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Charles Lane on job-killers that should be killed

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By Charles Lane
Monday, December 14, 2009

With unemployment stuck around 10 percent, President Obama has pledged "to take every responsible step to accelerate the pace of job growth." Here's a thought: Instead of trying to "create" jobs by tweaking this tax break or increasing that spending program, why not stop doing things that destroy jobs?

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I suggest starting with these three job-rescuing policy changes, none of which would cost taxpayers a dime.

-- End federal protectionism and price supports for sugar. Since 1982, the federal government has guaranteed the U.S. sugar lobby -- er, industry -- up to 85 percent of the market. The rest gets divided among other countries lucky enough to hold quotas. The government also guarantees minimum prices for raw cane sugar and refined beet sugar.

Sugar is an ingredient in a huge percentage of candy, beverages and baked goods. Expensive sugar makes it expensive to produce those goodies. U.S. candy-makers and other food processors cite sugar costs as a major factor in their industry's recent job losses -- including 70,000 between 1997 and 2004.

In 2006, the Commerce Department estimated that the sugar program cost three confectionery manufacturing jobs for each job it saved in sugar growing and harvesting.

-- Repeal the Davis-Bacon Act. Passed in the 1930s to "stabilize" the construction industry (in part by protecting white workers in the North against competition from migrating Southern blacks), this law requires employers to pay the "prevailing" local wage on federally funded projects. Today, Davis-Bacon applies to about a third of all public construction spending.

A large staff at the Labor Department calculates prevailing wages using a formula skewed to reflect union pay rates. This inflates the cost of labor on public construction by an average of about 10 percent, according to a 2008 study by the Beacon Hill Institute of Suffolk University in Boston. The added cost to taxpayers was $8.6 billion in 2007, the study found.

Repealing Davis-Bacon would enhance the employment impact of Obama's proposed infrastructure spending. In fact, the president has the power to suspend the law by declaring a national emergency. If the job crisis doesn't qualify, what does?

At the very least, Congress could change the size of covered projects from the absurdly low minimum established seven decades ago, $2,000, to a more plausible $1 million. The Congressional Budget Office estimates that would free up half a billion dollars over five years.

-- Reduce the federal minimum wage. In 2007, Congress enacted a three-step increase in the minimum wage, which was then $5.15 per hour. The final installment took effect in July, raising the rate to $7.25 per hour. In the meantime, unemployment climbed from 4.7 percent to 9.5 percent.

I am not saying that the minimum wage increase caused this; far from it. But study after study has shown that this supposed benefit to the poor prices low-skilled workers out of entry-level jobs. It was unwise to keep raising the cost of hiring them in a recession.

Economist David Neumark, co-author of a definitive book on minimum wages, said in a June Wall Street Journal op-ed that the July increase probably killed 300,000 jobs that would have otherwise gone to teenagers and young adults.

None of these measures alone, or even all three together, would eliminate unemployment. But they might significantly decrease it at a time when every job counts. That neither the president nor Republicans in Congress mentioned them in their jobs proposals last week shows that Washington thinks inside a very small box.

Sugar-cane growers in Florida and sugar-beet growers in the Great Plains, geographically distributed for maximum leverage in the Senate, defend their protectionist program. Organized labor argues for Davis-Bacon and the minimum wage with rhetoric about fairness and workers' rights, despite economic evidence to the contrary.

We are experiencing the worst unemployment since 1982 (when Congress enacted the sugar program), and the second-worst unemployment since the Great Depression (when we got Davis-Bacon and the federal minimum wage). Yet these outmoded, job-killing policies linger on the books.

Our politicians would get rid of them if they're really serious about putting America back to work.

The writer is a member of the editorial page staff. His e-mail address is lanec@washpost.com.


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