The MC: The Mackinac Center Blog

Mackinac Center Research Topic of Council Meeting

Local news covers pension problems in Norton Shores

One Michigan city’s unfunded pension liability was the subject of a city council meeting this week after a concerned resident read about the problem in Michigan Capitol Confidential and decided to call on local officials for a fix.

Norton Shores resident Jim Riley told Fox 17 — which covered the meeting after Riley encouraged other residents to attend — his city must begin to address its unfunded pension liability to avoid severe cuts to services, major tax hikes, or cuts to employee retirement.

These retirees are counting on this. … If you have a fiscal cancer, and you avoid doing any type of treatment for that fiscal cancer, it will get worse. And we have a fiscal cancer.

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Riley raised the issue after reading a recent report in Capitol Confidential explaining that Michigan’s local government pensions have less than 65 percent of the funds they need to cover obligations to retirees. Norton Shores only has 49 percent of the funds it needs, with an unfunded liability of over $20 million.

Mackinac Center Community Engagement Manager Anne Schieber Dykstra attended the meeting and told Fox 17 that Norton Shores and other municipalities that have unfunded liabilities need to close the system to new employees. Instead, new hires should be offered defined contribution plans similar to 401(k) retirement accounts.

Read and watch the full coverage by Fox 17 here.

Read Michigan Capitol Confidential’s report here.

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An Inspiration for Expanding Detroit’s Educational Choices

The second in a two-part series on Detroit Cristo Rey High School

You can read Part 1 here.

According to the Mackinac Center’s recent survey, nearly 90 percent of Michigan voters agree that students should be able to choose a private or parochial school.

However, many families are unable to afford the option. The average tuition at a private Michigan elementary school is $4,700 a year, and $7,800 a year for high school. But with its unusual model of financing through the Corporate Work Study Program, Detroit Cristo Rey High School makes a private education affordable.

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Statewide, six in 10 voters back the idea of providing tax incentives to encourage more private contributions to fund tuition scholarships. A slightly smaller share of Michiganders support the creation of education savings accounts. That type of program would provide parents with government funds to cover tuition and a wide variety of educational services outside the traditional public school system.

Michigan’s restrictive state constitution currently stands in the way of providing children opportunity through such programs. But the U.S. Supreme Court has given them clearance, since parents are making the choice among different secular and religious options. Twenty-five states, including all of Michigan’s neighbors, offer at least some families a form of private educational choice.

Rigorous Expectations

In the meantime, a small number of families have access to Detroit Cristo Rey High School, where motivated students can succeed. About a quarter to a third of arriving freshmen have attended one of the schools in the city’s shrinking Catholic school system, while the rest come from district or charter schools.

The growing professional obligations students face as part of the Work Study Program are accompanied by a demanding 25-course credit graduation requirement. Students must take four years each of English, math, and science, and three years of Latin and social studies. One Advancement Placement class is offered to seniors.

Teachers clearly post daily goals and expectations (“Students will be able to….”) on classroom walls, and then issue an “exit ticket” to students if they demonstrate knowledge of a relevant piece of material. “I think it’s something they subconsciously rely on without realizing it that every time they walk into a classroom there is an expectation that they are going to walk out being able to do that,” math teacher Abigail Carter observed.

Cristo Rey students wear uniforms, earning the occasional “Free Dress Day” as an incentive for achievements and good behavior.

A culture that supports campus safety is an attraction. School President Mike Khoury said that in the school’s earliest days, they were approached by a security company selling paid protection services. The school declined the offer, a decision it never has never regretted. “I can’t imagine having armed guards at Cristo Rey,” he said.

The academic year is longer than most nearby schools, starting before Labor Day and going beyond the first week of June. Students arrive before 7:30 a.m. for the all-school assembly, then head off to class or board one of a dozen different vans to be transported to their work sites. Classes dismiss at 4:00 p.m.

Aiming Higher

Cristo Rey does not rely on importing the cream of the crop. Most students enter one to two years behind grade level. Comparisons of state standardized tests, including the ACT, show that within Detroit, Cristo Rey students trail only those at one charter and DPS’ two selective high schools. “The vast majority of our kids couldn’t get into Renaissance or Cass Tech,” Khoury said, referring to the two schools’ admission testing requirements.

Seeing students accepted into postsecondary institutions does not mark the end of the high school’s commitment to the youth it serves. Every year, Khoury visits different college campuses to check in personally with some of the school’s alumni. Students make the transition with more confidence because of the job experience, he said. The class of 2016 earned the highest marks possible on the school’s own measures of college readiness.

Cristo Rey tracks the academic progress of alumni who give the school permission to keep tabs on their college career. Currently, just under half of the school’s graduates end up earning a college diploma, twice the national average for high-minority, low-income urban schools. School leaders aim for a 70 percent college completion rate.

The raw numbers may not be spectacular, but Detroit Cristo Rey helps to place its students on a positive trajectory. Chris was part of the school’s inaugural Class of 2012. During the spring of his junior year he scored a 14 on his ACT, improving to a 17 on his second try in the fall. He pieced together a resume that earned him admission to Michigan State University. Four years later, he emerged not only with a communications degree but also a $5,000 competitive grant to help him produce his first film.

Cristo Rey High School need not be an anomaly in Detroit’s educational landscape. The school’s innovative model makes a unique opportunity accessible to low-income families, while helping to continue the strong legacy of urban Catholic education.

Those who want to give Detroit parents access to a variety of effective educational choices can find inspiration at Cristo Rey.

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The first in a two-part series on Detroit Cristo Rey High School

While most of their neighboring peers soaked in the last days of summer vacation, incoming students at Detroit Cristo Rey High School spent much of their time in training sessions before the academic year started on Aug. 29.

The payoff for their small sacrifice may end up being life changing. The proof is in the record, and in the students’ own stories.

“In Cristo Rey, we really believe we are an exclusive school but for different reasons,” said school President Mike Khoury.

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The school’s 315 students don’t come from wealth or privilege. Families seeking enrollment must demonstrate that their income falls below $15,000 per household member. It turns the notion of private schools as elite institutions upside down.

College Bound

Detroit’s deep educational woes are well documented. For most students, the outlook is bleak. The availability of charter schools has helped some, providing students on average with two to three months extra learning in key subjects each year. But access to high-quality options and better opportunities is uneven across the region and grade levels, while progress toward acceptable results remains painfully slow.

A May 2016 survey by the Mackinac Center estimates 21,000 available seats in existing Michigan private schools. The number of openings within reach of Detroit families is probably far smaller — not nearly enough to provide educational opportunity to all the city’s kids in need, nor enough to add much healthy competitive pressure to the system.

But some private schools continue to thrive. Located in the city’s southwest Mexicantown neighborhood, Detroit Cristo Rey High School is seeking to raise the standard. The school has celebrated five classes of graduating seniors since its opening in 2008. Every one of those 257 graduates has been accepted to college, with about 85 percent enrolling in a postsecondary institution.

Cristo Rey graduates have been accepted into local institutions like Wayne State University and Henry Ford Community College, as well as Michigan’s flagship state universities and several of the region’s historically Catholic colleges.

Neither of Edgar Servin’s parents completed a high school education, but he has his sights set on that and more. He has every reason to hope he will continue the school’s perfect record. A rising senior in the class of 2017, he will join all his classmates in applying to three different colleges by October. He said his preference would be to go to Oakland University in the suburban metro area. His goal is to become a mechanical engineer.

But for the lifelong native of southwest Detroit, his ambition and aspirations don’t end with a career. “When I’m grown, in 10 years maybe, I want to give back to the community, since I grew up here and I want to visually see the difference and impact that I make into society,” Edgar said.

Abigail Carter teaches Algebra 2 and precalculus to the school’s upperclassmen, including Servin. She began teaching at Cristo Rey in 2015, after working in a diverse set of public school classrooms. “Cristo Rey has the most unique positive and supportive atmosphere in a school that I have ever seen,” she said.

“The School That Works”

Detroit Cristo Rey styles itself as “the school that works.” A unique arrangement offers students valuable workplace experience and makes tuition much more affordable.

Following a model aligned with the national Cristo Rey Network’s 32 schools, the Corporate Work Study Program gives a four-year student the equivalent of one year’s worth of full-time, entry-level professional experience. Students are released from the regular academic schedule five days a month on a rotating schedule to work at an off-site job assignment.

Detroit Cristo Rey’s three biggest corporate partners are General Motors, DTE Energy and Fiat Chrysler, though opportunities also exist with smaller firms in the areas of health care and law. Servin has gained a head start on an engineering career with the hands-on work he’s doing for Dearborn Mid-West Company in Taylor.

“In their neighborhood, [our students] may not encounter a lot of people who’ve gone to college and had a successful career,” Khoury said. “But now one day a week, they are in a job environment where they are working with college graduates who are very successful and have become mentors to our students, and our students quickly begin to see the value of a college education.”

In all, 65 participating businesses provide low-income students experiences and connections that give them a leg up if they persist in their educational careers. Cristo Rey gives incoming students a head start on the workforce experience with three weeks of August training sessions that impart everything from the proper way to shake hands and tie a necktie to using basic office software.

The money students earn on the job covers more than half of the school’s operating budget. Philanthropic support underwrites another significant portion. (Money from the Detroit-based Skillman Foundation and national partners like the Bill and Melinda Gates Foundation was essential to getting the school off the ground.)

As a result, the typical annual tuition burden falls between $600 and $800. This practice lines up with the vision of Cristo Rey Network founder Father John P. Foley, who believes that students tend to benefit more when even the most struggling families have some level of direct investment in the school.

“It’s for their sense of self-worth and dignity so when their child receives their diploma from Detroit Cristo Rey that family can correctly say, ‘We paid for that education,’” noted Khoury.

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Mackinac Center Offers Labor Reform Ideas in Time for Labor Day

Op-ed on top reforms in The Detroit News

Michigan’s economy has been on the upswing since it passed right-to-work legislation in 2012, with employment climbing 7 percent, private-sector wages increasing 4.9 percent, an unemployment falling from 9 percent to 4.5 percent – below even the national average.

Right to work has even helped unions, which have seen numbers climb now that they must earn the business of members. Mackinac Center’s Director of Labor Policy F. Vincent Vernuccio and adjunct scholar Jeremy Lott argue in an op-ed published by The Detroit News that Michigan’s labor reforms should continue.

They suggest four reforms that could help Michigan and its unions see continued growth: Enact Worker’s Choice, require re-certification, demand transparency and reform release time, each of which is detailed in the op-ed.

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The more we can root out many of the entrenched problems associated with compulsory unionism, the better. While much has been done in private sector unions, it’s important to move serious union reforms further in the public sector.

Just in time for Labor Day, the Mackinac Center for Public Policy has released Top Labor Reforms for Michigan. The guide, authored by Vernuccio, includes 13 reforms lawmakers could make to further improve the workplace and support workers. A copy of the guide has been sent to every state lawmaker in Michigan.

Read Top Labor Reforms for Michigan

Read the full op-ed in The Detroit News here.

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September 2, 2016 MichiganVotes Weekly Roll Call Report

Ding overspending schools, limit corporate subsidies, legislative subpeonas and a boost for the disabled

While the Legislature is on a summer break with no voting, the Roll Call Report continues its review of key votes from the 2015-2016 session.

House Bill 4329, Authorize emergency manager for chronically overspending school district: Passed 59 to 50 in the House on April 23, 2015

To authorize appointment of an Emergency Manager for a public school district that fails to comply with an “enhanced deficit elimination plan” required by House Bill 4327 for a district whose regular deficit elimination plan failed to fix the problem.

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Who Voted “Yes” and Who Voted “No”


House Bill 4329, Authorize emergency manager for chronically overspending school district: Passed 25 to 12 in the Senate on June 18, 2015

The Senate vote on the bill described above.

Who Voted “Yes” and Who Voted “No”


House Bill 4467, Allow more dangerous prisoners at Baldwin private prison: Passed 57 to 53 in the House on May 7, 2015

To allow more dangerous adult prisoners to be held at a privately owned and managed prison whose previous contract with the state to house juvenile prisoners was revoked by Gov. Jennifer Granholm in 2005. Since then the prison has contracted with other states to house their prisoners, although it is closed now.

Who Voted “Yes” and Who Voted “No”


House Bill 4467, Allow more dangerous prisoners at Baldwin private prison: Passed 23 to 14 in the Senate on May 27, 2015

The Senate vote on the bill described above.

Who Voted “Yes” and Who Voted “No”


House Bill 4333, Prohibit MEGA corporate subsidy deal modifications: Passed 105 to 5 in the House on May 7, 2015

To prohibit state economic development officials from amending or modifying a corporate tax break and subsidy deal granted to certain businesses and developers under a Michigan Economic Growth Authority law repealed in 2011. The bill was introduced after it was revealed that these agreements have generated an unfunded liability of nearly $10 billion for the state, and that officials continue to amend the deals in ways that may increase this.
The Senate has not voted on this bill.

Who Voted “Yes” and Who Voted “No”


House Bill 4182, Ban local government “phone-in” voting: Passed 91 to 19 in the House on May 26, 2015

To establish that if a member of an elected public body is allowed to cast a vote on a decision by the body without being physically present, it is a violation of the state Open Meetings Act.

Who Voted “Yes” and Who Voted “No”


House Bill 4182, Ban local government “phone-in” voting: Passed 30 to 7 in the Senate on October 22, 2015

The Senate vote on the bill described above.

Who Voted “Yes” and Who Voted “No”


House Bill 4542, Create college saving plan for disabled students: Passed 108 to 1 in the House on May 27, 2015

To authorize a new type of tax advantaged education savings plan called an “ABLE account," which mirrors a recently enacted federal law, and can be used to pay for a disabled individual’s living expenses in addition to education expenses. Related bills make contributions to a beneficiary's account tax deductible, and increase the maximum balance allowed in these and other "529” college savings plans to $500,000.

Who Voted “Yes” and Who Voted “No”


House Bill 4542, Create college saving plan for disabled students: Passed 35 to 0 in the Senate on September 29, 2015

The Senate vote on the bill described above.

Who Voted “Yes” and Who Voted “No”


House Bill 4522, Expand legislative subpoena power: Passed 69 to 39 in the House on June 2, 2015

To give certain committees of the legislature the explicit authority to subpoena and investigate records of local governments, authorities, school districts and community colleges. At least one member of the minority party would have to agree. Under current law committees can subpoena state agency personnel and private citizens.
The Senate has not voted on this bill.

Who Voted “Yes” and Who Voted “No”


House Bill 4458, Repeal complete streets advisory council: Passed 90 to 18 in the House on June 2, 2015

To eliminate a government “complete streets” advisory council comprised of representatives of various pro-sidewalk interest groups that was created by a 2010 law mandating local governments adopt policies that promote more sidewalks and bike paths.

Who Voted “Yes” and Who Voted “No”


House Bill 4458, Repeal complete streets advisory council: Passed 28 to 10 in the Senate on March 1, 2016

The Senate vote on the bill described above.

Who Voted “Yes” and Who Voted “No”


SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.

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Multiplier Analyses Are Prone to Abuse

Common ways to rationalize use of taxpayer dollars

The state's corporate welfare agency claimed that taxpayers get a $6.87 return for every dollar spent on Pure Michigan ads in 2014.

A recent article from Crain’s Detroit covers a study that says the state’s taxpayer-funded venture capital partnerships provided a 21-times multiplier on investments. That is, there were $21 of economic activity for every dollar taxpayers spent. The report, which argues for more taxpayer spending on venture capital, is yet another attempt to draw faulty conclusions by misapplying an economic multiplier analysis.

Publishing a multiplier analysis is a frequent tactic to gain support for taxpayer spending. On its face, it makes the case that putting money in your preferred place will provide substantial economic returns. A little bit of public investment will yield great returns, goes the argument. Here are some examples of different multipliers that have been used to justify government spending.

No single author or publisher created these reports. They drew on different sources of data, had different models of economic activity and used different methods to analyze the data. But they were similar in one important way: They were used to call for more government spending in Michigan.

One problem with all of them is that they are being used in ways they were not designed for. If they used the same methods and models, they might be used to show which kind of government spending would have the greatest economic impact. Instead, they are used to call for taking more money from taxpayers — a judgment call that is a different question entirely.

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As economist Dan Smith remarked, “The increasingly sophisticated reiterations of old Keynesian models still fail to pass the inspection of basic economics, and still fail to address the most basic question, ‘where is the money coming from?’”

When the state publishes a study on the economic multiplier of state-paid tourism advertising, it never uses the study as part of a broader effort to set priorities for economic development spending. The economic development agencies could, for example, compare the effects of using tax money to promote tourism with the effects of that same money to seed new companies with venture capital funding. But they don’t. That kind of comparison could let them conclude that spending on tourism is better than spending on venture capital. Instead, both areas of spending (and many others) is rationalized by the argument that they have an economic impact.

There are a number of different tools available to determine the economic impact of a government initiative. Multiplier analyses are one, but their findings are often misinterpreted. Until they are used to compare the economic activity that results from different areas of public spending — something impossible, given the important ways in which they differ one from another — they should simply be disregarded.

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Plastic Bag Tax Hurts Consumers, Businesses and Does Little for the Environment

Legislature considers bill to stop new Washtenaw County tax

In June, Washtenaw County became the first local government to approve a tax on disposable carry-out bags at the grocery store. If you forget to bring your own bags, grocers are forced to charge a 10 cent tax on every new bag you receive, paper or plastic. If you double-bag, it will cost you 20 cents.

Counties claim that they have the authority to manage solid waste collection but this is a policy that stinks on many levels. Let’s start with the environment. There is little evidence that targeting a particular type of packaging with a tax will have significant impact on reducing solid waste at municipal landfills. At last count, less than 13 percent of the 254 million tons of waste was comprised of plastic. Of this 13 percent or 32,520 million tons, 3,780 million are plastic bags. Additionally, paper bag use has been declining over the years due to increasing cost and recycling.

Many consumers reuse disposable bags before putting them in the trash and when these bags become unavailable or too costly, they’ll find alternatives, very likely plastic, and possibly, heavier plastic, which eventually end up in landfills.

A bag tax is bad for low-income consumers. Fixed taxes of this sort are regressive, meaning consumers with lower incomes will feel the pinch for non-compliance more than their affluent neighbors.

“I don’t tax poor people,” County Commissioner Ronnie Peterson was quoted as saying when he voted against the tax.

A bag tax also hurts businesses, who will have to find ways to absorb will the extra cost. Profit margins at grocers are getting slimmer in part to recent trends in declining food prices. Grocers will still have to stock disposable bags but now they will have to manage extra accounting associated with the tax. Stores can be subject to fines for non-compliance and this will require added documentation.

Probably the biggest threat a local bag tax imposes is the precedent it sets for the rest of the state. What’s to stop any local government from taxing things like plastic boxes, food containers to bring home leftovers from a restaurant, plastic cups at sporting events. The possibilities are endless. Can you imagine consumers having to steer through the patchwork of local taxes?

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States are starting to realize this potential for havoc by passing “uniformity” laws. Five states, including Michigan neighbors, Wisconsin and Indiana, approved a uniformity law within the last 18 months. Eleven states now have uniformity laws in place.

Michigan’s “uniformity” bill has cleared the State Senate and is now before the House. SB 853 prohibits local government from creating an ordinance that would regulate, restrict, tax or prohibit the use of “auxillary containers,” which would cover most forms of packaging. It would not ban curbside recycling programs or recycling collection centers. Littering ordinances would be unaffected.

Washtenaw County’s bag tax is scheduled to go into effect on Earth Day in April 2017 unless Michigan legislators can stop it. Taking care of the planet is a responsibility most people assume and is best done voluntarily and through public education. Forcing people to act through a tax, a tax that could vary from city to city, could jeopardize any goodwill towards the environment.

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Michigan’s Looming Dentist Shortage?

Mid-level providers could help fill the gaps

Michigan appears to be about average in access to dental care. There are about 7,700 dentists in the state and over 10,000 dental hygienists. In 2011, there were 6.2 dentists per 10,000 people, exactly the national average. But there is a concerning trend: Michigan’s dentist population skews older than average and the state may be facing a dentist shortage in the near future.

Results from a 2011 survey of Michigan dentists reveals the problem. At that time, 37 percent of dentists were between 55 and 64 and another 15 percent were over 65. This means that over half the dentists in Michigan are over 55 and within striking distance of retirement. For comparison’s sake, nationally only 26 percent of dentists were between 55 and 64 in 2011 and 16 percent were over 65.

Not surprisingly, according to the same 2011 survey, half of Michigan dentists said that they only planned to continue practicing for 10 years or less. Over 70 percent of dentists planned to retire within 15 years. Put another way, over the next 10-15 years, to maintain current populations of dentists, Michigan would need somewhere between 3,850 and 5,400 new dentists.

Michigan does have two fine dental schools (my younger brother just graduated from one) and perhaps these schools will produce all the new dentists the state needs. Maybe, but history suggests otherwise. From 2000-2011, there were 240 new dental license applications filed per year in Michigan, on average. If that pace continues, dental schools would only produce about 3,600 new dentists in Michigan over the next 15 years — not enough to replace those who plan to retire soon.

What can be done to help deal with this potential shortage? One idea is to create a midlevel dental provider, much like a nurse practitioner in medical care. Alaska, Minnesota, Maine and Vermont allow these service providers in their dental markets. And Sen. Mike Shirkey, R-Clarklake, introduced Senate Bill 1013 in June, which would create a new license for a midlevel provider called a dental therapist. These professionals would work under the supervision of a dentist but could provide preventive and routine care on their own (filling cavities, simple extractions, crowns, etc.).

Hiring dental therapists might make it easier and less costly for dentists to expand their practices and fill shortages. Given that Michigan may soon face a shortage of dentists, policymakers should seriously consider this proposal.

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Detroit Should Lessen Licensing Requirements

Mackinac Center op-ed published in Wall Street Journal

Detroit is living up to its motto and rising from the ashes by embracing business, but it would see greater job growth and faster recovery if it removed the arbitrary occupational licensing laws that are preventing it from reaching its full potential.

Mackinac Center for Public Policy’s Jarrett Skorup, a policy analyst, and Jacob Weaver, a research intern, wrote in an op-ed published by The Wall Street Journal that Detroit puts a heavy burden on people looking to find work and provide a service to the city. For at least 60 occupations, workers must pay fees, take classes, pass exams, and/or undergo additional training prior to being allowed to work.

Research shows that these barriers restrict job growth and provide no measurable health or safety benefits to the public. Morris Kleiner of the University of Minnesota concludes in a 2015 Brookings Institution paper that licensing requirements cost consumers more than $200 billion and result in up to 2.85 million fewer jobs. As the economic damage becomes more clear, Mr. Kleiner has found allies in groups as ideologically distinct as the Cato Institute and President Obama’s Council of Economic Advisers.

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Such unfair licensing requirements also disproportionally hurt low-income workers.

A bipartisan group of Michigan lawmakers have reformed licensing requirements at the state level and Detroit leaders should follow suit to ensure the city fully rebounds from bankruptcy.

Read the full op-ed in The Wall Street Journal.

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Praise, Not Criticism for Companies That Follow Rules

Op-ed on Mackinac pipeline published in MLive

Michigan’s regulatory system aimed at protecting the Straits of Mackinac are working, but that hasn’t stopped media, environmental groups and public officials from criticizing a private company that’s following the rules.

As explained in an MLive op-ed by Mackinac Center’s Director of Environmental Policy Jason Hayes, Enbridge Energy has come under fire in recent months after it reported erosion around lakebed supports of its Line 5 pipeline in the Straits and requested permits from the state to fix the unsupported sections. The company followed the regulations in conducting a survey of the pipeline and is now trying to repair the eroded areas.

Enbridge did exactly what it was supposed to and the regulatory system worked exactly as it should have. In a perfect world, the company would be able to accurately predict lakebed erosion, many years in advance, and pre-emptively install supports before they were needed. But should it be blamed for failing to foresee the future?

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Hayes said negative consequences may result if companies like Enbridge are criticized for doing the right thing; in the future, they may be less forthcoming with findings that reveal potential problems.

Read the full op-ed in MLive here.

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