September 2022 – From the Peanut Gallery

Thoughts on the “Kitchen Appreciation Fee”

Last Sunday the Star-Ledger and NJ.com (as a “subscriber exclusive”) ran an article about a restaurant that had instituted a “kitchen appreciation fee” tacked at the end of every bill. With the fact that sales tax will also be added and the need to tip,((I realize that a ‘gratuity’ is theoretically voluntary, given the very low minimum wage that servers get, it really isn’t. I would prefer that the waitstaff be paid a full wage by management and that cost be reflected in the cost of food and drink with no tipping expected or required to assure that servers are paid fairly.)) the restaurant tab will start to look like a new car sticker or a cell phone bill.

While I would prefer that the restaurant owners adjust menu prices to generate the same revenue,((My aversion to surcharges in the form of mandatory fees, summed up as “the price should be the price,” does not extend to sales taxes, which I believe should be separately stated based upon the countervailing principle that we should know how much we pay in taxes.)) there is noting inherently objectionable about the kitchen appreciation fee so long as it is not misleading. It must be prominently presented so the bill brings no surprises and also be used entirely for the described purpose.

In order to be prominently presented, I think that it would have to be repeated on every page (or at least every two-page spread) of the menu in type of a sufficient size so that it is not likely to be missed by customers in a hurry to order. (Recall how difficult it can be to find the listing of sides from which to choose.) The term “kitchen appreciation” means (to me) that it is benefitting the kitchen staff.

The article also mentions that some restaurants charge an extra fee if the customer pays by credit card in order to cover the processing cost. Again, this fee should be prominently advertised to avoid surprises and it cannot exceed the actual processing cost.

Jay Bohn

September 29, 2022

Importance of Newspapers Does Not Justify Special Exemption From Labor Laws

When I read it, I just knew it was blog fodder. Last Thursday the Star Ledger/NJ.com prominently published an opinion piece by Richard Vezza, its retired editor/publisher (and current government affairs chairman for the New Jersey Press Association), entitled “Our state newspapers are on the brink.” The story asserts an existential threat to many newspapers (and the potential of massive layoffs at others) caused by the enforcement of New Jersey’s law regarding the classification of the people who deliver those newspapers as employees rather than independent contractors and urges the governor and leaders of the senate and assembly to change the law (as California and New York have) so that newspaper delivery people can remain independent contractors.((As the piece explains, many newspapers contract out the delivery of their newspapers to just two companies for delivery to homes and retailers; these companies in turn rely upon individuals who are classified as as independent contractors rather than employees. If they were employees, the companies would have to pay more for their services (the piece estimates the increased cost to be between 86% to 128%), which costs would be passed on to the newspapers. That is the issue.))

Tort law has a doctrine known by the Latin term respondeat superior under which the master (employer in modern terms) is liable for the torts of the servant (employee) based upon the master’s legal authority to control the servant’s conduct. This vicarious liability does not apply to the master’s “independent contractors,” whose moment-by-moment conduct is not subject to the same degree of legal control.

Over time, and with the benevolent government’s increasing altruistic concern for the welfare of workers expressed by the mandating of benefits (for which someone else is paying), the distinction has become significant (and this is the current issue) in terms of whether those benefits must be provided and the liability and payor-identity of certain taxes. Independent contractors are not entitled to the minimum wage, overtime, unemployment compensation or other benefits that the employer or government (at partially or totally the employer’s cost) provides. To the extent a employer’s workers are independent contractors, there will be no obligation on the part of the employer to pay overtime, a share of social security, unemployment and perhaps other taxes or to provide benefits (such as health insurance) which its employees get.((At least some of these taxes are then supposed to be paid by the independent contractor, but collection becomes more questionable if not deducted at the source.)) Thus, in many cases an employer reduces its labor cost significantly by classifying workers as independent contractors rather than employees.((The classification is not always just done for this purpose. If the Star-Ledger calls in an outside IT firm to fix its computer network, that relationship is quite correctly one of an independent contractor rather than employment, but “freelance” journalism is probably an entirely separate question.)) The government does not let the employer’s classification, or even a specific agreement between the employer and the worker, be the last word. Instead, it applies what is typically called the “ABC test.”((For anyone particularly interested on what the ABC test is (and the specifics and desirability of that test is beyond the scope of this post), see how the New Jersey Department of Labor and Workforce Development phrases it.))

Independent contractor status benefits some workers for whom it provides greater flexibility and the opportunity to earn more by working for more than one employer. Vezza claims that newspaper delivery people are among them:

Most independent delivery people in New Jersey work 2-4 hours per day in the mornings and then have the flexibility to seek other work or take time for themselves and/or their families and loved ones. They set their own hours, are not supervised, and they may (and often do) hire others to perform their work. Their only obligation is to deliver the work product for which the company has contracted.))

Although I haven’t talked to any of them, I really doubt such satisfaction with their lot is a widespread view. Their ability to set their own hours is (or better be) fictional, otherwise my week’s worth of morning papers might be delivered Sunday afternoon. I don’t see how the classification impacts the time actually necessary to do the job or any of the other listed advantages.

Thus, we are left with the primary beneficiaries of a special exception to New Jersey’s labor laws being only New Jersey’s newspapers. Why are they deserving of this largesse? Vezza’s answer is: “to preserve the flow of information to the public, save jobs((The piece stresses that union jobs are at stake. I doubt those who are up early in the morning to deliver the papers are unionized; that probably one of the benefits that only employees get.)) and, most importantly, maintain government transparency.” I would imagine that any other industry that sought such an advantage — and to the expense of what must be its least-favored workers — would be editorially accused of padding its pockets on the backs of its workers or some other mixed metaphor.((I cannot actually accuse the Star-Ledger of the same degree of hypocrisy as I did with respect to the $15 minimum wage because I cannot find that it has taken an editorial position on this issue.))

In June 2021 I wrote: “Although I appreciate the importance of old-fashioned printed newspapers to an informed citizenry (and I subscribe to several), I cannot agree with the position that legal advertising should be mandated for the purpose of their economic support.” I feel the same way about giving them a special exception from a generally prevailing labor law.

Jay Bohn

September 26, 2022

Developers’ Escrows and the SEP Problem

During last year’s trek into economics, I posited that demand can be distorted by what I called the “SEP problem,” when someone else is paying. My thesis is that “demand” includes, but means more than, “want” or “desire” for an item; it requires “wherewithal,” the ability to pay, to be effective.((Discussed in a bit more detail in Economics 102: The Law of Supply and Demand.)) I gave as one example the means by which New Jersey municipal land use agencies pay for the services of their attorneys, engineers, planners, and other professionals in reviewing applications for development:

The applicant is required to fund (and replenish when depleted) an escrow account which is used to pay the municipal professionals. The applicant has no control over the selection of these professionals or their hourly rates and little opportunity to challenge their bills. Municipalities, which set the rates and can control the time expended on the review, have little incentive to do so, because “someone else is paying.”

The hourly rates paid to these professionals are not the biggest part of the problem because the law at least imposes some restraint. The professional is not allowed to charge the developer’s escrow at a rate greater than the professional charges the municipality when the town itself is the one paying the bill and municipalities will often pay lower rates than private clients.

The problem will usually arise in the amount of time that the professional devotes to the review and the prolixity of their reports, a long report giving the impression that the time was actually and appropriately spent. The problem becomes more acute when the professional is part of a larger firm that will assign multiple employees to work on the same review.((I have heard more than once that the municipal engineer charged more for the review of plans than the applicant’s engineer charged to prepare them.))

There is a means to dispute a charge, but it involves a challenge brought before the county board of construction appeals (not necessarily expert in this area), and what developer wants to anger the municipal review professional while the project is ongoing, or a future project is contemplated?

These jobs can become very lucrative for the professionals and despite some efforts to prevent it by “pay to play” restrictions, there is undoubtedly some sharing of revenues between some professionals and the politicians who select them. At the least the jobs are regarded in many towns as a political plum to be handed out to supporters. (There is often a wholesale change in professionals following a change in party control.)

This is not only a problem for developers; this system could lead to a tacit understanding between developers and municipal professionals: “I won’t complain about your escrow charges as long as I get my approval.” or “If you want your approval, don’t complain about my charges.”((I am saying there is a potential; I do not have any personal knowledge that this has actually happened.))

There is no structural way to assure good government, but government can be designed so that is more likely. I believe that municipalities should be given a greater incentive to control these charges by “having some skin in the game.” I propose that this be done by requiring some percentage (I don’t know if it should be 10% or 50%) of the cost be paid by the municipality.

Diverting Student Loan Relief to State Schools a Questionable Solution to a Different Problem

Last Thursday the Morning Call (a newspaper published in Allenton, Pennsylvania, for those of you who are not local((Look at me, implying not only that I have readers, but that they are geographically diverse.))) published “Invest in state schools, not in student debt,” an editorial by Eduardo Porter from Bloomberg Opinion.¹

Porter’s thesis is that the federal contribution to the availability of higher education, in the form of student loans and grants, largely resulted in price increases by “[p]retty much the entire educational ecosystem”((Porter spews particular venom at for-profit schools.)) and it would now be better (although not politically palatable) to spend the $500 billion plus that President Biden’s student debt cancellation is going to cost (in the form of foregone revenue) on matching the State appropriations to their public colleges and universities.

While I certainly agree with the premise that the availability of financial aid caused a large part of the increase in college costs (because any broad-based demand-side subsidy will tend to increase the cost of the subsidized commodity), the suggested solution is objectionable for any number of reasons.

Let’s start with the one Porter implicitly recognized when he doubted the political palatability of his proposal, student loan relief seeks to a solve a different problem. It attempts to mitigate perceived financial hardship resulting from the borrowers’ past consumption of higher education, while Porter’s “investment” is aimed at preventing or limiting future price increases, directly benefiting a mostly different set of student-consumers.

Further, even if the President((Technically, the Administration’s argument is that the secretary of education has the authority, but same difference.)) has the authority to cancel student loan debt as he proposes (which is by no means certain–Nancy Pelosi herself denied in the summer of 2021), that is hardly the same thing as sending checks to States or schools.

Finally (for now), the proposal does not really increase the supply of higher education, it just subsidizes demand less directly. No institution ever thinks it has enough revenue as new spending will immediately be seen to be needed. (Look at New Jersey’s 2022-2023 State budget; lots of extra money balanced by lots of new spending (I’m sorry, “investment”).)

Jay Bohn

September 19, 2022

I could not find the editorial on mcall.com, I imagine because it is syndicated, but it appears to be on Bloomberg’s own site (paywall) under the title “Deliver Students From Debt by Investing in State Schools.” [↩]

Border State Busing Exposes “Sanctuary City” Hypocrisy

Immigration is a complicated issue and has been a matter of contention since the founding of the republic.((Remember the Adams-era Alien and Sedition Acts from American history? The Sedition Act got the most attention, but three of the four laws, one of which remains in effect, were aimed at non-citizens.)) We cannot even agree on terminology. The phrase “illegal aliens,” common a few decades ago, is criticized on the ground that “no person is illegal.” (True, but the phrase does emphasize that these people’s entry into, or continued presence in, the United States is contrary to law, whereas the substitute “undocumented aliens” suggests that it is simply a question of lost paperwork, much like not having your car’s registration and insurance card in your glove compartment when stopped by the police.) Now even the word “alien” is unacceptable and being replaced by “non-citizen.”

For years some states, like Texas, have been pushing for the federal government fully to enforce existing immigration laws while presidents (who are constitutionally responsible to enforce those laws) decline to do so because they disagree with them from a policy perspective.((I too would prefer a more open immigration system than current law provides, but as the hypothetical reader of this blog may have gathered, I am always concerned about process issues. Immigration policy is a matter for legislation by Congress, subject to the presidential veto. Picking and choosing what laws to enforce encourages disrespect for all law.)) Many cities have declared themselves sanctuaries and refuse to cooperate in immigration enforcement activities. But these cities do not bear the same burden as do communities along the border. These “sanctuary cities” are able to pretend to the moral high ground because, to put it in economic terms, someone else is paying.

Thousands of migrants cross the border. Once in the country, even if caught by immigration officials, they claim asylum (which will be granted to so very few that the claim itself is essentially a fiction)((Asylum protects those with a well-founded fear of persecution, not the vast majority who simply want the better life they foresee in the United States.)) and are released until they receive a hearing. In the meantime they are, as the Southwest Airlines ad puts it, “free to move about the country.” Texas Governor Greg Abbot has responded in a politically brilliant way by creating “Operation Lone Star” in which willing migrants((See this CNN story: Texas is bussing migrants to New York and DC for free — many want to go .)) are put on busses that take them to Washington, New York, and, more recently, Chicago.

While mouthing platitudes about being welcoming communities, the mayors of these destination cities are seething about having to bear the economic cost of food and shelter for the migrants. The mayor of Washington complains that the federal government will not mobilize the National Guard; the mayor of Chicago created her own bussing program and sent the migrants to a hotel in a Republican suburb.

And what would a blog post be without a complaint about the professional media? It’s hard to find facts as most of the coverage is either partisan (in the sense of pro or anti immigration) or more interested in political conflict.

Jay Bohn

September 15, 2022

The Misuse of Emergency Powers

A while back((I just came across the piece yesterday.)) Tom Moran of the Star-Ledger/NJ.com published an editorial (which in turn relies substantially upon an analysis by Elizabeth Goitein of the Brennan Center for Justice) saying that President Biden should not, as urged by a number of senators, including New Jersey’s Cory Booker, declare an emergency in order to take action on climate change that Congress will not.

Both Moran and Goitein cite President Trump’s misuse of emergency power to reallocate government spending to his border wall as an example not to be followed. Goitein writes:

[The] purpose [of emergency powers] is to give presidents a short-term boost in power in situations that Congress cannot have foreseen (because they arise suddenly and without warning) and that Congress is ill-suited to handle (because they require immediate or highly nimble responses). Emergency powers are not intended to address longstanding problems, no matter how serious. Nor are they meant to authorize permanent or long-term policy solutions that Congress itself could provide but has chosen not to.

This position is consistent with the opinions I have expressed regarding COVID-19 and emergency powers here, here, and here. “Emergency” does not mean the same thing as “urgent.”

From my observation, it is increasingly uncommon for those who feel strongly about an issue to separate the merits of a particular policy from the power of a supportive official to implement that policy.((For example, in the early days of the COVID pandemic, Bergen County Executive James Tedesco ordered all malls in the county to close until further notice in order to prevent the spread of the disease. When asked about his legal authority to shut down private businesses, Tedesco responded: “I have the moral authority.” NJ coronavirus: All Bergen County malls must close (northjersey.com). Because Tedesco’s closure order was quickly subsumed by Governor Murphy’s, the question of legal authority was never authoritatively tested.)) As I wrote a few months ago, in response to the United States Supreme Court’s ruling West Virginia v. EPA that Congress did not grant EPA the authority to devise emissions caps based on the generation shifting approach the Agency took in the Clean Power Plan, two former EPA officials took the editorial position that in lieu of democracy regulatory authority should properly be vested in administrative agencies “staffed by experts.” “In the absence of specific statutory language to the contrary, deference would be given to each agency in defining the scope and limitation of its power, its range of activity, and the interpretation of the statutes it administers.”

Democracy is inefficient and sometimes gets it wrong, but it’s the best form of government we have.((Winston Churchill is often mistakenly quoted as saying: “Democracy is the worst form of government, except for all the others.”))

Jay Bohn

September 12, 2022

On the Waterfront (Commission)

In 1953, partially in response to a series of articles in The New York Sun that exposed the grip the mob had on commerce in the ports around New York City,((“On the Waterfront, a Mob Watchdog Is Fighting to Survive,” New York Times (online) January 17, 2018.)) the States of New York and New Jersey, with the consent of Congress, entered into a “compact” which created the Waterfront Commission of New York Harbor (the Waterfront Commission), to regulate the harbor.

In 2018 New Jersey passed a statute (Chapter 324) to withdraw from the compact and terminate the Waterfront Commission. This past March, just before the withdrawal was to take effect, New York sought leave to file a rare original action in the United States Supreme Court and a motion for preliminary relief to enjoin the withdrawal during the pendency of the action. The Supreme Court quickly granted preliminary relief and a few months later granted New York’s motion to file a bill of complaint. At the same time the Court granted the States’ joint motion to file cross-motions for judgment on the pleadings.

Last week the New Jersey Globe scooped NJ.com/the Star-Ledger in reporting that the United States had filed an amicus brief in support of New Jersey’s position.

Kudos to the New Jersey Globe for reporting the story, but it got the procedural history wrong. The end of the Globe’s article states that the Supreme Court’s decision to allow the bill of complaint to be filed “stay[ed] a Court of Appeals decision that sided with New Jersey.” This is inaccurate. What happened is that after Chapter 324 was passed the Waterfront Commission itself sued New Jersey in federal district court, which sided with the Waterfront Commission on the merits.((Waterfront Comm’n of N.Y. Harbor v. Murphy, 429 F. Supp. 3d 1, 3 (D.N.J. 2019).)) On appeal, the U.S. Court of Appeals for the Third Circuit ruled that the district court did not have jurisdiction over the State of New Jersey under the doctrine of sovereign immunity.((Waterfront Comm’n of N.Y. Harbor v. Governor of N.J., 961 F.3d 234, 236 (3d Cir. 2020).)) The Supreme Court denied review. ¹ Thus, the Third Circuit’s holding that the district court does not have jurisdiction over the State of New Jersey in a suit brought by the Waterfront Commission remains in effect. The Supreme Court’s unquestioned jurisdiction to entertain a suit brought by the State of New York is an entirely different matter.

As far as I could find, NJ.com has only published one story with any level of detail on the merits of New Jersey’s attempt to withdraw from the compact, a 2021 editorial The only reason to break up the Waterfront Commission: Politics. Not politics really though, the editorial contends that the New York Shipping Association and the “mobbed-up” International Longshoremen’s Association have bought New Jersey. If NJ.com believes that, where are the hard-hitting investigative pieces, like those that lead to the creation of the Waterfront Commission in the first place, proving it to be so?

I don’t know if New Jersey can or will root out any corruption infecting the 80% of harbor business that flows through the state, but I do not for one moment believe that New York’s opposition to the termination of the compact and the Waterfront Commission reflects only that concern. Like other bi-state agencies, the Waterfront Commission is a source of patronage spoils in the form of lucrative jobs and contracts split between the two governors, although I suspect that, as usual, New York gets more than its fair share.

Jay Bohn

September 8, 2022

Waterfront Comm’n of N.Y. Harbor v. Murphy, 142 S. Ct. 561 (2021). [↩]

Grateful for Geographic Accuracy

Yesterday NJ.com published an updated survey of New Jersey’s 50 greatest hole-in-the-wall restaurants (behind the paywall unfortunately). Listed among them was Toby’s Cup, correctly described as being in Lopatcong Township rather than in nearby Phillipsburg (a point specifically made in the text of the article).

While I applaud the geographical accuracy, I note that it was missing in last month’s roundup New Jersey’s 25 best vineyards and wineries, the ultimate guide (also behind the paywall), which incorrectly listed Alba Vineyard as being located in Milford (a borough in Hunterdon County) rather than Pohatcong Township, Warren County, not even adjacent to Milford.((I understand that Alba is served by the Milford post office and therefore has a Milford mailing address, but that’s a different issue for another day.))

Especially if I’m paying for information from the professional media, I expect factual accuracy and attention to detail. As the converse of the biblical parable of the talents,((Matthew 25:14-30.)) fail me in small things and I will not trust you with greater.

Jay Bohn

September 5, 2022

Professional Media Need to Take Some Responsibility for “Misinformation”

Especially since the 2020 election, the mainstream media have been complaining about mis- (or dis-) information being spread, particularly by means of social media. A similar complaint is made by NJ.com’s editorial Misinformation campaign over sex ed carries on was was published on August 26, 2022.

Misinformation is best combatted by (accurate) information. I thought that was the job of the news media, particularly newspapers. That’s why I subscribe to several. But they’re not doing their job.

It seems to be that most writers are less interest in reporting facts than in pushing their point of view. I have many times (here and here for example) complained that many “news articles” are really editorials in disguise. To misquote Joe Friday, “Just the facts, ma’am.” It may not be the most glamorous or exciting part of journalism, but I suspect that why those who subscribe do (or, to put it in current perspective, what gets the eyeballs and mouse clicks).

A similar problem is the lack of details, which was the subject of one of my earliest posts.

To use as an example NJ.com’s complaint about misinformation related to sex education, the problem is that the public does not have a report of what is being taught. Where is the public supposed to get the information? Isn’t it newsworthy enough? The very on-line editorial ends with a request for support for journalism. Maybe better quality would get better support. (I suspect the real answer is that the education establishment is just as uninterested in providing the information as the news media are to report it. “It’s not the public’s business; don’t worry your pretty little heads over it. It’s our job. We know best.”)

Another example is the 2020 presidential election itself and the allegations made about whether it was stolen. Did any news outlet lay out details of the allegations to support the labelling of the claims as false? Not that I saw. The only detailed discussion I ever found was the was the July 2022, report prepared by conservatives outside the media: Lost, Not Stolen: The Conservative Case that Trump Lost and Biden won the 2020 Presidential Election.

If the news media are not going to provide their customers with accurate information, they need to take responsibility for a large measure of the ability of others to spread misinformation.

Jay Bohn

September 1, 2022