[Congressional Record Volume 140, Number 88 (Monday, July 11, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: July 11, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                HEALTH REFORM AND JOBS: THE CLINTON PLAN

  Mr. CRAIG. Mr. President, several studies have been performed 
examining how the Clinton health security plan would affect jobs in 
America. Leading economists predict that employer mandates, Government 
subsidies, and other aspects of the Clinton plan will result in serious 
wage reduction and job loss.
  To avoid these adverse effects, Mr. President, reforms cannot place 
intolerable burdens on employers, but rather must further expand and 
improve the current system, allowing the market to develop naturally.
  When President Clinton introduced his health reform plan last year, 
his administration stated that as many as 600,000 people could 
initially lose their jobs, if everything works as planned. Since then, 
other studies have predicted job loss anywhere from 624,000 to 3.8 
million. In addition, as many as 23 million workers could experience 
lower wages, lower benefits, or reductions in hours worked. Any 
President who could stand before the American people and advocate a 
policy that would put people out of work amazes me.
  Mr. President, employer mandates will obviously place burdens on many 
employers who do not currently offer health insurance to their workers. 
The President's solution to ease this new burden is to provide 
subsidies from the Federal Government.
  According to the Clinton health plan, employer contributions must 
equal 80 percent of a ``weighted average premium,'' and the individual 
employees would pay the difference between the 80-percent employee 
contribution and the actual premium. However, the proposal also places 
limits on the percentage of the payroll spent on health insurance 
premiums.
  No employer will be required to pay more than 7.9 percent of the 
payroll; if health premiums exceed this amount, the Federal Government 
will make up the difference. This is the essence of the President's 
Federal subsidies.
  But the regulations are more complex than this, and Federal subsidies 
may only add to the difficulties created by an employer mandate.
  Liability is further limited as the number of employees falls and 
average wage decreases, creating a potentially serious problem. 
Employee liability as outlined in the Clinton plan provides a great 
incentive for cutting back employees and disincentive for hiring.
  For example, if a company has 49 employees with an average wage of 
$20,000, hiring the 50th person would cost the employer more than 
$9,000. Accordingly, a company with 50 employees earning an average 
wage of $20,000 will save over $9,000 by dismissing 1 worker.
  Mr. President, the Federal subsidies are designed to protect jobs by 
releaving financial pressures placed on employers. However, the 
combined effect of incentives for fewer workers with lower incomes and 
increased competition among employers to attract skilled workers will 
escalate employer-employee tension.
  In addition, to avoid expanding entitlements and thus adding to the 
Federal deficit, the Clinton plan places caps on these Federal 
subsidies. For example, the Congressional Budget Office predicts that 
small businesses would require $58 billion in subsidies under the 
Clinton plan in the year 2000, although the subsidies are capped at 
$4.1 billion.
  To maintain the level of Federal subsidies the President has 
promised, the Federal Government would be forced into even greater 
deficit spending to make up the difference in cost; on the other hand, 
if the Federal Government remains true to its caps and is forced to cut 
back on subsidies, financial pressure on employers will far exceed that 
predicted by the President, and job loss will be much greater than 
forecasted.
  Mr. President, a large portion of the job losses will affect small 
businesses with fewer than 100 workers, and an overwhelming majority of 
those workers who would lose jobs currently make less than $40,000. In 
addition, job losses would disproportionately affect minorities. Most 
of the jobs will be lost in services, manufacturing, and retail 
businesses; all States will be hit hard, with an average job loss near 
1 percent of the total work force throughout the country.

  Whether the total number of jobs lost is closer to 600,000 or 4 
million, almost all Americans will know someone who will have lost a 
job as a direct result of the Clinton health security plan.
  In response to this projected job loss, the President claims his 
health security plan will create new jobs. However, this will not 
offset the initial shock of job loss. Jobs will not be replaced as soon 
as they are lost. Employers are often quick to recognize savings 
opportunities by releasing workers, but corporate expansion, on the 
contrary, is generally gradual. No wise businessperson welcomes 
possible liabilities, and additional workers in an unproven system 
appear to be exactly that.
  In addition, the promised new jobs will affect a different group of 
workers. Job losses will affect a working population in services, 
manufacturing, and retail; new jobs will appear in health professional, 
policy, and administrative fields.
  Mr. President, we should be protecting rather than jeopardizing jobs. 
The Consumer Choice Health Security Act (S. 1743), which I cosponsor, 
will do this. This bill is designed to guarantee high quality, 
accessible health care services.
  I am particularly pleased with how this plan would enable us to move 
toward achieving universal access and comprehensive coverage. 
Refundable tax credits, based on the percentage of gross income spent 
on medical services, and the introduction of medical savings accounts 
are two features of this plan which will dramatically improve access 
without taking the choices from the consumer.
  Mr. President, we can reform our health care system without the 
serious side-effects of job loss and decreased wages. In supporting 
health care reform, my goal has been to empower people, to let them 
choose their own health plans and doctors. Individuals are certainly 
better able to determine their needs than is the Federal Government.
  We do not need extensive Government intervention to provide universal 
health care. On the contrary, excessive Government involvement only 
increases bureaucracy, reduces quality of services, and weakens a 
vibrant private business sector. The Federal Government functions best 
when simply developing the framework in which the market can work, and 
health care reform should focus on building this foundation.
  Mr. President, I ask unanimous consent that the following materials 
be printed in the Record:
  ``Strike Bill Could Destroy Critical Workplace Balance''--an op-ed in 
today's Christian Science Monitor, by two former members of the 
National Labor Relations Board with more than 100 years experience, 
between them, in employer-employee relations;
  ``Preparing for the `Jobs Summit': The 5 Principles of Job 
Creation''--a Backgrounder by the Heritage Foundation;
  ``Why Employer Mandates Hurt Workers''--a Brief Analysis by the 
National Center for Policy Analysis;
  ``F.Y.I.: The Jobs Impact of Health Care Reforms''--a Heritage 
Foundation Backgrounder;
  A white paper prepared by the National Federation of Independent 
Business on the President's proposed ``Health Security Act''; and
  ``Enraging Species Act''--a Wall Street Journal editorial from April 
19, 1994.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

          [From the Christian Science Monitor, July 11, 1994]

          Strike Bill Could Destroy Critical Workplace Balance

                (By Howard Jenkins and John A. Penello)

       For many years we served as representatives of the federal 
     government in various capacities with the National Labor 
     Relations Board (NLRB). We were appointed board members under 
     both Republican and Democratic administrations. Together we 
     represent more than 100 years of experience in labor-
     management relations.
       While we did not always agree on the outcome of cases 
     brought before the NLRB--member Jenkins's decisions were more 
     often pro-union and member Penello's dissents were more often 
     pro-employer--we agree that the Strike Bill would destroy the 
     core principle of balance in collective bargaining.
       The Strike Bill, which has passed the House and is expected 
     to be voted on today by the Senate, would prohibit employers 
     from defending their businesses by offering permanent jobs to 
     replacement workers during a strike over economic issues such 
     as pay raises and benefits.
       Proponents of the Strike Bill claim that employers' use of 
     permanent replacement workers during an economic strike is a 
     recent phenomenon. This simply is not true. The National 
     Labor Relations Act, enacted in 1935, provided a delicate 
     balance that allows unions to strike over wage demands and 
     allows employers to defend their businesses by hiring 
     permanent replacement workers.
       The striker-replacement legislation would destroy this core 
     principle of United States labor law, which has been 
     consistently supported by Democratic and Republican 
     presidents and federal courts for over half a century.
       In our experience, the balance of power inherent in these 
     countervailing economic weapons is what has made the system 
     work. Take away either the right to strike or the right to 
     operate with permanent replacements, and the other party will 
     be sure to overreach. We fear the striker replacement 
     legislation will encourage confrontation and ``risk-
     free'' strikes, where economic strikers could make 
     unreasonable demands and shut down employers with no risk 
     of their own.
       Some contend that the system is not balanced, that 
     permanent replacement of economic strikers is the equivalent 
     of being fired. Again, this isn't true. Even so-called 
     ``permanently replaced'' strikers have continuing rights to 
     reinstatement to all available future jobs. The NLRB 
     developed adequate safeguards for economic strikes, one of 
     which puts employers under an affirmative continuing 
     obligation to first offer jobs to unreinstated economic 
     strikers on a preferential basis before hiring new employees.
       Furthermore, the actual number of workers replaced is 
     minute. A Bureau of National Affairs study found nearly 
     40,000 economic strikers were replaced in 1991-1992, out of a 
     US labor force of 125 million. That's less than .03 percent. 
     Nearly 70 percent of these 40,000 strikers were later 
     reinstated to their jobs. Also, the number of strikes in the 
     US has been decreasing since 1947, the first year the US 
     Department of Labor's Bureau of Labor Statistics began to 
     maintain strike data.
       Current collective bargaining is a fair and reasonable 
     system that has worked for over 50 years. We see no 
     compelling evidence to suggest that any changes to this law 
     are needed or even wanted by the American people. In fact, a 
     recent Gallup poll shows that 57 percent of Americans oppose 
     a ban on permanent replacement workers.
       The current debate in Congress reflects these facts. In an 
     effort to save the Strike Bill, proponents of the legislation 
     are searching for an acceptable compromise. However, none of 
     the proposed compromises improve the original legislation. 
     Any Strike Bill compromise would have the same result as the 
     original legislation--risk free strikes.
       Under the most discussed compromise proposal--a moratorium 
     on hiring replacements--strikes would be limited to durations 
     of four to 10 weeks. This would avoid few strikes, since most 
     strikes last less than 10 weeks, and would do little to 
     mitigate the devastating economic impact of the original 
     bill.
       Economic strikes were never intended by Congress to be 
     risk-free. And the right to strike was never guaranteed to be 
     successful in forcing an employer to accede to a union's 
     bargaining demands. To the contrary, the core principle of 
     our national labor law is a balance of rights and 
     obligations, risks and reward, which, through the dynamics of 
     collective bargaining, drives parties closer together toward 
     labor contracts and peacefully negotiated settlements.
       For these reasons and based upon our long experience in 
     administering federal labor policy we must now speak out 
     against the strike-replacement legislation--in any form. We 
     believe the Strike Bill would imperil future decades of 
     improving cooperation between labor and management and return 
     us to the disruptive labor disputes of previous decades.
       Strikes in the US are at an all-time low. In 1974 there 
     were 424 strikes involving 1.8 million workers and 32 million 
     lost workdays, compared with 1993, when there were only 35 
     major work stoppages involving 182,000 employees and 4 
     million lost workdays.
       With the incidence of strikes at a record low, it is 
     difficult to understand why Congress would pass legislation 
     that would actually increase the number of strikes in 
     America.
                                  ____


       [From the Heritage Foundation Backgrounder, Mar. 11, 1994]

 Preparing for the ``Jobs Summit'': the Five Principles of Job Creation


                              introduction

       Leaders from the major industrialized countries are 
     scheduled to meet in Detroit, Michigan, on March 14-15, at 
     the request of President Clinton, to discuss the causes of 
     the persistently high levels of unemployment in their 
     countries. Announcing the goals of the summit in Europe this 
     January, President Clinton declared that, ``We simply must 
     figure out how to create more jobs and how to reward people 
     who work both harder and smarter in the workplace.''\1\
---------------------------------------------------------------------------
     \1\Footnotes at end of article.
---------------------------------------------------------------------------
       The President is right to focus on how to create more jobs 
     in this country. Although he boasted during his State of the 
     Union address that 1.6 million jobs were created in 1993, job 
     growth, in fact, is much weaker than normal this long after a 
     recession. Since World War II, total employment growth has 
     averaged 9.2 percent 33 months after a recession. But since 
     the bottom of the 1990-1991 recession, total employment in 
     the United States has climbed by just 2.5 percent.\2\ 
     President Clinton would do well to ponder the anemic job 
     growth in Europe, because European firms are encumbered with 
     costly mandates and taxes on employment that have discouraged 
     hiring and held back employment growth. The President should 
     recognize that his Administration's policies are repeating 
     the mistake of the Europeans, and contributing to slow growth 
     of earnings and employment in the United States. For example, 
     the Administration has:
       Enacted the biggest tax increase in American history, which 
     will discourage new business investment and job creation by 
     raising corporate and individual tax rates.
       Signed the mandated Family and Medical Leave Act, which 
     will raise labor costs and force employers to be far more 
     selective about whom they hire, since they are required to 
     offer certain employees more time off.
       Proposed a massive overhaul of the health care system, 
     which would raise labor costs by mandating that employers 
     cover workers. According to Lewin-VHI, one of the country's 
     leading health care econometrics firms, the Clinton health 
     plan would mean that among firms now providing health 
     insurance, 19.9 percent would see cost per employee rising 
     $500-$1,000 per year, 51.6 percent would face cost increases 
     per employee of $1,000-$2,500, while another 15.2 percent 
     would face costs per employee of more than $2,500.\3\
       Proposed worker training and unemployment insurance reform, 
     that would cost between $3 billion and $9 billion per 
     year.\4\
       Considered a hike in the minimum wage from $4.25 to $4.75 
     an hour, which would further increase the disincentive to 
     hire teenage and poor, inner-city unemployed individuals.
       Moved ahead with an ambitious environmental regulatory 
     agenda ranging from global warming to new logging 
     policies.\5\
       These policies signal an apparent misunderstanding of the 
     employment and job policies that led to the creation of over 
     20 million new jobs in the 1980s.\6\ Each of these new 
     programs or proposed policies add to the three principal 
     governmental barriers that discourage employers from creating 
     new jobs: taxes, credit barriers, and regulatory and mandated 
     benefit burdens. These barriers, which have steadily 
     increased over the past few years in the United States, have 
     discouraged business expansion and increased the cost of 
     hiring new workers. Failure to reduce these barriers or--
     worse still--the imposition of new barriers, means that 
     America will become a slow-growth economy.
       President Clinton should realize that high wages and 
     mandated benefits are ruining the European economies and 
     leading to high unemployment rates. In fact, several European 
     countries and Japan are now trying to lower their labor costs 
     and dismantle their generous ``safety nets.'' Instead of 
     continuing to add more burdens on employers, President 
     Clinton should take the opportunity of the summit to advocate 
     five simple principles of job creation:
       Principle #1: European-style job training and employment 
     policies have proven incapable of keeping unemployment low or 
     raising the worker's overall standard of living.
       Principle #2: High tax rates on employers and capital is 
     the quickest way to insure high unemployment.
       Principle #3: Excessive financial and banking regulations, 
     which restrict the amount of capital firms can obtain, 
     greatly limit business and job expansion.
       Principle #4: Increasing the regulatory burden and 
     mandating numerous employee benefits is a recipe for job 
     destruction.
       Principle #5: Sustained job growth results from 
     competitive, efficient industries that are free of excessive 
     government interference.
       Only by talking bluntly to the European allies and shunning 
     ``solutions'' to the continuing problems of unemployment that 
     will only slow wage growth, can President Clinton help the 
     industrialized world to correct its economic ills. Adopting 
     European-style employment policies, on the other hand, will 
     lead only to European-style results.


            understanding the five principles of job growth

       Principle #1: European-style job training and employment 
     policies have proven incapable of keeping unemployment low or 
     raising the worker's overall standard of living.
       During his speech announcing the jobs summit, President 
     Clinton declared, ``We Americans have a lot to learn from 
     Europe in matters of job training and apprenticeship, of 
     moving our people from school to work into good-paying 
     jobs.''\7\ Undoubtedly, Americans have much to learn from the 
     Europeans, but not about their employment policies.
       The true effects of the European policies which the 
     President and others glorify are best illustrated by the case 
     of Germany. German workers enjoy roughly six weeks paid 
     vacation each year, the shortest work week of any major 
     industrial nation, high wages (averaging $26 an hour), and 
     extensive health benefits mandated by the government. But as 
     Ferdinand Protzman of The New York Times notes, 
     ``Unfortunately, [the German system] no longer works. 
     Instead, the social contract that once made Germany's economy 
     a model of stability has helped erode the nation's 
     competitiveness as it struggles to recover from the worst 
     recession in postwar history.''\8\
       Like many of its European neighbors, Germany is struggling 
     with what has come to be known as ``Eurosclerosis,'' which 
     signifies a stagnant growth environment. As the chart on the 
     following page shows, adherence to this model has brought the 
     European Union (EU) slow growth and high unemployment. 
     Unemployment has averaged almost 10 percent over the past 
     decade in the major European countries, and is projected to 
     average 12.1 percent in 1994 for the members of the EU. At 
     the end of last year, approximately 32 million Europeans were 
     jobless, which is roughly equivalent to the combined 
     workforces of Spain and Sweden.\9\ Overall, the U.S. rate 
     of employment growth has far outstripped Europe. Observes 
     C. Fred Bergsten, director of the Institute of 
     International Economics, ``The U.S. has kept labor costs 
     down and created 40 million new jobs over the past 20 
     years. In Europe, wages have risen about 60 percent during 
     that span but only 2 or 3 million jobs have been 
     created.''\10\
       Peter Gumbel of The Wall Street Journal maintains this 
     Eurosclerosis is caused by a ``tangle of labor regulations 
     and rising costs for employers [which] acts as a major 
     disincentive to job-creation--and a powerful incentive to 
     moving production elsewhere.''\11\ Not surprisingly, perhaps, 
     some 30 percent of business surveyed recently by the German 
     Chamber of Commerce say they are considering shifting 
     production to a more hospitable business environment.
       Beside the European burdens on employers which discourage 
     job expansion, employment is also discouraged through 
     extensive unemployment insurance programs. Explains David R. 
     Henderson of the Hoover Institution, ``A single 40-year-old 
     previously employed at the average production worker's wage 
     would get benefits equal to 59% of previous earnings in 
     France, 58% in Germany and 70% in the Netherlands.''\12\ 
     These benefits can be collected for many years as well. 
     Hence, although the broad safety net available to displaced 
     workers seems compassionate on the surface, it actually 
     creates disincentives to full employment and a productive 
     workforce. Absenteeism, for example, ran at 9 percent in 
     Western Germany in 1992, 8.2 percent in France, and 12.1 
     percent in Sweden. By way of comparison, the U.S. rate is 
     only 3 percent.\13\
       Also overrated is the German job training system, which 
     Clinton and his Labor Secretary, Robert Reich, seek to 
     emulate. While the German educational system focuses on 
     highly technical training for its future workers, the U.S. 
     system focuses on generalized training. Some academics, such 
     as Lester Thurow of MIT argue that the German approach has 
     created a superior workforce which enjoys a better standard 
     of living. But a recent comparison of the two systems by 
     Kenneth A. Couch, of Syracuse University, disputes this 
     belief. Couch concludes that, ``an apprenticeship program by 
     itself is unlikely to have widespread positive effects either 
     on economic measures such as employment or indirectly related 
     social problems.''\14\ For example, comparing German and 
     American 24- to 33-year-old high school graduates without 
     further education, Couch found roughly the same percentage 
     were employed (with actually more Americans than Germans 
     possessing manufacturing jobs), more of the Americans in the 
     sample group were married, and slightly more Americans had 
     children. Likewise, from 1983 to 1988, Couch found American 
     workers outperformed their German counterparts overall. 
     America experienced average annual employment growth during 
     the period of 2.4 percent, versus Germany's meager 0.4 
     percent. And real GDP growth over the same period averaged 
     3.9 percent for America and 2.3 percent for Germany. Other 
     European countries have fared no better relative to America.
       If American policymakers choose to move toward a more 
     technical-based educational system, the German approach thus 
     is not the obvious model to follow. As Couch notes, 
     ``Emulating the German approach may in fact five us an 
     educational system that will not perform better but will cost 
     more than our current one.''\15\
       Following the Failed Model. European-style job training and 
     employment policies which have been implemented in America 
     have met with failure. Public employment programs have proven 
     to be net job destroyers, since the amount of money required 
     to create a public sector job is typically several times that 
     of private sector job creation.\16\ A recent study of public 
     transit investment by John Semmens of the Chandler, Arizona-
     based Lassez Faire Institute, notes that for the $61.5 
     billion invested since 1965, only 800,000 jobs were created. 
     If that same amount of money had been invested by private 
     business through a corporate tax cut, 8 million jobs could 
     have been created.\17\ Likewise, Semmens found that 13 
     million to 20 million jobs would have been created if the 
     $61.5 billion had instead been devoted to a capital gains tax 
     cut, or an expansion of Individual Retirement Account 
     investment in Treasury bills or common stocks.\18\ Most 
     important, instead of producing the high-wage, well-skilled 
     jobs the current Administration calls for so frequently, 
     public programs only provide low-wage, low-skill, temporary 
     employment, which often costs taxpayers dearly in the 
     process.
       Further, it cannot be argued that government sponsored 
     employment training policies provide European citizens 
     with greater purchasing power and a higher standard of 
     living than Americans. Purchasing power parity, which is 
     the most accurate measure of comparative consumer power, 
     shows that the U.S. consumers have a clear advantage over 
     foreign citizens (see table at end of article). Following 
     Europe's poor example, therefore, likely will lead not 
     only to lower growth and fewer jobs, but also to a lower 
     standard of living for American citizens.
       The ``Europeanization'' of American Labor Market. Despite 
     the failure of the European system to sustain employment and 
     a higher standard of living, America's federal labor market 
     policy is being molded to resemble German, French, and other 
     European models. This ``Europeanization'' of the American 
     labor market policy threatens to undermine industrial 
     competitiveness, increase budgetary strains, and lower the 
     average worker's standard of living.
       Principle #2: High tax rates on employers and capital is 
     the quickest way to insure high unemployment.
       To hire additional workers, employers need capital. Capital 
     fuels job creation by allowing employers to invest in the 
     various means of production, including land, equipment, 
     factories, new technologies, and labor. Capital can be 
     acquired in one of two ways: saving it from profits or 
     borrowing it. Examining each method of capital accumulation 
     indicates why U.S. employers are finding it increasingly 
     difficult to obtain the fuel for job creation.
       The Current Tax Environment. Past recoveries show that the 
     U.S. economy is performing below typical levels. Whereas 
     employment in the previous post-war recoveries averaged 9.2 
     percent 33 months after the end of the recession, the current 
     recovery has only seen approximately 2.5 percent growth over 
     a similar period of time. One factor that aided recoveries 
     during the early 1960s and early 1980s was a reduction in tax 
     rates.
       Unfortunately, the most recent recession, which followed 
     the 1900 tax hikes, has been followed by tax rate increases. 
     The Clinton tax plan adopted by Congress last year increased 
     taxes on business and investment. The corporate tax rate on 
     business, for example, was raised from 34 percent to 36 
     percent. Likewise, top individual rates moved up from 31 
     percent to as high as 42.5 percent. This is important since 
     approximately 80 percent of small businesses pay taxes under 
     the personal income tax code. The excessive taxation of 
     capital gains also continues. The capital gains tax on 
     individuals currently stands at 28 percent, up from 20 
     percent in 1986. As the chart on the following page shows, 
     before this rate jump, new business incorporations had risen 
     steadily throughout the 1980s. After the increase, start-ups 
     fell immediately and sharply. The aggregate effect of these 
     taxes is a huge barrier to job creation, as capital shifts 
     from the hands of investors to the government.
       The Effects of the Tax Barrier. High taxes reduce 
     investment in businesses and slow job growth by encouraging 
     individuals and firms to seek alternative investments with a 
     more profitable return on their dollar. It should be no 
     surprise that America's current savings and investment rates 
     are lower than those required for robust, long-run economic 
     growth. This is due directly to the trade-off investors face 
     when contemplating increasing consumption versus saving or 
     investing. Increasing consumption carries little penalty; few 
     taxes or other disincentives exist for immediate 
     purchases. But forgoing current consumption to invest 
     assets represents an increasingly unattractive option if 
     the rewards of profitability springing from investment are 
     penalized with higher tax rates. Moreover, earnings in the 
     U.S. are still penalized twice through taxation, first at 
     the corporate level and then later at the individual 
     level. Therefore, if an investor had $10,000 to spend or 
     invest, spending currently would more than likely 
     represent a more attractive choice than investing.
       Taxes raise the cost of capital for industrial equipment 
     and machinery. As the American Council for Capital Formation 
     (ACCF) reports, ``Recent research confirm[s] . . . that the 
     volume of investment in equipment is a critical factor in the 
     pace of economic growth and development. [I]nvestment in 
     equipment is perhaps the single most important factor in 
     economic growth and development.''\19\ Yet, ACCF points out 
     that despite the beneficial effects of the tax-reducing 
     Economic Recovery Act of 1981 on such investment, tax policy 
     in the following years became heavily biased against such 
     investment incentives. The tax acts of 1982 and 1986, which 
     raised taxes, each resulted in an increase in the cost of 
     capital for equipment as investors found such opportunities 
     less attractive. Largely as a result of these high-tax 
     policies, the total cost of capital for manufacturing 
     equipment increased by 22.9 percent from 1981 to 1986. The 
     most recent revisions of the tax code are likely to further 
     discourage investment, and thereby increase barriers to 
     expansion and job creation.
       Hence, the potential for long-term job creation in the 
     current tax environment is not encouraging, since 
     entrepreneurs are less able to entice investors to risk their 
     money on new business ventures. Because taxes create 
     disincentives to invest in businesses, capital for future job 
     creation is being produced at a lower rate.
       Principle #3: Excessive financial and banking regulations, 
     which restrict the amount of capital firms can obtain, 
     greatly limit business and job expansion.
       In recent years, the term ``credit crunch'' has been coined 
     to refer to how difficult it has been for many businesses to 
     obtain loans. One reason this crunch has occurred has been 
     the sharp rise in banking regulation in recent years. In 
     addition to $10.7 billion in general regulatory compliance 
     costs in 1992, bankers face costs from lost interest payments 
     on reserves they are required hold at the Federal Reserve, 
     and deposit insurance premiums.\20\
       The Effects of the Credit Barrier. How do these trends 
     affect job creation? This regulatory burden has had a 
     restrictive effect on credit growth in recent years. The 
     American Bankers Association observes that over this same 
     period, more than 40 major federal regulations affecting bank 
     operations were promulgated.\21\ Although estimates of the 
     regulatory burden on banks are not available for previous 
     recessionary periods, there is no doubt that the number of 
     regulatory restrictions and burdens the banking industry 
     faces have increased significantly over the past 20 years. 
     Declares the American Bankers Association: ``Hog-tying the 
     banking system with regulatory red tape means two things--
     more expensive bank credit and less of it.''\22\
       Just as higher taxes restricted job creation by holding 
     back entrepreneurs, so too has the credit crunch. Without 
     easy access to credit, American firms are forced to postpone 
     plans for job expansion. A 1993 survey of small and mid-size 
     businesses by the Arthur Anderson Enterprise Group revealed 
     that 38 percent of all businesses surveyed were unable to 
     fulfill their capital needs. Perhaps more important, 58 
     percent of businesses that were in their first three years of 
     operation have been unable to fulfill their capital needs. 
     The same survey noted that, due to the lack of capital, 39 
     percent of the surveyed businesses were unable to expand 
     operations and almost 20 percent of them reduced 
     employment.\23\ Limited access to capital has also made it 
     more difficult for firms to purchase their own equipment, 
     forcing an increasing number of small businesses to lease 
     equipment, often at very high interest rates.\24\
       In response to this problem, the Clinton Administration has 
     called for new banking regulations governing how loans are 
     made. The Administration hopes to boost the number of loans 
     made through the Small Business Administration to ``make SBA 
     more responsive to those industries with the potential for 
     creating a higher number of jobs, those involved in 
     international trade, and those producing critical 
     technologies.''\25\ But this is unlikely to be a solution to 
     the underlying problem of restricted credit growth. The SBA 
     loan program accounts for only a small percent of capital 
     for new firms, and in any case tends to funnel dollars to 
     favored businesses rather than the best investments.
       Clinton's new plan to reform banking regulation through 
     agency consolidation will not help either. Monopolizing 
     regulatory power in the hands of one agency will make it 
     easier for heavy-handed and manipulative policies to be 
     implemented, thereby raising the regulatory burdens faced by 
     banks. Lawrence Lindsey, a member of the Board of Governors 
     of the Federal Reserve System, says, ``Monopoly regulation is 
     a bad idea. [It] will greatly harm both the banking industry 
     and the economy, and lead to an unfortunate politicization of 
     bank regulatory policy.''\26\
       Principle #4: Increasing the regulatory burden and 
     mandating numerous employee benefits is a recipe for job 
     destruction.
       The number of regulations and mandated benefit requirements 
     that employers are forced to comply with has grown steadily 
     in recent years. Estimates of the total cost that regulations 
     impose on the economy range from a low of $615 billion to a 
     high of $1.7 trillion.\27\ This burden translates into 
     millions of foregone job opportunities.\28\ For example, 
     Michael Hazilla and Raymond Kopp have estimated that 
     environmental regulations reduced aggregate employment by 
     1.18 percent as of 1990,\29\ which means over one million 
     jobs would have existed without the regulations.\30\
       Regulation and mandated benefits take their toll 
     indirectly. When the government increases this burden on the 
     private sector by promulgating new rules, firms must adjust 
     their behavior accordingly. This adjustment process may 
     require an increase in worker training, paperwork 
     requirements, or even retooling. Regardless of the adjustment 
     method, costs will be incurred. The costs of adjustment 
     directly affect the firm's profits since a greater than 
     expected amount of earnings will be exhausted in compliance 
     measures. In addition there may be extra costs associated 
     with hiring new workers. As a result, firms will try to pass 
     the costs of adjustment on to their consumers, or, if that is 
     not possible due to competitive market conditions, scale back 
     future production, investment, or new hiring. If the new 
     compliance and adjustment costs are sufficiently high, firms 
     may scale back existing production and lay off workers.
       The Effects of the Regulatory and Mandated Benefits 
     Barrier. Several studies point to the job-destroying effect 
     of the regulation and mandated benefits explosion that has 
     taken place in recent years.\31\ With the passage of mandates 
     included in the Clean Air Act Amendments of 1990, the 
     Americans With Disabilities Act of 1990, and the Civil 
     Rights Act of 1991, and the increases in the minimum wage 
     in 1990 and 1991, the burdens on employers have ballooned.
       The dramatic rise in the minimum wage alone, from $3.35 in 
     1989 to $3.80 in 1990 and $4.25 in 1991, helped push teenage 
     unemployment to the highest rate in a decade. If the Clinton 
     Administration proceeds with plans for a 50 cent hike in the 
     minimum wage, and the labor market adjusts as it has in the 
     past, there is likely to be an increase in the teenage 
     unemployment rate of between 0.5 percent and 3 percent.
       Another burdensome employer mandate will be the ``employer 
     trip reduction'' requirement of the Clean Air Act. Starting 
     this year, this will require employers in nine metropolitan 
     areas to reduce the number of employees driving to work. 
     Although no employment loss estimates are available, over 12 
     million employees will be covered by the act, making a 
     difficult to believe that some jobs will not be affected.\32\
       Whatever this intentions, civil rights employment mandates 
     also take their toll. Peter Brimelow and Leslie Spencer of 
     Forbes recently estimated the total cost of civil rights 
     regulation to be $236 billion, which translates into a loss 
     of 4 percent of GNP.\33\
       The Family and Medical Leave Act of 1993, which grants 
     employees as much as 12 weeks unpaid leave each year, 
     discourages job creation. Because many employers will not be 
     able to absorb the high costs and lost output resulting from 
     mandatory worker leave, the policy will have the unintended 
     consequence of encouraging struggling businesses not to hire 
     individuals who might take advantage of the leave policy. The 
     SBA has found the overall costs of this act to total as much 
     as $1.2 billion.\34\
       Other employer mandates that currently burden the labor 
     market include the health care requirements found in the 
     Consolidated Omnibus Budget Reconciliation Act of 1985 
     (COBRA), the prevailing wage requirements of the Davis-Bacon 
     Act, and workers and unemployment compensation payments. 
     These factors create added disincentives to job expansion 
     since taking on an additional worker means steadily higher 
     employer payroll burdens.
       Employment Thresholds. In recent years, many legislators 
     have come to realize that added regulation and mandates have 
     a destructive effect on job growth, particularly in the small 
     business sector. But, instead of attempting to craft more 
     sensible policies or deregulate where possible, they tend to 
     respond to small business concerns by adopting employment 
     thresholds. Employment thresholds exempt smaller-sized 
     businesses from certain regulations. For example, the 
     Americans With Disabilities Act currently exempts all firms 
     with fewer than 25 employees from the regulation; this will 
     be lowered to cover firms with fewer than 15 employees after 
     July 26, 1994. Other examples include the Family and Medical 
     Leave Act, which exempts business with fewer than 50 
     employees and the Plant Closing Law, which exempts 
     businesses below 100 employees.
       These thresholds have the unfortunate side-effect of 
     discouraging employers near the threshold from hiring new 
     employees. Pointing to the Family and Medical Leave Act, Ruth 
     Stafford, president of the Kiva Container Corporation, says, 
     ``Fifty is the magic number.''\35\ Her firm, like many 
     others, plans to hold employment stable just under the 50 
     employee barrier using more temporary or part-time workers. 
     This phenomenon is already being seen: according to the 
     Bureau of Labor Statistics, temporary employment grew by 20 
     percent in 1993, up from 6 percent in 1990.
       Principle #5: Sustained job growth results from 
     competitive, efficient industries that are free of excessive 
     government interference.
       Steering America onto a path of greater job creation, low 
     unemployment, and a higher standard of living will require a 
     shift of current American economic policy. The three primary 
     governmental barriers to job expansion--high taxes, limited 
     credit through irrational financial regulations, and 
     excessive regulations and added mandated benefits--all must 
     be corrected. Adopting the European system would be a 
     mistake. America should instead learn from history that where 
     goods, services, labor, and wages have been allowed to move 
     or fluctuate freely, prosperity, entrepreneurship, and high 
     employment have been the result.
       To put American back on the high-employment, high-wage 
     track, President Clinton should take several specific and 
     immediate steps to ensure American industries remain strong 
     and competitive:
       Step #1: Lower tax rates on businesses and capital. The 
     effects of high tax rates on employers and capital are direct 
     and damaging. Lowering both corporate tax rates and the 
     capital gains tax rate (while indexing it for inflation) 
     would provide an immediate and strong job stimulus by 
     reducing the cost of hiring workers and unlocking the capital 
     needed for business expansion.
       Step #2: Reject all attempts to establish a European-style 
     employment policy, especially expensive job training 
     programs. High wages, sustained employment, and increased 
     business activity should be guiding goals of public policy. 
     Mandating them should not. Costly and ineffective job 
     training programs should be ruled out as job-creating 
     options. Americans need only look at the failure of European 
     programs to understand why such an approach is a mistake. 
     Such programs require massive amounts of public spending for 
     the small number of jobs which are created.
       Step #3: Cap federal spending. This will aid job creation 
     by increasing the amount of private savings available for 
     business investment.
       Step #4: Enact comprehensive regulatory reform. The 
     ``hidden tax'' of regulation and increased mandated benefits 
     directly increase the cost of employing workers. The 
     President and Congress should establish a federal regulatory 
     budget and estimate the employment impact of regulations 
     before they take effect. The regulatory budget would place 
     a limit on the total cost that is imposed on the economy 
     each year by new federal regulations. When the budget had 
     been passed, no new regulations could be imposed--unless 
     other rules were withdrawn.
       Step #5: Adopt rational health care reform based upon 
     consumer choice and not new employer mandates. No new policy 
     action threatens to do as much damage to the labor market in 
     the immediate future as does employer-based health care 
     mandates. While reform is needed, it should not simply push 
     the cost of comprehensive health coverage onto employers 
     through expensive new payroll taxes. Accomplishing reform in 
     this manner will result in the loss of millions of jobs.\36\
       Step #6: Reform America's archaic financial and banking 
     laws. Financial restrictions such as the McFadden Act of 
     1927, the Bank Holding Act of 1956, and the Glass-Steagall 
     Act of 1933 retard bank stability and expansion and, 
     therefore, limit the credit opportunities they can offer to 
     businesses. Eliminating these impediments to financial 
     efficiency would allow businesses to take advantage of 
     expansionary opportunities by borrowing needed capital.
       Step #7: Overhaul antiquated antitrust laws. America's 
     outdated antitrust laws, such as the Sherman Antitrust Act of 
     1890 and the Clayton Antitrust Act of 1914, make it difficult 
     for firms to enter into joint production alliances that could 
     raise industrial efficiency and create new job opportunities.
       Step #8: Pass product liability reform and other tort 
     reform legislation. Currently, America's tort system saps 
     private sector entrepreneurialism, hinders product 
     innovation, and threatens the continuation of numerous 
     businesses. Without reforms limiting punitive damages and 
     streamlining costly cost procedures, an increasing number of 
     jobs will be placed at risk.
       Step #9: Continue to push for trade liberalization globally 
     while eliminating domestic barriers to free trade. While the 
     job gains will result from the wise actions already taken of 
     passing the North American Free Trade Agreement (NAFTA) and 
     General Agreement on Tariffs and Trade (GATT) agreements, 
     further efforts should be made to expand free trade 
     agreements while lowering the domestic barriers to imports.
       Step #10: Encourage the use of privatization and 
     contracting out whenever possible. Privatization and 
     contracting out not only insure that services are delivered 
     more efficiently for less money, they also allow private 
     firms to raise capital and re-invest in more productive, 
     long-term private sector jobs. Vice President Gore's National 
     Performance Review failed to tap such methods of real 
     government reform.\37\ Undertaking such measures would 
     encourage increased private sector employment while 
     demonstrating that the Administration is serious about 
     changing the way Washington works.


                               conclusion

       The Jobs Summit affords President Clinton the opportunity 
     to outline the fundamental principles of job creation to the 
     industrial nations of the world. Unfortunately, many nations, 
     specifically in Europe and more recently the United States, 
     have forgotten that low taxes, easy access to credit, 
     rational regulations, and vigorous exposure to competition, 
     are the foundation for a healthy, job-creating economy.
       The most important lesson that President Clinton can bring 
     back from Detroit is that government policies that increase 
     the cost of hiring people mean that fewer people will be 
     hired.
                                                  Adam D. Thierer,
                                                   Policy Analyst.


                               footnotes

     \1\David R. Sands, ``Clinton Announces Plans for Jobs 
     Summit,'' The Washington Times, January 11, 1994, p. B7.
     \2\Daniel J. Mitchell, ``The Budget and the Economy: A First 
     Year Assessment of the Clinton Presidency,'' Heritage 
     Foundation Backgrounder Update No. 213, February 7, 1994, p. 
     2.
     \3\Lewin-VHI, The Financial Impact of the Health Security Act 
     (Fairfax, VA: Lewin-VHI, 1993).
     \4\David R. Sands, ``Hill Republicans Criticize Clinton's 
     Jobless Measure,'' The Washington Times, February 23, 1994, 
     p. B8.
     \5\Federal Register pages, a rough estimate of the overall 
     amount of regulatory activity, ran 60,950 for 1993, the 
     highest level since the Carter Administration left office in 
     1980.
     \6\See Daniel J. Mitchell, ``Tax Rates, Fairness, and 
     Economic Growth: Lessons from the 1980's,'' Heritage 
     Foundation Backgrounder No. 860, October 15, 1991, p. 2.
     \7\Sands, ``Clinton Announces Plans . . .,'' op. cit.
     \8\Ferdinand Protzman, ``Rewriting the Contract for Germany's 
     Vaunted Workers,'' The New York Times, February 13, 1994, p. 
     F5.
     \9\Stella Dawson, ``Global Jobs Summit Delayed Amid NAFTA 
     Battle,'' The Reuters European Business Report, November 4, 
     1993.
     \10\Quoted in Protzman, op. cit.
     \11\Peter Gumbel, ``Western Europe Finds That It's Pricing 
     Itself Out of the Job Market,'' The Wall Street Journal, 
     December 9, 1993, p. A1.
     \12\David R. Henderson, ``Eurosclerosis Spreads to Our 
     Shores,'' The Wall Street Journal, October 14, 1993, p. A16.
     \13\Protzman, op. cit.
     \14\Kenneth A. Couch, ``Germans and Job Training, Education 
     and Us,'' The American Enterprise, November/December 1993, p. 
     18.
     \15\Ibid., p. 13.
     \16\See Edward L. Hudgins, Ph.D., ``Why Infrastructure 
     Spending Won't Jump Start the Economy,'' Heritage Foundation 
     Memo to President-Elect Clinton No. 9, January 15, 1993.
     \17\John Semmens, ``Government Investments Yield Poor 
     Results,'' Heartland Institute, A Heartland Perspective, 
     October 18, 1993, p. 2.
     \18\John Semmens, ``Federal Transit Subsidies: How Government 
     Investment Harms the Economy,'' The Freeman, February 1994, 
     p. 71-75.
     \19\Mark Bloomfield and Margo Thorning, Ph.D., ``The Impact 
     of President Clinton's Tax Proposals on Capital Formation,'' 
     American Council for Capital Formation, Testimony to the 
     House Ways and Means Committee, March 16, 1993, p. 5.
     \20\Not included in the $10.7 billion figure are the 
     potential costs from the FDIC Improvement Act of 1991, which 
     could push regulatory costs even higher.
     \21\American Bankers Association, ``The Banking Industry: The 
     Key to Jobs and Economic Growth,'' February 1, 1993, p. 8.
     \22\American Bankers Association, ``Cutting the Red Tape: Let 
     Banks Get Back to Business,'' November 1992.
     \23\Arthur Anderson Enterprise Group, Survey of Small and 
     Mid-Sized Businesses: Trends for 1993, June 1993, p. 11.
     \24\Michael Selz, ``Many Small Businesses Are Sold on Leasing 
     Equipment,'' The Wall Street Journal, October 27, 1993, p. 
     B2.
     \25\The National Performance Review, Creating a Government 
     That Works Better & Costs Less, September 7, 1993, p. 148.
     \26\Lawrence Lindsey, ``How to Corrupt Banking,'' Forbes, 
     January 31, 1994, p. 100.
     \27\See ``Manhandled by Mandates,'' Forbes, October 25, 1993, 
     p. 39; William G. Laffer III and Nancy A. Bord, ``George 
     Bush's Hidden Tax: The Explosion in Regulation,'' Heritage 
     Foundation Backgrounder No. 905, July 10, 1992.
     \28\William G. Laffer III, ``How Regulation is Destroying 
     American Jobs,'' Heritage Foundation Backgrounder No. 926, 
     February 16, 1993.
     \29\Michael Hazilla and Raymond J. Kopp, ``Social Cost of 
     Environmental Quality Regulations: A General Equilibrium 
     Analyis,'' Journal of Political Economy, Vol 98, No. 4, 
     (1990) p. 867.
     \30\Laffer and Bord, op. cit., p. 6.
     \31\See Laffer, op. cit., p. 7; Gary Anderson and Lowell 
     Gallaway, ``Derailing the Small Business Job Express,'' 
     (Washington, D.C.: Joint Economic Committee, November 7, 
     1992); Lowell Gallaway and Richard Vedder, ``Why Johnny Can't 
     Work: The Causes of Unemployment,'' Policy Review, Fall 1992; 
     Alan Reynolds, ``Cruel Costs of the 1991 Minimum Wage,'' The 
     Wall Street Journal, July 7, 1992, p. A14.
     \32\See David Andrew Price, ``Newest Mandate--Everyone Into 
     the Carpool,'' The Wall Street Journal, November 8, 1993, p. 
     A14.
     \33\Peter Brimelow and Leslie Spencer, ``When Quotas Replace 
     Merit, Everybody Suffers,'' Forbes, February 15, 1993, p. 82.
     \34\Eileen Trzcinski and William T. Alpert, ``Leave Policies 
     in Small Business: Findings From the U.S. Small Business 
     Administration Employee Leave Survey,'' Small Business 
     Administration Office of Advocacy Research Summary Number 99, 
     March 1991.
     \35\Jeanne Saddler, ``Small Firms Try To Curb Impact of Leave 
     Law,'' The Wall Street Journal, August 5, 1993, p. B1.
     \36\See Daniel J. Mitchell, ``The Economic and Budget Impact 
     of the Clinton Health Plan,'' Heritage Foundation 
     Backgrounder No. 974, January 13, 1994.
     \37\See Scott A. Hodge and Adam D. Thierer, ``The National 
     Performance Review: Falling Short of Real Government 
     Reform,'' Heritage Foundation Backgrounder No. 962, October 
     7, 1993.

     Note.--Nothing written here is to be construed as necessarily 
     reflecting the views of The Heritage Foundation or as an 
     attempt to aid or hinder the passage of any bill before 
     Congress.

           U.S. Citizens Still Top World in Purchasing Power

                  [Per capital gross domestic product]

United States...................................................$22,130
Switzerland......................................................21,780
Germany..........................................................19,770
Japan............................................................19,390
France...........................................................18,430
United Kingdom...................................................16,340

Note.--Data are for 1990. Figures represent Purchasing Power Parities, 
which take into account exchange rates, inflation, and other currency 
differences.

Source: United Nations World Development Report, 1993.


                Legally required burdens employers face

     Payroll Taxes:
       [X] Social Security (FICA)
       [X] Unemployment

     Other Taxes:
       [X] Corporate Income Tax
       [X] Sales Taxes

     Mandated Benefits:
       [X] Minimum Wage Act of 1938
       [X] Worker's Compensation
       [X] Davis-Bacon Act of 1931 (Prevailing wage requirements)
       [X] Family and Medical Leave Act of 1993
       [X] Americans With Disabilities Act of 1990
       [X] Consolidated Omnibus Budget Reconciliation Act of 1985 
           (health benefits)
       [X] Equal Pay Act of 1963

     Various Regulations:
       [X] Various environmental regulations (e.g. Clean Air Act)
       [X] Occupational Safety and Health Act of 1970
       [X] Equal Employment Opportunity Act of 1972
       [X] Age Discrimination Act of 1967
       [X] Fair Labor Standards Act of 1935 (overtime regulations)
                                  ____


[From the National Center for Policy Analysis Brief, Analysis No. 110, 
                             June 27, 1994]

                   Why Employer Mandates Hurt Workers

       Are employer mandates the best way to pay for health care 
     reform? Virtually all studies of mandates conclude that they 
     kill jobs. Even the Clinton administration agrees.
       An Employer Mandate is Really an Employee Mandate. 
     Economists generally agree that fringe benefits are earned by 
     workers and that they substitute for wages. Employers cannot 
     afford to pay more in total compensation than the value of a 
     worker's output. So if labor costs go up because of mandates, 
     the employer usually is forced to reduce wages by an 
     offsetting amount.
       Thus, requiring employers to provide health insurance is 
     simply a disguised attempt to force workers to take health 
     insurance rather than wages. Nominally, the proposed mandates 
     apply to employers. Actually, they force workers to purchase 
     health insurance, whether they want to or not.
       Why Mandates Would Cost Jobs. When the government forces 
     people to earn less and to pay for health insurance they may 
     not want, working becomes less attractive. This is especially 
     true for marginal workers--teenagers, working wives and the 
     elderly--who may already be covered under some other policy. 
     In addition, employers may not be able to substitute lower 
     wages for health insurance for some employees because of the 
     minimum wage law and other legal barriers. In that case, 
     workers would simply lose their jobs.
       Moreover, to the extent that the cost of mandated health 
     insurance is not paid for by lower wages, it is a tax on 
     capital. Taxes on capital reduce the amount of capital, which 
     in turn reduces the demand for labor
       Mandates Under the Clinton Plan. The Clinton plan's 
     mandates would be especially onerous because:
       Workers such as teenagers, part-time workers, two-worker 
     families and elderly workers on Medicare would have to pay 
     again for coverage they already have;
       The Clinton plan's requirement of community rating would 
     double the cost of health insurance for younger workers, who 
     tend to place the lowest value on health insurance;
       The plan would impose a disguised 7.9 percent tax on labor 
     income;
       Although there are subsidies for small businesses with low-
     income employees, the taxes needed to fund these subsidies 
     also would cost jobs.

             ESTIMATED JOB LOSS FROM THE CLINTON HEALTH PLAN            
------------------------------------------------------------------------
                                           Probable Job    Potential Job
                  Study                        Loss            Loss     
------------------------------------------------------------------------
ALEC....................................  1.0 million...  ..............
State of California.....................  2.6 million...  3.7 million.  
DRI/McGraw-Hill.........................  659,000.......  908,000.      
Employment Policies Institute...........  780,000-890,00  2.3 million.  
                                           0.                           
JEC/GOP.................................  710,000.......  807,000-1.2   
                                                           million.     
NCPA/Fiscal Associates..................  738,000*......  ..............
NFIB/CONSAD.............................  850,000.......  3.8 million.  
RAND....................................  600,000.......  ..............
      Average...........................  1.0 million...  2.1 million.  
------------------------------------------------------------------------
*The NCPA study also includes an ``Optimistic'' forecast of 677,000 jobs
  lost.                                                                 

       The Clinton Administration's Estimates of Lost Jobs. The 
     Clinton administration estimates that its health reform plan 
     would cost 600,000 jobs, but says that most of these losses 
     would be offset by job gains elsewhere in the economy. The 
     administration has modest support among outside analysts. 
     Economist Alan Kruger of Princeton University believes that 
     only about 200,000 jobs would be lost. The Congressional 
     Budget Office claims that the administration's proposal would 
     ``probably have only a small effect on low-wage employment.'' 
     These administration-friendly analysts believe job loss would 
     be minimal because the additional cost of health insurance 
     premiums would be largely absorbed by lower wages and slower 
     wage growth, thereby leaving labor costs essentially 
     unchanged.
       More Realistic Estimates of Lost Jobs. Eight major 
     independent studies of the impact of employer mandates 
     estimate job losses ranging from a low of 600,000 (the Rand 
     Corporation) to a high of 3.8 million (CONSAD Research 
     Corporation). The average predicted loss is 1 million jobs. 
     [See the table.]
       The range reflects the uncertainty about how an employer 
     mandate would affect employers and workers. An employer 
     insurance mandate would raise labor costs to employers, but 
     they would pass much of those costs on to workers by lowering 
     wages. The more employers are able to shift their increased 
     labor costs to employees, the fewer jobs would be destroyed. 
     For example:
       The Rand study, which forecast the smallest job loss, 
     assumes that 85 percent of the increased labor cost would be 
     shifted back to workers in the form of reduced wages;
       The Employment Policies Institute study assumes that 70 
     percent of the increased labor cost would be shifted back to 
     lower wages;
       The American Legislative Exchange Council study assumes 
     wage shifting of both 62 percent and 85 percent.
       Estimates of Lost Wages. The wages of highly-paid workers 
     who already receive health benefits would be little affected 
     by employer mandates. Because the wages of the lowest-paid 
     workers cannot be cut very much, jobs then would be at great 
     risk. The large in-between group would face significant wage 
     reductions.
       Five of the eight studies examine the wage effects of an 
     employer mandate, using different approaches. The studies 
     forecast these aggregate wage losses in 1998:
       Employment Policies Institute: $27 billion;
       State of California: $68 billion;
       American Legislative Exchange Council: $93 billion;
       National Center for Policy Analysis: $69 billion;
       CONSAD Research Corporation: $28 billion.
       Only the CONSAD study estimates the number of employees 
     affected. It sets the number at 23 million, making the 
     average wage loss $1,200 per worker in the in-between group. 
     The Joint Economic Committee of Congress estimates that as 
     many as 41 million workers would be affected, with the loss 
     per affected worker ranging up to $2,300.
       Estimates of the Economic Impact. Four of the major studies 
     also consider the impact of an employer mandate on the 
     economy as a whole. Their predictions:
       DRI/McGraw-Hill: gross domestic product (GDP) will be down 
     by $53 million in the year 2000;
       The National Center for Policy Analysis: GDP will be down 
     by $90 billion in 1998;
       American Legislative Exchange Council: personal income will 
     be down $112 billion by 1998;
       State of California: GDP will cumulatively decrease $224 
     billion from 1995 through 1998.
       Other Studies. The Joint Economic Committee of Congress has 
     cataloged 40 studies of employer mandates. Only the eight 
     studies examined here used econometric models to produce 
     specific numbers on job loss. However, all 40 came to the 
     same general conclusion: employer mandates destroy jobs and 
     reduce wages.
                                  ____


          [From the Heritage Foundation F.Y.I., July 6, 1993]

                 The Jobs Impact of Health Care Reforms

                  (By Peter J. Ferrara, Senior Fellow)


                              introduction

       Only one major health care reform proposal guarantees 
     secure and portable health insurance coverage for every 
     American family while not destroying jobs, according to a 
     recent study conducted for the National Federation of 
     Independent Business (NFIB), the nation's largest association 
     of small business owners. That reform proposal is The 
     Heritage Foundation's Consumer Choice Health Plan.\1\
       CONSAD Research Corporation, which conducted the study, is 
     a major health care research firm based in Pittsburgh.\2\ Its 
     calculations are based on labor impact models developed for 
     the U.S. Department of Health and Human Services. In the NFIB 
     study, CONSAD concludes: ``The Heritage Foundation's proposal 
     is estimated to have no effect, severe or moderate, on 
     employment.'' The other universal health care proposals 
     analyzed by CONSAD were the ``managed competition'' plan 
     developed by the so-called Jackson Hole Group, the employer 
     mandate plan designed by California Insurance Commissioner 
     John Garamendi, and the ``play or pay'' bill introduced in 
     1991 by the Democratic leadership in Congress. Each of these 
     would lead to heavy job losses, because of the extra labor 
     costs they would impose on firms. Another proposal examined 
     by CONSAD, the Conservative Democratic Forum plan, would not 
     cost jobs. But unlike the other plans modelled, including the 
     Heritage proposal, it would not lead to universal coverage.

                           HOW JOBS WOULD BE AFFECTED BY MAJOR HEALTH REFORM PROPOSALS                          
----------------------------------------------------------------------------------------------------------------
                             Proposal                                        Jobs lost           Jobs at risk\1\
----------------------------------------------------------------------------------------------------------------
Heritage..........................................................  No jobs lost..............  No jobs at risk.
Jackson Hole......................................................  900,000 to 1.5 million....  16.3 million.   
Garamendi.........................................................  390,000 to 650,000........  6.6 million.    
Play or Pay.......................................................  650,000 to 1.1 million....  11.5 million.   
CDF\1\............................................................  None\2\...................  None.\2\        
----------------------------------------------------------------------------------------------------------------
\1\``At risk'' means workers have a high probability of layoff or job elimination, and stand the greatest chance
  of substantial losses in wages and benefits.                                                                  
\2\The CDF Plan, unlike the other proposals, would not achieve universal coverage.                              

                           the heritage plan

       Under the Heritage Consumer Choice Health Plan, each worker 
     would have the right to use the money currently paid by his 
     or her employer for health coverage to purchase any other 
     health insurance plan of the worker's choice, from any 
     source. Any resulting savings would go directly to the 
     family. In addition, the worker could direct these and other 
     funds into a medical savings account to pay for future health 
     expenses. These workers, as well as workers currently without 
     employer-provided insurance, would receive a substantial tax 
     credit for the payments made for family health insurance 
     premiums, medical savings account contributions, or out-of-
     pocket health expenses. The credit would be ``refundable,'' 
     meaning that families near or below the tax threshold would 
     receive the equivalent of the tax credit in the form of a 
     voucher.
       Through this market-oriented plan, consumers are given 
     broad, powerful market incentives to consider the costs and 
     benefits of different health insurance plans, and the medical 
     services they buy directly. They would tend to avoid 
     unnecessary health care. And since consumers would be far 
     more directly concerned with costs, doctors, hospitals, and 
     insurers would compete far more vigorously to reduce costs. 
     Such market incentives and competition, not government price 
     controls, are the most effective means for reducing cost.\3\
       At the same time, the Heritage Plan would require each 
     individual to purchase a basic catastrophic health plan, just 
     as in most states automobile drivers are required to purchase 
     at least a minimum liability insurance policy. This health 
     insurance requirement is to protect other members of society 
     from having to pay for the cost of care for the uninsured. 
     Through the refundable credit, low-income Americans would be 
     given government assistance to pay the premiums.
       The Heritage Plan thus provides for universal coverage 
     without imposing extra costs on employers--and so would not 
     reduce employment.
       CONSAD Estimate of Job Losses: No jobs lost or put at risk.


                         The Jackson Hole Plan

       The ability of the Heritage Plan to achieve universal 
     coverage while protecting jobs contrasts sharply with the 
     managed competition proposal advanced by the Jackson Hole 
     group of policy experts, including Professor Alain Enthoven 
     of Stanford University, physician Paul Ellwood, and 
     others.\4\ This proposal would require all employers to 
     purchase at least a set of standards federally designed 
     health insurance plans for their employees and their 
     families, through regional insurance cooperatives--or 
     directly from insurers in the case of larger employers. The 
     proposal seeks to steer workers into Health Maintenance 
     Organizations (HMOs) or similar managed care networks in 
     which the consumer's choice of doctors and services is 
     limited. This proposal is typically called ``managed 
     competition,'' or the ``Jackson Hole Plan.''
       The CONSAD study concludes that because of the cost of the 
     mandate to employers, the managed competition proposal would 
     put 16.3 million small business jobs, or almost 25 percent of 
     all small business employment, ``at risk.'' This means that 
     workers would be subjected to prolonged layoffs, reduced 
     compensation, or future job cutbacks and plant closings. The 
     study estimates that between 900,000 and 1.5 million small 
     business jobs would be lost once the proposal was 
     implemented. These negative effects would occur because the 
     mandated employer payments for health insurance would raise 
     the cost of labor and, consequently, encourage many employers 
     to reduce compensation or to cut jobs.
       CONSAD Estimate of Job Losses: 900,000 to 1.5 million jobs 
     directly lost; 16.3 million jobs put at risk.


                           The Garamendi Plan

       Another proposal analyzed in the CONSAD study is advanced 
     most prominently by the Insurance Commissioner of California, 
     John Garamendi. This proposal would be similar to the managed 
     competition proposal, but would finance the health insurance 
     package through a payroll tax. Under the proposal, employers 
     and employees would pay a combined 9 percent payroll tax to 
     regional cooperatives, which would make available to families 
     a range of plans meeting minimum specifications.
       This proposal bears the closest similarities to the plan 
     being developed by the Clinton Administration. The CONSAD 
     study estimates that this proposal would put about 6.6 
     million small business jobs, or about 10 percent of all small 
     business employment, at risk of reduced work or benefits, 
     with from 390,000 to 650,000 jobs eliminated altogether. This 
     loss again occurs because the payroll tax on employers raises 
     the cost of labor. The study notes, incidently, that the 
     proposed 9 percent payroll tax probably would be insufficient 
     to finance the expected benefits, which would include 
     workmen's compensation and health care for auto injuries. If 
     a higher payroll tax were necessary, as is likely, it would 
     cause larger job losses.
       CONSAD Estimate of Job Losses: 390,000 to 650,000 jobs 
     directly lost; 6.6 million jobs put a risk.


                          The Play or Pay Plan

       Another major proposal examined in the CONSAD study is the 
     ``play or pay'' plan advanced in recent years by leading 
     congressional Democrats.\5\ This is the primary proposal for 
     employer-mandated health insurance being considered in 
     Congress. Under this proposal, employers have a choice: 
     Either they must purchase health insurance providing at least 
     certain specified benefits to their employees and their 
     dependents, or pay a tax for similar coverage to be provided 
     by the government.
       The CONSAD study concludes that the additional labor costs 
     imposed on many firms by this requirement would put 11.5 
     million small business jobs, or about 17 percent of all small 
     business employments, at risk of reduced work or 
     compensation. CONSAD estimates that from 650,000 to 1.1 
     million Americans would lose their jobs.
       CONSAD Estimate of Job Losses: 650,000 to 1.1 million jobs 
     directly lost; 11.5 million jobs put at risk


                              the cdf plan

       The final major proposal studied is a version of managed 
     competition included in a bill (H.R. 5836) introduced by 
     Representative Jim Cooper, the Tennessee Democrat, and other 
     members of the Conservative Democratic Forum, a caucus of 
     conservative Democrats in the House of Representatives. While 
     similar to the Jackson Hole Group's proposal, this bill 
     differs in a crucial respect: It would not require employers 
     to pay for employees health insurance. It would require 
     employers only to make such insurance available through 
     regional cooperatives for purchase by workers if the employer 
     did not choose to pay for it.
       Since the CDF bill would not require any increase in labor 
     costs, the CONSAD study found it would have no significant 
     negative effect on employment or jobs. The bill, however, 
     does not achieve universal coverage, unlike any of the others 
     plans analyzed, since the uninsured likely would remain 
     without insurance. The reason: Neither employee nor employer 
     would have any new requirement or assistance to purchase 
     coverage.


                               conclusion

       Most of the leading health care reform proposals, including 
     the emerging Clinton plan, seek to finance expanded health 
     insurance at least in part by imposing new financial 
     obligations on employers. This method of finance has a 
     political advantage. It hides must of the cost of coverage 
     from those who will ultimately pay the cost--American 
     workers. This cost is not just financial. By increasing the 
     cost of labor in many firms, it would mean fewer jobs and 
     reduced wages paid to those with jobs.
       This effect is well understood by economists and business 
     owners, if not, unfortunately, by the workers not affected. 
     The CONSAD study actually quantifies these effects. The study 
     indicates that three of the five major proposals examined--
     and by implication the emerging Clinton plan--would mean 
     heavy job losses and put millions more jobs at risk.
       There are only two plans that would not cost jobs. One is 
     the proposal advanced by the Conservative Democratic Forum. 
     But while it avoids jobs losses by not imposing a mandate on 
     employers, it does not achieve universal coverage. There is 
     only one plan that leads to universal coverage with no job 
     losses. That is the Heritage Foundation Consumer Choice 
     Health Plan.


                               footnotes

     \1\See Stuart M. Butler, ``A Policy Maker's Guide to the 
     Health Care Crisis, Part II: The Heritage Consumer Choice 
     Health Plan,'' Heritage Foundation ``Talking Points,'' 
     February 28, 1992; Stuart M. Butler, ``Using Tax Credits to 
     Create an Affordable Health System,'' Heritage Foundation 
     ``Backgrounder,'' No. 777, July 26, 1990; Stuart Butler and 
     Edmund F. Haislmaier, eds., ``A National Health System for 
     America'' (Washington, D.C.: The Heritage Foundation, 1989).
     \2\CONSAD Research Corporation, ``The Employment Impact of 
     Proposed Health Care Reform on Small Business,'' May 6, 1993. 
     Available from the NFIB Foundation, Suite 700, 600 Maryland 
     Avenue, S.W., Washington, D.C. 20024.
     \3\Edmund F. Haislmaier, ``Why Global Budgets and Price 
     Controls Will Not Curb Health Costs, Heritage Foundation 
     Backgrounder No. 929, March 8, 1993.
     \4\Peter J. Ferrara, ``Managed Competition: Less Choice and 
     Competition, More Costs and Government in Health Care,'' 
     Heritage Foundation ``Backgrounder'' No. 948, June 29, 1993; 
     Robert E. Moffit, ``Overdosing on Management: Reforming the 
     Health Care System through Managed Competition,'' Heritage 
     Lecture No. 441, April 15, 1993.
     \5\Stuart M. Butler, ``Why `Play or Pay' National Health Care 
     Is Doomed to Fail,'' Heritage Lecture No. 329, August 14, 
     1991; Edmund F. Haislmaier, ``The Mitchell Health AmericaAct: 
     A Bait and Switch for American Workers,'' Heritage Foundation 
     Issue Bulletin No. 170, January 17, 1992.

              The Health Security Act--An NFIB White Paper


                           executive summary

       NFIB and its small business owners have been crying out for 
     health care reform louder and longer than most. In 1986, NFIB 
     members declared health care reform their number one 
     priority. Since that time, we have been polling small 
     business owners on various elements of reform schemes and we 
     now have a fairly solid conception of what the small business 
     community wants--and doesn't want--from health care reform.
       Small business does not want the system envisioned by the 
     Health Security Act.
       Small business owners are in a unique position within the 
     health care reform debate. On one hand, they are a primary 
     ``victim'' of the current cost crisis and, on the other hand, 
     they are being asked to fund the lion's share of the reform 
     bill. According to HHS Secretary Shalala, the business 
     community will fund approximately 60 percent of the new plan. 
     Small firms will have to fund insurance coverage for their 
     employees and dependents, a new cost for 55-60 percent of the 
     American business community. According to Lewin/VHI, the 
     proposed plan will cost American small business nearly $29 
     billion in new expenditures for the 80 percent mandate alone. 
     NFIB estimates that at least two of every three employers 
     would have increased health insurance costs if the Health 
     Security Act were enacted, almost all of which would be small 
     employers.
       NFIB's contacts with small business owners--the people who 
     create the jobs, meet payroll and make their business run 
     every day--show significant fear of a huge new program 
     affecting millions of businesses and hundreds of millions of 
     Americans, supported by an unprecedented bureaucracy. The 
     more details of the plan they see, the more concerned small 
     business owners become.
       In the beginning of the debate, President Clinton laid out 
     two main goals with which nearly everyone agreed: providing 
     coverage to the nation's uninsured and mitigating the cost 
     crisis in health care. NFIB strongly supports these two 
     critical goals, along with the President's six essential 
     principles against which any reform plan should be measured. 
     However, we believe the plan falls far short on the goal of 
     reducing costs, and is untrue to the six principles:
       Security: We believe the plan trades job security for 
     health security.
       Simplicity: The plan is extraordinary complex for the 
     business owner and in overall structure.
       Responsibility: Small business owners will bear a 
     disproportionate share of the responsibility.
       Choice: For the business owner, choice and flexibility are 
     eliminated.
       Quality: Caps on spending and excessive government control 
     could reduce quality and innovation.
       Savings: With a huge new bureaucracy in place, realization 
     of savings is dubious.
       In the beginning a requirement for employers to provide 
     coverage for their employees and dependents seemed to some to 
     be the simplest solution. However, the real life implications 
     are fast becoming known. The attached sheet on public opinion 
     about the employer mandate shows that the American public is 
     not in favor of these types of restrictive requirements on 
     businesses.
       While nearly all provisions of the plan affect small 
     business, the most critical can be broken down into five 
     general categories:
       Financing: NFIB does not believe that the funding for this 
     plan is sound, nor do we find the estimates on target. The 
     country cannot afford for the small business community to be 
     the primary financing mechanism for a vast new entitlement 
     program. In the event of a funding shortfall, every financial 
     safety valve is connected to the business community and 
     therefore to jobs. Given the choice of cutting the benefit 
     package, raising taxes or passing on the cost to employers, 
     the government's predictable choice will be the latter.
       Subsidies: Small business owners, even those who believe 
     they may be better off in the short term as a result of the 
     proposed subsidies, do not find these promises credible. 
     First, the subsidy levels have shifted several times since 
     first announced and an overall cap has been imposed. Second, 
     Administration officials have declared them temporary. Third, 
     they may be practically meaningless. In the case of a 
     shortfall by the state or an alliance, employers may be 
     ``assessed'' again to make up the difference.
       Mandate: While economists may not agree on everything, one 
     thing they do agree on is the impact of payroll taxes on job 
     creation. Payroll taxes are without a doubt the small 
     business owner's biggest financial burden. In fact, most 
     small firms now pay more in payroll taxes than they do in 
     income taxes. Payroll taxes must be paid whether the firm is 
     profitable or not, and they raise the cost of hiring and 
     keeping employees. The 80 percent employer mandate is by 
     definition a new broad-based payroll tax. The result: higher 
     price reduction in benefits, fewer jobs created, potentially 
     widespread layoffs and fewer business start ups.
       Simplicity: Small business owners believe they will need an 
     entire new employer benefits department to comply with the 
     Health Security Act. Obviously, for most of the nation's 
     small firms that is impossible. Contrary to what many 
     lawmakers believe, the administrative burden for small firms 
     under the President's proposal will expand markedly. Rather 
     than spending productive time building and improving the 
     business, business owners will be transformed into the 
     government's administrative enforcer under the reform plan.
       Expansion of Government: The Health Security Act proposes 
     an unprecedented expansion of government bureaucracy to 
     support the new system. While small business owners believe 
     government has a role to play in health care reform, they see 
     the proposed structure as far too expensive because it leaves 
     virtually nothing in the health care sector outside of 
     government control. Expanding government involvement in a 
     program has never improved a program, nor brought down its 
     overall costs.
       NFIB believes the plan to be overpromised, underfunded, and 
     a tremendous burden for business owners.
       NFIB and its over 600,000 members across the country have 
     been advocating comprehensive health care reform since 1986. 
     Our positions on various aspects of reform plans have been 
     established by our members through seven years of polling on 
     the subject of health reform. In the 103rd Congress, reform 
     plans supported by NFIB include the Managed Competition Act 
     of 1993 (Senators Breaux and Durenberger), the Health Equity 
     Access Reform Today Act of 1993 (Sen. Chafee, et. al) and 
     plans introduced by Rep. Michel, Sen. Nickles and others.

                     The Clinton Health Reform Plan


                  Provisions Concerning Small Business

       Employers are required to pay for 80 percent of coverage 
     for employees and dependents.
       The requirement that employers pay 80 percent of the health 
     insurance costs for all employees and their dependents is no 
     different than a new payroll tax. This is especially true for 
     the 55-60 percent) of the business community that does not 
     provide health insurance. In fact, is the single largest 
     payroll tax increase in history.
       Employers must cover part time and seasonal workers, in 
     addition to picking up Medicare costs for employees over age 
     65.
       Payments made for two worker families are calculated so 
     that both employers must pay, based on a complicated and 
     bureaucratic formula (payment--80 percent of average weighted 
     premium divided by the average number of workers per family 
     type for that region).
       Employers may be required to send payments to multiple 
     alliances.
       Alliances may require employers to pay by electronic 
     transfer.
       Recordkeeping and calculations to determine eligibility for 
     the subsidy are complicated and cumbersome. For most small 
     firms, fluctuating wages will make this a nightmare to 
     determine.
       Employers must provide alliance with all relevant 
     identification and employment information for each employee, 
     forward all relevant health plan and alliance information to 
     their employees, report any and all changes in personnel to 
     the purchasing alliance and track workers' family status.
       Extensive records must be kept and made available to the 
     alliance. At year end, businesses must reconcile their 
     payments with the alliance to ensure compliance and must 
     report information on wages and number of employees to ensure 
     eligibility for subsidies.
       Alliances can audit employers to ensure compliance.
       The Clinton plan changes the tax treatment of certain 
     earnings of an S corporation, significantly increasing the 
     Medicare tax on many S corporation shareholders. Also, 
     shareholder earnings will now be included in the calculation 
     of payroll, reducing the small business subsidy for many.
       The plan is likely to significantly narrow the definition 
     of ``independent contractor.'' The plan grants the Treasury 
     Department the authority to issue new rules defining who is 
     an employee for purposes of FICA, FUTA and the health plan 
     premium. This substantial new power allows the IRS to 
     override anything in current law except for the new safe 
     harbor created by the plan.
       Since the regional alliances will be responsible for 
     collecting premiums from employers, they will have to make a 
     determination as to which workers are independent contractors 
     and which are employees. Problems may develop in cases where 
     the regional alliance classifies a worker as an employee, but 
     the IRS considers that worker to be an independent contactor.
       States are permitted to opt out of the system and choose 
     single payer for all or part of the state.
       Employers may be required to pay additional amounts if a 
     state or alliance fails to meet its budget target or collect 
     the premiums it is owed.
       The Administration's proposal establishes a standard 
     benefits package that has been compared to those provided by 
     ``Fortune 500'' companies. In addition, the National Board 
     that will administer the system can add benefits to the 
     package, as can individual states.
       Alliances have the potential to become huge, government-run 
     entities with significant regulatory powers.
       The alliances will have strictly set boundaries, may not 
     cross state lines and may not split MSAs. Since so many 
     businesses operate across state lines or across MSAs, the 
     employer may have to pay multiple alliances compounding the 
     administrative complexity.
       Employers would lose all control over their health 
     insurance costs. Self insurance for forms under 5000 
     employees will not be allowed, and all ability to control 
     benefits and premium costs will be low.
       The national board is given extraordinary power, including 
     determining per capita premium targets and alliance budgets, 
     approving state systems, interpretation and upgrade of 
     standard benefit package, and general oversight and 
     enforcement.
       The Administration's proposal is a massive top-down 
     reorganization of the nation's health care system with an 
     unprecedented level of government involvement and control 
     over health care. With such a powerful National Health Board, 
     potentially hundreds of Health Alliances, and dozens of new 
     agencies proposed to run the system, the Administration's 
     plan is government-intensive.
       The plan sets up an infrastructure that could easily be 
     used as a launching pad for a Canadian style, single payer 
     health care system.
       A 7.9 percent cap for large corporations with fewer than 
     5000 employees is a huge windfall for many big corporations 
     that have allowed their health care costs to skyrocket. 
     General Motors and Ford, for example, currently pay close to 
     20 percent of payroll in health costs. For the majority of 
     larger firms with over 100 employees, overall costs will go 
     down by about $14.5 billion. In addition, the Administration 
     has recommended that the government pick up 80 percent of the 
     health insurance costs of early retirees, another boon for 
     large corporations.
       The bill's malpractice language is weak, providing only for 
     some alternative dispute resolution, a collateral source rule 
     and a nominal limit on attorney's fees.

                        The Health Security Act


                        where's the simplicity?

       One of President Clinton's principles for health care 
     reform is ``simplicity.'' However, as we've seen it laid out, 
     the plan seems anything but simple for the small business 
     owner. In addition to the requirement to fund coverage for 
     all employees and dependents, business owners must comply 
     with far reaching and complex information reporting. Although 
     the plan removes the responsibility for ``shopping'' for 
     coverage, it has multiplied the employer's administrative 
     burden.
       Following is a list of employer administrative 
     requirements:
       Reporting: Prior to enrollment, the business owner must 
     provide to the alliance identification and employment 
     information for each employee.
       Once a year the employer must furnish the following data to 
     the alliance: number of months of full time equivalent 
     employment for each employee and each class of enrollment, 
     amount deducted from wages for the family share of premiums, 
     total employer premium payment for the year for all employees 
     in each alliance area, the number of full time equivalent 
     employees for each class of enrollment (i.e. the number of 
     single employees or employees with dependents) broken down by 
     month, the amount of wages covered for each employee, any 
     employer collection shortfall payments and any additional 
     information specified by the Department of Labor.
       Each month, the employer must apprise the alliance of any 
     information on a change in an employee's employment status 
     (such as a firing or hiring, wage increase, change for part 
     time to full time, etc.), and any change in employee's family 
     status (such as a divorce, marriage, new dependent).
       For a new employee, the employer must provide 
     identification information, home address, alliance area of 
     residence, class of family enrollment (divorced, single, 
     dependents), health plan employee is currently enrolled in, 
     whether employee has moved from one area to another and any 
     additional information the Board or the Department of Labor 
     may specify.
       Employers must provide to each employee information on the 
     number of months of full time equivalent employment for each 
     class of enrollment, the amount of wages attributable to 
     qualified employment, the amount of covered wages, the total 
     family share deducted from wages and any other information 
     that the Department of Labor may specify. [If the employer 
     paid premiums for employees to more than one alliance, 
     information must be reported separately for each alliance.]
       Payment Calculation: In order to calculate his or her 
     contribution, the business owner must determine which 
     ``family status'' category each employee fits into, track 
     that throughout the year and pay 80 percent of the alliance's 
     average weighted premium.
       Payments made for two worker families are calculated so 
     that both employers must pay, based on a complicated and 
     bureaucratic formula (payment=80 percent of average weighted 
     premium divided by the average number of workers per family 
     type for that region).
       Payments for part time workers are calculated pro-rata 
     based on a 30 hour baseline. For example, for an employee 
     working 10 hours a week, the employer must pay one-third of 
     80 percent of the average weighted premium for the employee's 
     chosen plan.
       In order to determine whether they qualify for a subsidy, 
     an employer must calculate the company's average wages (total 
     wages of qualified employees divided by the number of full 
     time equivalent employees). This figure must be calculated 
     each month, then payments must be reconciled at year end. 
     Monthly fluctuations, common in small firms, make this an 
     administrative nightmare.
       Recordkeeping: Employers must keep extensive records of all 
     these transactions and calculations and make them available 
     to the alliance. At year end, all payments and wages must be 
     reconciled and reported to the alliance.
       Employers may be audited by the alliance.
       A true understanding of the small business community would 
     reveal that many of the smallest firms, subsidy or no, could 
     crumble under the combined weight of the new administrative 
     requirements and the 80 percent mandate. The administrative 
     burdens of the proposal are just as much a tax as the 
     requirement to pay 80 percent. The average small firm does 
     not have a ``green eyeshades'' benefit administrator in its 
     backroom and did not get into business to serve as a partner, 
     or administrator, for the federal government. Where's the 
     simplicity?


                 the employer mandate is a tax on jobs

       ``A majority of House members and the House parliamentarian 
     view the employer mandate in the Clinton health reform plan 
     as a form of tax revenue.''--BNA Daily Report for Executives, 
     November 1993.
       The Health Security Act requires all employers to pay 80 
     percent of the health insurance costs for all current and 
     future employees and their dependents and a pro-rated portion 
     of this 80 percent requirement for part-time employees and 
     their families. After reviewing the Health Security Act, NFIB 
     reasserts what it has argued all along; the mandate-to-pay is 
     a payroll tax increase that will result in job loss in the 
     smallest weakest, newest businesses in the U.S. economy. We 
     also assert the following: to maintain its reputation for 
     honesty in federal budgeting, the Congressional Budget Office 
     must determine that the 80 percent premium requirement is a 
     tax.
       How can the mandate be anything else? Title I of the bill 
     places into the law the idea that the federal government will 
     guarantee that all Americans have a certain set of health 
     benefits. Title VI finances this legal guarantee by telling 
     employers how much they must pay for health insurance, where 
     they are to send the money and subjects them to audit and 
     federal penalties if they do not comply. All of this makes 
     the mandate no different than a tax. It must be called what 
     it is and treated as such by Congress.
       A payroll tax is the most onerous tax for a small business. 
     It must be paid regardless of a firm's financial health. It 
     raises the cost of hiring and/or keeping each employee. In 
     the case of the health care employer mandate, it is not 
     difficult to see which firms will be hit hardest. Three 
     million firms employ four or fewer employees. These Main 
     Street firms make up 60 percent of all American employers. Of 
     these three million, 76 percent do NOT currently offer health 
     insurance to their employees (HIAA data). Most of these firms 
     do not provide insurance simply because they cannot afford 
     it. They will be hit the hardest by the mandate, as will new 
     businesses. Of all American employers, 55 percent to 60 
     percent do not provide health insurance. The 80 percent 
     mandate will force the owners of the smallest businesses in 
     the economy to pay for an untested system with no certainty 
     of future costs.
       NFIB estimates that at least two of every three employers 
     would have increased health insurance costs if the Health 
     Security Act were enacted, almost all of which would be small 
     employers.
       In a September Gallup Poll of NFIB members, 84 percent of 
     small business owners opposed the employer mandate-to-pay. 
     When asked how they would be affected by a 3.5 percent 
     increase in payroll costs (the best deal many firms could get 
     under the Clinton plan), one third of respondents said they 
     would let employees go and nearly one half said they would be 
     forced to raise prices. Every public study and survey of 
     economists done on the employer mandate forecasts job loss 
     (up to 3.1 million). Even the Clinton Administration has 
     acknowledged that approximately 600,000 jobs could be lost. 
     Europe is suffering chronic unemployment in part as a result 
     of mandated benefits. Many advocates of universal coverage in 
     both political parties have rejected the employer mandate to 
     pay as an inefficient, risky way to achieve that goal. In 
     short, health security need not come at the expense of job 
     security.


         subsidies and payroll caps: unreliable and undesirable

       Ira Magaziner, the President's health care advisor, once 
     declared that concerns about the job loss impact of the 
     employer mandate to pay were ``crazy.'' But on page 1051 of 
     the Health Security Act comes the clearest admission to date 
     that job loss concerns are not only not crazy, they are well 
     founded.
       On that page, Section 6123 of the bill outlines the small 
     business subsidy scheme through which the required health 
     premium costs for small firms (under 75 employees) would be 
     limited to 3.5 percent to 7.9 percent of payroll. The federal 
     government would pick up the rest. While NFIB appreciates 
     this recognition that some small firms simply cannot afford 
     to pay 80 percent of a government mandated ``Fortune 500'' 
     health plan, these subsidies and payroll caps have so many 
     weaknesses that small business owners view then as 
     unreliable, undesirable and under-financed:
       (1) The percentages of payroll at which mandated health 
     care costs are capped would always be subject to change. In 
     fact, just since the first unveiling of the President's plan, 
     they already have.
       Example: Mr. Smith owns a landscaping company and employs 
     26 people who on average make $15,000 a year. When the first 
     draft of the President's plan was released on September 7th, 
     his health care costs were capped at 3.8 percent of payroll. 
     But what happened when concerns were raised that the health 
     bill was not paid for? On October 4th, a new subsidy table 
     came out which would have raised Mr. Smith's cap to 4.4 
     percent of payroll (BNA's Daily Health Care Report). When the 
     Health Security Act was finally submitted to Congress in 
     November, Mr. Smith's payroll cap rose again to 5.3 percent 
     of payroll. In these two changes, Mr. Smith's already 
     considerable mandated health care costs rose $5,850 per year. 
     This process would only be magnified if the employer mandate 
     were law and political and fiscal pressures mounted. Because 
     of financing problems, the payroll caps are made of swiss 
     cheese.
       (2) While the bill ``entitles'' certain firms to payroll 
     caps based on their size and average wage, it places a cap on 
     the amount of funds that would be available for this 
     entitlement. This means that if estimates for the cost of 
     this entitlement are off, the ``caps'' of 3.5 percent to 7.9 
     percent are meaningless.
       There is every reason to believe that the Administration 
     estimates will be off. Neither the Bureau of Labor Statistics 
     nor the Small Business Administration have current statistics 
     of average wages by firm size, making it very difficult to 
     know how many firms will be eligible for the subsidies. 
     Lewin/VHI's recent financial analysis of the plan found the 
     Administration's cost estimate for the subsidy to be off by 
     $36 billion. Then there is history, In 1965, Medicare was 
     estimated to cost $9 billion by 1990. It actually cost $116 
     billion. When cost estimates of the subsidy prove to be low, 
     the payroll caps will prove meaningless.
       (3) The Health Security Act allows the state and the 
     National Health Board or Congress to adjust the already 
     generous standard benefits package. Recent experience has 
     clearly shown that a federal government fiscally restrained 
     by huge deficits is inclined to pass and take credit for 
     benefits for which it does not have to pay. If this should 
     happen with the standard benefits package, the small business 
     subsidy would cover less and the employer mandate would cost 
     more.
       (4) Fifty-five percent to 60 percent of U.S. employers do 
     NOT currently offer health insurance to their employees. To 
     them even a subsidized employer mandate will raise the cost 
     of each employee by 3.5 percent to 7.9 percent.
       (5) Small businesses do not want and have never asked for a 
     government subsidy. They want a reformed, competitive health 
     care market that reduces costs and offers them and their 
     employees affordable insurance.


          voodoo economics: financing the health security act

       HHS Secretary Donna Shalala recently testified that 
     business will fund about 60 percent of the Health Security 
     Act, with the federal government and individuals picking up 
     the rest. This makes the business community, more than 95 
     percent of which are small employers, the biggest stakeholder 
     in the fiscal soundness of the proposal. Small business 
     owners cannot afford to be the major financer for a litany of 
     new open-ended entitlements. If the numbers do not add up, 
     small business will be asked to pay more. Given the choice of 
     cutting benefits, raising taxes or passing the cost on the 
     employers, the latter is likely to be the choice.
       Is the plan small business owners will be asked the pay for 
     fiscally responsible? The answer is no.
       Entitlements and obligations. The Health Security Act 
     provides: (1) A ``Fortune 500'' health plan to 37 million 
     uninsured Americans; (2) more generous health care benefits 
     for the millions of Americans who have insurance but do not 
     have a Fortune 500 plan; (3) new long term benefits for the 
     elderly; (4) prescription drug benefits for the elderly; (5) 
     subsidies to low income families and small firms to reduce 
     the cost of mandates; (6) early retiree benefits; (7) deficit 
     reduction; (8) 100 percent tax deduction for the self 
     employed; and more.
       Financing. These obligations are financed by: the employer 
     mandate; a corporate alliance payroll tax; Medicare and 
     Medicaid cuts; new tax revenues that result from post health 
     care reform profits and a tobacco tax increase. NFIB believes 
     that each of these financing mechanisms as well as the 
     estimates of the costs of what they pay for are alarmingly 
     off target.
        For example, the plan forecasts with attempted precision a 
     $71 billion windfall for business that would result from 
     lower health care costs. But the employer mandate makes this 
     impossible. As previously mentioned, 55 percent to 60 percent 
     of employers do not currently offer health insurance to their 
     employees. For this majority of American employers, health 
     care costs will automatically rise, not go down. It is simply 
     not credible to say that the health care program will produce 
     a $71 billion revenue windfall when it imposes an 
     economically damaging tax on a majority of employers.
       A recent study by Lewin/VHI, considered the most definitive 
     financial analysis of the President's plan to date, finds 
     that the costs will be significantly higher than the 
     Administration projected. Lewin estimates the plan will cost 
     the government $364 billion; the Administration estimated 
     $286 billion. Similarly, Lewin finds the Administration's net 
     deficit reduction figure to be overblown by 300 percent.
       There are other problems. The plan depends on cuts in 
     Medicare and Medicaid that experts both conservative and 
     liberal, Republican and Democrat, believe are not achievable. 
     The 1 percent corporate alliance payroll tax will produce 
     less revenue than expected when big corporations find it more 
     advantageous to simply join regional alliances.
       But let us make the dubious assumption that all of the 
     revenue and savings proposals produce exactly the amount of 
     money they are supposed to generate. There is no reason to 
     believe it will pay for all of the spending items listed 
     above. Remember, in 1965, government actuaries who were 
     projecting the 1900 cost of Medicare were off by more than 
     1,000 percent. The projection for Medicaid in that same year 
     was off by nearly 8000 percent.
       What if the government's ability to predict cost has 
     radically improved? What if the cost projections of all the 
     listed entitlements and commitments for which the federal 
     government must pay are off by only 50 percent? There would 
     be at least a $190 billion shortfall. Small business owners 
     cannot afford to be the major financing mechanism for this 
     risky fiscal gambit. Small business employees won't be able 
     to afford it either.


        the health security act and the expansion of government

       A majority of NFIB members have said in surveys that 
     government has a role to play in the health care sector of 
     our economy. And NFIB members have also stated that health 
     care reform is their most important priority. But in terms of 
     government involvement, the Health Security Act goes way too 
     far. The Health Security Act, if enacted, would be the 
     largest single expansion of government authority in the 
     country's history.
       The nearly $2 billion new bureaucracy that is included in 
     the plan is alarming to small business owners but is only a 
     small portion of the shadow that the Administration plan will 
     cast over the private sector. A close look at the bill shows 
     that there is no aspect of the nearly $1 trillion health care 
     industry that is outside of government control.
       Among other things, the National Health Board will set a 
     health care budget for both the public and private sector, a 
     budget equaling one seventh of the economy. It will set 
     similar health care budgets for individual states and 
     regional alliances. It can order reductions in payments by 
     health alliances to health plans and, as a result, to doctors 
     and hospitals. It can tell the Department of Health and Human 
     Services to take over a noncomplying health alliance. It will 
     determine how much insurance premiums can go up. It will 
     interpret and adjust the standard benefits package. It will 
     have a role in the pricing of breakthrough drugs. It will 
     establish advisory commissions. And it will have broad 
     rulemaking authority to carry out any aspect of the bill.
       What about the regional alliances? They will not only 
     negotiate health care prices on behalf of small business 
     owners and individuals, as was the original purchasing 
     cooperative concept. They will require alliance participation 
     by every employer with fewer than 5,000 employs along with 
     individuals. They will have the right to refuse health plans 
     whose premiums are more than 20 percent higher than the 
     average premium in the area. They will have the authority to 
     reduce payments to health plans and providers when the 
     alliance is over budget. They will have the responsibility of 
     including failed corporate alliances, which would create an 
     influx of thousands of employees at a time. The alliance will 
     monitor (through audits) employer compliance with the 
     employer mandate, average wage formulation and payroll caps. 
     The alliance will preside over the individual and small 
     business subsidy program. The alliance will have the 
     authority to increase employer and individual payments when 
     it anticipates a premium shortfall.
       There are numerous other examples of the vast expansion of 
     government's reach in the Health Security Act. Suffice it to 
     say that small business owners do not accept the idea that 
     health care reform can only come with government control of a 
     health care budget that would be more than three times the 
     size of the annual defense budget.


            public opinion on employer mandates and job loss

       USA Today/CNN Gallup poll--11/1/93. 64 percent believe 
     employers should be encouraged by tax breaks not required to 
     pay health costs for their workers.
       USA Today/CNBC survey of 55 economists--10/1/93. 78 percent 
     say that enactment of President Clinton's health care plan 
     would slow employment growth.
       CBS/New York Times poll of 1136 adults--9/19/93. 41 percent 
     believe the decision to provide health insurance to employees 
     should be left up to the individual company.
       47 percent believe that a proposal requiring all employers 
     to provide coverage to all employees would kill jobs.
       Wall Street Journal/NBC poll--9/21/93. 55 percent agree 
     that the President's health care reform plan will force many 
     small businesses to close.
       Marttila & Kiley poll of 800 adults--10/18/93. 59 percent 
     are concerned that President Clinton's plan will cause small 
     business to eliminate jobs or hire fewer workers.
       Mason-Dixon Political/Media Research poll of 818 registered 
     voters--9/93. 49 percent oppose employer mandates for health 
     insurance.
       Washington Post poll of 1015 adults--10/12/93. 64 percent 
     are concerned that the Clinton plan will cause employers to 
     eliminate existing jobs.
       73 percent believe the plan will hurt small business.
       American Viewpoint survey of 1000 adults--11/12/93. 58 
     percent agree that employer mandates will cause job loss, 
     fewer jobs created and lower pay.
       National Association of Self-Employed survey of 500 
     members--11/19/93. 24 percent said an employer mandate would 
     have a significant effect on wages and profits.
       29 percent said an employer mandate would cause them to 
     sharply cut wages and jobs.
       25 percent said an employer mandate would cause them to 
     close their doors.


 small business owners speak out on employer mandated health insurance

       ``I am a small-business owner (25 employees) working very 
     hard along side my husband to build a future for ourselves.
       ``We do not have a profit margin to support the President's 
     proposed 80 percent burden of health insurance costs. Even 
     with the proposed subsidies, a 3.5 percent rise in payroll 
     costs will seriously challenge our ability to stay in 
     business. This is not an exaggeration. What options does a 
     small business owner like myself have? We've considered 
     cutting our staff, freezing all wage increases indefinitely 
     and raising our prices. Also, we could not invest in new 
     equipment, store upgrades and the hope of ever expanding our 
     business--there would be no money left for these things. I 
     haven't even mentioned the desire to eventually begin 
     receiving an income from all of our hard work.''--Diane M. 
     Weidrick, Tipndi, Inc., DBA Tallmadge Dairy Queen, Cuyahoga 
     Falls, OH.
       ``We employ approximately 100 people. Should this health 
     care program be approved we have two alternatives. One, raise 
     prices. Two, reduce our staff. Because we can't raise prices 
     enough to make up $135,000 a year, we will be forced to 
     install automatic dishwashers and lay off about 12 people who 
     now wash dishes. Based on the Clinton's plan, we estimate our 
     insurance increase would be $135,000.
       ``I wish the `experts' in Washington could get their 
     figures first hand. Come run our restaurant. Tell me where to 
     get $135,000 extra to pay for health care.''--Lynn McGarvey, 
     Charco Broiler, Bellvue, CO.
       ``Our existing insurance costs are now 9.87 percent of our 
     gross sales. If you take our present insurance costs and add 
     the proposed new cost of a mandated health plan, it will 
     increase our insurance costs to approximately 30.63 percent 
     of our existing gross sales. There is no way this business 
     can produce enough revenue to cover all insurance costs, pay 
     all state, federal and local taxes and remain in business. If 
     required to close, it will add nine more people to the 
     unemployed group, having a small direct effect on our local 
     economy.''--Troy Elliott, Troy's Welding Inc., Albuquerque, 
     NM.
       ``As a small business owner, I am greatly opposed to the 
     mandatory insurance program. If this is enacted, I will have 
     to cut my employee hourly wages to compensate for the higher 
     insurance premiums I will be forced to pay.
       ``I will have to eliminate all part-time employees and to 
     severely cut back on the full-time employees that I have in 
     my employ. In our business at the present time, we are at a 
     point that we need to add additional employees to our 
     payroll. But so far we have refrained because of the threat 
     of mandatory increases in employer contributions to insurance 
     and also the threat of increased taxes. If these become 
     enacted they will increase expenses for business which will 
     further decrease the business base. And my business may be 
     one of those that will have to be sacrificed for these 
     mandates.''--James K. Grieser, Grieser & Son, Inc., Wauseon, 
     OH.
       ``Everyone of you [politicians] run for re-election on the 
     premises of keeping Montanans employed. We do keep 70 Montana 
     people employed year in and year out. If [honorable sirs] 
     vote in a mandate on a health care system you are 
     automatically adding a minimum of 10 people to the 
     unemployment rolls.''--Howard B. Hanger, Thriftway Family 
     Market, Missoula, MT.
       ``Our business, employing 23 people, is a service business 
     which provides meals to the elderly in North Louisiana 
     parishes. Mandated health insurance, or an employer mandated 
     tax plan to pay for health reform, will simply LOCK THE DOOR 
     to this business. This cost cannot be passed on.''--Gail 
     Elkin, Bountiful Foods, Monroe, LA.
       ``I am close to having to close my doors now because of 
     taxes. That means it could be the end of employment for 6 
     people if I am forced to pay out any more.''--Violet K. 
     Hinton, Attorney at Law, Battle Creek, MI.
       ``According to the premium amounts published under 
     Clinton's proposals (assuming we pay 80 percent of $4200 
     family premiums for all 43 of our married employees), our 
     medical premiums would increase $77,360/year. This represents 
     an 84 percent increase! If our premium requirement is capped 
     at 7.9 percent of payroll, our annual premium would increase 
     $44,300. This would be a 48 percent increase!''--Jack Miner, 
     Timber By-Products, Inc., Albany, OR.
       ``I am afraid for myself, my 240 employees, and the 
     viability of my business. We have quite a few employees, but 
     the average wage is under $20,000 a year. We are a small 
     business, and our expansion and jobs will die from lack of 
     profit. If we are put at a competitive disadvantage because 
     we are over 75 employees, the business itself could be in 
     peril.''--David Evans, CRIC Ltd., Cedar Rapids, IA.
       ``Bridge Builders, Inc. is struggling to continue 
     furnishing health care insurance for employees and families--
     with employees sharing one-half of the cost. Today, if we 
     were required to do much more than we're already doing, then 
     we may as well close the doors and let the government take 
     care of us.''--Dean I. Gillespie, Bridge Builders, Inc., 
     McMinnville, TN.


                 a small business health reform agenda

       Following is a list of guiding principles which NFIB 
     believes any comprehensive reform plan should follow. Taken 
     together, we believe these measures will increase access to 
     affordable health coverage and help to contain cost 
     increases. While the list is not all-inclusive, it does 
     represent the result of numerous surveys of small business 
     owners over the last several years.
       Health insurance purchasing groups should be formed. By 
     joining together to purchase health insurance, small 
     businesses and individuals can reduce costs through 
     administrative savings and risk-sharing.
       Self-employed business owners should be allowed a permanent 
     100 percent tax deduction for health insurance premiums. 
     Self-employed business owners such as sole proprietors, 
     partnerships and S-corporations are allowed only a 25 percent 
     deduction; that deduction is temporary. Expanding and making 
     permanent the tax deductibility of premiums would enable many 
     of the nearly five million uninsured self-employed to buy 
     coverage for themselves and the millions they employ.
       Insurance company practices should be reformed to make 
     health insurance coverage easier and less expensive to buy. 
     Being able to count on obtaining insurance with fairly stable 
     premiums would enable more small business owners to purchase 
     coverage for themselves and their employees. Specifically, 
     any reforms in this arena should include elimination of the 
     preexisting condition limitation, guaranteed access to 
     policies regardless of medical condition, guaranteed 
     renewable and portability.
       Costly state benefits mandates and anti-managed care laws 
     should be preempted. Enactment of certain state laws have 
     significantly limited the availability of affordable health 
     plans and discourage the growth of managed care systems. 
     State mandates alone can raise the cost of insurance 30 
     percent. Pre-empting these mandates and repealing many 
     restrictive state anti-managed care laws would allow small 
     business owners easier access to affordable plans and greater 
     access to cost-saving managed care arrangements.
       A uniform, affordable standard benefits package should be 
     developed in consultation with business, consumers, and state 
     and local governments. However, regardless of who determines 
     what is in a ``basic standard benefits package,'' care must 
     be taken to ensure that the plan is at a level necessary to 
     assure adequate coverage and care, but remains affordable. As 
     such, we should consider the packages developed by the most 
     efficient and cost-effective health maintenance 
     organizations. Developing ``Fortune 500'' type packages that 
     are too generous will price them out of the reach of 
     individuals and small business owners.
       Attempts to control costs by imposing spending restraints 
     or ``global budgets'' fail to address the root causes of the 
     problem and should be avoided. Many have suggested the 
     imposition of ``global budgets''--caps on overall health care 
     spending--in order to bring health expenditures under 
     control. However, NFIB believes that global budgets are 
     fundamentally unworkable and will lead to increased rationing 
     of health care. Currently, most experts agree that we do not 
     possess the relevant data on which to base such allocations. 
     Further, global budgets do not address the root causes of 
     health care inflation, nor do they provide any incentives to 
     increase efficiency in delivery of care.
       Changing our medical malpractice laws. The current 
     malpractice crisis only adds to the already astronomical cost 
     of treatments, services, medical devices and pharmaceuticals, 
     and inhibits research and development of new products. We 
     believe that serious reform of the medical liability system 
     can reduce the overuse of excessive and costly defensive 
     medicine and save about $30 billion a year.
       Implementing administrative and paperwork reforms. As much 
     as one quarter of every health care dollar in U.S. goes to 
     paperwork and administrative costs. Economies of scale for 
     small firms mean that more of their health care dollar--
     usually more than twice as much as large businesses--goes to 
     cover paperwork and administrative costs. As such, 
     simplifying paperwork requirements and reducing 
     administrative costs must be a part of any health care 
     reform.
       Consumer information and education is essential. NFIB 
     strongly believes that informed consumers make more cost-
     conscious decisions relating to their health care. Currently, 
     part of the reason that health care costs are going up so 
     rapidly is due to the fact that consumers have lost their 
     buying power in the health care market. Most Americans are 
     shielded from the true cost of their insurance coverage and 
     the cost of medical care, largely because the premiums are 
     borne by employers. As a result, there is little or no 
     incentive to search out the highest quality health product at 
     the lowest cost, a theory fundamental in the purchasing of 
     most other goods.
       While no health reform bill will be a perfect one, NFIB 
     strongly believes that we need to enact a reform package that 
     achieves three main objectives: (1), bring down the cost of 
     health insurance; (2), stabilize the often unpredictable/
     fluctuating health insurance system for small firms and 
     individuals; and (3), expand insurance coverage to more 
     Americans.
       NFIB members support the President's reform goals. They 
     believe, however, that the plan proposes too much, too soon, 
     through questionable and untested economic means. The Health 
     Security Act will affect each and every business differently. 
     A broad brush approach on an issue this critical to 
     individuals and employers is unwise. Instead, Congress should 
     consider the several comprehensive, viable alternatives that 
     accomplish our three main objectives without placing an undue 
     burden on small business, creating a huge new bureaucracy or 
     damaging our economy.
                                  ____


             [From the Wall Street Journal, Apr. 19, 1994]

                          Enraging Species Act

       The Third Amendment to the Bill of Rights states that no 
     soldier can ``be quartered in any home, without the consent 
     of the owner.'' Somehow, though, it apparently never occurred 
     to the Founding Fathers that we might someday need an 
     amendment against the arbitrary ``quartering'' of endangered 
     species on private land. Good thing the Founders didn't live 
     to see the day, ours, when property owners all over America 
     would be told to idle their land and effectively use it only 
     as a wildlife refuge.
       Ambitious government ``ecosystem management'' plans are 
     locking up millions of acres of private land--without 
     compensation. Take the spotted owl, which has effectively 
     halted most timber production in the Pacific Northwest. The 
     Anderson & Middleton Logging Co. has been enjoined from 
     harvesting any timber on 72 acres of its land in Washington 
     state. No spotted owls live on its land, but two have been 
     seen nesting on government land 1.6 miles away.
       Residential owners are also affected: Marj and Roger 
     Krueger spent $53,000 on a lot for their dream house in the 
     Texas Hill Country. But they and other owners have been 
     barred from building because the golden-cheeked warbler has 
     been found in ``the canyons adjacent'' to their land.
       The government justifies these restrictions by noting that 
     the Endangered Species Act bars actions that ``harm'' 
     critters protected under it. The U.S. Fish and Wildlife 
     Service interprets that to include any action that results in 
     ``significant habitat modification'' that could affect the 
     ``breeding, feeding or sheltering'' patterns of a species. It 
     has issued countless edicts barring even such ordinary uses 
     of property as clearing brush or harvesting trees because 
     they might ``modify'' nearby habitat.
       Even some environmentalists have questioned if Congress 
     intended such restrictions. Michael Bean, chairman of the 
     Environmental Defense Fund's Wildlife Program, has noted 
     ``there are forceful arguments that such a broad 
     interpretion'' is ``improper.''
       Last month, the U.S. Court of Appeals for the District of 
     Columbia agreed. It invalidated the U.S. Fish and Wildlife 
     regulation that prevented habitat modification on private 
     land. The court ruled that the regulation ``was neither 
     clearly authorized by Congress nor a `reasonable 
     interpretation' of the statute.''
       The court's decision enraged radical environmentalists. 
     They support a provision to the Marine Mammal Protection Act 
     now before Congress that would explicitly allow the 
     regulation of private land use and would bolster the Clinton 
     Administration in its attempt, which it announced yesterday, 
     to overturn the D.C. Court of Appeals decision.
       The Senate refused to include such language in its version 
     of the bill, but it may wind up adding it in conference if 
     the House insists. Today, Rep. Gerry Studds will demand a 
     House vote to insist the regulatory language be retained. 
     Environmental groups, agitated by recent property rights 
     victories in Congress, are determined to prevail this time.
       The dispute over endangered species isn't over whether or 
     not society should protect them. It's between a policy that 
     refuses to set priorities and insists on preservation no 
     matter what the costs to the human species or, alternatively, 
     a more balanced approach.
       We are hard put to see how the species act can itself 
     survive politically operating as an environmentalist land 
     grab of other people's property. The seriousness of the 
     claims for these various species might be better tested if 
     the government had to compensate landowners for their losses. 
     That approach isn't just our idea; it is the ``takings'' 
     clause of the Fifth Amendment to the Bill of Rights.
  Mr. CRAIG. Mr. President, once again let me close by saying today we 
have proven law in this country, law that has maintained the kind of 
balance that has historically brought the employee and the employer to 
the bargaining table with a sense that there was equality in the 
negotiating environment. That is what we ought to be promoting in 
policies for economic growth and development in this country, and this 
is why I stand strongly in opposition to S. 55.
  Several Senators addressed the Chair.
  The PRESIDING OFFICER (Mr. DeConcini). The Senator from Oklahoma.
  Mr. NICKLES. Mr. President, I know my colleague from Iowa is here, 
and I inquire of him how long he is planning on speaking.
  Mr. HARKIN. I am glad the Senator was recognized. I have quite a 
speech. It will be a long time.
  Mr. NICKLES. I thank my friend and colleague. I will not be quite 
that long.
  Mr. President, I wish to congratulate and compliment Senator 
Kassebaum and Senator Cohen as well as Senator Craig for their 
speeches. I think they made some excellent points in defining and 
outlining this debate on S. 55, the so-called striker replacement bill.
  Mr. President, first let me just make a couple comments concerning 
some of the arguments made in favor of this legislation. I have heard 
my friend and colleague, Senator Metzenbaum, say that we needed to pass 
this legislation in order to restore the right to strike. This 
legislation does not do that. The right to strike already exists in 
current law. I have heard Senator Wellstone say we need to pass this 
legislation in order to have the right to organize and to bargain 
collectively. You do not need to pass this legislation to do that. 
Employees have the right to organize; they have the right to bargain 
collectively, and they also have the right to strike.
  Passage of this legislation would undo over 50 years of labor 
management law, and would basically tell employers that they could not 
keep the doors open. They could not hire permanent replacement workers.
  I might mention that some people have implied during the course of 
this debate that this is so imperative, so important because of the 
PATCO strike--because Ronald Reagan proved that workers were striking 
against the law and he fired those workers because they broke the law--
that this has opened the door, and now employers are routinely 
referring to the practice of hiring permanent replacement workers.
  That is not the case. Studies by GAO, both in 1985 and in 1989, said 
that only 3 to 4 percent of striking workers were permanently replaced.
  I think it is important that we stick to facts. And the facts are 
that workers have the right to organize. They have the right to 
bargain. They also have the right to strike. Currently, employers have 
the right to hire permanent replacement workers during an economic 
strike. We should keep that right. If we do not, we are basically 
telling organized labor this is no longer a level playing field; they 
have not only the right to strike, but are guaranteed the right to win 
the strike. For over 50 years, that has not been the law, and it should 
not be the law.
  Unions should have the right to go on strike and withhold their 
services. But likewise the employer has to have the right to hire 
permanent replacement workers and keep their doors open.
  I heard my friend and colleague, Senator Metzenbaum from Ohio, state 
that Republicans are antiworker, that they opposed increases in the 
minimum wage, that they opposed the family and medical leave bill, and 
some were opposing the health care bill. I would disagree. I would 
disagree very strongly. But I look at some of the agenda that the 
Senator from Ohio was referring to, and I see some of that agenda with 
good titles being very antiworker, including the legislation that we 
have before us.

  I think if we pass this bill that says you cannot hire permanent 
replacement workers during a strike, it is very antiworker because the 
net result of it would be we are going to have more strikes. A lot of 
people are going to lose jobs. Strikes costs jobs. Some people cannot 
survive during a strike.
  I worked for a company during a strike. I can tell you that strikes 
are not pleasant. They are not fun. They are not fun for the employers, 
and they are not fun for the employees. We should be doing what we can 
to discourage strikes.
  I hate to tell my friends, particularly the sponsors of this 
legislation, that this is a bill to encourage strikes. We have very few 
strikes percentagewise in the United States today. I think that is 
good. I hope we have less. But I can almost guarantee you that if this 
legislation passes, we are going to have more. We are going to have 
more labor unrest. We are going to have greater tensions. We are going 
to have greater battles between labor and management. There is going to 
be greater strife and less cooperation in the workplace.
  I hate to see that happen. I hate to see that kind of conflict evolve 
between labor and management. That is going to be the result of this 
legislation. Basically we are going to be telling the employer you 
cannot hire a replacement worker during a strike. So organized leaders 
of organized labor are going to be saying, ``Wait a minute. You can 
join our union, you can strike, and they cannot replace you. So we have 
tremendous clout. We have tremendous clout, if necessary, to bring this 
company to their knees in order to achieve our objectives through this 
labor battle or through this confrontation.'' So there will be more 
strikes. More people will lose their jobs.
  What about the people that are depending on that company for parts 
for supplies? A lot of companies need that supplier to be able to 
provide jobs. And so, not only would there be a loss of jobs in the 
company that has a strike, there would be a loss of jobs in other 
companies which depend on the striking company for its business. I 
think that is the most devastating aspect of this bill.
  So this bill, as I see it, is not a bill to protect strikers. This is 
a bill, if we are not careful, that will encourage strikes, cost jobs, 
put people out of work, and make us less competitive.
  I might say, Mr. President, I read Labor Secretary Reich's letter to 
the Senate encouraging people to vote for this bill. I could not help 
but almost laugh to myself. In his letter he says:

       To compete effectively in the international economy, 
     America needs a framework for labor relations that stimulates 
     productivity and enables management to tap the maximum of 
     employees' skills, talents and efforts.

  I agree with that statement. But this bill does not do it. The Labor 
Secretary's letter continues. He says:

       We can turn our attention towards a more cooperative labor 
     management future.

  This bill does not do it. It does just the opposite. This bill should 
be entitled ``A Bill to Encourage Labor Strife and Strikes.'' This 
legislation is going to tell one side, ``Hey, you cannot lose. You can 
go on strike and you cannot lose your job, so you can withhold your 
services without risk. You have the right to bargain. You have the 
right to organize. You have the right to strike. So you can withhold 
services but they cannot replace you.''
  So the net result is a lot of companies will lose. Maybe they will 
give in to organized labor, if they can afford it. But if they cannot, 
they may cut jobs. They may lose competitiveness, they may lose future 
contracts, or they may close the doors. A recent Teamsters' strike--I 
remember reading that a truck firm closed down and thousands of jobs 
were lost. Why? Because they were involved in a strike, and they were 
not survivors in that strike.
  Strikes, in my opinion, Mr. President, are a lose-lose situation. I 
do not see them as healthy. I want to discourage strikes, and I am 
afraid that this legislation before us will encourage strikes. It will 
encourage labor strife. Mr. President, I think it would be a serious 
mistake.

  I also heard some of our colleagues say that, well, we are trying to 
restore balance between labor and management. Frankly, labor and 
management have been working off the National Labor Relations Board 
going all the way back to 1935, and have been under a ruling under a 
Supreme Court case going all the way back to 1938 that allows employers 
to hire replacement workers for an economic strike. So things have not 
changed.
  It is the proponents of this legislation that are trying to change 
the balance. This balance in the United States has worked fairly well 
for over 50 years. We have strikes less often than most other 
countries. Why should we want to have more? There is an equilibrium 
between labor and management. This bill would greatly distort that.
  Again, I think it would be a serious mistake, and ultimately will 
hurt workers. I do not see this legislation as being worker friendly. I 
think it is just the opposite. This bill is strike friendly. It is not 
worker friendly, and strikes are not friendly to workers.
  So I urge my colleagues to vote against the motion to proceed to S. 
55.
  Mr. President, I yield the floor.
  Mr. HARKIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. HARKIN. Mr. President, I am going to have quite a bit to say 
about this legislation, S. 55. I will take a little bit of time today 
and I hope to take some more time tomorrow, because I believe that the 
whole story on this bill and what it seeks to correct is really not 
being told. I hope to take, as I said, some time today and some time 
tomorrow to lay out the case both historically and in terms of what is 
happening economically and productivity-wise in this country as to why 
this legislation is sorely needed at this time.
  Just sitting here listening to the last two speakers--both of them 
good friends of mine, both of them well-meaning individuals--talk about 
this legislation and the need for a level playing field, everything it 
seems has to be level between management and labor. Well, we all agree 
with that. That is what it ought to be. But I must ask how can you have 
a level playing field, or how can you form an equal partnership, so to 
speak, when you hold the gun at the head of one of the so-called 
partners? That can never lead to a level playing field nor any kind of 
equal type of footing or relationship. In fact, with the ability that 
the management has today, in order to fire or to get rid of their 
striking workers and have them permanently replaced, really takes away 
the right to strike. Not only does it take away that right, but it 
takes away the right to collectively bargain.
  Again, I think if you ask any American--and we have heard some polls, 
data, proffered by the Senator from Idaho earlier--I think if you ask 
any American whether or not individual workers ought to have the right 
to bargain collectively for wages, hours, and conditions of employment, 
the vast majority of Americans would say yes. They probably never heard 
of the Wagner Act or the National Labor Relations Act. They have never 
heard of these. But I think inherently they would feel that free people 
working together ought to be able to join together in an association or 
union and to bargain with their employer for wages, hours, and 
conditions of employment.
  I think the vast majority of Americans would support that, and I 
think the polls show that. But that right to bargain collectively 
becomes a hollow right when there is no right to strike, or when a 
laboring person comes to the bargaining table to bargain with 
management. There is only one thing that worker has to bring to that 
table, and that is the sweat of his or her brow, their expertise, their 
knowledge, their experience, but basically their labor. They have no 
money to bring, no economic clout. They only bring what they can do, 
and that is their labor.

  So, therefore, the only chip they have to put on that table is their 
labor and the threat to withhold that labor if in fact management does 
not bargain in good faith and negotiate a binding contract.
  Well, that right to withhold that labor is what is called the right 
to strike. The right to strike has been upheld many times by our 
courts. It is a thing I think most people would recognize that working 
people have.
  I must ask, Mr. President, what kind of a right is it when, if you 
exercise that legal right, your employer can say goodbye; you are gone; 
we have replaced you with permanent replacement workers?
  So, by definition, today in the United States of America, there is no 
legal right to strike. And because there is really no legal right to 
strike, there is no legal right to bargain collectively. And since 
there is no legal right to bargain collectively, there is no level 
playing field. In fact, there is really no playing field, let alone a 
level or uneven one. There is no playing field. Management says you 
bargain on our terms; you agree with what we want; or you can just go 
strike. And, by the way, if you strike, we will permanently replace 
you. If you are permanently replaced, that means you are out of work 
forever; you lose all your pension rights; you lose your seniority; you 
lose your job forever.
  In fact, Mr. President, the right to strike today is, by any measure, 
a hollow right. It is a hollow right. In the past, we had people in the 
United States--African-Americans, for example, in many parts of the 
South--and, oh, sure, the Constitution guaranteed them the right to 
vote. They had the right to vote. But because of poll taxes and tests 
they had to take, to pass, in order to vote, they really did not have 
the right to vote. So it became a hollow right. We recognized that, and 
that is why we had to pass the Voting Rights Act, to make sure that the 
right to vote was not indeed just a hollow right.
  So today in America the right to bargain collectively is really a 
hollow right. Sure, you can go through the motions, and unions do it. 
They can sit down and bargain. Take the recent experience with UAW and 
Caterpillar. They were going through a negotiation process on a new 
contract. Well, I am not going to interfere and say who was right or 
wrong, that type of thing. But all I know is that it broke down. The 
union went out on strike. The first thing the Caterpillar management 
said was that they were going to hire permanent replacement workers--
holding that as a threat over the union employees. So, again, there 
really is no right to strike.
  I guess there is a right to strike; I should correct that. There is a 
right for you to quit your job, because that is really what it amounts 
to. Labor only really has one right today in the bargaining field--the 
right to quit their jobs and walk away. So what has happened is that we 
have had a breakdown in this structure in America.
  Mr. President, I was intrigued by an article that came out in the May 
23, 1994, issue of Business Week. Business Week is not known for being 
a real advocate of unions and union labor. It is, as it says, a 
business magazine which caters to the business community. But it had a 
very interesting article in there. When I get through reading it, I 
will ask that it be printed in the Record. But first let me read some 
excerpts from it. It is entitled ``Why America Needs Unions But Not The 
Kind It Has Now.''
  I see my good friend from Utah here, and there is a quote in the 
beginning of the article that says:

       There are always going to be people who take advantage of 
     workers. Unions even that out, to their credit. We need them 
     to level the field between labor and management. If you 
     didn't have unions, it would be very difficult for even 
     enlightened employers to not take advantage of workers on 
     wages and working conditions, because of [competition from] 
     rivals. I'm among the first to say I believe in unions.

  It went on to say this quote is not from Senator Kennedy or Labor 
Secretary Reich; it is Senator Orrin Hatch of Utah. I do not know if it 
is an accurate quote or not. I am just quoting from the Business Week 
magazine.
  But what the article goes on to say is that:

       * * * when pressed, even he concedes a point that's of 
     growing concern to economists, administration officials, and 
     some executives: Free-market economies need healthy unions. 
     They offer ``a system of checks and balances,'' as former 
     Labor Secretary George P. Shultz has put it, by making 
     managers focus on employees as well as on profits and 
     shareholders.

  Now, we have heard all this talk about leveling the playing field, 
have we not? Listen again to this, regarding George Shultz, a well-
known Republican:

       The concern of Shultz and others is that the balance has 
     shifted significantly. Since 1983, union membership has 
     fallen 6 percent, to 16.6 million, or 15.8 percent of the 
     workforce--the lowest since the Great Depression. Subtract 
     Government employees, and unions represent a mere 11 percent 
     of private-industry workers, a figure that by 2000 could 
     plunge to 4 or 5 percent, some experts say.
       Labor's fabled bargaining and political clout largely has 
     vanished, too.

  The article says, if Senator Hatch is right: ``* * * the drawbacks of 
deunionization should be appearing.''
  New research from respected economists at such schools as Harvard and 
Princeton shows that blue-collar wages trailed inflation in the 1980's 
partly because unions represented fewer workers. The resulting drag on 
pay for millions of people accounts for at least 20 percent of the 
widening gap between rich and poor, which has reached Depression-era 
dimensions.
  The article goes on:

       The President's annual economic report, released earlier 
     this year, cited these findings and called the new income 
     disparities ``a threat to the social fabric that has long 
     bound Americans together.''
       Experts cite weakening unions as a key reason for the 6-
     percentage-point slide in the 1980's in the share of 
     employees with company pension plans, for the 7-point decline 
     in those with employer health plans, and for a 125-fold 
     explosion in unlawful-discharge suits now that fewer 
     employees have a union to stick up for them.

  The Business Week article goes on to say:

       The surprising implication, in fact, is that the U.S. might 
     be better off, socially and perhaps even economically, with a 
     healthier union movement.

  Mr. President, that is pretty interesting coming from Business Week 
magazine.
  What does that have to do with the bill in front of us? It has 
everything to do with this bill. I argue, as economists are arguing 
now, and some of them very conservative economists, that we must halt 
this slide into unionization in America; that we really need unions for 
higher productivity and wages and better skills.
  And in order to stop that slide, we have to stop the practice of 
permanent replacing those workers who have gone out on strike.
  This bill is a proworker, proproductivity, 
procompetitiveness bill that we have before us and we should have 
passed it long ago.
  This Workplace Fairness Act, S. 55, restores a fundamental principle 
of labor-management relations, the right of workers to strike without 
having to fear the loss of their jobs.
  Too often in today's workplace, workers are forced to choose between 
their jobs and their legal right to strike for better wages, benefits, 
and working conditions. That has not always been the case.
  Again, in response to widespread abuses, union busting, in 1935 we 
passed the National Labor Relations Act, as I mentioned earlier the 
Wagner Act, signed into law by President Roosevelt. The Wagner Act 
guarantees workers the right to organize and bargain collectively and 
strike if necessary. It makes it illegal for companies to interfere 
with these rights. In fact, it specifically specifies the right to 
strike and states: ``Nothing in this act--except as specifically 
provided herein--shall be construed so as to interfere with or impede 
or diminish in any way the right to strike.''
  Or affect limits or qualifications on that right.
  If that is part of the law, what has happened? Well, historically 
what happened is that in 1938 the Supreme Court dealt the Wagner Act a 
mortal blow. We all know the case, the famous case of NLRB versus 
Mackay Radio and Telegraph Co. In that case the Supreme Court--and 
basically this was not even the ruling of the Supreme Court; the ruling 
had to do with something else--but in dicta, in sort of its discussion 
of the case, the Supreme Court said that Mackay Radio and Telegraph Co. 
could hire permanent replacement workers for those engaged in an 
economic strike.
  And this has been taken sort of as law ever since then. But as 
speakers before me have pointed out, enlightened management at that 
time saw that it was in their best interests to not use that dicta, 
that reasoning of the Supreme Court in that case, which, by the way, 
the ruling in that case in fact found for the workers in terms of their 
rights to be reinstituted and the fact that the company itself had 
acted illegally in not permitting certain union activists to come back 
to work. But, as I said, this was in the discussion of it, and the 
Court went on a little bit further to give them the right to hire 
permanent replacements. But ever since then, companies have not done 
that because they recognized that it would upset this level playing 
field. For almost 40 years, nothing was done by management in any case 
to hire permanent replacements. But then it started happening in the 
1980's.
  Permanent replacement became a regular tool to break unions and shift 
the balance between workers and management.
  More than 3,500 Continental Airline pilots replaced by Frank Lorenzo; 
1,100 UAW members replaced at Colt Firearms; 6,000 TWA flight 
attendants lost their job to permanent replacements; 2,500 paper 
workers disposed of at International Paper mills; 35,000 pilots and 
machinists fired from their jobs. Thousands more working men and women 
who dared to try and exercise their legal rights have lost their jobs 
to permanent replacements.
  Mr. President, where is the incentive for employers to bargain in 
good faith if they can displace those who disagree with them? Some 
employers go so far to advertise permanent replacements before they 
begin negotiations. In other words, it had always been a practice by 
companies in the past to perhaps stockpile raw materials, and things 
like that, in anticipation of a strike, and this has been a well-
accepted practice. Unions recognize that. But now what they do is they 
stockpile scabs, just like they stockpile raw materials, and go out and 
advertise for permanent replacements, build up the rosters and dare the 
union to go out on strike.
  These management actions over the past decade have undermined the 
legal right to strike. When you deny the right to strike, you deny the 
right to bargain for better wages, and when you destroy that, you 
destroy the very fundamental basis for organized labor in America. And 
in doing so, you destroy motivation, incentive, productivity, and 
competitiveness.
  You destroy our best opportunity to move forward as a Nation into an 
era of high wage, high skilled, highly productive jobs that serve us 
well in the global marketplace.
  Mr. President, I have more to say about this bill. But suffice it to 
say, this bill, more than anything else, is a bill that will once again 
get America started on the path of being competitive in the world 
market.
  I recommend to my colleagues to read the Business Week article of May 
23, 1994, to read it and to see what it says in there about the need 
for unions and what unions can do to help get us on the path toward 
higher productivity.
  But with what we have in front of us now, with the permanent 
replacement to strikers, with the destruction of organized labor, I 
fear that we are on the path toward less competitiveness and less 
productivity, less motivation, and less incentives for workers in this 
country.
  So that is a sad day. When we hear all this talk about level playing 
field, let us remember there is not even a playing field out there now. 
That field is gone. If we really want to truly have a level playing 
field, then we should pass this legislation and, Mr. President, it is 
clear that the votes are here in the Senate to pass this bill. We have 
a majority to pass it. But those who are so opposed to this bill are 
filibustering it and, therefore, we will probably not get to whether we 
vote on this bill or even amend it. There may be some amendments 
offered to this bill that might improve it. I do not know. But we 
probably will never get to that point because of the filibuster. It 
takes 60 votes to break the filibuster, and obviously it does not 
appear right now that we have those 60 votes. But I am hopeful that we 
do. I hope that those who are opposed to the bill will at least give us 
the right to bring it up, to debate it, to vote on it to amend it if 
necessary, and pass it. The House has passed the bill. It is clear that 
a clear majority in the House voted for it and passed it.
  I think it is clear that a majority of the Senate would vote for it, 
too, if we only had the ability to get past the filibuster.
  Mr. President, I ask unanimous consent to print, at the end of my 
remarks, the article from Business Week magazine of May 23, 1994.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

                        Why America Needs Unions

                          (By Aaron Bernstein)

       ``There are always going to be people who take advantage of 
     workers. Unions even that out, to their credit. We need them 
     to level the field between labor and management. If you 
     didn't have unions, it would be very difficult for even 
     enlightened employers to not take advantage of workers on 
     wages and working conditions, because of [competition from] 
     rivals. I'm among the first to say I believe in unions.''
       Ted Kennedy spouting tired liberal dogma? Labor Secretary 
     Robert B. Reich pandering to President Clinton's union 
     backers? Nope. The speaker is Senator Orrin G. Hatch (R-
     Utah), labor's archrival on Capitol Hill for nearly two 
     decades. Don't misunderstand: Hatch still opposes organized 
     labor at nearly every turn. But when pressed, even he 
     concedes a point that's of growing concern to economists, 
     Administration officials, and some executives: Free-market 
     economies need healthy unions. They offer ``a system of 
     checks and balances,'' as former Labor Secretary George P. 
     Shultz has put it, by making managers focus on employees as 
     well as on profits and shareholders.
       The concern of Shultz and others is that the balance has 
     shifted significantly. Since 1983, union membership has 
     fallen 6%, to 16.6 million, or 15.8% of the workforce--the 
     lowest since the Great Depression. Subtract government 
     employees, and unions represent a mere 11% of private-
     industry workers, a figure that by 2000 could plunge to 4% or 
     5%, some experts say.
       Labor's fabled bargaining and political clout largely has 
     vanished, too. Pay increases for union members lagged those 
     for nonunion ones from 1983 until the recession pummeled 
     everyone in 1990. And as labor's 1993 defeat on the North 
     American Free Trade Agreement shows, it delivers a 
     lightweight's political punch compared with the days when 
     ``Clear it with Sidney'' referred to the veto Franklin Delano 
     Roosevelt supposedly gave clothing-union leader Sidney 
     Hillman over FDR's 1944 running mate. In short, if Hatch is 
     right, the drawbacks of deunionization should be appearing.


                               scary gap

       They are. New research from respected economists at such 
     schools as Harvard and Princeton shows that blue-collar wages 
     trailed inflation in the 1980s partly because unions 
     represented fewer workers (charts). The resulting drag on pay 
     for millions of people accounts for at least 20% of the 
     widening gap between rich and poor, which has reached 
     Depression-era dimensions. The President's annual economic 
     report, released earlier this year, cited these findings and 
     called the new income disparities ``a threat to the social 
     fabric that has long bound Americans together.'' The full 
     scope of that threat remains to be seen, but the early signs 
     are disturbing: Experts cite weakening unions as a key reason 
     for the six-percentage-point slide in the 1980s in the share 
     of employees with company pension plans, for the seven-point 
     decline in those with employer health plans, and for a 125-
     fold explosion in unlawful-discharge suits now that fewer 
     employees have a union to stick up for them.
       The surprising implication, in fact, is that the U.S. might 
     be better off, socially and perhaps even economically, with a 
     healthier union movement. That could be true especially if 
     the 86 unions of the AFL-CIO follow through on a February 
     report that urges labor to become partners with management in 
     boosting efficiency. This is an unprecedented endorsement of 
     alternative systems--including self-managed workplace teams--
     that already have fed big efficiency gains at such companies 
     as Ford, Xerox, and Scott Paper. ``If unions help improve 
     productivity with ideas like teams, they can justify higher 
     wages and their existence,'' say Paul A. Samuelson, the 
     father of neoclassical economics and professor emeritus at 
     Massachusetts Institute of Technology.
       The AFL-CIO's action, in fact, may help legitimize the most 
     important development in U.S. labor relations in generations. 
     Here and there, traditional adversarial bargaining, which 
     evolved 60 years ago in response to Frederick W. Taylor's 
     ``scientific management'' methods of dividing work into its 
     simplest tasks, is being replaced by a more flexible, 
     participative approach as companies flatten hierarchies. 
     ``Unions helped make Taylorism work in the '30s and '40s by 
     institutionalizing its principles'' in labor contracts, says 
     MIT management professor Thomas A. Kochan. ``We need to [do] 
     that today through cooperative labor mechanisms.''


                                partners

       Xerox Corp. and its 6,200 U.S. copier assemblers, who 
     belong to the Amalgamated Clothing & Textile Workers Union 
     (ACTWU), are proving that this works. Three tries at teamwork 
     since 1982 have fared so well that Xerox is bringing 300 jobs 
     from abroad to a new plant in Utica, N.Y., where it expects 
     higher quality and savings of $2 million a year. Xerox gives 
     union officials internal financial documents and teaches them 
     statistics in the same classes managers take. ``I don't want 
     to say we need unions if that means the old, adversarial 
     kind,'' says Xerox CEO Paul A. Allaire. ``But if we have a 
     cooperative model, the union movement will be sustained and 
     the industries it's in will be more competitive.''
       This view is spreading among the few dozen major companies 
     developing partnerships with labor. ``There's definitely a 
     place in American society for unions,'' says David H. Hoag, 
     chief executive of LTV Corp. In 1993, he signed a labor pact 
     with the United Steelworkers (USW) that lets the union 
     nominate a board member in return for backing teams and other 
     efficiency measures. Declares Ernest J. Savoie, who heads 
     Ford Motor Co.'s cooperative labor programs: ``If unions were 
     to disappear, the country would be in serious trouble.''
       Most employers couldn't agree less. Few American managers 
     have ever accepted the right of unions to exist, even though 
     that's guaranteed by the 1935 Wagner Act. Over the past dozen 
     years, in fact, U.S. industry has conducted one of the most 
     successful antiunion wars ever, illegally firing thousands of 
     workers for exercising their rights to organize. The chilling 
     effect: Elections to form a union are running at half the 
     7,000-a-year pace of the 1970's. And major strikes--involving 
     1,000 or more workers--have fallen from 200-plus a year to 35 
     in 1993. To ease up now, many executives feel, would be to 
     snatch defeat from the jaws of victory.
       Most managements detest unions out of a belief that they 
     impede productivity and raise wage costs. That's partly true. 
     Numerous studies have confirmed that unions reduce profits, 
     especially in such industries as steel and autos, where 
     workers got a healthy share of outsized, oligopolistic 
     earnings in the '50s and '60s. Now that the oligopolies are 
     being undercut by global competition and deregulation, 
     ``large employers no longer have oligopoly profits to share 
     with unions,'' says Samuelson.
       Still, unions are often blamed for more trouble than 
     they've caused. In the 1970s, for instance, many executives 
     believed that unions inflated prices by lifting wages above 
     some presumed market level. Since then, however, more than 50 
     quantitative studies have concluded that the higher 
     productivity of unionized companies offsets most of their 
     higher costs. ``It's a misreading of economic analysis to 
     conclude that unions inherently cause inflation or 
     unemployment,'' says Nobel laureate Gary S. Becker, a 
     conservative economist at the University of Chicago. ``Some 
     kind of union behavior is bad, but unions that help workers 
     bargain collectively instead of individually perform a 
     legitimate role that's not counter to social efficiency.''
       George Shultz, now a fellow at Stanford University's Hoover 
     Institution, goes further. ``As a management person, if I 
     don't have a union, I don't want one,'' he said in a 1991 
     speech to the National Planning Assn., a labor management 
     group. ``But . . . look at this more broadly. Free societies 
     and free trade unions go together. Societies are missing 
     something important if they do not have an organization in 
     the private sector, such as a trade union movement'' that 
     gives workers the clout labor has exerted to help pass safety 
     and pension laws.
       Shultz's notion is taken for granted in most of the 
     industrialized world. True, Europe's recession has set off 
     nasty clashes between unions and companies bent on cost-
     cutting. Still, say European labor experts, most companies 
     there continue to see unions as social partners, not enemies. 
     What's more, every Western European country except Britain 
     and Ireland has a legally mandated second channel, such as 
     works councils, for advancing worker interests. These groups, 
     usually elected by employees, provide input into many 
     managerial decisions.
       The Clinton Administration would make this the model for 
     U.S. labor-management cooperation. A year ago, the Labor and 
     Commerce Depts. appointed a 10-member commission composed 
     primarily of academics. Headed by former Labor Secretary John 
     T. Dunlop, it may ultimately suggest revising the Wagner Act 
     to ease roadblocks to organizing. In return, some commission 
     members want to amend the act to legalize teams in nonunion 
     companies, which risk violating a prohibition against sham 
     unions--groups that workers seem to run but actually are 
     controlled by management.
       AFL-CIO President Lane Kirkland will take this trade-off, 
     leaving a divided business community to decide if teams are 
     worth the risk of more union organizing. It isn't clear if it 
     will take the chance. But even the National Association of 
     Manufacturers--founder of the Council on a Union-Free 
     Environment--may consider the idea. ``Can you fix the 
     management abuses without tilting the field too much back to 
     labor?'' asks NAM Industrial Relations Vice-President 
     Randolph M. Hale. ``I'm not sure, but I'm open to listening 
     to the arguments.''


                           ``threat effect''

       While those issues are thrashed out, the effects of labor's 
     decline pile up. Take inflation-adjusted pay. Historically, 
     it has tracked productivity. But in the 1980s, output per 
     worker jumped 12%, while real wages and benefits for all 
     workers rose only 4%, according to the Bureau of Labor 
     Statistics. Falling unionism was a major factor, several 
     studies have found. Private-sector union workers on average 
     earn 39% more in pay and benefits than nonunionized ones, 
     according to the BLS. And as unions shrank, a rising share of 
     workers had to settle for lower-paying nonunion jobs.
       That particularly hurt the least educated. For instance, 
     deunionization accounts for one-third of the 15% decline in 
     real earnings of white male high school dropouts between 1979 
     and 1988, according to a 1991 study led by McKinley L. 
     Blackburn of the University of South Carolina. Weaker unions 
     account for half the 10% pay slump of black male high school 
     grads in that period and two-thirds of the 3% decline for 
     white female dropouts. And the study didn't measure smaller 
     pay hikes nonunion workers got as the threat of unions 
     subsided. ``We ignored the threat effect, which would make 
     the impact bigger,'' says Blackburn.
       These figures portray the partial dismantling of the middle 
     class. By pushing up blue-collar pay, unions helped narrow 
     the gap between rich and poor after World War II. But now the 
     trend has reversed. In 1988, white-collar men aged 25 to 64 
     earned 48% more than blue-collar men of the same age, up from 
     35% more in 1979, according to a 1991 study by Harvard 
     University economist Richard B. Freeman. Nearly half the 
     increase reflected falling unionization, Freeman found. And 
     for all men aged 25 to 64, including service workers, 
     deunionization caused at least 20% of the spike in male wage 
     inequality in the '80s. Freeman's findings have been 
     confirmed by recent studies by Princeton University economist 
     David Card and George J. Borjas of the University of 
     California at San Diego. ``It's clear that deunionizing had 
     an important impact,'' says Borjas, a political conservative 
     who's no fan of unions.
       Labor's decline has even hurt professionals. Traditionally, 
     companies have pegged white-collar pay hikes to those won by 
     their unionized workers. Nonunion employers did so 
     indirectly, with salary surveys that cover unionized 
     companies. In the '80s, professionals got fatter raises than 
     union members. But they got a bigger share of a smaller pie.
       If unions had represented one-third of the workforce in 
     1990, as they did in 1950, the bottom 80% of families--those 
     earning up to $83,400 a year--would have received 61% of the 
     nation's income, according to a 1993 study by economist Rudy 
     Fichtenbaum at Wright State University in Dayton, Ohio. 
     Instead, they got 56%. ``White-collar workers think unions 
     don't matter, but they're not on a separate boat from blue-
     collar ones,'' says Research Director Lawrence Mishel of the 
     Economic Policy Institute (EPI), a Washington think tank 
     partly funded by unions.
       There's no way to tell whether the combined income of all 
     U.S. workers would have been higher had unions not lost 
     ground: No one has yet proved whether unions push up overall 
     income or merely redistribute it. But it's clear who 
     prospered in the '80s. The rent, dividends, and interest that 
     owners of capital earned jumped 65%, according to an EPI 
     analysis of Commerce Dept. figures. Wages and salaries, 
     including white-collar ones, grew only 23%.


                             frayed fringes

       As wages have gone, so have fringe benefits: Most workers 
     have them largely because of unions, and they're disappearing 
     partly because unions are weaker. Company-paid retirement 
     plans, for instance, caught on after World War II, when 
     federal wage and price controls prompted unions to demand 
     pensions in lieu of pay. To keep unions at bay, nonunion 
     employers followed suit, and pension plans multiplied. The 
     trend reversed as the union threat shrank. The share of 
     workers aged 25 to 64 with an employer-paid pension plan slid 
     6 points, to 57%, from 1979 to 1988, according to a 1992 
     study by Freeman and David E. Bloom, a Columbia University 
     economist. ``The single biggest reason for the decline,'' 
     says Freeman--roughly 25%--``is deunionization.''
       The same goes for health insurance, which also became a 
     standard benefit after unions pushed it during the war. Since 
     1980, the share of workers under 65 with employer-paid health 
     care has plunged from 63% to 56%, according to the Employee 
     Benefit Research Institute (EBRI), a Washington research 
     group. Rising costs are a factor, but ``coverage would not 
     have dropped as much if unions had stayed strong,'' says EBRI 
     research director William S. Custer.
       Similarly, fewer workers now have grievance systems to 
     protect against mistreatment. Forced to fend for themselves, 
     they're filing unjust-dismissal suits, which have exploded 
     from about 200 a year in the late 1970s to more than 25,000 a 
     year now, experts estimate. ``There's no question that 
     protections for workers have gone down with the decline of 
     unions,'' says Theodore J. St. Antoine, a University of 
     Michigan professor who's an authority on such cases.
       Of course, employers don't respond just to unions. They 
     react as well to social trends and market forces, such as the 
     women's movement or competition for skilled workers. For 
     instance, the share of workers in midsize and large companies 
     with unpaid maternity leave--for which unions haven't pushed 
     hard--rose from 33% to 37% between 1988 and 1991, says the 
     BLS. And some benefits, such as pensions and Social Security, 
     have developed their own constituencies.
       Unions are the guardians of others, however. Take safety 
     regulations. The Occupational Safety & Health Administration 
     under Reagan and Bush was hands-off agency--and workdays lost 
     to injuries jumped from 58 to 100 workers in 1983 to 86 in 
     1991. Now, President Clinton is beefing up the agency, partly 
     because of the support unions gave him. That's typical of 
     interest-group politics, which experts say works best if all 
     major interests in society are represented. Even Senator 
     Hatch agrees: ``We need unions to make sure that working 
     people have a legitimate and consistent voice.''
       If unions are so important, why are they going the way of 
     T. Rex? Certainly, labor itself hasn't helped. When global 
     competition hit, most unions dismissed employers' demands for 
     change as the same old handwringing by fat-cat bosses. And as 
     their ranks thinned, unions were slow to tackle the costly 
     and iffy job of aggressively organizing new industries.
       In fact, the 1980s spotlighted the lackluster leadership 
     that has plagued unions for years. They never developed an 
     antidote to union-fighting tactics. And they found no 
     rejoinder when President Reagan labeled labor's millions of 
     middle-class constituents a special-interest group. The dour, 
     cerebral Kirkland instead found soulmates among Reaganites 
     who shared his hatred of communism. His failure to devise a 
     domestic strategy left labor rudderless at its most crucial 
     moment in half a century.
       Still, even a brilliant leader would have struggled. The 
     shift from factories to services spurred new jobs in 
     industries that traditionally have been hard to unionize. The 
     effects were compounded by industry's antiunion fervor in the 
     face of global competition. Other industrialized countries 
     have shifted to services, yet their unions haven't collapsed, 
     Harvard's Freeman says. The difference, he adds, is the 
     extraordinary opposition of U.S. managers.
       For instance, employers illegally fired 1 of every 36 union 
     supporters during organizing drives in the late 1980s, vs. 1 
     in 110 in the late '70s and 1 in 209 in the late '60s, 
     according to an analysis of National Labor Relations Board 
     figures by University of Chicago professors Robert J. LaLonde 
     and Bernard D. Meltzer. Unlawful firings occurred in one-
     third of all representation elections in the late '80s, vs. 
     8% in the late '60s, they found. ``Even more significant than 
     the numbers is the perception of risk among workers, who 
     think they'll be fired in an organizing campaign,'' says 
     Harvard law professor Paul C. Weiler. Indeed, when 
     managements obey the law, they don't defeat unions nearly as 
     often. Union membership in the public sector, where federal, 
     state, and local officials don't try so desperately to break 
     or avoid unions, has risen by 23% since 1983, to 7 million 
     last year.
       The excuse on which industry based its assault--that U.S. 
     labor costs were out of line internationally--was largely a 
     bogus issue: Such comparisons sprang mostly from the 
     ultrastrong dollar. Now that it's lower again, U.S. wages are 
     below Europe's and Japan's.


                             Blunderbusses

       Companies had a point, though, on productivity. Across the 
     economy, it rose only 1% a year in the '70s and '80s, down 
     from 3% in the '50s and '60s, meaning that it failed to 
     offset wage growth. Bad management was a major culprit. But 
     labor blundered, too: Its contracts made it hard for 
     unionized employers to cut costs as quickly as nonunion 
     companies when global competition undercut the pricing power 
     of U.S. industry. As a result, the premium union members earn 
     over nonunion workers rose from 10% to 15% in the 1960s, 
     economists have found, to about 21% today. That's partly why 
     corporate animosity toward unions continued even as annual 
     factory productivity growth returned to 3% in the '80s and 
     union pay lagged behind inflation.
       This attitude may change only if labor embraces cooperation 
     with unprecedented enthusiasm. Doing so will require unions 
     to reinvent themselves as extensively as executives are 
     reinventing the corporation. The unions of tomorrow will need 
     to balance better wages with efforts to help employers win 
     competitive battles. And in place of adversarial skills, 
     labor leaders will need expertise in everything from 
     management techniques to technology.
       More fundamentally, unions will need to adopt a ``we're-in-
     this-together'' mentality instead of the ``us-vs.-them'' one 
     that has characterized both sides of the industrial divide 
     for decades. ``We want a whole new approach to how labor and 
     industry can work together,'' says Lynn Williams, a leading 
     advocate of labor cooperation who retired in March as USW 
     president. Such views received an important boost from the 
     AFL-CIO's remarkably self-critical February report, titled. 
     The New American Workplace: A Labor Perspective. It declares 
     that new cooperative work methods ``increase worker 
     opportunities . . . bring greater democracy to the workplace 
     . . . and improve the quality, and reduce the cost, of the 
     goods and services.''
       This attitude already has begun to filter into industries 
     as diverse as farm equipment, autos, electrical equipment, 
     garments, mining, paper, steel, and telecommunications. 
     Companies such as Deere, AT&T, and National Steel are 
     creating completely new roles for both managers and union 
     officials, who collaborate daily on everything from work 
     assignments to marketing strategies. One early example of 
     this new unionism is General Motors Corp.'s Saturn Corp., 
     where teams of workers largely govern themselves and union 
     officials are involved at every level of management.


                              paper copies

       Another is Scott Paper Co., which four years ago took a 
     startlingly different tack than the frontal assault 
     International Paper Co. had mounted on the United 
     Paperworkers Union in an effort to cut costs. Scott and the 
     union formed a committee of 10 top officials from each side 
     who pledged to ``work together to meet the needs of 
     employees, customers, shareholders, the union, and the 
     community.'' They set up teams that give workers more 
     decision-making power, a move so successful in reducing costs 
     and boosting quality that other paper companies, such as 
     Champion International Corp., are copying it. ``The union can 
     play a key role in our business,'' says Philip E. Lippincott, 
     who retired as Scott's chief executive officer on Apr. 1.
       It isn't easy for unions to make the transition. The days 
     of sitdown strikes and company goons stamped generations of 
     labor leaders with a profound suspicion of management. And 
     recent antiunion battles exacerbated this. For instance, the 
     United Auto Workers (UAW) advocated cooperation in 1973 at 
     GM. But a dissident group sprang up to resist in the '80s, 
     when GM shut some plants that didn't accept teams. And some 
     unions fear that managers use teams to abolish hard-won work 
     rules or dupe employees into working harder for no extra pay. 
     Beyond that, some experiments in cooperation have left a 
     bitter taste: An early-1980s effort between AT&T Co. and the 
     Communications Workers of America (CWA) failed when lower-
     level officials weren't included and AT&T cut jobs.
       Perhaps the hardest question for unions to deal with is why 
     they're necessary for a high-performance workplace. What 
     really makes empowerment succeed, after all, isn't unions per 
     se, but employee trust and commitment. Teams lift 
     productivity most in companies with four features, according 
     to a 1990 review of two dozen studies by University of 
     California at Berkeley economist David I. Levine and Laura 
     D'Andrea Tyson, who now heads the Council of Economic 
     Advisers. These include productivity bonuses, job security, 
     steps to build group cohesiveness (such as limiting pay 
     differences between workers and managers), and employee 
     rights (such as protection from arbitrary firings). ``A union 
     is one way to do [all] that,'' says Levine, ``although it's 
     [not] the only way.''


                               futurists

       Still, employers that pull all this off, such as Motorola 
     Inc. and Procter & Gamble Co., have formal mechanisms that 
     protect employees much as unions do. These include no-layoff 
     practices, grievance procedures, and profit sharing. 
     Moreover, unions can be very helpful when they're willing. In 
     fact, surveys by the General Accounting Office show that 
     alternative work schemes are spreading at least as rapidly in 
     unionized companies as in nonunion ones.
       National Steel Corp., for example, began cooperation two 
     years after Japan's NKK Corp. bought 70% of the No. 4 U.S. 
     steelmaker in 1986. To build trust, the company adopted a no-
     layoff policy for all 9,500 union members with a year's 
     seniority. Hourly workers act as foremen. And USW officers 
     get data on everything from earnings to market conditions--to 
     help them see what it takes to compete. The payoff: Despite 
     recent operational problems that have hurt profits, the 
     number of hours needed to make a ton of steel at National's 
     main plant in Ecorse, Mich., has fallen by 33% since 1988, to 
     295--among the industry's best numbers. National has run ads 
     proclaiming: ``We're partners with labor because we can't 
     imagine a future without them.''
       Even AT&T and the CWA are starting over. In December, 1992, 
     they set up elaborate joint structures, such as councils of 
     company and union officials at the local, regional, and 
     national level. Now those are paying off. For instance, 
     AT&T's long-distance unit wanted to evaluate technicians in 
     Virginia for traits that make employees good at customer 
     relations. Technicians feared that those who did poorly might 
     be moved or fired. But instead of fighting the effort, the 
     CWA won a guarantee of no forced layoffs or relocations. The 
     profiling has helped to speed up AT&T's maintenance times, 
     officials say, and now is being expanded to 1,600 technicians 
     nationwide. ``If we had tried to do that absent the union's 
     involvement, we wouldn't have gotten as much cooperation from 
     our technicians,'' says Stan Kabala, the unit's head.
       The lesson: If organized labor can offer itself as a 
     partner, it may win at least grudging acceptance and carve 
     out a place in the global economy. If not, its slow fade will 
     continue. And many employees, union and nonunion alike, will 
     suffer, whether they know it or not.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, I listened to a number of these remarks 
here, and I have a few things to say. This is a very, very important 
issue.
  Mr. President, S. 55 is mistitled the Workplace Fairness Act. It is 
the latest attempt by some of my colleagues who have dedicated their 
life to overturning Supreme Court decisions they find objectionable.
  When I first heard of this particular bill, which would overturn what 
has become known as the Mackay doctrine, I wondered which Supreme Court 
Justice had written the offending decision. Naturally, given the sense 
and level of outrage expressed by some in this body one would assume 
that the misguided jurist was an appointee of President Reagan or 
President Bush, perhaps Justice Scalia or even Chief Justice Rehnquist. 
But in fact the judicial offender in this instance was Justice Owen 
Roberts. That is correct. Justice Owen Roberts. The Supreme Court 
decision we are being asked to overturn was written in 1938. Today we 
are asked to overturn a decision that was issued more than 56 years 
ago, a decision that has stood without a challenge for more than a half 
century, a decision that has been endorsed by successive Congresses 
since that time.
  It is interesting to note--in fact it is remarkable--that with all 
the problems facing our Nation today, the economic challenges, the 
budgetary crisis, health care, crime, despite all of these problems, 
some of my colleagues believe that it is more important for the Senate 
to correct what they perceive to be the mistakes of the pre-World War 
II era. The proponents of this bill have summarized the thrust of their 
legislation in the following manner: Employees cannot be disciplined or 
discharged for engaging in a strike but they can be permanently 
replaced. The proponents assert that because employers can hire 
permanent replacements for striking workers, employees are discouraged 
from going on strike. It is harder for unions to win strikes. It is 
more difficult for organized labor to shut down employers, and it 
causes greater economic destabilization.
  Alarmed by these facts, the proponents have introduced S. 55. Its 
purpose is rather straightforward: Change the rules that have governed 
Federal labor law for the last 55 years so that unions will be able to 
win almost every time they go out on strike; change the rules so that 
unions can shut down any employer whenever they want, for how long they 
want, and as often as they want.
  Union leaders understand that current law places risks on both 
management and labor during labor disputes. If employers act 
unreasonably, their employees can go on strike. And, unions understand 
that if their demands are unreasonable and they still go on strike, 
employers may hire permanent replacements.
  Current law is based on the tried and true concept that, by making a 
strike risky for both sides in a collective bargaining dispute, both 
sides have a vested interest in finding reasonable solutions to their 
labor disputes.
  Consequently, it is not difficult to understand the purpose of the 
legislation. Eliminate the risk for unions when they go on strike.
  Eliminate the need for economic responsibility. You will inevitably 
make it easier for unions to go on strike and to win their strikes. By 
legislative fiat, S. 55 will provide unions with what they do not enjoy 
today--unrivaled economic power and control of the labor market. That 
is what they want.
  Many of us in this Chamber recognize that the role of unions in the 
workplace has greatly diminished. Part of this has been due to economic 
realities. Part has been due to misguided leadership in the union 
movement. Part has been due to the passage of legislation that enhances 
employee benefits and protections. And, part of this diminution is due 
to a growing sophistication among employers and employees.
  The relationships between labor and management have improved 
dramatically during this century, as employers have begun to understand 
the importance of maintaining positive relationships with their 
workers.
  For all of these reasons, the AFL-CIO is no longer the economic power 
it was 50 years ago, 20 years ago, or even 10 years ago. But it is 
still a most formidable political power, if not the most formidable 
political power in this area.
  No observer of Congress can deny that the AFL-CIO still wields much 
power in the Halls of the House and Senate.
  In the past, the AFL-CIO liked to boast that they controlled the 
agenda of the U.S. Congress. While that may be a bit of an 
overstatement today, it is true that they still have the ability to 
demand that the bills they want Congress to vote on, will be voted on. 
This is a perfect illustration.
  Consequently, the unions have decided that they will force Congress 
to change the rules that have governed Federal labor law for the last 
55 years.
  If they cannot win at the bargaining table like they did in the past, 
then they will just demand that Congress change the rules until they 
can win again.
  The AFL-CIO is demanding that we tilt the balance so far in their 
favor that they can once again force employers to accept their demands, 
reasonable or unreasonable, without any need for economic 
responsibility on their part.
  Does any one in this body really believe that by making strikes risk-
free for unions that there will not be more strikes? Does anyone really 
believe that the solution to our current economic problems--problems 
compounded by the internationalization of markets and skill 
shortages in the labor force--is to encourage the small percentage of 
American workers represented by unions to go on strike?
  Do we as a body really want to tell the American people that we have 
finally found the answer to our economic woes, and it is to go on 
strike?
  The proponents of S. 55 have also been a little loose with their 
explanation of current law.
  Today, employees have the right to strike--the ultimate collective 
bargaining weapon that unions can bring to bear on an employer's 
business.
  But, how an employer responds to that strike depends on what kind of 
strike it is.
  If a strike is caused or prolonged by an employer's unfair labor 
practice, such as a failure to bargain in good faith, striking 
employees cannot be permanently replaced. Let me repeat myself. If a 
strike is caused or prolonged by an employer's unfair labor practice, 
such as a failure to bargain in good faith, striking employees cannot 
be permanently replaced.

  In these instances, under the National Labor Relations Act, the 
employer is required to reinstate the strikers to their former 
positions and may be liable for substantial amounts of backpay.
  If, on the other hand, the strike has nothing to do with any 
wrongdoing by the employer and is purely over economic terms, such as 
an increase in wages, an employer may take a variety of steps to 
withstand the strike, including hiring permanent replacements.
  In these cases, strikers who have been replaced and seek to return to 
work retain their status as employees and must be reinstated as 
positions become available.
  If the employer has done nothing more than resist a union's economic 
demands at the bargaining table, the law has always permitted employers 
to keep operating by hiring permanent replacements. In fact, as the 
Supreme Court has stated in Belknap versus Hale, the ``very purpose of 
enabling an employer to offer permanent employment to strike 
replacements is to permit the employer to keep his business running 
during the strike.''
  S. 55, however, would say that an employer has no such right. No 
matter how outrageous or irresponsible the demands of the union, if the 
union goes out on strike, the employer has no right to hire permanent 
replacements. The employer's only right under S. 55 is to capitulate to 
the union's demands or hope the union returns to work before the 
business closes down for good.
  Recognizing the absurdity of this scenario, for more than half a 
century, American labor law has provided both labor and management with 
a balanced set of rights.
  Economic weapons and risk are critical elements of our national labor 
policy. As the Supreme Court has explained: ``The presence of economic 
weapons in reserve, and their actual exercise on occasion by the 
parties, is part and parcel of the system that the Wagner and Taft-
Hartley Acts have recognized.'' NLRB v. Insurance Agents, 361 U.S. 477, 
489 (1960). And, as a leading labor law expert has noted, 
``[c]ollective bargaining evidently functions as a method of fixing 
terms and conditions of employment only because the risk of loss to 
both parties is so great that compromise is cheaper than economic 
strife.'' Charles J. Morris, ``The Development Labor Law,'' second ed., 
at 996.
  Under current law, employers' demands at the bargaining table are 
checked by the knowledge that their employees have a most powerful 
weapon--the strike--a weapon that could cause loss of profits and 
market share and could ultimately put them out of business.
  Employee's demands, at the same time, are likewise checked by the 
knowledge that a call for a strike may be met by the hiring of so-
called Mackay replacements.
  The inherent uncertainty about what will happen when both sides 
resort to their ultimate weapons is an essential element in the 
dynamics of collective bargaining. Most importantly, it provides the 
strongest possible inducement for both groups to negotiate in good 
faith and to resolve their differences without resorting to such 
measures at all.
  S. 55 proposes to change this level playing field on which labor and 
management have long operated.
  A level playing field does not guarantee that parties bring either 
equivalent strength or wisdom to any particular labor dispute.
  Nor does it guarantee that the results of any labor dispute, or the 
specific terms of any particular labor contract, are what any of us 
individually would think were either the most fair, most reasonable, or 
most prudent for either side.
  Congress has never established itself, or the courts, as an 
arbitrator to determine the terms of collective bargaining agreements. 
Rather, the true level playing field that is part of our national labor 
policy was designed to foster a balance in the legal rights of the 
parties. Since the protection of the right to strike gave unions an 
extremely potent offensive weapon, the law also gives employers the 
defensive weapon of continuing to operate during a strike.
  As described by former Solicitor of Labor and NLRB general counsel 
the late Peter Nash,

       The hiring of permanent replacements has long been 
     recognized as constituting part of the legitimate self-help 
     available to employers in a strike situation and allows the 
     dispute between the employer and its employees ``to be 
     controlled by the free play of economic forces.'' Machinists 
     v. Wisconsin Employment Relations Comm., 427 U.S. 132, 140 
     (1976) (quoting NLRB v. Nash-Finch, 404 U.S. 138, 144 (1971).

  If S. 55 became law, it would insulate striking employees from the 
risks that traditionally have acted as a check on the voluntary 
decision to strike over economic issues, and would free organized 
workers to command a price for their labor without regard to the market 
forces of supply and demand.
  The Mackay doctrine, in contrast, serves as an important market check 
on opportunistic high demands of unions as well as on opportunistic low 
offers by employers who are prohibited under this existing doctrine 
from offering replacements a better deal than the one rejected by 
strikers.
  As one expert has noted in this regard, ``the willingness of workers 
to cross picket lines and offer their services on the basis of the 
employer's final offer tells something about the economic 
reasonableness of the union's demands.'' Estreicher, ``Strikers and 
Replacements,'' 3 Labor Law 897, 902 (1987).
  The result of overturning the longstanding Mackay doctrine would be 
an increase in the number of strikes, and an increase in the risk of 
anticompetitive collective-bargaining agreements.
  Moreover, S. 55 would injure many nonstriking workers and their 
families, whose livelihoods depend on a functioning, economically 
viable employer. Customers, suppliers, and consumers would all suffer 
the burdens of the increased strike activity and the harmful economic 
impact that would be generated by this bill.
  Let me talk a little bit about myths and realities.
  The proponents of this legislation have attempted to justify their 
attack on the Mackay doctrine by promoting several myths about Federal 
labor law and strikes.
  The first myth is a whopper. The proponents claim that the Mackay 
doctrine--a Supreme Court precedent of more than half a century--should 
be ignored, because it is only dicta.
  As my colleagues know, dicta refers to opinions of a judge which do 
not embody the resolution or determination of the Court. In other 
words, something that is dicta is an opinion offered by the Court which 
is unnecessary or extraneous to the decision itself. Its elimination 
from a judicial decision would not alter the holding of the court.
  In other words, the proponents are arguing that by overturning the 
Mackay doctrine they are not really overturning a Supreme Court 
decision but rather only taking issue with one justice's extraneous 
comment.
  The Mackay doctrine, which has some of my colleagues in such high 
dudgeon, stems from a Supreme Court decision issued on May 16, 1938.
  The case, National Labor Relations Board v. Mackay Radio & Telegraph 
Co., 304 U.S. 333 (1938), grew out of a labor dispute between Mackay 
Radio and Telegraph and local No. 3, of the American Radio 
Telegraphists Association. Negotiations between the company and the 
union broke down, and the employees went out on strike. The company 
brought employees from its offices in other cities to take the places 
of the strikers. Subsequently, all but five of the strikers were taken 
back by the company.
  The union filed charges with the National Labor Relations Board, 
charging that by failing to reinstate the five remaining strikers, the 
company was discriminating against them on account of their union 
activities. The Board, among other things, ordered the company to 
reinstate the five with back pay.
  The Supreme Court was asked to review the Board's decision, which it 
upheld. One of the issues before the court was whether the Board lacked 
jurisdiction because the company was at no time guilty of any unfair 
labor practice. The Court noted that there was no evidence that the 
company was guilty of any unfair labor practice.
  To explain its conclusion, the Court noted that the company was 
negotiating with the authorized representatives of the union. Then the 
Court addressed the issue of whether its use of replacements was an 
unfair labor practice. In responding to this issue, the Court outlined 
what thereafter became known as the Mackay doctrine:

       Nor was it an unfair practice to replace the striking 
     employees with others in an effort to carry on the business. 
     Although Section 13 provides, ``Nothing in this Act shall be 
     construed so as to interfere with or impede or diminish in 
     any way the right to strike,'' it does not follow that an 
     employer, guilty of no act denounced by the statute, has lost 
     the right to protect and continue his business by supplying 
     places left vacant by strikers. And he is not bound to 
     discharge those hired to fill the place of strikers, upon the 
     election of the latter to resume their employment, in order 
     to create places for them. NLRB v. Mackay Radio & Telegraph 
     Co., 304 U.S. 333, 345-346 (1938).

  Now I realize that one person's dicta is another's doctrine, but the 
Supreme Court was rather clear in its holding. Nothing in the Wagner 
Act, the National Labor Relations Act, prohibited an employer from 
hiring replacements for employees who have gone out on strike, and the 
employer is not required to fire those replacements once the strikers 
decide they wish to return to work.
  What was Congress' reaction to the decision? The following year, 
Senator Wagner appeared before the Senate Education and Labor Committee 
and made the following statement:

       Every step that the Supreme Court has taken toward 
     clarifying the meaning and defining the scope of the act has 
     made it easier for workers and employers to deal successfully 
     under its provisions.

  This is hardly a statement one would expect from Senator Wagner if 
the Supreme Court's opinion in the Mackay decision had been viewed from 
its inception as incompatible with the basic rights and values of 
Federal labor law.
  This mistaken assertion was made by the committee majority in the 
report accompanying S. 55. I can only surmise that the authors of the 
majority report have concluded that a statement by Senator Wagner, the 
author of the Federal statute, made a year after the Supreme Court's 
decision, has no merit. Perhaps they feel that the statement by Senator 
Wagner is also dicta.
  In fact, Senator Wagner's assessment is relevant, because it 
underscores the fact that instead of being an aberration, the Mackay 
doctrine was consistent with the legislative history of the Wagner Act.
  A memorandum prepared by the Senate Education and Labor Committee on 
S. 1958, Senator Wagner's bill, clarified the ability of employers to 
hire replacements. It states:

       S. 1958 provides that the labor dispute shall be current, 
     and the employer is free to hasten its end by hiring a new, 
     permanent crew of workers and running the plant on a normal 
     basis.
  And, there is more. During the floor debate on the House version of 
the Wagner Act, Representative Fletcher asked whether anything in this 
legislation would prevent employers from bringing in strikebreakers. 
The bill's floor manager, Representative Connery of Massachusetts 
replied,

       I do not think there is. The employers' rights under the 
     law will be just as strong and secure after passage of this 
     act as they were before.

  Consequently, instead of being dicta, representing some unnecessary, 
extraneous viewpoint that was repudiated from the moment it was 
offered, the Mackay doctrine was an accurate articulation of 
congressional understanding of employer rights under the Wagner Act. 
The Supreme Court's opinion was not at odds with congressional intent. 
The two were consistent.
  But, let us assume for a moment that the proponents' revisionist 
version of history is accurate.
  If the Mackay doctrine was an aberration, something far removed from 
the intent of Congress and the body of judicial thought, then it is 
logical to assume that Congress would take immediate steps to correct 
this flawed doctrine at the appropriate time.
  In 1959, Congress passed the Landrum-Griffin Act, which dealt 
directly with the issue of picketing, strikes, and voting rights for 
economic strikers.
  Obviously, it would be hard to imagine a time more appropriate to 
correct something as abhorent as the Mackay doctrine, if the proponents 
are correct in their assertion that the doctrine was incompatible with 
basic rights and values of Federal labor law. But, it was not changed, 
and everybody knows that.

  Instead, the Landrum-Griffin Act included a provision giving economic 
strikers the right to vote in an election held within 1 year after 
commencement of an economic strike if they have been replaced.
  Congress gave those strikers the right to vote to prevent employers 
from getting rid of the union by hiring permanent replacements, and 
then holding an election immediately thereafter in which the permanent 
replacements but not the strikers could vote.
  Even the most rabid proponent of this legislation would have to agree 
that there would have been no need for this provision in the Landrum-
Griffin Act if Congress believed that an employer could not hire 
permanent replacements for economic strikers.
  In sum, Mr. President, the Mackay doctrine was not ``dicta.'' It did 
not thwart the will of Congress. On the contrary, it is obvious that 
Congress clearly believed that the Mackay doctrine was the correct 
expression of the law--that employers could hire permanent replacements 
for economic strikers.
  In fact, contrary to the assertion that the Mackay rule is an 
aberration, the Supreme Court has affirmed it on numerous occasions 
over the past 50 years, at times by Justices not known for harboring an 
antiunion bias.
  In 1963, in NLRB v. Erie Resistor Corp., 373 U.S. 221, 232 (1963), 
against a challenge to Mackay, the Court stated, ``We have no intention 
of questioning the vitality of the Mackay rule * * *''
  In 1967, in NLRB v. Fleetwood Trailer Co., 389 U.S. 375, 379 (1967), 
the Court stated that employers have,

     ``legitimate and substantial business justifications'' for 
     refusing to reinstate employees who engaged in an economic 
     strike * * * when the jobs claimed by the strikers are 
     occupied by workers hired as permanent replacements during 
     the strike in order to continue operations.

  In 1983, the Court reaffirmed Mackay in Belknap, Inc. v. Hale, 463 
U.S. 491, 504, n. 8 (1983), when it held,

       The refusal to fire permanent replacements because of 
     commitments made to them in the course of an economic strike 
     satisfies the requirement that the employer have a 
     ``legitimate and substantial justification'' for its refusal 
     to reinstate strikers.

  As recently as 1989, Justice O'Connor, writing for the Court, applied 
Mackay to affirm the validity of TWA's permanent replacement of 
striking flight attendants. She wrote, ``On various occasions [over the 
years] we have reaffirmed the holding of Mackay Radio.''
  The fundamental principles behind Mackay rest in the proposition that 
unions and employers are entitled to a level negotiating field in which 
each party is free to use the economic weapons available to it. There 
is a delicate balance in labor law that must be maintained, and Mackay 
Radio is part of the maintenance of that delicate balance.
  On occasions, these principles are reaffirmed by the most unlikely 
members of the Court.
  In a case involving a union challenging an employers' association's 
use of ``freeze-outs,'' Justice William Brennan wrote for the Court:

       Although the [National Labor Relations] Act protects the 
     right of employees to strike in support of their demands, 
     this protection is not so absolute as to deny self-help by 
     employers when legitimate interests of employees and 
     employers collide. Labor Board v. Truck Drivers Union, 353 
     U.S. 87, 96 (1957).

  Likewise, it was Justice Brennan, who in a subsequent case involving 
union strike tactics, again reaffirmed the Court's affirmation of the 
principles behind Mackay. In Labor Board v. Insurance Agents, 361 U.S. 
477, 489-490 (1960), he wrote:

       The presence of economic weapons in reserve, and their 
     actual exercise on occasion by the parties, is part and 
     parcel of the system * * * two factors--necessity for good-
     faith bargaining between parties, and the availability of 
     economic pressure devices to each to make the other party 
     incline to agree on one's terms--exist side by side * * * 
     and, at the same time, negotiation positions are apt to be 
     weak or strong in accordance with the degree of economic 
     power the parties possess * * *. And if [the government] 
     could regulate the choice of economic weapons that may be 
     used as part of collective bargaining, it would be in a 
     position to exercise considerable influence upon the 
     substantive terms upon which the parties contract.

  As one can readily see, it is clear that S. 55 demands that we 
overturn a well-established precedent of labor law.
  Far from being dicta, the Mackay doctrine is a clear expression of 
the law. It has been left unchanged by Congress for more than half a 
century. It has been upheld by the Supreme Court on a number of 
occasions.
  In sum, the attempted minimization of the Mackay doctrine by the 
proponents of S. 55 will not stand the light of review.
  Myth No. 2:
  Well, the proponents of this bill are nothing if not advocates, and 
they are nothing if not resourceful. Faced with the rather obvious 
probability that they could not discredit the Mackay doctrine through a 
tortured legal analysis, they propagated yet another myth, a myth that 
brings this issue up to the present.
  I suppose this myth was inevitable--namely, the idea that it is all 
President Reagan's fault.
  The proponents argue that the hiring of permanent replacements was 
just not done before 1980. In other words, the Mackay doctrine was not 
a problem for more than 40 years because employers never exercised this 
legal right.

  There was no reason for the unions and their friends in Congress to 
complain about the hiring of permanent replacements, because no 
permanent replacements were ever hired. It just was not done.
  For those listening closely, they will not miss the significance of 
the date used by the bill's supporters. The proponents claim that it 
was not until the 1980's that the use of permanent replacements became 
so commonplace.
  It was not until the Reagan administration that employees began 
racing out and hiring permanent replacements the first moment an 
employee went out on strike.
  President Reagan, according to proponents, made it fashionable to use 
replacements when the members of PATCo, the air traffic controllers, 
broke the law that prohibits Federal employees from striking against 
the Federal Government.
  When these employees went out on strike, they were permanently 
replaced by the President. According to the proponents, President 
Reagan's actions gave employers around the Nation the green light, and 
employers ever since have been replacing thousands upon thousands of 
employees.
  I suppose it was only a matter of time until we got around to blaming 
Ronald Reagan.
  I find it ironic that some of my colleagues routinely criticize 
President Reagan for doing so little, and then immediately turn around 
and blame him for everything they believe is wrong with the United 
States today. And they certainly find a lot that is wrong. For someone 
who is constantly criticized for being so inactive, President Reagan 
certainly seems to have accomplished a lot.
  The only problem with the argument that the use of permanent 
replacements is a recent phenomenon is that it is wrong.
  According to a study released by the Employment Policy Foundation, 
there are 251 National Labor Relations Board cases since 1938 where the 
Supreme Court's decision in Mackay was cited and permanent replacements 
were hired. All but 22 of these cases involved strikes that occurred 
before 1981.
  Over the next several days, this body is likely to hear about a 
General Accounting Office report commissioned by the proponents of the 
legislation entitled, ``Report to Congressional Requesters: Strikes and 
the Use of Permanent Strike Replacements in the 1970's and 1980's.'' 
GAO/HRD-91-2 (1991).
  This report is purported to be the definitive proof of how widespread 
the problem of permanent replacements has become. According to the 
report, the GAO found that, in 1985, 4 percent of striking employees 
were replaced by Mackay replacements--4 percent. The report went on to 
conclude that this figure fell to 3 percent in 1989. And, these figures 
count as permanently replaced those strikers who returned or will 
return to their jobs as a result of vacancies, a strike settlement, or 
a National Labor Relations Board order in case of an unfair labor 
practice strike.
  According to the report requested by proponents, 96 percent of all 
employees who went on strike in 1985 were not replaced by permanent 
replacements. In 1989, 97 percent of workers who went on strike were 
not permanently replaced.

  This is the proponents' evidence of an employer community run amok. 
The fact is that the problem they are complaining about has decreased.
  I might note that the number of affected strikers is less than one 
one-thousandth of 1 percent of all Americans in the civilian labor 
force.
  So much for that myth.
  Myth No. 3:
  Another myth associated with S. 55 is the implication that the 
legislation would restore balance and fairness to our labor laws.
  While the legislation clearly limits the actions an employer can take 
during a strike, it should be remembered that there is nothing in S. 55 
which would impose a similar limitation on the rights of unions.
  There is nothing in the bill that increases the economic risk of 
union members, nor are they forced under the bill to relinquish an 
equivalent right.
  Economic strikers in some States have the right to collect 
unemployment compensation. They are not prevented from finding other 
employment during the strike. They are entitled to receive union strike 
benefits which might not be insignificant in some instances. Further, 
in some States strikers may be eligible for welfare benefits. Nothing 
in the legislation would change these rights.
  Moreover, nothing in the bill would prohibit unions from engaging in 
destructive corporate campaigns or from running a company out of 
business. S. 55 would make no changes in the rights afforded to 
strikers, only in the rights afforded to employers.
  So much for myth No. 3.
  Let me go to myth No. 4.
  Another myth disseminated by the proponents is that the Mackay 
doctrine corrupts the collective bargaining process.
  In fact, S. 55 would itself corrupt the bargaining process because it 
would provide that the right to strike may be asserted free of any 
economic disadvantage.
  The right to strike was never intended to make strikers the owners of 
their jobs.
  As Justice Stewart explained in writing for the majority in the 
Supreme Court's opinion in 1965 in American Ship Building Company v. 
NLRB, 380 U.S. 300:

       [T]he right to bargain collectively does not entail any 
     ``right'' to insist on one's position free from the sort of 
     economic disadvantage which frequently attends bargaining 
     disputes * * *. The right to strike as commonly understood is 
     the right to cease work--nothing more.

  Myth 5--other countries do it, they say.
  Another argument trotted out by the proponents is that other 
industrialized countries like Japan, Germany, and Canada do not permit 
the hiring of permanent replacements. What the proponents like to skip 
over is the fact that most other countries do not simply reject the 
Mackay doctrine--they reject our entire industrial relations system.
  In fact, a quick trip around the world reveals that American unions 
already enjoy several advantages over their international counterparts.
  Would the proponents like to buy into the entire German labor 
relations system?
  In Germany, more than one union can represent employees performing 
the same work. A strike in Germany becomes illegal whenever picketers 
use intimidation as a tactic. Strikes are forbidden in Germany if they 
would grievously wound a company, and all strikers are ineligible for 
unemployment benefits.
  How would you like to have the German laws? So ours are far more fair 
to workers than the German labor laws.
  In France, the law permits individual bargaining or unilateral 
employer action to supersede collective-bargaining agreement 
provisions. Moreover, French labor law eliminates any requirement that 
unions and management try to reach an agreement. In the Netherlands, 
courts are given broad judicial authority to enjoin strikes.
  As to Canada, it is noteworthy that according to a recent study in 
the Journal of Labor Economics, after a ban on hiring striker 
replacements was passed in three Canadian provinces, more and longer 
strikes resulted.
  Interestingly, the one policy that has a significant effect on 
reducing the incidence of strikes and the duration of strikes was a 
mandatory strike vote, a requirement which is not contained in our 
Federal labor laws.
  So myth No. 5--``Other countries do it''--really does not apply here.
  Let me go to myth No. 6--``employers don't need this right,'' they 
say.
  The final justification for S. 55 is that employers have other 
options they can use to continue to operate a facility during a strike.
  According to the proponents, these options include the hiring of 
temporary replacements, using supervisory or management personnel to 
run the plant, transferring or subcontracting work, or stockpiling in 
advance of the strike.
  In 1991, the majority of the Senate Labor Committee observed that:

       * * * in light of * * * our recent chronically high 
     unemployment rates, it is undoubtedly easier today to find 
     temporary replacement workers for even skilled jobs than it 
     was even 10 years ago, let alone 50 years ago.

  What the proponents apparently do not believe is their own rhetoric--
that many union workers are highly skilled employees, who provide the 
companies for which they work with a valuable service.
  You cannot replace a skilled workforce overnight, nor can you expect 
a handful of supervisory and management personnel to maintain 
operations adequately during a strike for an indefinite period of time. 
There is an inevitable loss of organizational efficiency and control.
  Apparently we have to state the obvious. If companies could operate 
without the striking employees, they would employ fewer people in the 
first place.
  What the proponents apparently do not know is that many plants cannot 
just be shut down. You don't just turn off the lights in a chemical 
plant and lock the door behind you. In such instances, the shutdown 
must be performed in a very careful, orderly manner, using highly 
trained workers over a 2- to 3-week period. This is true even when the 
shutdown occurs not because of a strike but because of routine 
maintenance.
  What the proponents apparently do not know is that the pool of 
unemployed workers who might temporarily assist employers during a 
strike do not possess the same skills as the striking union members. As 
the Society for Human Resource Management explained during the hearings 
on S. 55,

       An employer's challenge of recruiting temporary workers 
     would be difficult enough if the pool of available workers 
     was literate and possessed general skills. However that is 
     not the case. Employers are confronted with a less educated 
     and less skilled workforce and must frequently educate 
     employees before they can even begin to train them for 
     specific jobs.

  What the proponents of the legislation apparently do not know is that 
there is not a pool of available skilled workers waiting to run the 
gauntlet of a picket line in order to work for what could be only a 
handful of days.
  This is especially true for industries such as the airline industry. 
As the Air Transport Association of America emphasized in its hearing 
statement:

       Ready pools of skilled pilots and FAA certified mechanics 
     simply do not exist for the airline industry. The training 
     and skills needed to serve the public safety constitute such 
     high standards that there is actually a labor scarcity. In 
     this context, the longstanding Mackay rule is a fundamental 
     protection that the employer needs in order to balance the 
     unlimited power of the strike.

  What the proponents of the legislation apparently do not know is that 
many small businesses cannot operate simply by using management and 
supervisory personnel.
  Small businesses tend to be tightly run companies that are extremely 
efficient. If their employees go on strike, they shut down. There is no 
alternative.
  Perhaps the most honest assessment of the fallacy of the proponents' 
assertion that there is a ready pool of qualified skilled labor ready 
and willing to be hired for an indefinite period of time and to run a 
gauntlet of harassment every day is the AFL-CIO. Listen to the 
statement of Walter Kamiat, associate general counsel of the AFL-CIO:

       Nothing we have said thus far is to deny that some 
     particular employers may ``need'' to hire permanent 
     replacements in order to prevail in a particular strike. This 
     may be the case, for example, where striking workers are 
     particularly skilled and the labor market is particularly 
     tight.

  Mr. Kamiat apparently is willing to admit a simple fact that has 
escaped the proponents of the legislation. Namely, some employers have 
to be able to hire permanent replacements or they will always lose. The 
unions will always win when they go out on strike. There will be no 
economic restraint on these unions to modify their demands. Their limit 
will only be their imagination.
  The fact is, it is virtually impossible to replace a highly skilled 
workforce with competent people for an indefinite period of time, 
unless the employer can make an offer of permanent employment.
  But, of course, that is why this bill makes every union decision to 
strike a no-lose decision.
  Consequently, without any real check on the demands that can be made 
by organized labor, employers will have no viable alternative but to 
cave in and agree to every demand made by striking employees.
  S. 55 is perhaps most condemnable for what it does not address. The 
proponents claim that they want to restore fairness to strikes. They 
want to correct the perceived flaws in our current labor laws.
  What they have concocted is perhaps the most lopsided, special-
interest oriented pieces of legislation that has been rammed through 
Congress in recent memory.

  There is nothing in S. 55 about public safety, about the impact of 
prolonged strikes that place the public welfare and safety at risk.
  What happens when employees at a nursing home go out on strike? What 
happens when workers at acute care hospitals go out on strike? Do the 
proponents really believe that by giving unions in the health care 
industry the ability to call strikes without economic risk that there 
will not be an increase in the disruption of health care services?
  Do the proponents, who have expressed such great concern over the 
skyrocketing cost of health care in this Nation, believe that this 
legislation will have no impact on health care costs?
  The committee report accompanying S. 55 actually had a section 
entitled, ``Cost Estimate.'' It contains the following statement:

       The Committee is unable to determine the precise economic 
     impact the legislation would have on affected individuals, 
     consumers, and businesses, but the Committee believes that 
     any such impact will be minimal.

  The authors of the committee report must be the only people in the 
United States that cannot figure out the answer to that question.
  The economic impact on affected individuals will be devastating. The 
economic impact on consumers will be devastating. The economic impact 
on businesses will be devastating.
  And, some in this body still wonder why the American people feel that 
Congress has lost touch with reality. How can one honestly argue that 
by making strikes risk free for hospital unions, or for unions in any 
industry, costs will not go up?
  Perusal of S. 55 will also find another issue not covered. For most 
Americans, mention the word ``strike'' and the word ``violence'' comes 
to mind.
  Since it is inevitable that S. 55 will result in more strikes, what 
does the bill have to say about violence? Absolutely nothing.
  What does S. 55 do to prevent random shootings like those that 
occurred during the Greyhound strike? Absolutely nothing.
  What does S. 55 do to prevent the bombings and knifings that were 
such an integral part of the New York Daily News strike? Absolutely 
nothing.
  What does S. 55 do about the pattern of unrestrained violence that 
breaks out every time the United Mine Workers goes on strike?
  What does it do about the killing of Eddie York, an employee of an 
independent contractor, shot as he tried to leave a mine in West 
Virginia in July, 1993?
  So, Mr. President, this is the so-called Workplace Fairness Act of 
1994--a bill that would overturn more than 55 years of Federal labor 
law, a bill that encourages employees to go on strike, a bill that 
ignores union violence, a bill that pretends that it will have no 
economic impact, and a bill that in the name of fairness would benefit 
only one special interest group. It would benefit this group at the 
expenses of the rest of America's working men and women, at the expense 
of the free enterprise system, and at the expense of public health and 
safety.
  We all know that our Nation faces serious social and economic 
problems. We all know that the Federal budget is a nightmare, and that 
the deficit is slowly choking the lifeblood from our Nation. We all 
know that there is a crisis of confidence in our Government, 
particularly with this Congress. And the proponents of S. 55 have 
unveiled their solution--go on strike.
  Mr. President, I can think of no other bill before this body that is 
a better test of who is interested in preserving our free enterprise 
system and generating jobs and economic growth.
  I can think of no other, single bill that is a better test of who is 
interested in preserving a balance in our Federal labor laws to ensure 
that the rights of employers and employees are equivalent.
  I can think of no other single bill that is a better test of who is 
interested in preserving, fostering, and nurturing small business in 
this country.
  I can think of no other single bill that is a better test of who is 
interested in preventing one special interest group from dictating the 
laws of our Nation.
  Mr. DOMENICI addressed the Chair.
  The PRESIDING OFFICER (Mr. Ford). The Senator from New Mexico.
  Mr. DOMENICI. Parliamentary inquiry. Is there any limits on speaking 
at this point?
  The PRESIDING OFFICER. There is none. The Chair might have some 
feeling about it.
  Mr. DOMENICI. I understand the Chair might not want to stay here all 
evening, and I do not intend to burden him with that either. I think I 
will speak about 10 minutes. I ask to be notified when I have used 10 
minutes.
  The PRESIDING OFFICER. We will be glad to do that.
  Mr. DOMENICI. Mr. President, I have not indicated that will be the 
extent, but I would like to be reminded. I thank the Chair.

                          ____________________