27% overall and to almost 50% among blacks. We’re basically telling these young people that their labor is worth nothing if it’s not worth some government-mandated cost of hiring them. That’s a tragic waste and lost opportunity. And it’s flat immoral to tell someone they have zero value to society if they can’t contribute at some arbitrarily set level. I have a hard time believing that’s what minimum wage proponents intended, but that’s the consequence.

Speaking of government mandates, the U.S. Constitution names three federal crimes: treason, piracy, and counterfeiting. Everything else is left to the states. And yet there are about 4,500 federal crimes spread out among some 27,000 pages of federal code. If all we had to keep track of were the Constitutional three plus state laws we’d probably be fine. Except what would lawmakers in D.C. have to do if they didn’t make laws, or more accurately, make outlaws out of all of us? It’s been estimated that the average professional commits as many as three crimes a day without even knowing it.(1) According to a recent Wall Street Journal article, federal prosecutions have gone from fewer than 200 per million U.S. adults in 1980 to nearly 400 in 2009.(2) The sheer mass of federal code has unintentionally made criminals out of all of us since we can’t possibly know everything they tell us to do and not do in our everyday lives. Unintended? Maybe. Consequential? Ask someone who’s in prison for violating a law they didn’t know existed.

How about housing regulations? Codes, zoning, and other mandates add about 25% to the cost of a new home.(3) No matter how well intentioned, increasing costs by a fourth will hardly result in affordable housing or high-paying construction jobs. We see the uniform architecture and well-ordered streets. What we don’t see are people priced out of the market and workers unable to feed their families.

And finally, the mother of all unintended consequences: health care “reform.” Here’s just one example. The National Federation of Independent Businesses reports that 57% of small businesses may drop employee health care coverage because of the new law.(4) Despite repeated promises that “you can keep your current coverage if you like it,” your coverage doesn’t have to keep you. Turns out it’s cheaper for both employers and employees to move workers to federally subsidized exchanges and have taxpayers foot the bill. I’m not so sure that was unintended, but it’s definitely a consequence.

What’s unseen is more important than what’s seen because it’s often felt by those least able to influence policy, and its effects last much longer than the immediate gratification of doling out favors at somebody else’s expense. So epiphanies are good; especially those that encourage people to make rational decisions based on all costs and all benefits, both seen and unseen.

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For Immediate Release

704Words

 

Carl Graham is president of the Montana Policy Institute, a nonprofit policy research and education center based in Bozeman.

He can be reached at:

67 W. Kagy Blvd., Ste. B

Bozeman, MT 59715

(406) 219-0508

cgraham@montanapolicy.org

 

Notes: (for ed. use)

(1) http://www.amazon.com/Three-Felonies-Day-Target-Innocent/dp/1594032556

(2) Wall Street Journal, “More are Ensnared By Criminal Laws,” p. A1, 7/23/2011

(3) National Association of Home Builders, “High Regulatory Costs for New Homes Another Obstacle to Housing Recovery, Study Finds,” http://www.nbnnews.com/nbn/textonly/2011-07-25/front+page/index.html

(4) Wall Street Journal, “The Flight to the Exchanges,” p. A12, 7/25/2011

Don’t Shoot the Messenger: MPI Wants Pay Accuracy, Too

By: Carl Graham, CEO, Montana Policy Institute

MEA-MFT’s Eric Feaver asserts in a recent open letter to me that the state employee compensation data at MPI’s opengovmt.org website is “…flawed and distorts the reality of state employee salaries and benefits.”  I think his frustration is misplaced.

While we simply presented data provided by the state and cannot independently verify whether it’s “flawed,” it’s also true that the data would be much more useful if it contained greater detail, omitted certain things, and provided more context. We’d like that, too.

MPI waited over two years, won a lawsuit, and paid the state over $1,000 to obtain the pay data used in opengovmt.org.  What you see is what we got, with one caveat.  The 189 Mbytes of data – equal to nearly 120,000 printed pages – provided by the state broke down pay items by earning codes, and our original intent was to present them that way.  But for reasons too technical to describe in 700 words, we simply were not comfortable with the validity of that breakdown.  So instead we went with the state-provided year-to-date total figure that included most benefits and other payroll costs.

Mea Culpa on us for not explaining that better.  But after months of delays and unexpectedly high fees from the state, we simply felt we had done the best that we could.  That being said, the best MPI can do from the outside is certainly not the best that can be done.

This point is illustrated by Mr. Feaver’s recitation of opengovmt.org’s shortcomings, with which I mostly agree.  Let’s take a look.

First, he points out that year-to-year pay increases due to job changes or as a result of going from a partial year’s work to a full year’s work are not highlighted and explained as such.  Yep.  The data we obtained does not include hire date or job changes, only current job and whether anything was paid that year.  Breaking that down further would require the state to create yet another custom report at our expense.  We had to draw the line somewhere on how much we were willing to pay the state to create electronic reports from their SABHRS personnel system, and that level of detail didn’t make the budget.  Why a system as comprehensive as SABHRS has to be reprogrammed at great expense to create custom reports with existing data is a different question altogether, and one we’d leave for the Department of Administration to address.

Next, Mr. Feaver points out that we did not disaggregate employee reimbursements for business expenses.  I agree completely that expense reimbursements are not pay and would have omitted them if it were possible without compromising other data.  But since we were unable to pick and choose pay codes we were forced to aggregate it all.  MPI was clear in our court case that we were not interested in reimbursements, but since the state mingled them with the full data set we could not confidently omit them.

Mr. Feaver also notes that we did not disaggregate employee benefits and severance payments.  Same answer as above.  We wanted to disaggregate and display individual types of pay (other than reimbursements) all along but could not confidently do it with the data set that we received.  Where we erred was in not making that tradeoff clearer in the website’s overview and methodology notes.

Finally, Mr. Feaver asserts that we have an obligation to verify the data (with whom he does not say since it came from and resides at a single source: The Department of Administration), and to suspend opengovmt.org until we make the changes he requests.  Well, that’s not going to happen.

What can and should happen, though, is working together as Mr. Feaver suggests to “…compel the state to create its own state employee pay site…”  Getting the state to post spending online is something MPI has worked for unsuccessfully since 2008.  State employee compensation would be a relatively simple place to start.

MPI and MEA-MFT working together on something like this would not only be a Disney moment with birds twittering and flowers blooming; it would also be a service to state employees and taxpayers.  If the state publishes a timely, credible, and comprehensive website: one that includes information currently at opengovmt.org while addressing Mr. Feaver’s concerns, the pay portion of MPI’s site will go dark the very next day.  We can pull the plug on it together.

 

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For Immediate Release

731 Words

 

Carl Graham is CEO of the Montana Policy Institute, a nonprofit policy research and education center based inBozeman.

He can be reached at:

67W. Kagy Blvd., Ste. B

Bozeman,MT59715

(406) 219-0508

cgraham@montanapolicy.org

New Website Provides State Employee Pay

Bozeman — Despite a two-year pay freeze, average state employee salaries and benefits have increased faster than the rate of inflation since 2004.

This and other findings are available in a new website, opengovmt.org, created by the Bozeman-based nonprofit Montana Policy Institute.

Pay data in the website was handed over by the state following a long legal battle and provides individual pay information for all state employees along with summary statistics in a variety of areas, including employee demographics, average compensation values, union membership, and funding sources.

According to MPI president Carl Graham, site users can review salary information for employees based on name, location, department, and many other criteria.

“The site is nonjudgmental about whether the numbers are too high, too low, or just right” said Graham. “But it does put the lie to recent statements that state employee pay has been frozen.”

According to site data, the real (after inflation) average increase in compensation was nearly 11 percent between 2004 and 2011, with the largest increases going to those making over $75,000 per year.

Compensation is likely to be a hot issue for the 2013 Legislature after it failed to ratify a pay raise for state workers in 2011. Lawmakers will be expected to vote on a recently announced 5 percent increase negotiated between public employee unions and the Schweitzer administration.

“This type of data should place everybody on an equal footing” added Graham. “Legislators and taxpayers have a right to know what their employees are paid, and that information simply was not available until now.”

Following nearly two years of open records request refusals by the state, MPI recently won a lawsuit demanding actual pay data for each state employee. That data is now available to the public at no cost on the opengovmt.org transparency portal along with detailed school revenue and spending information.

 

Contact:

Carl Graham

CEO

Montana Policy Institute

(406) 219-0508

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305 Words

For July 11th, 2012 Release

 

For an interview with Montana Policy Institute’s Carl Graham call (406) 219-0508 or email info@montanapolicy.org.

The Montana Policy Institute is a nonprofit, nonpartisan policy research center based in Bozeman. To find out more visit us on the web at www.montanapolicy.org or contact us at 406-219-0508.