The first plan the House of Representatives put forward to repeal the Affordable Cart Act (ACA) was the American Health Care Act (AHCA). The Congressional Budget Office projected that the AHCA would cost 24 million Americans their health insurance coverage by 2026. An amended version, which passed the House, cut this number to 23 million. Besides inflicting these coverage losses, the AHCA would have cost jobs and increased out-of-pocket costs faced by Americans.
The second plan, the Better Care Reconciliation Act (BCRA) failed narrowly in the Senate. The CBO projected that the BCRA would have cost 22 million Americans their coverage by 2026. On one hand, it may have seemed like progress of some kind to reduce the number thrown off the insurance rolls relative to the AHCA, but the BCRA back-loaded severe cuts to Medicaid beyond the budget window that CBO traditionally examines. This means that in the longer run, the BCRA would have been even more destructive to health security than the House-passed plan. Additionally, unlike the AHCA, the BCRA cut not just the expansions to Medicaid passed under the ACA, but cut deeply into traditional, pre-ACA Medicaid, shifting the burden of paying for health care onto states and/or poor households.
Think of the latest Republican entry, known as Graham-Cassidy, as the BCRA on steroids. After the CBO budget window passes, Graham-Cassidy is not a “repeal-and-replace the ACA” plan. It’s not even a straight “ACA repeal” plan. Instead, it’s a plan that repeals the ACA and cuts Medicaid over and on top of that. It’s, in short, an attempt to rollback not just the ACA, but even the coverage provided by the pre-ACA American health care system.
Just to remind everybody, this pre-ACA coverage system was unraveling at a rapid rate, with roughly 15 million workers losing employer-based coverage between 2000 and 2010.
The Federal Open Market Committee (FOMC) meets today and tomorrow to determine whether or not to raise interest rates. The FOMC has raised rates three times since December 2016. The evidence arguing that these increases were wise or necessary was thin at best. That rationale for raising interest rates is to rein economic growth that threatens to drive down unemployment so low that workers will be empowered to achieve unsustainably large wage increases. The worry is that such wage increases could push price inflation over the Fed’s target rate.
But the real-world data that exists on every link of this causal chain shows that such worries are baseless. Economic growth in recent quarters is depressingly slow, not fast. Unemployment rates are in the low-end of historical experience, but have been lower (without wage or price inflation) several times in recent years. Other measures of labor market slack show the economy is far from recovered. Wage growth shows little sign of accelerating to levels that would spark wage-price spirals.
The rate increase that happened in June was particularly dispiriting for those hoping the Fed would continue to follow the evidence-based approach largely adhered to under the reign of Janet Yellen as Fed Chair. The economic data going into that meeting gave plenty of reasons why a data-dependent Fed might worry that it was riskier to raise rates too high too soon than to stand pat for a couple of months. Yet the Fed raised rates.
Data since June has been much softer. The Fed’s preferred inflation measure has decelerated significantly, and any upward creep of wage growth has stopped. There just is no case for continuing to raise rates in the face of this data.
While the outcome of any single FOMC meeting is not crucial for the American middle class, what this week’s meeting signals for the commitment of the Fed to genuine full employment is crucial. History has shown that low and middle-wage workers in the United States only get consistent annual wage increases when the economy is near genuine full employment. For example, for two solid years in 1999 and 2000 the unemployment rate averaged 4.1 percent and spent a number of months below 4 percent. And the late 1990s are the only time in recent economic history when wage growth was strong across the wage scale.
2016 ACS shows stubbornly high Native American poverty and different degrees of economic well-being for Asian ethnic groups
Thursday’s release of 2016 American Community Survey (ACS) data allows us to fill in the blanks for race and ethnic groups that were not covered in Tuesday’s Census Bureau report on income, poverty, and health insurance coverage in 2016. ACS is an annual nationwide survey that provides detailed demographic, social, and economic data for smaller populations like Native Americans and the thirteen distinct ethnic groups that make up the Asian American population. For the sake of comparability, in this blog post, the national estimates of median household income and poverty that I refer to are from the ACS.
Between 2015 and 2016, the real median household income for Native Americans increased 1.8 percent to $39,719. This was 69 percent of the national average in 2016 and $1,194 (-2.9 percent) lower than the group’s 2007 pre-recession level. While this data comes from a different source than Tuesday’s data on household income and covers a slightly different survey period, it suggests that Native American median household income is similar to that of black households, but Native American households experienced much slower income growth than blacks over the last year. Despite the income gains, poverty among all Native Americans was virtually unchanged between 2015 and 2016 (from 26.6 to 26.2 percent) and 33.8 percent of Native American children lived in poverty in 2016—the same as in 2015. Both rates are similar to those reported for blacks in the Current Population Survey, though slightly higher. The rate of poverty among Native Americans was nearly double the national average for all people and 1.7 times higher for children.
Median household income for Native Americans and total population (2016 dollars), 2005–2016
|Native Americans||Total population|
Source: Author's analysis of American Community Survey data 2005-2016
Share of people in poverty, Native Americans and total population, 2015 and 2016
|Native Americans||Total population|
Source: Author's analysis of American Community Survey data, 2015 and 2016
Share of children in poverty, Native Americans and total population, 2015 and 2016
|Native Americans||Total population|
Source: Author's analysis of American Community Survey data, 2012 and 2013
According to my prior analysis of Tuesday’s Census report, Asian Americans were the only group for whom the increase in real median household income between 2015 and 2016 was statistically insignificant, but like non-Hispanic white and black households, still had not recovered their 2007 income level. The 2016 ACS data shows the variance in income across the different Asian ethnic populations, as well as their disparate rates of recovery. In 2016, median household income among Asian ethnic groups ranged from $110,026 for Indians to $38,971 for the Burmese. Indians also had the most income growth since 2007 (13.4 percent), although eight of the fourteen ethnic groups with reported income in 2007 had surpassed their 2007 income level. The wide range of incomes and income growth across Asian ethnic groups are also generally reflected in differences in poverty rates. Three groups—Indians (7.6 percent), Filipinos (6.6 percent) and Japanese (8.0 percent)— had poverty rates of 8 percent or lower, while over one-fourth of the Burmese (29.3 percent) and more than one-fifth of the Bangladeshi (22.6 percent) and Hmong (21.7 percent) populations lived in poverty.
Median household income and share of population in poverty, various Asian populations, 2016
|Share of U.S. Asian population||Poverty rate||Change in poverty||Median household income||Change in income|
|Chinese (except Taiwanese)||24.2%||15.6%||3.6%||0.1%||$72,827||-4.3%||1.7%|
* ACS estimates for Indonesian, Nepalese, and Burmese populations started in 2011.
Note: The margin of error is greater in the ACS estimates for small sub-groups, which might account for the large percent changes in median household income and poverty rates for some Asian populations across years.
Source: Author's analysis of American Community Survey data 2007-2016
This week, the Census Bureau released its report on incomes, earnings, and poverty rates for 2016. Most analysis paid particular attention to the changes between 2015 and 2016. We wanted to take a deeper look at earnings by race and gender over a longer period of time—since 2000—to paint a more complete picture of what has happened over the last full business cycle (2000-2007) plus the most recent recession and recovery (2007-2016). Since 2000, wages have been generally stagnant, and large gaps persist by race and gender. This longer-term trend might at least partially explain the less-than-rosy outlook many working people seem to have about the economy and their personal economic security—despite ongoing progress toward a full economic recovery.
To a great extent, trends in annual earnings since 2000 resemble the overall wage stagnation we’ve seen since the mid-1970s. (Here, we discuss annual full time earnings, but the long-run trends are consistent with the hourly wage data. For an extensive discussion of hourly wage trends, see The State of American Wages 2016.) Between 2015 and 2016, men’s earnings fell slightly, and are still 0.6 percent below their 2000 level. Meanwhile, women’s earnings increased slightly, and are now 8.5 percent higher than in 2000. Because of these divergent trends, the overall gender wage gap narrowed between 2000 and 2016, though at a slower rate than in the previous two decades.
These patterns in men’s and women’s full-time median annual earnings can be further broken down by race. As you can see in the figure below, real median earnings of full-time workers—male and female, black and white—have been relatively flat since 2000. While all four groups experienced an increase between 2014 and 2015, along with impressive gains across-the-board in 2015, only white women saw their median wages rise between 2015 and 2016. For the most part (except for white women), median wages were flat or falling in the full business cycle of 2000–2007, and have yet to significantly grow past their 2000 levels.
In recent decades, the vast majority of Americans have experienced disappointing growth in their living standards—despite economic growth that could have easily generated faster gains in their living standards had it been broadly shared. Tuesday’s relatively good news on family income growth over the past year doesn’t make up for this long legacy of rising inequality. This year’s growth is encouraging though not as strong as the previous year in part due to near zero inflation between 2014 and 2015. Unfortunately, the growth in 2016 was also not as broadly shared as it was in 2015. Families in the top fifth of the income distribution grew faster than in 2015, while the bottom 80 percent of families saw slower growth. Another year of decent across-the-board growth should more than fully restore the income losses suffered during the Great Recession for most American families. But, it will barely put a dent in the generation of losses suffered as the incomes for the vast majority lagged far behind the economy’s potential.
As with most economic analysis, meaningful assessments of growth of living standards for the vast majority requires specifying benchmarks against which to measure actual performance. We offer up two reasonable benchmarks. The first is how income growth differs for families at different parts of the income distribution. What we have seen since the last business cycle peak in 2007, before the Great Recession hit, is growing income inequality. This week’s news that income growth in 2016 was positive across the board but does not overturn the general pattern of unequal growth that we have seen since 2007. The second benchmark we posit is income growth relative to that of earlier historical epochs. This benchmark shows that in the three decades following World War II, income growth was both much faster as well as more broadly shared than it has been since 1979.
The American Community Survey (ACS) data released today shows that the decline in the national poverty rate was felt in nearly every state. The poverty rate decreased in 43 states and remained unchanged in three states. While there were slight increases in the poverty rate in four states and the District of Columbia, the only statistically significant increase occurred in Vermont. In only two states, Louisiana and Mississippi, was the poverty rate above 20 percent.
Overall, the national poverty rate, as measured by the ACS, fell 0.7 percentage points, to 14.0 percent. Oregon saw the largest decline in its poverty rate (-2.1 percentage points), followed by Arkansas (-1.9 percentage points), Alabama (-1.4 percentage points), Hawaii (-1.3 percentage points), Montana (-1.3 percentage points), and South Carolina (-1.3 percentage points). There were increases in poverty in Vermont (1.7 percentage points), the District of Columbia (1.3 percentage points), Louisiana (0.6 percentage point), Oklahoma (0.2 percentage point), and Wyoming (0.2 percentage point). In Kentucky, Maryland, and West Virginia the rate remained essentially unchanged between 2015 and 2016.
Income growth at the national level and an increase in the number of jobs pulling workers off the sidelines accounted for a drop in the poverty rate in many states. While the federal minimum wage sits at $7.25, many states and localities have increased their minimum wages, which helps lift workers out of poverty. At the same time, government programs including Social Security, refundable tax credits, and Supplemental Nutrition Assistance Program (SNAP) are directly responsible for keeping tens of millions out of poverty across the country. A significant drop in the poverty rate for the second year in a row is a positive sign, but lawmakers should be careful to protect these recent gains with policies that raise wages for working families.
State income data from the American Community Survey (ACS), released today by the Census Bureau, showed that from 2015 to 2016, median household income rose moderately across the country, with all but 7 states and the District of Columbia posting gains in inflation-adjusted household income. The ACS report showed a 2.1 percent increase in inflation-adjusted median household income for the country as a whole—an increase of $1,157 in the annual income of a typical U.S. household. This is similar to, albeit slightly lower than, the 3.2 percent increase in household income that the Census Bureau’s reported earlier this week using data from the Current Population Survey (CPS). The ACS and CPS have different samples and cover a somewhat different timeframe, which can lead to slightly different estimates.
In 2016, median household income ranged from $41,754 in Mississippi (17.5 percent below the median for the country) to $78,945 in Maryland (37.0 percent above the median for the country.)
From 2015 to 2016, the largest percentage gains in household income occurred in Idaho, where the typical household experienced an increase of $2,922 in their annual income—an increase of 6.0 percent. Massachusetts (5.3 percent), Oregon (4.9 percent), North Carolina (4.4 percent), Arkansas (4.3 percent), and New Jersey (4.1 percent) all had increases of 4 percent or more. Twelve other states (Nevada, California, Utah, South Carolina, Washington, Georgia, Rhode Island, Alaska, Maryland, Arizona, Indiana, and Nebraska) experienced income growth that exceeded the national average. Median household income was essentially unchanged over the year, after adjusting for inflation, in 4 states (Hawaii, Oklahoma, Vermont, and Montana), and it declined in 5 states (New Hampshire, Delaware, North Dakota, Wyoming, and Louisiana) and the District of Columbia. The states with the largest percentage declines—North Dakota at 1.1 percent, Wyoming at 1.8 percent, and Louisiana at 2.5 percent—are all states whose economies are heavily dependent upon energy production. Thus, it is likely that these declines are the result of falling energy prices, which slowed economic growth in these states.
Poverty declined modestly in 2016; government programs continued to keep tens of millions out of poverty
From 2015 to 2016, the official poverty rate fell by 0.8 percentage points, as household income rose modestly, albeit unevenly, throughout the income distribution. This was the second year in a row that poverty declined, and at 12.7 percent, the official poverty rate in 2016 was statistically the same as it was in 2007, just prior to the Great Recession. The poverty rate remains significantly higher than the low point of 11.3 percent it reached in 2000.
Since 2010, the U.S. Census Bureau has also released an alternative to the official poverty measure known as the Supplemental Poverty Measure (SPM).1
The SPM corrects many potential deficiencies in the official rate. For one, it constructs a more realistic threshold for incomes families need to live free of poverty, and adjusts that threshold for regional price differences. For another, it includes as income many resources available to poor families, such as Medicare, food stamps, and other in-kind government benefits.
As shown in Figure A, a larger proportion of Americans are in poverty as measured by the SPM than the official measure reports. (Importantly, however, researchers who constructed a longer historical version of the SPM found that it shows greater long-term progress in reducing poverty than the official measure.) In 2016, the SPM declined by 0.6 percentage points to 13.9 percent. Under the SPM, 44.6 million Americans were in poverty last year, compared with 40.7 million Americans under the “official” poverty measure.
New census data show strong 2016 earnings growth across-the-board, with black and Hispanic workers seeing the fastest growth for second consecutive year
Today’s Census Bureau report on income, poverty, and health insurance coverage in 2016 shows that median household incomes for all race and ethnic groups increased between 2015 and 2016. Encouragingly, groups that, by and large, had seen the worst losses in the years since the Great Recession saw the biggest earnings gains for the second consecutive year. Real incomes increased 5.7 percent (from $37,365 to $39,490) among African Americans, 4.3 percent (from $45,719 to $47,675) among Hispanics, 4.2 percent (from $78,143 to $81,431) among Asians, and 2.0 percent (from $63,747 to $65,041) among non-Hispanic whites. The increase in incomes was statistically significant for all groups except Asians, resulting in some improvement of racial and ethnic income gaps between 2015 and 2016. The median black household earned just 61 cents for every dollar of income the white median household earned (up from 59 cents), while the median Hispanic household earned just 73 cents (up from 71 cents). Meanwhile, households headed by persons who are foreign-born saw an increase in incomes of 4.9 percent between 2015 and 2016 (from $52,956 to $55,559), compared to an increase of 3.3 percent (from $57,896 to $59,781) among households with a native-born household head.
Real median household income, by race and ethnicity, 2000–2016
Note: CPS ASEC changed its methodology in 2013, hence the break in the series. Solid lines are actual CPS ASEC data; dashed lines denote historical values imputed by applying the new methodology to past income trends. White refers to non-Hispanic whites, black refers to blacks alone, Asian refers to Asians alone, and Hispanic refers to Hispanics of any race. Comparable data are not available prior to 2002 for Asians. Shaded areas denote recessions.
To account for the redesign of the CPS ASEC survey, when the difference between the original data for 2013 and the redesigned data for 2013 is small in magnitude (less than a 1 percent difference) and statistically insignificantly different, data for 2013 is an average of the original and redesigned data. When the difference between them is relatively large in magnitude (1 percent or greater) or statistically significantly different, we display a break in the series and impute the ratio between them to historical data.
Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement Historical Poverty Tables (Table H-5 and H-9)
Based on EPI’s imputed historical income values (see the note under Figure A for an explanation), real median household incomes for all groups, except Hispanics, remain below their 2007 levels. Compared to 2007, 2016, median household incomes are down 1.5 percent (-$595) for African Americans, 1.2 percent (-$781) for non-Hispanic whites and 1.4 percent (-$1,158) for Asians, but increased 9.9 percent ($4,295) for Hispanics. Asian households continue to have the highest median income, despite large income losses in the wake of the recession.
Today’s report from the Census Bureau shows strong across-the-board improvements to household incomes in 2016. Household incomes rose 3.2 percent, after an impressive 5.2 percent gain in 2015; non-elderly households saw a similar rise of 3.6 percent this year after gaining 4.6 percent the year before. However, inflation-adjusted full-time annual earnings for men fell slightly in 2016, 0.4 percent, while women working full time saw an earnings increase of 0.7 percent. Men’s earnings are still below their 2007 level (by 1.1 percent points), while women’s earnings are now 2.3 percent above. Better across-the-board earnings growth would have made this year’s income report unambiguously excellent news, much like the 2015 report. This year’s report is mostly encouraging, but wages need to make strong and sustained gains before we can rest easy about how the economy is working for typical American households.
While the gains in household income are not as impressive as the previous year, they nonetheless represent significant improvements. Part of this year’s slowdown in income growth relative to 2015 simply represents a small inflation bounce back. In 2015, plunging energy prices led to essentially zero inflation. In 2016, inflation rebounded to a still-low 1.3 percent. Besides representing a small slowdown in the pace of income growth, this year’s report reminds us that the vast majority of household incomes (when corrected for a break in the data series in 2013) have still not fully recovered from the deep losses suffered in the Great Recession—the bottom 80 percent of households had incomes in 2016 just at or below those of 2007 (while those in the top five percent are now 8.7 percent ahead). One more year of modest growth will likely bring the broad middle class back to pre-recession incomes.
This fact sheet provides key numbers from today’s new Census reports, Income and Poverty in the United States: 2016 and The Supplemental Poverty Measure: 2016. Each section has headline statistics from the reports for 2016, as well as comparisons to the previous year, to 2007 (the final year of the economic expansion that preceded the Great Recession), and to 2000 (the historical high point for many of the statistics in these reports.) All dollar values are adjusted for inflation (2016 dollars).
Median annual earnings for men working full time fell 0.4 percent, to $51,640, in 2016, although this change was not statistically significant. Men’s earnings are down 1.1 percent since 2007, and are still 0.6 percent lower than they were in 2000.
Median annual earnings for women working full time rose 0.7 percent, to $41,554, in 2016—also statistically no different than women’s earnings in 2015. Women’s earnings are up 2.3 percent since 2007, and are 8.5 percent higher than they were in 2000.
Median annual earnings for men working full time in 2016: $51,640
Change over time:
- 2015–2016: -0.4%
- 2007–2016: -1.1%
- 2000–2016: -0.6%
Median annual earnings for women working full time in 2016: $41,554
Change over time:
- 2015–2016: 0.7%
- 2007–2016: 2.3%
- 2000–2016: 8.5%
Two officials with a history of anti-worker behavior nominated to be worker advocates
Late last week, President Trump announced his nominees to several key positions at the Department of Labor (DOL). Trump nominated Cheryl Stanton to serve as his Wage and Hour Division (WHD) administrator, a position responsible for enforcing our nation’s basic wage protections. Since 2013, Stanton has headed the South Carolina Department of Employment and Workforce, an agency that does not handle wage enforcement. Much of her career has in fact been dedicated to representing employers, not workers, in wage and hour cases. Stanton has also faced her own wage and hour litigation. The Center for Investigative Reporting recently revealed that she was sued last year for failing to pay her house cleaners. If confirmed, Stanton will be tasked with holding employers accountable when they steal workers’ wages. Her history of siding against workers certainly raises the question of how vigorously she will approach this task.
Trump also nominated former coal mining executive David Zatezalo to head the Mine Safety and Health Administration (MSHA). Zatezalo formerly served as chief executive of Rhino Resources, a coal company that had numerous clashes with MSHA officials during the Obama administration. Following the Upper Big Branch mine disaster on April 5, 2010, MSHA stepped up its enforcement efforts, and identified a number of health and safety violations at Zatezalo’s company. In fact, in 2011, MSHA sought a federal court injunction against Zatezalo’s company. If confirmed, Zatezalo will be charged with ensuring safety standards in our nation’s mines. Twelve coal miners have died on the job to date this year.
Next Tuesday will see the Census Bureau’s annual release of data on earnings, income, poverty, and health insurance coverage for 2016, which will give us a better picture of how working families are—and are not—recovering from the Great Recession. While it may seem a bit odd to still be talking about recovery a full 9 years after the Great Recession started, even as of 2015 median incomes for American households still had not gotten back to their pre-Great Recession peaks. Worse, in the full business cycle of 2000-2007, household incomes never fully recovered to the pre-recession peaks reached in 2000. This means that the slow early-2000s recovery and expansion, combined with the damage done by the Great Recession, has led to nearly two decades of lost income growth for typical American households. Next week’s release will help us chart the progress in clawing back these lost decades—paying particular attention to differences in the recovery across racial and ethnic groups.
Last year, annual earnings and household incomes rose significantly for the first time since 2007. At the same time, the official poverty rate sharply fell. These long-awaited and impressive across-the-board improvements were welcome news after the lengthy downturn. Furthermore, most of these gains were experienced by workers of both genders and workers and households of all races and ethnicities. Despite these significant improvements, by 2015 household incomes had still not fully recovered from the deep losses suffered in the Great Recession. One more year of modest growth should bring the broad middle class back to pre-recession incomes. It is important to note, however, that some of the improvements we saw last year were driven by very low inflation (0.1 percent), mostly due to falling oil prices. While still low by historical standards, inflation was 1.3 percent between 2015 and 2016, which should moderate some of the gains expected in next week’s report.
Since the beginning of his presidential campaign, Donald Trump has railed against the North American Free Trade Agreement (NAFTA) as being a bad deal for working Americans. He promised that if he was elected, he would renegotiate NAFTA and secure a “much better deal for all Americans.”
So it’s not surprising that earlier this week, the leader of a prosperous country engaged in NAFTA renegotiations demanded changes to increase workers’ leverage, provide a bulwark against downward wage pressure, and prevent his country’s manufacturing sector from being undercut by weak labor standards. But was this leader Donald Trump? Nope. It was Justin Trudeau of Canada.
Even more striking, the reported change that Trudeau’s government has requested to stem downward pressure on Canadian wages is one that beefs up American labor standards. Yes, the low-wage, low-standard country that Trudeau’s government is correctly concerned about as they renegotiate NAFTA is the United States.
The requested change is ambitious: Trudeau’s government wants an end to so-called “right to work” (RTW) laws in American states. This would clearly be good for American workers. In a nutshell, “right to work” laws have nothing to do with helping people find work—instead they simply ban contracts requiring that workers benefiting from labor union representation pay their fair share for this representation. This ban makes it extraordinarily difficult for workers to join together and form unions in RTW states. As a result, these states have substantially fewer union members and less collective bargaining. The economic evidence shows that RTW laws do not boost employment or economic growth, but do suppress wages.
Tomorrow the Senate Banking Committee will vote on the first Trump administration nominee to the Federal Reserve Board of Governors, Randal Quarles. As we’ve noted again and again in recent years, members of the Federal Open Market Committee (FOMC), which include Fed governors, have extraordinary power over American economic policy. A primary job for the FOMC is balancing the two prongs of the Fed’s “dual mandate”—the pursuit of maximum employment consistent with stability of prices (or at least stability of inflation). For too many years over recent decades the Fed has privileged avoiding any outbreak of above-target inflation over the need to pursue maximum employment and keep labor markets tight. This failure to target and achieve genuine full employment has been a key driver in the rise of income inequality and the failure of wages for the vast majority to meaningfully outpace inflation. Currently, this debate over full employment and the dual mandate centers over concerns that the Fed may have begun raising short-term interest rates too early and too rapidly, threatening to drag on the pace of economic recovery and progress in reducing unemployment.
Quarles has made it clear that he does not think that recent interest rate increases have proceeded too rapidly. In fact, he has made a conventionally conservative mistake in declaring that low interest rates are a “threat to financial stability.” This outlook should not come as a huge surprise. A key reason why the Fed in recent decades has privileged extreme inflation control over tight labor markets has been because the financial sector and wealth holders are extremely averse to inflation surprises. The financial sector dominates governance of the regional Federal Reserve banks, which supply 5/12ths of the votes of the FOMC. Quarles’ arguments against efforts to aggressively pursue genuine full employment are fully consistent with his background as a self-described “Wall Street lawyer.”
The saying goes that even a stopped clock tells the correct time twice a day. This is a pretty good description of the Trump administration’s approach to trade policy: their analysis and motivations are almost never right, yet they occasionally hit on a decent idea. But then they move quickly off of it. This is illustrated perfectly in their recent moves regarding the Korea-U.S. Free Trade Agreement (KORUS).
News reports suggest that the Trump administration is preparing to withdraw from KORUS. The motivation for this seems more driven by Trump pique that the South Korean government is not rubber-stamping his preferred policy stance on the current tensions in the Korean peninsula, rather than on any coherent economic analysis.
Yet, it’s true that on pure economics, KORUS should be seen as a failure. The KORUS deal, approved in 2011, was supposed to result in rising U.S. exports. However, U.S. exports to Korea actually fell $1.2 billion between 2011 and 2016, while imports from South Korea soared—increasing the bilateral trade deficit by $14.4 billion and eliminating more than 95,000 jobs in the first three years alone.
The glaring omission in KORUS was failure to include enforceable provisions on currency policy. Korea is a well-known currency manipulator, and it also has the fourth largest current account trade surplus (the broadest measure of trade in goods, services, and income) in the world. Ending Korean currency manipulation and revaluing the won is the surest way to increase U.S. exports and stop the surge in Korean imports in the United States, demonstrating the value of this strategy for rebalance overall U.S. trade and helping to rebuild U.S. manufacturing. Recent estimates suggest that rebalancing U.S. trade will require Korea to revalue the won by at least 32.7 percent.
This morning Attorney General Jeff Sessions announced that the Trump administration will “wind down,” and in six months, end Deferred Action for Childhood Arrivals (DACA), a Department of Homeland Security initiative put in place in 2012 that temporarily deferred the deportation of approximately 800,000 young immigrants who were brought to the United States as children. DACA has been an unqualified success and has benefited not only the DACA recipients themselves, but also the country and the economy.
The young immigrants who met the requirements and passed the necessary background checks for DACA were promised by the federal government that they would not be removed from the United States for two years at a time, as long as they kept applying to renew, kept a clean criminal record, and were either enrolled in school or graduated, or serving in the military or honorably discharged. Because of these requirements, we know that nearly all of the recipients are deeply integrated into their local American communities and labor markets.
Along with protection from removal, DACA recipients are entitled to receive an employment authorization document (EAD), allowing them to be employed in the United States legally, along with certain other benefits. More than 100 legal experts and 20 state attorneys general have recently argued that DACA is a lawful use of the executive branch’s prosecutorial discretion, and as I have written before, the granting of an EAD to deferred action recipients is clearly authorized by statute. Together this means that eliminating DACA is entirely a political decision and not a legal one. The impact of this political decision is significant: 800,000 young immigrants—many of whom have never known another country except when they were small children—will become instantly deportable and lose the ability to work legally and contribute to the United States, and will be effectively left without labor rights and employment law protections in the workplace.
Trump administration and congressional GOP will return to a packed schedule, but maintain attack on working people
Congress returns from a month-long recess next week to a packed agenda. Lawmakers must pass a government spending bill by September 30 in order to avert a federal government shutdown. They must also increase the debt ceiling or risk defaulting on the national debt. In spite of Republican control in both chambers of Congress, action on these critical measures is complicated by divisions within the party over whether to tie the debt limit vote to spending cuts. Funding for President Trump’s border wall and the need to consider disaster relief funding for those areas impacted by Hurricane Harvey loom over any government spending measure. One thing is clear—September is likely to be filled with congressional chaos. In the midst of that chaos, the Trump administration and congressional Republicans will continue to advance the anti-worker agenda they have been working to carry-out since taking office. While those actions may not get attention proportional to their impact, EPI will continue to monitor and report on these important issues. Here are some critical actions to look out for this month:
Trump continues to attack workers’ retirement, costing them billions in retirement savings
Just this week, the Department of Labor (DOL) published a proposal to delay full implementation of the fiduciary rule (the rule that requires financial advisers to act in the best interest of their clients) for another 18 months. This delay would cost retirement-savers 10.9 billion over the next 30 years. Public comments on the proposal are due September 15. It is expected that DOL will quickly finalize this delay. Workers should be able to invest for retirement without worrying about their financial advisers steering them toward investments that pay a lower rate of return for the saver, but offer a higher commission to the adviser. The only people who will benefit from the Trump administration’s DOL actions here are unscrupulous financial advisers and financial services companies.
Trump continues efforts to take away the rights of millions of workers to get paid for working overtime Read more
Labor Day is a celebration of the labor movement and the contributions working people make to the economy and the country. Today’s unions give workers across the economy the power to improve their jobs; through collective bargaining, working people gain a voice at work and the power to shape their working lives. As we illustrated in a recent research report, unions are associated with higher wages and benefits for workers of all genders, races, and ethnicities, better health and safety practices in a variety of sectors, and lower levels of economic inequality across the economy. Unfortunately, aggressive anti-collective bargaining campaigns and lobbying have eroded union membership, thwarting the ability for workers to organize.
Without stronger collective bargaining—and stronger labor standards in general—it is only in the tightest of labor markets that the vast majority of workers see their wages grow and their working conditions improve. Without strong unions, one of the only ways workers have leverage in the labor market is when workers have good “outside options,” i.e. when business have to woo workers rather than workers having to compete for scarce job openings. And unfortunately, that has not been the case for many years.
Repeal of pay transparency rule will make it easier to discriminate against women and people of color
On Tuesday, the Trump administration announced a “review and immediate stay” of the EEO-1 pay data collection rule, which was an Obama-era rule issued by the Equal Employment Opportunity Commission (EEOC). The rule would have required large companies (with 100 or more employees) to confidentially report to the EEOC information about what they pay their employees by job category, sex, race, and ethnicity. Pay transparency is key in leveling the playing field in order to eliminate employer discrimination.
This move is just another example of how the Trump administration’s campaign rhetoric on supporting working people has been followed by actions that hurt them at every turn. Further, this decision runs counter to what the research shows—inequities have gotten worse, not better. Even among workers with the same level of education and work experience, black-white wage gaps are larger today than nearly 40 years ago and gender pay disparities have remained essentially unchanged for at least 15 years. In both cases, discrimination has been shown to be a major factor in the persistence of those gaps.
As my colleague Marni von Wilpert notes, by staying the equal pay data rule, the Trump administration is making it harder for employers and federal agencies to identify pay disparities and root out employment discrimination—and it will make it more difficult for working people to know when they are being discriminated against. When this rule was first announced, former EEOC Chair Jenny R. Yang stated, “Collecting pay data is a significant step forward in addressing discriminatory pay practices. This information will assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of our federal anti-discrimination laws.” By staying this rule, the Trump administration has shown that it does not value equal pay for equal work.
This post originally appeared on the NAACP Legal Defense Fund’s Medium page.
This week, New York Magazine and ProPublica published a scathing article by Alec MacGillis titled, “Is anyone home at HUD?”. Multiple sources — current and former, career, and political staff — described a U.S. Department of Housing and Urban Development in disarray, with severe lack of direction from a Secretary who has said he believes poverty is a mindset. Here, Richard Rothstein digs into the socio-economic conditions that lead to poverty for many low-income children, which policymakers like Secretary Carson would do well to consider.
Ben Carson, Secretary of Housing and Urban Development, told an interviewer recently that poverty results from “the wrong mindset:” low-income persons with strong motivation can escape poverty while those with negative attitudes remain poor.
His own life story seems to illustrate this. Poor children with ambition and self-discipline can occasionally climb the socioeconomic ladder. Luck figures, too, but a child must be on the lookout for it to benefit. Children expecting defeat may never seize opportunities within reach.
Yet as a scientist, Dr. Carson should realize that it’s always dangerous to jump from anecdotes about exceptional cases to generalizations about entire groups. Every human condition has variability. Only some children in Flint got lead poisoning, although all drank the same poisoned water. Even native intelligence is distributed: in any demographic group, some have above average I.Q.s, some are below it, and most are average, around 100.
During a town hall on Monday, House Speaker Paul Ryan trotted out a standard and misleading talking point, claiming that the international competitiveness of U.S. corporations is damaged by an allegedly too-high corporate income tax rate.
“I was just meeting with a father/son business in—I was doing office hours in Janesville today. I met with a father/son business in—down in south central Wisconsin. I don’t want to tell their names because I don’t want to, you know, get them grief. But down in Genoa City, they have an electricity business. They make electrical parts for Snap-on and other companies.
Their biggest competitor is Canada, a company in Canada. Their tax rate—they’re a corporation, small business, 35 percent. You know what the Canadian tax rate is? Fifteen percent. Eight out of 10 businesses in America file their taxes as people, as individuals. We call them, like, Subchapter S corporations, LLCs. Their top effective tax rate is 44.6 percent. Canadians are at 15 percent. The Irish at 12.5 percent. China, 25 percent.”
As I noted a couple weeks ago, the most common version of this talking point just compares the statutory U.S. corporate tax rate to the statutory corporate rate in other countries. This is already awfully misleading because what corporations actually pay (their effective rate) is far less than the 35 percent statutory rate, thanks to a corporate tax code riddled with loopholes. It’s hard to come up with an exact number, but studies have found effective federal corporate tax rates ranging between 12.5 and 19.4 percent—a far cry from 35 percent.
The first round of the Trump administration’s NAFTA renegotiations began in Washington wrapped up on Saturday. The negotiators will meet again in September in Mexico City and then again in October in Canada. The United States has not yet proposed any specific measures on important issues such as labor rights, currency manipulation, or rules of origin. By all accounts, these negotiations are more likely to hurt than help most working Americans, who would be better served by efforts to target countries with large, global trade surpluses such as China, the European Union (EU) and Japan. Rather than tinkering around the edges of NAFTA, the United States should begin a campaign to realign the U.S. dollar and rebalance global trade.
Over its first 20 years, growing trade deficits with Mexico and Canada from the North American Free Trade Agreement (NAFTA) eliminated 850,000 U.S. jobs, most of them in manufacturing. (American workers suffered far more after China entered the World Trade Organization in 2001, including 3.4 million jobs lost through 2015 alone, due to growing trade deficits with that country.) And trade deficits and job losses are just the tip of the iceberg of the devastation wreaked by bad trade deals, which have also driven down the wages of all 100 million American workers without a college degree, who have suffered losses of just under $2,000 per year for each median wage, full-time worker. Roughly $200 billion per year is being taken from the pockets of working people and middle class families, because the super-rich and huge corporations have been able to game the system at their expense.
NAFTA has created the economic equivalent of a 14-lane freeway to Mexico, paving the way for the outsourcing of jobs and factories to Mexico. In the past twenty years, the U.S. has lost more than 87,000 factories (manufacturing establishments), wiping out nearly one-third of U.S. manufacturing production capacity. Tweaking NAFTA around the edges is not going to change those dynamics. As EPI founder Jeff Faux recently explained, NAFTA created “radical new rules for trade…that shifted the benefits of expanding trade to investors and the costs to workers.” The system that created this deal to benefit rich executives and multinational companies is still in place and if anything, tilts even further in their interest in an administration lead by former Goldman Sachs executives Gary Cohn (Trump’s chief economic advisor) and Treasury Secretary Steve Mnuchin.
Yesterday, the National Labor Relations Board (NLRB) filed its brief in NLRB v. Murphy Oil, which will be argued in the Supreme Court in October. The case will determine whether mandatory arbitration agreements with individual workers that prevent them from pursuing work-related claims collectively are prohibited by the National Labor Relations Act (NLRA). The brief makes clear what is at stake for workers if the Supreme Court were to rule against the NLRB in this matter.
The NLRA guarantees workers the right to stand together for “mutual aid and protection” when seeking to improve their wages and working conditions. Employer interference with this right is prohibited. However, increasingly, employers are requiring workers to sign arbitration agreements that force them to waive their rights to collective actions, and handle workplace disputes as individuals. In practice, that means that even if many workers faced the same type of dispute at work, each individual employee must hire their own lawyer, and must resolve their disputes out of court, behind closed doors, with only their employer and a private arbitrator. The NLRB has found these forced arbitration agreements interfere with workers’ right to engage in concerted activity for their mutual aid and protection, in violation of the NLRA.
U.S. corporations pay a far lower effective tax rate than the statutory rate would indicate—and a recent CBO study doesn’t actually contradict this
The conventional wisdom on corporate taxes holds that while the U.S. statutory rate of 35 percent is among the highest of our peer countries, widespread loopholes in the corporate tax system mean that the rate actually paid by U.S. corporations is far lower, and actually firmly in line with these international peers. And this is one of the times where the conventional wisdom is actually correct. Because of a lack of data, it’s hard to put an exact number on it, but it’s clear that the actual rate faced by U.S. corporations is far lower than the headline 35 percent rate.
But recently, some have been trying to refute this conventional wisdom by brandishing a recent Congressional Budget Office (CBO) report. Summary Table 1 in the report has led some to believe that even the effective rates that U.S. corporations actually face are high among peer countries. But as we describe in our recent paper, once you dig into the details of the measures that CBO is reporting, this isn’t actually the case. And in fact, their findings simply bolster conventional wisdom. See EPI’s analysis of the CBO report:
Does a recent CBO report contradict our findings about U.S. effective rates? No—and here’s why.
CBO recently released an updated report comparing corporate income taxes across G-20 countries (CBO 2017). Uncareful readers might be led into thinking that the CBO report overturns the empirical evidence cited above that indicates that corporate taxes actually paid by American companies are not notably high relative to international peers. But a careful read shows that the CBO report does not contradict this other evidence.
The headline findings of the CBO study claim that the United States has the highest statutory corporate tax rate, the third-highest average corporate tax rate, and the fourth-highest effective marginal corporate tax rate. However, when we dig into the study, we are able to show that the latter two claims are simply not true. We’ll take each of the CBO estimates in turn and show why they do not contradict the evidence presented in Figure C.
The statutory tax rate. As we have already noted, it is absolutely true that the United States has one of the highest statutory rates, but widespread loopholes make this rate irrelevant to the broader question of what corporations are actually paying in corporate income taxes.Read more
What to watch on jobs day: Hoping for stronger nominal wage growth as the economy continues to inch toward full employment
This week, I wrote two blog posts about wages in the first half (FH) of 2017. First, I analyzed up-to-date real (inflation-adjusted) hourly wage series from the Current Population Survey (CPS) across the wage distribution and compared it to FH2016, FH2007, and FH2000. Preliminary findings from 2017 suggest more broadly based wage growth—with significant gains at the 10th percentile—associated with an economy approaching full employment as well as state-level increases in the minimum wage. However, that good news is tempered by the fact that the vast majority of workers are, in reality, only beginning to make up for lost ground, rather than getting ahead, and wage inequality is still far greater today than in 2007 or 2000.
Second, I analyzed wages in FH2017 by education level. I found that wages for workers with less than a high school degree or just a high school degree rose faster over the last year than any other group at 1.9 percent and 1.7 percent, respectively. This phenomenon is likely related to the disproportionate increases among lower wage workers, due to some states raising their minimum wage. Somewhat surprisingly, given their unemployment rate of 2.9 percent over the last year, I also found that college wages actually fell slightly between FH2016 and FH2017. This is evidence against the claim that the U.S. economy is experiencing a work shortage, particularly among credentialed workers. If employers had to work harder to attract or retain workers with a college degree, we would surely see it in the wage data.
In January, Montgomery County, Maryland County Executive Isiah Leggett vetoed an ordinance passed by the county council that would match the minimum wage in the District of Columbia, raising the county minimum to $15 by 2020. Leggett then commissioned the consulting firm PFM to analyze the likely economic effects. The firm just released their study and their findings are so implausible that they border on the absurd. The study essentially concludes that raising the minimum wage in Montgomery County—even a small amount—would be the most devastating economic shock the county has experienced in a generation, more damaging than the Great Recession. To say that the study has methodological problems would be a gross understatement. No county official, business owner, worker, or resident in Montgomery County—and certainly not editorial boards of local newspapers—should give any credence to this report.
The report posits that the proposed $3.50 minimum wage hike over 5 years will lead to massive losses in jobs, income, and county revenues. Ostensibly wanting to present both the costs and benefits, the authors do also note that “increased wages are associated with improved mental health, reduced hunger, and decreased stress for workers and their families.” Admittedly, I have only skimmed the full 145 page report, but one only needs to read the initial section on job impacts to see how flawed this “study” is. The alleged large negative outcomes for incomes and county revenues all stem from the jobs findings, so there really isn’t need to read much further.
The report’s methodology for how they calculate expected impacts on employment is completely divorced from any actual research. First, the authors go through a long discussion of other localities that have enacted higher minimum wages—such as the District of Columbia, Los Angeles, and San Jose, among others— which they refer to as “comparison jurisdictions,” implying that the impacts of minimum wage hikes in these locations might provide guidance for how a higher minimum wages might affect Montgomery County. Ironically, they note that in virtually all these “comparison jurisdictions,” studies that analyzed the resulting or likely employment effects of the local minimum wage showed that any impact on jobs was negligible. Nevertheless, the authors assert that Montgomery County is not a “twin” of any of these places, thus none of these chosen comparisons should serve as a guide.
Yesterday, I took an in-depth look at the latest wage data for select percentiles. Today, I’m going to provide a brief look at the latest wage data by educational group for the first half (FH) of 2017 compared to FH2016 and FH2007, before the Great Recession began. While FH data are, by definition, more volatile than full year data, data for this year so far indicate a mild reversal of trend from what I found in The State of American Wages 2016.
The table below shows real average hourly wages in FH2017 dollars for the five main educational groupings and annualized changes over the last year and since FH2007. It is particularly striking that the wages for workers with less than a high school degree or just a high school degree rose faster over the last year than any other group at 1.9 percent and 1.7 percent, respectively. This phenomenon is likely related to the disproportionate increases among lower wage workers. I pointed out earlier this week the likely relationship between strong wage growth at the 10th percentile and the significant number of state-level minimum wage increases that took effect at the beginning of the year.
Average hourly wages by education, FH2007–FH2017 (FH2017 dollars)
|Less than high school||High school||Some college||College||Advanced degree|
|Annualized percent change|
Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata
From the latest wage data, we also see that average wages for workers with some college or a bachelor’s degree fell over the last year. Because of the opposing trends in high school and college wages, the gap between those two groups fell, mildly offsetting the increases we saw between 2015 and 2016. The slight decline in average wages for college graduates is particularly striking as the unemployment rate for that group averaged 2.9 percent over the last year. While not definitive, this is a sign that there is no shortage of credentialed workers in the economy today. If there were, employers would have to offer higher wages to attract and retain the workers they want. It remains to be seen whether this trend will continue through the remainder of the year.
Agriculture has long been the poster child for an industry dependent on low-wage migrant workers. Today, about two-thirds of the hired workers employed on crop farms were born in Mexico, and most of these Mexican-born workers are not authorized to be employed in the United States. The total number of unauthorized migrants has fallen, while the number of unauthorized migrants who are employed in the U.S. labor market has been stable at about eight million, and the share of Mexican-born farm workers has also been stable. The lack of unauthorized newcomers makes agriculture a bellwether of how industries that rely on newcomers from abroad are adjusting to the slowdown in unauthorized migration. In agriculture, employers are responding in a number of ways. One of their main strategies has been to increase the use of the H-2A guestworker program to hire farm workers from abroad for seasonal jobs; this poses key challenges that have yet to be fully explored.
How farmers are adjusting to fewer new unauthorized migrant workers: 4-S strategies
Farmers are adjusting to the lack of new unauthorized migrant workers and higher labor costs with some or all of what are called “4-S” strategies: satisfy, stretch, substitute, and supplement. First, by satisfying current workers with new incentives, employers may be able to retain them longer. The second strategy is to stretch the current workforce with mechanical aids that increase worker productivity, which can include using conveyor belts that reduce the need to carry harvested produce as far, making them more productive and harvesting jobs more appealing to older workers and women. The third strategy is substitution or replacing workers with machines. Five of the most important field crops covered by government support programs—corn, soybeans, wheat, cotton, and rice—have largely been mechanized. Fresh fruits and vegetables, on the other hand, have defied mechanization because many are fragile and require gentler human hands, and machines that shake apples or pears from trees damage a higher share of the fruit than hand harvesters.
Approximately 4,000 workers at a Nissan manufacturing plant in Mississippi will be voting on August 3 and 4 whether to join the United Autoworkers (UAW). The Nissan plant in Canton is located in a suburb of Jackson, the Mississippi state capital. For decades, the working poor in and around Jackson have faced significant problems stemming from systematic, persistent poverty. Over 30 percent of the people living in Jackson, and 26 percent of the people living in Canton, are living in poverty. But the struggles that many Mississippians face are not insurmountable, unchangeable problems. Rather, they are the result of deliberate policy choices made just down the road from the Nissan plant at the state’s capitol, on issues such as health, education, and jobs.
When it comes to health, Mississippi has the highest death rates in the country from preventable causes such as heart disease, diabetes, and stroke, but has one of the lowest rates in the country of residents who receive health insurance through their jobs. There is an immense need for better access to health care in Mississippi, and the Medicaid expansion available to Mississippi under the Affordable Care Act would give an additional 300,000 people coverage. But Governor Phil Bryant (R) deliberately chose not to expand Medicaid access for his citizens.
When it comes to education, many workers at the Nissan plant send their children to the Jackson and Canton public school districts, which were both graded as failing by the state’s Department of Education. To address underperforming schools, the state legislature established the Mississippi Adequate Education Program (MAEP), which requires the state to determine the amount of funding necessary to ensure schools districts have the basic funds needed to equip students to perform at least a “C” level. But each year, the state legislature has deliberately chosen to underfund the MAEP, totaling over $1.7 billion in education underfunding since 2008.
And when it comes to jobs, Governor Bryant is making another deliberate policy choice that will harm working people in Mississippi: he opposes the Nissan workers’ drive to form a union. The governor has taken this position even though unions have consistently been shown to raise wages and benefits for workers, which would be a much-needed boost for communities with high poverty rates like Jackson and Canton.