The Jones Act, Union hucksters, and other fun tid-bits...

I’ve been working on a little project concerning the Jones Act; a protectionist law that costs Hawaii's economy hundreds of millions of dollars each year. The law, enacted in 1920, basically protects all ships operating between US ports from competing against any non-US shipping companies. US shipping companies and organized labor have a very powerful lobby in place to keep the Jones Act in place. Even conservative Republicans - the same ones that claim to be "free-market capitalists – don’t seem to have the spine to go near the bill.

Having said that; while carrying out some of the research on my project, I came accross some interesting information I thought was worth sharing. I'm also hoping to get some feedback from anyone familiar with the Jones Act.

The Jones Act is a popular subject among my economics professors. One professor in particular dedicates an entire week’s worth of class time to the subject. This obsession makes sense seeing as though I attend university in one of the most effected states of the Jones Act: Hawaii. When giving the estimated per-household cost of the Jones Act to Hawaii’s residents, the numbers vary, but they hover around $3,000 per year. Whether or not this figure is “dead-on” is not my concern. But it can certainly be said that the Jones Act inflates the price of goods that are shipped under the anti-competitive auspices of the Act.

Cliff Slater, a writer for the Honolulu Advertiser and ardent critic of the Jones Act, points out in his article entitled Jones Act Costs Us Big Bucks that no real research has been carried out on the Act’s effect on Hawaii. But in the same article he points to the following comparison between shipping routes protected by the Act and those which are open to competition:

The cost to ship a standard-size 40-foot container of apples 2,100 miles from Oakland to Honolulu via Matson (using Jones Act ships) is $4,862, or $2.31 per container/mile.

To ship the same container of apples 5700 miles from Seattle to Hong Kong (using competitive ships) costs $3,800, or 68 cents per container/mile.

Allowing that the cost of loading and unloading is disproportionately higher for the shorter runs, it is not unreasonable to assume that, everything else being equal, Jones Act shipping costs about twice as much as competitive shipping.

Again, the exact cost to Hawaiian consumers is not the issue here, but their should at least be an agreement on the fact that the Jones Act does indeed create higher costs on shipped goods. Having said that, consider the following assessment by a University of Hawaii professor:

In summary, using Jones Act opponents' numbers, there would be a net loss of $257.25 million to $1.5 billion in output per year in Hawai'i, or a loss ranging from $611 to to $3,563 per household if the Jones Act were repealed. The number of jobs lost in ocean shipping ranges from a low of 5,675 to a high of 17,025. This compares with a total loss of jobs in the Hawaiian economy of approximately 13,000 since 1991. The loss in personal income would range from a low of $157,750,000 to a high of $473,250,000.

You can check out this professor's "study" for yourself (and contact me if you can make any sense of the reasoning behind his conclusion). Also, put aside his argument that almost every shipping job on the islands would be lost as a result of repealing the Jones Act (does he assume port maintenance, unloading/loading of ships, ship repair, and all the other jobs that make up the vast majority of the shipping industry could be carried out by the crew of a foreign ship?). This professor's economic reasoning is a whole other matter in and of itself. But the fact that someone is actually making an argument that the Jones Act actually saves the Hawaii economy money makes me wonder who this guy is shilling for.

The professor behind this "study" is Dr. Lawrence Boyd, a labor economist for the Center for Labor Education and Research (CLEAR) at the University of Hawaii. Dr. Boyd's resume is pretty thin, so its hard to pin down where hes been or who may have influence over his "research". But the director of CLEAR, William Puette, has a resume that leaves little to the imagination in terms of where his interests lie. Here's an excerpt:

He is also the publishing editor for a Hawaiian labor history series, author of the booklets, CLEAR Guide to Hawai'i Labor History, Labor Dispute Picketing: Organizing a Legal Picket in Hawai'i, A Picket Guide for Hawai'i Public Employees: Organizing a Legal Picket Line Under Chapter 89, HRS, and Pa'a Hui Unions: the Hawai'i State AFL-CIO, 1966-1991; […] Through Jaundiced Eyes: How the Media View Organized Labor.

Hmm... wonder if this guy is pro-union? Anyways, back to Dr. Boyd's "study" on the Jones Act, and his claim that it actually benefits Hawaii's economy. To explain the enourmous difference between the conclusions of other economists and his own, Boyd makes the following statement/claim:

Why are these results so different? Often when highly charged debates take place you occasionally see "dueling experts" for both sides who provide different results because they are paid or committed to one side or the other. This is not the case here. This research is a spin off of a larger research project where I am trying to determine the degree to which competition exists in the Hawaiian shipping trade. Neither the Center for Labor Education and Research nor myself have received any financial support for this effort. (Emphasis added)

Whenever someone makes a statement like the one above, and claims to be an inpartial critic, I will always assume the exact opposite. To me, a statement of pre-emptive denial should be treated as a red flag screaming out "GOOGLE THIS HACK!" So, I did some "Googling", and found that CLEAR is – surprise! - far from impartial.

CLEAR received a $1,000,000 from Unity House, a non-profit group formed to benefit Local 5 and Hawaiian Teamsters. The endowment was presented to the University of Hawaii and CLEAR by none other than Anthony Rutledge, son of Unity House’s founder Arthur Rutledge. The Rutledge name is no stranger to union corruption and fraud. Consider the following report from the National Legal and Policy Center Organized Labor Accountability Project:

On Oct. 30 of [2002], the U.S. Attny. for the Dist. of Hawaii charged Aaron Rutledge with persuading an unnamed individual to destroy and withhold records and "objects" sought by fed. investigators on Oct. 30, 1997. That day, the agents were searching the offices of the non-profit, Unity House, and Local 5 of the Hotel Employees & Restaurant Employees union (HERE). They also searched the home of Aaron's grandfather, Art, frmr. chief of Local 5 and founder of Unity House, a non-profit established to benefit members of Local 5 and the Hawaii Teamsters union. Reportedly, the agents seized computer files and bundles of cash that day.

Can Dr. Boyd really claim CLEAR's inpartiality when one of their major sources of income is from an organization with dubious connection to organized labor? Also, can the director of CLEAR be even-handed when setting the priorities of the organization when he himself has such a long history of labor advocacy? Does the University of Hawaii, a public university, feel comfortable spending tax payer's hard-earned money to fund such shady "studies"?

Stay tuned.