DRI-270 for week of 2-9-14: Can We Make Economic Sense of First Wives’ ‘Joining Forces’ Initiative?

An Access Advertising EconBrief:

Can We Make Economic Sense of First Wives’ ‘Joining Forces’ Initiative?

In 2011, the wives of President Obama and Vice-President Biden, Michelle Obama and Dr. Jill Biden, announced formation of a public-service initiative called “Joining Forces.” The action is ostensibly intended to “honor and support our veterans, troops and military families.” What sort of “honor” and “support” is provided? A fair idea can be gleaned from the op-ed appearing under Ms. Obama’s byline in the Monday, February 10, 2014,

Wall Street Journal. It is entitled “Construction Companies Step Up to Hire Veterans.”

It contains the sort of prose that adult Americans have been bombarded with since birth. Still, inquiring economists want to know: What sense can we make of this sort of appeal?

Why Should Construction Companies Hire Veterans?

Ms. Obama uses the lead paragraph of her op-ed to announce an announcement. On publication day, “more than 100 construction companies – many of whom are direct competitors – are coming together to announce that they plan to hire more than 100,000 veterans within the next five years. They made this commitment not just because it’s the patriotic thing to do, and not just because they want to repay our veterans for their service to our country, but because these companies know that it’s the smart thing to do for their businesses.”

“As one construction-industry executive put it, ‘Veterans are invaluable to the construction industry. Men and women who serve in the military often have the traits that are so critical to our success: agility, discipline, integrity and the drive to get the job done right.” Ms. Obama records her approval of this “sentiment” and reiterates the guiding challenge of Joining Forces: “Hire as many of these American heroes as you can.”

Joining Forces originated in 2011. “Since then,” Ms. Obama reports, “we have been overwhelmed by the response… The CEOs we have spoken to have been consistently impressed with their hires…veterans are some of the highest-skilled, hardest-working employees they’ve ever had… resilient, adept at building and leading teams, comfortable with diversity, and able to handle uncertainty.” This is attributable to veterans’ “training and experience,” including “some of the most advanced information, medical and communications technologies in the world.” To bolster her argument, she offers an anecdotal case of an Air Force manpower specialist whose service job was estimating the troop strength and specialties needed for missions. Like many veterans whose “qualifications aren’t always obvious from their resumes,” he would have been “easy to overlook” if not for the Disney Company’s human-resources specialists, who are “trained…to translate military experience into civilian qualifications.” They realized that his military background ideally qualified him to plan meals by specifying exact kinds and quantities of ingredients.

Ms. Obama earnestly implores us to consider the multitude of possible employment conversions. Military medics would make such good paramedics and EMTs. Tank crew members would make dandy truck drivers. The military employs “engineers, welders [and] technicians.” Small wonder, then, that “American businesses have hired nearly 400,000 veterans and military spouses” since Joining Forces opened up.

Why Do Construction Company Managers – or Employers

Generally – Need Advice on Whom to Hire?

The first question that occurs to the inquiring economist is: Why do construction company managers need advice on whom to hire? Indeed, why would any employer need that sort of advice?

Running a business can get complicated. But few decisions are as fundamental as qualifications for new hires. If owners and managers don’t know what they’re looking for in a job applicant, how can they ever hope to succeed?

It is true that we recently underwent a financial crisis, the trigger of which was a housing bubble. Undoubtedly many unwise decisions were made in housing sale and finance, and quite a few in housing construction. But nobody has suggested that the crisis was caused by construction companies hiring the wrong people.

In her op-ed, Ms. Obama didn’t actually

say that employers are boobs who are incapable of hiring the right candidates without the help of the federal government – more specifically, without the help of the wives of the President and Vice-President of the U.S. (Of course, her actions tacitly encourage this belief on the political Left, where it has always flourished.) In fact, what she actually said was that “CEOs …have been consistently impressed with their hires.” She even quoted “one construction industry executive” to the effect that “veterans are invaluable to the construction industry. Men and women who serve in the military often have the traits that are so critical to our success.” (The executive cannot be speaking from experience gained from working with Joining Forces, since that partnership is only now being announced.) If construction-industry executives

already knew

that veterans are “invaluable” – a plausible conjecture for reasons adduced above – why was the intervention of Joining Forces needed?

The clincher comes from Ms. Obama herself, referring to the commitment made by the consortium of construction companies. “They made this commitment not just because it’s the patriotic thing to do…but because these companies know that it’s the smart thing to do for their businesses.” If they

already knew that it was in their interest, in

advance

of this agreement, why was jawboning by Joining Forces required?

In her op-ed, Ms. Obama offers no hint as to why the employers she is urging need advice on hiring. She actually vitiates her own argument by providing persuasive evidence that they do

not

need her gratuitous advice.

If Employers Did Need Advice on Hiring, Why Would They Seek it from the First Wives?

When people need advice, they generally seek out experts. The hiring decisions of business owners and managers affect their livelihoods and the wealth of investors – all the more reason to obtain qualified opinions when in doubt. Why would a manager base hiring decisions on advice offered informally by two people whose fame and expertise lie outside the industry – and who have no experience in management or personnel?

Taking the advice of a lawyer and an English professor on hiring because their husbands happen to be the President and Vice-President would be tantamount to acting on the basis of a celebrity endorsement. We might heed a celebrity endorser on a question of taste – a choice of beer, say, or candy bar – but not on a matter demanding specialized or expert knowledge.

In her op-ed, Ms. Obama makes one reference to “current research,” but cites no original research attributable to her, Ms. Biden or Joining Forces. In other words, her initiative adds nothing not already available to employers, who already have the strongest possible incentive to seek out and act upon pertinent information about employment candidates.

It is clear that the First Wives would ordinarily not be people whom executives, managers and business owners would solicit for advice on hiring.

Is Ms. Obama Asking for Charity, Demanding an Entitlement or Offering Advice on Efficient Hiring?

Ms. Obama’s plea for hiring of veterans is a mixture of mutually exclusive messages. In the opening paragraph of her op-ed, she declares that construction companies made the commitment to hire over 100,000 veterans in the next five years “because it’s the patriotic thing to do…because they want to repay our veterans for their service to our country [and] because it’s the smart thing to do for their businesses.” Each of these motives is distinct from, and inconsistent with, the others.

In a free-market economy, the purpose of business is to produce as many goods and services as efficiently as possible. This requires hiring workers solely on the basis of their productivity. While business owners are not barred from having ulterior motives and acting upon them, they will suffer a penalty for indulging any prejudices or whims not consonant with the goal of maximum efficiency and profit. And when businesses depart from the straight and narrow, consumers suffer as well.

If the veteran is indeed the best employee for the job, everybody – the veteran, the company and consumers – wins if the vet is hired. But in that case, the intercession of Ms. Obama, Dr. Biden and Joining Forces is utterly superfluous. If the vet is not the best candidate, then the efforts of some outside agency might well be decisive. But that is hardly a victory for truth, justice and the American way. How is patriotism served by making the company and consumers worse off? For that matter, what is patriotic about sticking a veteran in a job in which he or she is inferior to somebody else?

The notion of “repay[ing] our veterans for their service to their country” is at best an anachronism, a throwback to the days before the all-volunteer military. The draft was viewed – erroneously – as a means of assembling a fighting force without having to pay the full economic costs that would be demanded by willing workers. In that context, it might have made a semblance of sense to provide extra compensation to surviving soldiers after demobilization. But today’s fighting force is composed of volunteers. They are professionals who are paid for their work and equipped with physical, mental and emotional skills that pay dividends after their service ends. It is patronizing and insulting as well as flagrantly inaccurate to treat them as naïve conscripts who need looking after. They are not “our boys.” They are men – and women. Apart from medical treatment for injuries suffered on duty, the only further payment they require is respect.

Why is it Desirable for Construction Companies to Collude in Hiring Veterans?

Ms. Obama went to great pains to announce that over 100 construction companies were “coming together” to “plan” their hiring of veterans. To alleviate potential ambiguity on the point, she noted that “many of [them] are direct competitors.” The term economists and lawyers use to characterize collective hiring decisions made by direct competitors is “collusion.” It is presumptively illegal, on the theory that it allows firms to set wages lower than would be the case were the companies to compete independently in the same labor market. Collusion allows the firms to replicate, or at least approach, the outcome attained by a single

monopsony buyer of labor – just as collusion by a cartel of sellers in a market for output strives to replicate the

monopoly

result attained by a single seller.

When owners of major-league baseball teams were adjudged guilty of collusion in bargaining with players, they were subject to legal penalties. Why is it wrong for baseball-team owners to collude in hiring players but praiseworthy for construction companies to collude in hiring veterans? Does the approval of Madams Obama and Biden sanctify the practice?

It seems axiomatic that when two people whose primary basis for association is political cooperate to achieve an outcome, their motives are presumed to be political. A political motivation does not sanctify collusion – just the opposite, in fact. A political motivation suggests that the collusion will benefit one political interest or party at the expense of the other or others. Moreover, it also suggests that the gains of the gainers will be less than the losses felt by the losers. That is one way of defining the difference between economic change and political change.

Will Madams Obama and Biden personally supervise the hiring to prevent the monopsony outcome described above? Ms. Obama made no mention of it. There is no reason to expect that, since we have no reason to think that either Ms Obama or Ms. Biden have advanced training in economic theory and no reason to think they could effectively supervise the hiring of thousands of people even if they did. It is competition that precludes the possibility of monopoly, not minute scrutiny of each economic transaction by government authorities.

How Do We Explain the History of Joining Forces?

We have cast overwhelming doubt on the public rationale behind Joining Forces, the initiative promoted by the First Wives. What, then, is its likely purpose? The late Milton Friedman likened the actions of politicians to those of the lead duck in a flying V-formation. Periodically, the leader glances back, only to discover that the formation has deserted him and is flying off in a different direction. The leader must scramble to find the formation and resume his place at the head. The point is that this form of leadership is purely ceremonial; the formation leads and the apparent leader is really following.

It was clear even in 2011 that the Obama administration’s economic stimulus package had failed to stimulate. The Federal Reserve had embarked on an unprecedented program of monetary expansion that was being sold as stimulus but was really designed to prop up the financial system. The Obama administration needed something it could point to as a success and claim credit for.

Presidential spouses since Mamie Eisenhower have been publicly active. Mostly their activities have been innocuous; i.e., non-political. The most conspicuous exception was Hillary Clinton’s leadership of her husband’s health-care program – a choice that turned out to be notably unsuccessful. This time, Mrs. Obama’s involvement was shrewdly chosen.

Politically, her support for veterans was designed to appeal to both friend and foe. It would satisfy Democrats who had become accustomed to a party line of supporting soldiers but not war and whose nostrils quivered at the scent of a victimized interest group. The President

was thought to be particularly unpopular with the military community and pro-military Republicans, so Ms. Obama’s stand couldn’t help but improve matters there.

Economically, Ms. Obama would be betting on a sure thing. The President’s wind-down of wars in Iraq and Afghanistan, coupled with Defense Department budget cuts, would gradually feed veterans into the civilian work force. Mrs. Obama’s strategy would portray them as if they were draftees coping with a painful readjustment amidst civilian indifference or even hostility,

a la the World War II vets in the movie

The Best Years of Our Life or the Vietnam vets of

Coming Home

.

Of course, nothing could be further from the truth than this pretense. The volunteer military has been working well for decades. In order to attract recruits, the military has had to offer not only wages and salaries sufficient to compensate soldiers for the opportunity costs of service, but also training in the skills and technological savvy necessary to run a modern military. To employers starved for job applicants with just those skills and training and the emotional maturity gained from military service, skilled vets are like raw meat to hungry lions. And even unskilled vets offer physically trained bodies coupled with mental self-discipline – two more attributes that are highly attractive to sectors like the construction industry.

What about the publicity given to returning vets suffering from forms of emotional trauma such as delayed stress? Could this have given rise to a bias adversely affecting the employment prospects of all returning veterans? Could Joining Forces play a role in overcoming this bias?

We will never know because Ms. Obama’s op-ed says nothing on the subject. We cannot very well grant Joining Forces the credit for overcoming a bias that may or may not exist and that the initiative has ignored. It is easy to understand why the First Wives might skirt the issue. They have no expertise in this area either and do not want to introduce an issue that can only detract from their otherwise favorable publicity.

So what role have the First Wives and Joining Forces played in the absorption of vets into the civilian work force? None whatsoever. They are the leader ducks scrambling to get in front of the formation. They are desperate to take credit for veterans’ inevitable success. No wonder, since this has been the only bona-fide economic success that the Obama administration has rubbed up against in recent years.

Why Has Business Cooperated in this Sham Initiative?

Ms. Obama’s op-ed makes it clear that businesses throughout the country have cooperated with the First Wives in professing solidarity with their initiative and making sympathetic noises toward veterans in general.

Our analysis shows that Joining Forces is a sham. Its motives are purely political. In economic terms, it is superfluous. The internal logic behind the project is so contradictory that the more contemplation it receives, the more ludicrous is becomes.

Why, then, have businesses been so cooperative with the First Wives? The obvious answers would seem to be: fear and prudence. Businesses have watched the conduct of the Obama administration. They have seen auto-company shareholders expropriated for the benefit of unionized employees. They have seen one regulatory agency after another launch assaults on industries in the form of new rules, regulations and policies. They have observed an entire Presidential campaign built around attacks on business success and a candidate who epitomized it. They saw the President’s approval rating remain consistently high throughout, suggesting that his actions resonated with a majority of the general public – not just the proverbial 47% that are supposedly dependent on government. Thus, they have every reason to fear the wrath of this administration and to avoid displeasing it if possible.

In this case, business leaders almost certainly reason that playing along with the sham of Joining Forces is a form of cheap insurance. They can make effusive public statements supporting the goals of the First Wives – talk is the cheapest form of political payoff. And they don’t even have to lie – at least not much. They can sign declarations of support and even make public “plans,” “announcements” and “commitments” – none of which contractually obligate them to anything and which the public will have forgotten about within days. The Obama administration has no intention of later holding their feet to the fire and checking to see if they follow through on that “commitment” to hire 100,000 veterans. (Follow-through would have everything to lose and nothing to gain, since the administration only cares about

seeming to cause veterans to be hired, not about actually

doing

it.) Businesses will certainly hire veterans, who constitute an attractive employment option. No economic archaeologist is going to later paw through the data to calculate whether veteran hires reached the promised total. As political blackmail goes, this is probably the cheapest form of protection these businesses will ever pay.

What’s the Harm?

Readers might wonder where the harm lies in allowing the First Wives their little deception. They aren’t altering the course of economic activity much by their actions. Perhaps this forestalls them from pursuing some more destructive pastime.

Willful deception practiced by government cannot be beneficial. Its effects will harm us both directly and indirectly. Waste and misdirection of resources are bad enough. But the misleading impression of an omniscient and confident government compensating for the ham-handed, ineffectual efforts of a short-sighted private sector establishes a precedent for future interventions. Each new intervention sets the stage for the one that follows. The success of a protection racket like this one emboldens and empowers politicians to attempt bigger and more expensive scams.

There is no conceivable rationale or defense for Joining Forces, the job-placement initiative for veterans begun by Madams Obama and Biden. Its economic benefits are entirely illusory. Its aims are purely political. It is big-government bunkum at its most cynical and demagogic. And this conclusion derives not from political animus, but rather from the straightforward logical implications of Ms. Obama’s own words.