Walgreens’s ‘No Overtime’ Rule: Why I Support Raising the Overtime Threshold

My name is Caleb Sneeringer, and I worked for Walgreens for six years. I was first hired in 2008 as an assistant manager, and in 2010 I was promoted to executive assistant manager—my first salaried position with Walgreens. I earned a salary of $46,000 and was scheduled for 45 hours a week.

Unfortunately, 45 hours a week quickly turned into 55–70 hours. You see, around the time of my promotion, Walgreens implemented a “no overtime” rule for hourly employees. In my store this and other budget cuts resulted in a loss of approximately 150 hours a week among hourly employees—and their work and responsibilities were shifted to salaried staff. This created a more unpredictable scheduling situation, and many store associates were forced to use SNAP assistance (i.e., food stamps) to meet their basic needs.

Right now, the U.S. Department of Labor is considering an important rule change that would affect salaried workers and overtime pay. If implemented, the overtime salary threshold will be raised from $23,660 to $50,440. For me, my former coworkers at Walgreens, and millions of workers across the country, this rule change will mean the right to receive the overtime pay we are owed.

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Victory for Home Care Workers Bodes Well for Overtime Rule

After the Department of Labor (DOL) issued regulations last year requiring third-party providers of home care services to pay the minimum wage and overtime to their employees, various employer groups filed suit in federal court in an attempt to have the new rules struck down. In short, they argued that the Secretary of Labor didn’t have the legal authority under the Fair Labor Standards Act (FLSA) to change the definition of “companionship services” it had used in the regulations it promulgated in 1975 to set wage and hour rules for home care workers. The U.S. District Court judge who heard the case, Richard Leon, didn’t just agree with the employers, he wrote a vituperative opinion expressing his outrage that the Department of Labor was arrogantly usurping congressional powers.

Calling on his inner George W. Bush, the judge declared that the Department of Labor was trying to “seize unprecedented authority to impose overtime and minimum wage obligations in defiance of the plain language of Section 213. It cannot stand.”

Last week, in Home Care Association v. Weil, a unanimous three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit disagreed with Judge Leon about the “plain language” of the statute and overruled him, finding that “the Department’s authority [to change its regulations] is clear.” The appeals court pointed out that the Supreme Court had already decided that Section 213 of the Fair Labor Standards Act doesn’t unambiguously compel any conclusion about whether third-party providers of home care services are exempt from the overtime and minimum wage requirements. Judge Leon forgot that the issue was so far from plain that back in 1975 that DOL considered covering third-party employers, before choosing not to. (How he forgot, since he cited DOL’s hesitation himself, is another story.)

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Why Recent Stock Volatility Shouldn’t Factor Into Interest-Rate Hikes

This blog post originally appeared on Wall Street Journal Think Tank.

Recent volatility in stock markets in the U.S. and globally has led many economic observers to conclude that the Federal Reserve is less likely to begin raising short-term interest rates at its September meetings. I’ve been on Team Don’t Raise for a while now, but I’m not excited about those joining the cause in light of recent stock market swings.

As a general principle, the Fed should not react to short-term movements in the financial markets. For one thing, the labor market is much more important to the lives of most Americans, and it is more relevant to the Fed’s mandate of securing maximum employment with inflation stability.

Then consider this: More than 80% of stock wealth in the U.S. is owned by the wealthiest 10% of Americans, and more than half of Americans own no stocks at all (either directly or through retirement or other accounts). In short, movements in the stock markets do not have much effect on the spending power of most U.S. households. That means that movements in the stock markets—especially short-term volatility that is likely to largely dissipate—provides little information about the overall state of economic health.

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How Worried Should We Be About the Stock Market’s Recent Declines?

The stock market has taken a hit in the past few days, with concern over the Chinese economy driving a big selloff. How worried should we be? The short answer is: not very.

My assessment of the underlying health of the U.S. economy hasn’t really changed over the past week, even as the stock market has declined pretty spectacularly in recent days. Why this equanimity?

A couple of things. First, stock market movements significantly change the wealth of only a small sliver of the U.S. population. Roughly 90 percent of stocks are held by the wealthiest 10 percent of the population. This means that the spending power of the vast majority of American households isn’t significantly affected by changes in stock prices.

Second, while stocks were pretty expensive in the past week, it doesn’t seem to me that there was an obvious market-wide bubble that would mean these declines were inevitable and will be enduring. Yes, some sectors and stocks (tech and “sharing economy” stocks) do look awfully bubbly. But when graded on things like price/earnings ratios—especially given today’s very low interest rates—the market overall looks expensive but not like an obvious bubble. What all this means is that recent stock market declines are most likely to redistribute wealth from today’s stock owners to tomorrow’s stock owners (who are buying up cheap stocks today).

All in all, the stock market is a terrible gauge of overall economy-wide health, so even large swings in it by themselves do not provide much of a signal for how to assess this broader health.

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Why Nonprofits Shouldn’t Fret Over the New Proposed Overtime Rules

President Obama recently announced a major overhaul of the rules governing the payment of overtime to salaried employees. These changes are long overdue and will finally align the overtime exemption for salaried employees with common sense and the original intention of the law—to ensure that all workers receive overtime protection except those with such high salaries or such substantial responsibilities that they don’t need the protections.

Since the president’s announcement, opponents of the proposal have made a number of questionable claims. One claim in particular—that nonprofit organizations providing services to the poor and the disadvantaged will see a crippling increase in personnel costs—is demonstrably false.

The Fair Labor Standards Act (FLSA) is based on a few basic principles. First, most employees in the United States are entitled to the minimum wage, currently set at $7.25 per hour at the federal level, for all hours worked, and “time-and-a-half” for all hours worked over 40 in a workweek. These rules, first enacted in 1938, have proven to be a simple but important protection for workers and the labor market, guaranteeing workers at least a minimal level of wage protection.

The second principle, however, is that FLSA coverage does not extend to all employees or all employers. There are number of exemptions and exclusions from minimum wage and/or overtime embedded in the FLSA. Unless coverage is established for the employer or employees, the protections of the FLSA, including the proposed overtime rule changes, simply do not apply.

Coverage is determined in one of two ways. First, employers who are engaged in business that generates annual business or sales revenues of at least $500,000 per year are covered by the FLSA and must pay the minimum wage and overtime, unless another of the many exemptions in the law applies. Importantly, the key criterion for this provision is business or sales revenue. Most nonprofitsincluding the charitable organizations providing free meals to the hungry and nonprofits providing addiction or mental health services are not engaged in business, they are providing charitable services and therefore their employees are not typically covered by the FLSA.Read more

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Soft Bigotry of Low Expectations, U.S. Growth Version

Catherine Rampell wrote a piece having some fun with the bidding war among GOP candidates about how much they can promise to raise economic growth rates. There’s some good stuff there—including the riff on how GOP politicians are looking to “disrupt” economic statistics largely by defunding those doing the valuable work of collecting them.

But “Step 1” in her list is a pet peeve of mine. The claim is that the growth of the mid/late-20th century rested largely on the fact that the United States faced less foreign competition in those years, as trading partners’ economies in Europe and Asia were devastated by war. Let me quote a chunk of Rampell’s point here:

“If we (or others) can manage to destroy the capital stock of our economic rivals while sustaining no damage to our own—which is, you know, basically what happened in World War II—we’ll be perfectly positioned for another global-competition-free, postwar economic boom. This little artifact of the last postwar era, and how much it explains the robust mid-20th-century growth rates that my presidential rivals now pine for, has curiously eluded others’ policy plans.”

One hears variants of this argument a lot*, but it’s actually really hard to make an economic case that this dynamic—increased U.S. competitiveness stemming from war destruction in our trading partners—mattered at all for mid-century American growth.

Is the claim that exports surged and that’s why mid-century growth was good? They really did not—exports grew substantially faster post-1979 than before. And we were not shielded from import growth in the pre-1979 period, since imports grew faster than in the pre-1979 period than after.

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Breaking News: The Rich Discover Inequality

This post originally appeared in The Huffington Post.

After forty years of rising income and wealth inequality, some of America’s rich seem worried that maybe things have gone too far. In a recent New York Times op-ed, for example, Peter Georgescu, CEO emeritus of the multinational public relations firm, Young and Rubicon, wrote that he is “scared” of a backlash that might lead to social unrest or “oppressive taxes.”

The Times was so impressed with such enlightened views from this prominent capitalist that a few days later they devoted another long article with his answers to questions submitted by readers.

We should, I suppose, be grateful that Georgescu seems to understand that the gap between the rising value of what American workers produce and the stagnation of their wages has channeled the benefits of economic growth to shareholders (and, he might have added, but didn’t, corporate CEOs). But if you are waiting for him and other members of his class to get serious about the problem, don’t hold your breath.

Georgescu writes that he would like to see corporations pay their workers a fair wage. But with few exceptions, they don’t. He doesn’t tell us why, but the reason is obvious—paying workers less has made their owners and top executives rich.

So, what to do?

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Congress Must Act to Save the 190,000 to 640,000 U.S. Jobs at Risk Due to Chinese Currency Devaluation

China’s decision to devalue its currency last week means that it has chosen to export its unemployment problem, rather than take the hard steps needed to restructure its domestic economy. Over the past decade, trade deficits caused by currency manipulation by about 20 mostly Asian countries, predominantly China, has eliminated between 2.3 million and 5.8 million U.S. jobs. The yuan fell 4.4 percent in the first three days after China announced its devaluation, and a cumulative drop of 10 to 15 percent is possible over the next two weeks, according to the Economist Intelligence Unit. A devaluation of the yuan of between 4.4 to 15 percent, if it persists, would likely increase U.S. trade deficits sufficiently to eliminate between 190,000 and 640,000 U.S. jobs. There is growing, bipartisan support from both Republicans and Democrats for new policies to end currency manipulation and to reverse the damage it has done to the U.S. economy. Congress should take immediate steps to pass tough laws to end currency manipulation and to ensure that injured domestic workers and companies obtain timely relief from unfairly traded imports.

To evaluate the costs of China’s currency devaluation, I use the results of C. Fred Bergsten and Joseph E. Gagnon’s study for the Peterson Institute for International Economics, which used the Federal Reserve Board’s macroeconomic model to assess the effects of a 10 percent depreciation of the trade-weighted value of the U.S. dollar. China is America’s largest trading partner, responsible for 21.3 percent of total U.S. trade, based on the trade weights used in the Federal Reserve’s Broad Index of the U.S. dollar. Thus, a 4.4 percent devaluation of the yuan (or renminbi, as it is also known) translates into a 0.9 percent appreciation of the real U.S. dollar. Likewise, a 10 percent devaluation would increase the U.S. dollar by 2.1 percent, and a 15 percent devaluation would increase the value of the dollar by 3.2 percent.

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Four Pinocchios for the Washington Post Fact Checker

In the Washington Post Fact Checker column today, Glenn Kessler got really exercised about Bernie Sanders’ totally accurate description of a Congressional Budget Office (CBO) report on job losses that will occur if spending caps in the Budget Control Act (BCA) are not loosened in coming years. In the end, Kessler’s “fact check” is much more misleading than anything Sanders and his staff released.

The CBO provided a range of estimates of job losses that would occur in 2016 and 2017 if these spending caps are not lifted (alternatively, one could describe these as job gains that would be realized if the caps are lifted). The high end of these estimates was 800,000 jobs in 2016 and 600,000 in 2017. That’s how much higher total employment in the United States could be if the caps were lifted, relative to a counterfactual baseline where the caps stay in place.

So, what has Kessler so angry? First, that Sanders cited the high end of the CBO range—even though he and his staff are clearly identifying it as the high end. Kessler writes:

First of all, note that the Sanders’ statement says that “as many as” 1.4 million jobs would be lost. That’s a signal that a politician is using the high-end of a range.

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Social Security at 80: Built to Last

Eighty years ago today, President Franklin D. Roosevelt signed the Social Security Act into law. Four and a half years later—after the German invasion of Poland but still two years before Pearl Harbor propelled the United States into war—65-year-old Ida May Fuller received the first Social Security check for $22.54. She would live to be 100 years old.

Fuller might seem like a historical footnote, but history matters, and not just because the Social Security program was born in the midst of the Great Depression and the first benefit check was paid out even as the country was poised on the brink of war.

By any measure, Fuller got a bargain. She paid into the program for three years and collected benefits for 35 years. This was by design: Social Security’s pay-as-you-go structure allowed the first generation of seniors to collect benefits even if they hadn’t had a chance to contribute meaningfully into the program. Fuller herself was unsure if she was eligible for benefits, later saying she dropped by the Rutland, Vermont, Social Security office on a whim, remembering that contributions had been deducted from her paycheck. (Fuller, who never married, had had a long career as a teacher and legal secretary.)

Most of the benefits claimed by retirees are paid out of current workers’ contributions, not advanced savings in the Social Security trust fund (contrary to popular belief). This means that each generation earns a “return” on contributions that is linked to productivity and wage growth and not subject to the vagaries of financial markets. The trust fund is more like a checking or contingency savings account than a retirement savings account, expanding and contracting to accommodate demographic booms and busts. Thanks to advance planning, we accumulated enough in the trust fund to get us through the peak retirement years of the large baby boomer generation, another legacy of World War II.

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By Devaluing Its Currency, China Exports Its Unemployment

On Tuesday, China announced the largest one-day devaluation of its currency in more than two decades. Make no mistake—although authorities claimed this policy was a shift toward more market-driven movements, the value of the currency is tightly controlled by China’s central bank. By choosing to devalue its currency, Chinese officials are trying to solve their domestic economic problems—including a massive property bubble, a collapsing stock market, and a slowing domestic economy—by exporting unemployment to the rest of the world. The United States, which is the largest single market for China’s exports, will be hardest hit by the devaluation of the yuan. Manufacturing, which was already reeling from the 20 percent rise in the value of the dollar against major currencies in the last 19 months, can expect to see even faster growth in imports from China.

The devaluation of the yuan (also known as the renminbi) will subsidize Chinese exports, and act like a tax on U.S. exports to China, and to every country where we compete with China, which is already the largest exporter in the world. It will provide rocket fuel for their exports, transmitting unemployment from China directly to the United States and other major consumers of imports from China. Already in 2015, the U.S. manufacturing trade deficit has increased 22 percent, which will continue to hold back the recovery in U.S. manufacturing, which has experienced no real growth in output since 2007.

The Chinese devaluation highlights the importance of including restrictions on currency manipulation in trade and investment deals like the proposed Trans-Pacific Partnership (TPP), which includes a number of well-known currency manipulators. Millions of jobs are at stake if a clause to prohibit currency manipulation is not included in the core of this “twenty-first century trade agreement.” This devaluation by China, which is not a member of the TPP, will raise pressure on other known currency manipulators that are in the agreement—such as Japan, Malaysia, and Singapore—to devalue their currencies, which could more than offset any benefits obtained under the terms of the TPP.

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Job Openings Data Suggest the Economy is Chugging Along, Albeit Slowly

So far this year, job growth has been steady as the economy has continued to slowly chug along. This morning’s Job Openings and Labor Turnover Survey (JOLTS) report supports that story and rounds out our knowledge of the employment situation for June.

In June, the number of unemployed fell to 8.3 million. While this is an improvement, the number of job openings also fell, which caused the job-seekers-to-job-openings ratio to stay put at 1.6-to-1. This ratio has been declining steadily from its high of 6.8-to-1 in July 2009, but it has been stuck at 1.6 for the past three months, as shown in the figure below. The job-seekers ratio is currently much higher than its low-point of 1.1 in 2000, indicating that there is still a lot of slack in the labor market. In a tighter labor market, this ratio would be closer to 1-to-1 or less, as there would be more job opportunities available for each job seeker.

JOLTS

The job-seekers ratio, December 2000-June 2015

Month Unemployed job seekers per job opening
Dec-2000 1.1
Jan-2001 1.1
Feb-2001 1.3
Mar-2001 1.3
Apr-2001 1.3
May-2001 1.4
Jun-2001 1.5
Jul-2001 1.5
Aug-2001 1.7
Sep-2001 1.8
Oct-2001 2.1
Nov-2001 2.3
Dec-2001 2.3
Jan-2002 2.3
Feb-2002 2.4
Mar-2002 2.3
Apr-2002 2.6
May-2002 2.4
Jun-2002 2.5
Jul-2002 2.5
Aug-2002 2.4
Sep-2002 2.5
Oct-2002 2.4
Nov-2002 2.4
Dec-2002 2.8
Jan-2003 2.3
Feb-2003 2.5
Mar-2003 2.8
Apr-2003 2.8
May-2003 2.8
Jun-2003 2.8
Jul-2003 2.8
Aug-2003 2.7
Sep-2003 2.9
Oct-2003 2.7
Nov-2003 2.6
Dec-2003 2.5
Jan-2004 2.5
Feb-2004 2.4
Mar-2004 2.5
Apr-2004 2.4
May-2004 2.2
Jun-2004 2.4
Jul-2004 2.1
Aug-2004 2.2
Sep-2004 2.1
Oct-2004 2.1
Nov-2004 2.3
Dec-2004 2.1
Jan-2005 2.2
Feb-2005 2.1
Mar-2005 2.0
Apr-2005 1.9
May-2005 2.0
Jun-2005 1.9
Jul-2005 1.8
Aug-2005 1.8
Sep-2005 1.8
Oct-2005 1.8
Nov-2005 1.7
Dec-2005 1.7
Jan-2006 1.7
Feb-2006 1.7
Mar-2006 1.6
Apr-2006 1.6
May-2006 1.6
Jun-2006 1.6
Jul-2006 1.8
Aug-2006 1.6
Sep-2006 1.5
Oct-2006 1.5
Nov-2006 1.5
Dec-2006 1.5
Jan-2007 1.6
Feb-2007 1.5
Mar-2007 1.4
Apr-2007 1.5
May-2007 1.5
Jun-2007 1.5
Jul-2007 1.6
Aug-2007 1.6
Sep-2007 1.6
Oct-2007 1.7
Nov-2007 1.7
Dec-2007 1.8
Jan-2008 1.8
Feb-2008 1.9
Mar-2008 1.9
Apr-2008 2.0
May-2008 2.1
Jun-2008 2.3
Jul-2008 2.4
Aug-2008 2.6
Sep-2008 3.0
Oct-2008 3.1
Nov-2008 3.4
Dec-2008 3.7
Jan-2009 4.4
Feb-2009 4.6
Mar-2009 5.4
Apr-2009 6.1
May-2009 6.0
Jun-2009 6.2
Jul-2009 6.8
Aug-2009 6.5
Sep-2009 6.2
Oct-2009 6.5
Nov-2009 6.3
Dec-2009 6.1
Jan-2010 5.6
Feb-2010 5.9
Mar-2010 5.7
Apr-2010 4.9
May-2010 5.1
Jun-2010 5.3
Jul-2010 5.0
Aug-2010 5.1
Sep-2010 5.2
Oct-2010 4.8
Nov-2010 4.9
Dec-2010 4.9
Jan-2011 4.8
Feb-2011 4.5
Mar-2011 4.4
Apr-2011 4.5
May-2011 4.6
Jun-2011 4.4
Jul-2011 4.0
Aug-2011 4.4
Sep-2011 3.9
Oct-2011 4.0
Nov-2011 4.1
Dec-2011 3.7
Jan-2012 3.5
Feb-2012 3.6
Mar-2012 3.3
Apr-2012 3.5
May-2012 3.4
Jun-2012 3.4
Jul-2012 3.5
Aug-2012 3.4
Sep-2012 3.3
Oct-2012 3.3
Nov-2012 3.2
Dec-2012 3.4
Jan-2013 3.3
Feb-2013 3.0
Mar-2013 3.0
Apr-2013 3.1
May-2013 3.0
Jun-2013 3.0
Jul-2013 3.0
Aug-2013 2.9
Sep-2013 2.8
Oct-2013 2.7
Nov-2013 2.7
Dec-2013 2.6
Jan-2014 2.6
Feb-2014 2.5
Mar-2014 2.5
Apr-2014 2.2
May-2014 2.1
Jun-2014 2.0
Jul-2014 2.0
Aug-2014 1.9
Sep-2014 2.0
Oct-2014 1.9
Nov-2014 1.9
Dec-2014 1.8
Jan-2015 1.8
Feb-2015 1.7
Mar-2015 1.7
Apr-2015 1.6
May-2015 1.6
Jun-2015 1.6

 

ChartData Download data

The data below can be saved or copied directly into Excel.

Note: Shaded areas denote recessions.

Source: EPI analysis of Bureau of Labor Statistics Job Openings and Labor Turnover Survey and Current Population Survey

Copy the code below to embed this chart on your website.

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On Immigration, Bernie Sanders is Correct

I was caught off guard by all of the recent attention and coverage given to Senator and presidential candidate Bernie Sanders’ positions on immigration. Not because his views were widely discussed (he is running for president, after all), but because the criticisms he was subjected to were often mistaken or even intentionally misleading.

So what did Senator Sanders actually say about immigration? In an interview with Sanders, Vox.com editor Ezra Klein brought up the concept of an “open borders” immigration policy. Sanders rejected the notion—open borders and unlimited immigration, of course, being a position that no elected official supports. Sanders went on to point out—a point which he later reiterated to journalist Jose Antonio Vargas and the Hispanic Chamber of Commerce—that in some cases the importation of new foreign workers can negatively impact the wages of workers in the United States. Note that Sanders didn’t say immigrants are taking jobs or lowering wages. He was specifically referring to non-immigrant, temporary foreign worker programs, also known as “guestworker” programs, which are full of flaws that employers take advantage of to exploit American and migrant workers alike, and to pit them against each other in the labor market.

The reality is that what Sanders supports on immigration is careful and nuanced, and it’s the correct path forward for American immigration policy. In a nutshell, Sanders is strongly in favor of legalization and citizenship for the current unauthorized immigrant population, which will raise wages and lift labor standards for all workers, and he’s against expanding U.S. temporary foreign worker programs, which allow employers to exploit and underpay so-called guestworkers. Limiting guestworker programs will reduce wage suppression and improve labor standards for U.S. and migrant workers alike.

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Slow Wage Growth is Certainly Not a Sign of the “Some Further Improvement” Needed for the Fed to Raise Rates

Arguably, the most important measure for the Federal Reserve as they decide whether to raise rates in September is nominal average hourly earnings. Over the year, average hourly earnings rose only 2.1 percent, in line with the same slow growth we’ve seen for the last six years. And wages for production/nonsupervisory workers rose even more slowly, at 1.8 percent over the year. The annual growth rates are slow by any measure, but are certainly far below any reasonable wage target.

Wage growth needs to be stronger—and consistently strong for a solid spell—before we can call this a healthy economy. As shown below, nominal wage growth since the recovery officially began in mid-2009 has been low and flat. This isn’t surprising—the weak labor market of the last seven years has put enormous downward pressure on wages. Employers don’t have to offer big wage increases to get and keep the workers they need. And this remains true even as a jobs recovery has consistently forged ahead in recent years.

Pressure is building on the Fed to reverse its monetary stimulus by raising short-term interest rates, slowing the recovery in the name of stopping wage-fueled inflation. Fortunately, the Fed has said that their decision to raise rates will be “data driven.” The data clearly show that the economy has not improved enough.

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Prime-Age Employment-to-Population Ratio Remains Terribly Depressed

My former colleague, Heidi Shierholz, used to call the prime-age employment-to-population ratio (EPOP) her desert island measure, if she could only take one with her. Today, I decided to take a closer look. My crude drawings on an otherwise straightforward graph are my attempt to illustrate three important points about trends in the prime-age EPOP. (Side note: I use prime age here, i.e. 25–54 year olds, to remove structural trends like baby-boomer retirement. And, for those nerdy enough to want to know, my drawings eliminate the ability to see the data behind this chart. For the data series, please see here.)

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The most obvious point is the huge nose dive prime-age EPOP took during the Great Recession. The green circle shows the slow climb as the recovery began to take hold. We had a couple years of solid job growth, and that’s a fairly decent pace for the EPOP recovery. Then, early this year, the EPOP stalled out (see the red circled region). The prime-age EPOP hit 77.3 percent in February, then stagnated for four months at 77.2 percent, and fell slightly to 77.1 in July. This would be a terrible new normal for the economy, for the American people.

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Paid Sick Leave is a Win for Workers and the Economy

The White House is reportedly considering an executive order that would require that federal contractors provide their employees with seven days of paid sick leave.  This is a step in the right direction: The United States remains alone among our economic peers worldwide in failing to give all workers access to earned paid sick time. Through this executive order, President Obama can lead by example, and start to shift the paradigm towards giving more American workers and their families the right to take paid leave to care for their own or their family members’ health needs.

Currently paid sick days laws are or will soon be in place in 24 jurisdictions across the country, including four states: Connecticut, California, Massachusetts, and Oregon. The evidence from these jurisdictions has been overwhelmingly positive. The first jurisdiction to set a paid sick days standard was San Francisco, where employers have been required to offer earned paid leave since 2007. Fears that the law would impede job growth were never realized. In fact, during the five years following its implementation, employment in San Francisco grew twice as fast as in neighboring counties that had no sick leave policy. According to the Institute for Women’s Policy Research, San Francisco’s job growth was even faster in the foodservice and hospitality sector, which is dominated by small businesses and viewed as vulnerable to additional costs. Connecticut, meanwhile, became the first state to enact a sick-days standard in 2011. A year-and-a-half after the law took effect, researchers at the Center for Economic and Policy Research found that the law brought sick leave to a large number of workers, particularly part-time workers, at little to no cost to business. By mid-2013, more than three-quarters of employers expressed support for the law.

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Exploring EPI’s Minimum Wage Tracker

The federal minimum wage has languished at $7.25 since 2009. As inflation erodes the real value of the federal minimum, twenty nine states (and D.C.) have taken it upon themselves to raise their state minimum wages. Some states have made small changes (such as Arkansas, which raised its minimum wage to $7.50), while others have moved forward more boldly (such as Massachusetts, where the state minimum wage will reach $11.00 by 2017.) Some passed incremental increases which will take place over two or three years, while others have automatic increases every year to account for inflation. Several enacted changes to their laws back in 2006, while others have jumped on the new wave of action that has taken place in the past few years. There is tremendous variation in minimum wage policy across the states, and EPI’s minimum wage tracker provides a simple and intuitive way to understand the breadth of state, local, and federal minimum wage policy.

Here are some interesting trends and data points worth noting:

Five states do not have a minimum wage. Alabama, Louisiana, Mississippi, South Carolina, and Tennessee all defer to the federal minimum wage of $7.25 in the absence of any state laws. Wyoming and Georgia both have a state minimum wage lower than the federal minimum. The minimum wage in both of these states is $5.15, but the federal minimum wage applies.

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What to Watch on Jobs Day: Preparing for September’s Fed Meeting

Tomorrow, when the Bureau of Labor Statistics releases its monthly jobs report, we’ll be looking at what the Federal Reserve should pay attention to as they debate whether or not to raise interest rates at the next FOMC meeting in September. The Fed has continued to read the signs right and has kept its foot off the brakes as the economy continues to recover from the Great Recession. However, there are some rumblings of an interest rate hike in September. Such a hike would be premature. Where’s the evidence that the Fed should raise rates this year? If anything, the recovery has been slowing: on average, only 208,000 jobs were added in the first six months of this year, compared to an average 281,000 in the last six months of 2014. Yes, there was a long, cold winter, but we’ve yet to see the thaw in the topline numbers. A serious look at the economy suggests slow growth, not acceleration.

Nominal wage growth is one of the top indicators for the Fed to watch as it considers whether or not to raise rates, and I don’t see much positive news there. Wage growth has been pretty flat for the last five years, as shown in the chart below. And, the data from the Employment Cost Index that came out earlier this week confirms those trends.

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Risk Shift and the Gig Economy

Recently, everyone from Hillary Clinton to the American Enterprise Institute  (AEI) has been focused on the “gig” economy—businesses like Uber and Taskrabbit that let consumers call up services on demand with their computers or phones. Despite all the attention these businesses have received, both AEI and the Wall Street Journal have pointed out that the gig economy supposedly has not shown up in Bureau of Labor Statistics job data. But while the on-demand economy has not appeared in government labor statistics—yet—that does not mean that it is not having an impact on people’s livelihoods. The rise of the gig economy is part of a wider trend that Yale political scientist Jacob Hacker has noted of risk being shifted from employers onto the backs of workers. New technologies have only accelerated this shift.

Drivers for Uber and Lyft, as well as most workers in the gig economy, are classified as independent contractors, despite the fact that their employers direct much of their work activities. Uber, for example, tells drivers where to pick up passengers and also deactivates drivers’ accounts if they consistently receive poor ratings from passengers. But because they are independent contractors, drivers are responsible for insuring their own vehicles, and the company does not provide them with health insurance, paid vacation, or retirement benefits. Independent contractors are also unable to file for unemployment compensation, must bear all of the cost of Social Security payroll taxes, and cannot file for workers’ compensation.

Ride-sharing is not the only part of the economy where workers are frequently misclassified as independent contractors, however. Misclassification happens throughout the economy, everywhere from construction to housecleaning to home health care. Across the board, this practice leads to lower wages and tax revenues, among other social costs.

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Summing up Today’s GDP Data Release

Today’s report on gross domestic product (GDP)—the widest measure of economic activity—does not paint an encouraging picture of America’s past or present economic health.

First: the past. Today’s report provides revisions to GDP data going back three years. These revisions show slower growth over the past three years, meaning that the second half of the economic recovery following the Great Recession has been slower than previously thought. This slower growth was driven in part by government spending—federal, state, and local—that was even more austere than previously estimated. Additionally, the deceleration of key inflation measures (“core” personal consumption expenditure prices) over the past three years was more pronounced than previously thought. The revised data indicate that the recovery has been weaker than originally thought and, subsequently, that a fully healthy economy is farther away.

Now: the present. Growth in the second quarter of 2015 proceeded at a 2.3 percent annualized rate, following growth of 0.6 percent in the first quarter. While it’s a relief that the first quarter growth disaster wasn’t repeated, nobody really thought that was a big danger. But today’s data does indicate that there has been a slowdown relative to even the past couple of years, and, unless growth in the second half of the year accelerates markedly, it’s likely that 2015 will struggle to post even 2.0 percent growth overall.

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Inequality is Central to the Productivity-Pay Gap

Matt Yglesias is an insightful writer, but his recent article, “Hillary Clinton’s favorite chart is pretty misleading” is itself very misleading. Since the Clinton campaign’s “favorite chart” is an EPI chart, which Jared Bernstein and I originally came up with twenty years ago, I think it’s important to set the record straight. The main problem is that Yglesias does not actually engage with the chart he says he’s criticizing.

The chart compares the growth of average productivity since 1948 with the growth of the hourly compensation (all wages and benefits) of production/nonsupervisory workers, a group comprising 82 percent of payroll employment (blue collar workers in manufacturing and non-managers in services).

The point is to show that the pay of a typical worker has not grown along with productivity in recent decades, even though it did just that in the early post-war period. That is, it shows a substantial disconnect between workers’ pay and overall productivity—a disconnect that has not always existed. We use data on production/nonsupervisory workers because there is no other data series on the pay of a typical worker that goes back to the early post-war period. The point of the chart is to show not only the current divergence but also that it was not always present—also, these data tend to move with the economy-wide median wage.

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Does Disability Insurance Reduce Labor Force Participation?

(This is the fourth of six blog posts on disability.)

In Senate testimony earlier this year, Stanford economist Mark Duggan claimed that Social Security Disability Insurance (SSDI) was an “important factor” in the decline in labor force participation in the United States relative to other industrialized countries. In an earlier blog post, I showed that even research cited by Duggan found that disability receipt had a negligible impact on overall employment. Is it still possible that SSDI has a noticeable impact on labor force participation, a measure that includes unemployed workers actively looking for work? It might, if you believe—as Duggan does—that the process of applying for benefits is enough to make people stop looking for work. But as will be detailed in this blog post, there are more likely explanations for the relative decline in labor force participation in the United States compared to Europe, including more supportive labor market policies in Europe.

In his testimony, Duggan points to an increase since 1990 in the prime-age (25-54) labor force participation rate for the EU-15 countries (countries that belonged to the European Union before it expanded into Eastern Europe) and a decline in the same measure in the United States. (Note that Duggan focuses on a measure that excludes older workers who have higher disability rates. The labor force participation of older workers is higher in the United States than in Europe, a fact that does not support Duggan’s claim that disability insurance is keeping Americans out of the labor force.)

Research that considers multiple causes for recent declines in participation in the United States generally finds that an aging workforce and unemployment—especially long-term unemployment—have been the main drivers (see, for example, research from the Council of Economic Advisors and Harvard University). The question is whether SSDI caused some unemployed workers to exit the labor force, or whether they would have exited regardless.

Looking at longer-term trends, the biggest difference between the United States and the EU-15 has been an increase in female employment and labor force participation in Europe, in which the adoption of family-friendly labor policies likely played a role. Prime-age employment rates in Europe are now similar to the United States (solid lines in the figures below) though they remain lower for older workers (dashed lines).

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Clinton Speech Confirms That Presidential Campaigns Will Focus on Wage Stagnation

Hillary Clinton appropriately defines her economic policy goal as raising “incomes for hardworking Americans so they can afford a middle-class life” rather than “hitting some arbitrary growth target untethered to people’s lives and livelihoods.” The object of economic policy, in other words, is not growth or redistribution but higher living standards for the vast majority! Bravo. Equally important is that one of her three pillars of growth—fair growth—focuses on ending the wage stagnation that has limited median incomes for the past generation. America “needs a raise” and we need to reward “actually building and selling things.” As Clinton said, “If you work hard, you ought to be paid fairly.” So, if there was any doubt that addressing wage stagnation would be the central economic policy issue debated in the upcoming Presidential election then Hillary Clinton’s economic vision speech ended it.

Clinton’s speech sets the foundation for the emerging debate on wages by asserting that: (1) wage stagnation is the result of policy choices (it should be added, “on behalf of those with the most income, wealth and power”); and (2) ending wage stagnation is the “core economic challenge” to boosting middle class incomes and lifting more households into the middle class. Let the debate begin. We look forward to hearing from other candidates not only how they plan to obtain growth, but also how such growth will translate to higher pay for the vast majority. That generally hasn’t happened since 1979.

This is, of course, exactly the debate we hoped for when the Economic Policy Institute launched its Raising America’s Pay initiative in June 2014, and it is also how we framed the debate in our initial paper (“Raising America’s Pay: Why It’s Our Central Economic Policy Challenge”) and in our Raising America’s Pay policy agenda. In fact, making wage growth the central economic issue has been a key conclusion of every State of Working America published since its inception in 1988. Thanks are due to the fast-food and Walmart workers and their allies for establishing that wage growth for the vast majority is the immediate and central economic policy issue. Let the debate begin among the Democrats, among the Republicans, and then between the parties in the general election.

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Do Disability Benefits Reduce Work Effort?

(This is the third of six blog posts on disability.)

In two earlier blog posts, I look at evidence compiled in Senate testimony by Stanford economist Mark Duggan arguing that financial incentives are driving a growth in disability rolls. I cite research showing that disability benefits aren’t growing relative to earnings and that age-adjusted disability incidence isn’t rising, though there has been a modest increase for women offset by a modest decline for men.

This isn’t surprising, because as we’ll see in today’s blog post, even research cited by Duggan and other critics shows that disability receipt has a negligible impact on work effort. Very few beneficiaries would be able to support themselves by working if they weren’t receiving benefits, based on the dismal employment prospects of rejected applicants who were on the margin of being accepted.

Though Duggan and other critics claim disability insurance reduces employment, the Social Security Disability Insurance (SSDI) program creates strong incentives for beneficiaries to stay in, or return to, the workforce. Beneficiaries are allowed to earn up to $1090 a month (the current threshold for “substantial gainful activity”) with no reduction in benefits. Since most disabled beneficiaries rely on modest government benefits for most of their incomes (see the Center on Budget and Policy Priority’s informative chartbook), the fact that fewer than 10 percent avail themselves of this opportunity suggests that for most, even part-time or intermittent work isn’t an option. Another 4 percent are able to resume “substantial gainful activity” as their health and job prospects improve. Though the latter will forgo cash benefits if they remain gainfully employed above the SGA threshold for more than 12 months, they retain health benefits regardless of earnings for a longer period and are eligible for expedited reinstatement of cash benefits if their earnings drop. In short, the SSDI program is designed to encourage beneficiaries to return to or stay in the workforce.

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The Game Is Rigged Against Hardworking Americans

The referee might miss an occasional handball, but a soccer game isn’t rigged in favor of one group of players over another. Unlike a soccer game, the most powerful economic actors have rigged the labor market against everyday hardworking Americans. The weak economy following the Great Recession and its aftermath came on the heels of three decades of the systematic reduction of workers bargaining power in the workplace. It’s no surprise then that this morning’s Job Openings and Labor Turnover Survey (JOLTS) report shows that the quits rate remains depressed as workers continue to be stuck in jobs that they would leave if they could.

The figure below shows the hires, quits, and layoff rates through May 2015. The layoff rate shot up during the recession but recovered quickly and has been at pre-recession levels for more than three years. The fact that this trend continued in May is a good sign. That said, not only do layoffs need to come down before we see a full recovery in the labor market, but hiring also needs to pick up–the hires rate dipped slightly in May, and is still below where it was at the end of 2014. It had been generally improving, but has shown concerning signs as of late and still remains significantly below its pre-recession level.

JOLTS

Hires, quits, and layoff rates, December 2000-May 2015

Month Hires rate Layoffs rate Quits rate
Dec-2000 4.1% 1.4% 2.3%
Jan-2001 4.4% 1.6% 2.6%
Feb-2001 4.1% 1.4% 2.5%
Mar-2001 4.2% 1.6% 2.4%
Apr-2001 4.0% 1.5% 2.4%
May-2001 4.0% 1.5% 2.4%
Jun-2001 3.8% 1.5% 2.3%
Jul-2001 3.9% 1.5% 2.2%
Aug-2001 3.8% 1.4% 2.1%
Sep-2001 3.8% 1.6% 2.1%
Oct-2001 3.8% 1.7% 2.2%
Nov-2001 3.7% 1.6% 2.0%
Dec-2001 3.7% 1.4% 2.0%
Jan-2002 3.7% 1.4% 2.2%
Feb-2002 3.7% 1.5% 2.0%
Mar-2002 3.5% 1.4% 1.9%
Apr-2002 3.8% 1.5% 2.1%
May-2002 3.8% 1.5% 2.1%
Jun-2002 3.7% 1.4% 2.0%
Jul-2002 3.8% 1.5% 2.1%
Aug-2002 3.7% 1.4% 2.0%
Sep-2002 3.7% 1.4% 2.0%
Oct-2002 3.7% 1.4% 2.0%
Nov-2002 3.8% 1.5% 1.9%
Dec-2002 3.8% 1.5% 2.0%
Jan-2003 3.8% 1.5% 1.9%
Feb-2003 3.6% 1.5% 1.9%
Mar-2003 3.4% 1.4% 1.9%
Apr-2003 3.6% 1.6% 1.8%
May-2003 3.5% 1.5% 1.8%
Jun-2003 3.7% 1.6% 1.8%
Jul-2003 3.6% 1.6% 1.8%
Aug-2003 3.6% 1.5% 1.8%
Sep-2003 3.7% 1.5% 1.9%
Oct-2003 3.8% 1.4% 1.9%
Nov-2003 3.6% 1.4% 1.9%
Dec-2003 3.8% 1.5% 1.9%
Jan-2004 3.7% 1.5% 1.9%
Feb-2004 3.6% 1.4% 1.9%
Mar-2004 3.9% 1.4% 2.0%
Apr-2004 3.9% 1.5% 2.0%
May-2004 3.8% 1.4% 1.9%
Jun-2004 3.8% 1.4% 2.0%
Jul-2004 3.7% 1.4% 2.0%
Aug-2004 3.9% 1.5% 2.0%
Sep-2004 3.8% 1.4% 2.0%
Oct-2004 3.9% 1.4% 2.0%
Nov-2004 3.9% 1.5% 2.1%
Dec-2004 4.0% 1.5% 2.1%
Jan-2005 3.9% 1.4% 2.1%
Feb-2005 3.9% 1.4% 2.0%
Mar-2005 3.9% 1.5% 2.1%
Apr-2005 4.0% 1.4% 2.1%
May-2005 3.9% 1.4% 2.1%
Jun-2005 3.9% 1.5% 2.1%
Jul-2005 3.9% 1.4% 2.0%
Aug-2005 4.0% 1.4% 2.2%
Sep-2005 4.0% 1.4% 2.3%
Oct-2005 3.8% 1.3% 2.2%
Nov-2005 3.9% 1.2% 2.2%
Dec-2005 3.7% 1.3% 2.1%
Jan-2006 3.9% 1.3% 2.1%
Feb-2006 3.9% 1.3% 2.2%
Mar-2006 3.9% 1.2% 2.2%
Apr-2006 3.8% 1.3% 2.1%
May-2006 4.0% 1.4% 2.2%
Jun-2006 3.9% 1.2% 2.2%
Jul-2006 3.9% 1.3% 2.2%
Aug-2006 3.8% 1.2% 2.2%
Sep-2006 3.8% 1.3% 2.1%
Oct-2006 3.8% 1.3% 2.1%
Nov-2006 4.0% 1.3% 2.3%
Dec-2006 3.8% 1.3% 2.2%
Jan-2007 3.8% 1.2% 2.2%
Feb-2007 3.8% 1.3% 2.2%
Mar-2007 3.8% 1.3% 2.2%
Apr-2007 3.7% 1.3% 2.1%
May-2007 3.8% 1.3% 2.2%
Jun-2007 3.8% 1.3% 2.0%
Jul-2007 3.7% 1.3% 2.1%
Aug-2007 3.7% 1.3% 2.1%
Sep-2007 3.7% 1.5% 1.9%
Oct-2007 3.8% 1.4% 2.1%
Nov-2007 3.7% 1.4% 2.0%
Dec-2007 3.6% 1.3% 2.0%
Jan-2008 3.5% 1.3% 2.0%
Feb-2008 3.5% 1.4% 2.0%
Mar-2008 3.4% 1.3% 1.9%
Apr-2008 3.5% 1.3% 2.1%
May-2008 3.3% 1.3% 1.9%
Jun-2008 3.5% 1.5% 1.9%
Jul-2008 3.3% 1.4% 1.8%
Aug-2008 3.3% 1.6% 1.7%
Sep-2008 3.1% 1.4% 1.8%
Oct-2008 3.3% 1.6% 1.8%
Nov-2008 2.9% 1.6% 1.5%
Dec-2008 3.2% 1.8% 1.6%
Jan-2009 3.1% 1.9% 1.5%
Feb-2009 3.0% 1.9% 1.5%
Mar-2009 2.8% 1.8% 1.4%
Apr-2009 2.9% 2.0% 1.3%
May-2009 2.8% 1.6% 1.3%
Jun-2009 2.8% 1.6% 1.3%
Jul-2009 2.9% 1.7% 1.3%
Aug-2009 2.9% 1.6% 1.3%
Sep-2009 3.0% 1.6% 1.3%
Oct-2009 2.9% 1.5% 1.3%
Nov-2009 3.1% 1.4% 1.4%
Dec-2009 2.9% 1.5% 1.3%
Jan-2010 3.0% 1.4% 1.3%
Feb-2010 2.9% 1.4% 1.3%
Mar-2010 3.2% 1.4% 1.4%
Apr-2010 3.1% 1.3% 1.5%
May-2010 3.3% 1.3% 1.4%
Jun-2010 3.1% 1.5% 1.5%
Jul-2010 3.2% 1.6% 1.4%
Aug-2010 3.0% 1.4% 1.4%
Sep-2010 3.1% 1.4% 1.5%
Oct-2010 3.1% 1.3% 1.4%
Nov-2010 3.1% 1.4% 1.4%
Dec-2010 3.2% 1.4% 1.5%
Jan-2011 3.0% 1.3% 1.4%
Feb-2011 3.1% 1.3% 1.4%
Mar-2011 3.3% 1.3% 1.5%
Apr-2011 3.2% 1.3% 1.5%
May-2011 3.1% 1.3% 1.5%
Jun-2011 3.3% 1.4% 1.5%
Jul-2011 3.2% 1.3% 1.5%
Aug-2011 3.2% 1.3% 1.5%
Sep-2011 3.3% 1.3% 1.5%
Oct-2011 3.2% 1.3% 1.5%
Nov-2011 3.2% 1.3% 1.5%
Dec-2011 3.2% 1.3% 1.5%
Jan-2012 3.2% 1.3% 1.5%
Feb-2012 3.3% 1.3% 1.6%
Mar-2012 3.3% 1.3% 1.6%
Apr-2012 3.2% 1.4% 1.6%
May-2012 3.3% 1.4% 1.6%
Jun-2012 3.2% 1.3% 1.6%
Jul-2012 3.2% 1.2% 1.6%
Aug-2012 3.3% 1.4% 1.6%
Sep-2012 3.1% 1.3% 1.4%
Oct-2012 3.2% 1.3% 1.5%
Nov-2012 3.3% 1.3% 1.6%
Dec-2012 3.2% 1.1% 1.6%
Jan-2013 3.3% 1.2% 1.7%
Feb-2013 3.4% 1.2% 1.7%
Mar-2013 3.2% 1.3% 1.5%
Apr-2013 3.3% 1.3% 1.7%
May-2013 3.3% 1.3% 1.6%
Jun-2013 3.2% 1.2% 1.6%
Jul-2013 3.3% 1.2% 1.7%
Aug-2013 3.4% 1.2% 1.7%
Sep-2013 3.4% 1.3% 1.7%
Oct-2013 3.3% 1.1% 1.8%
Nov-2013 3.4% 1.1% 1.8%
Dec-2013 3.3% 1.2% 1.7%
Jan-2014 3.3% 1.3% 1.7%
Feb-2014 3.4% 1.2% 1.8%
Mar-2014 3.4% 1.2% 1.8%
Apr-2014 3.5% 1.2% 1.7%
May-2014 3.5% 1.2% 1.8%
Jun-2014 3.5% 1.2% 1.8%
Jul-2014 3.6% 1.3% 1.8%
Aug-2014 3.4% 1.2% 1.8%
Sep-2014 3.6% 1.2% 2.0%
Oct-2014 3.7% 1.2% 2.0%
Nov-2014 3.6% 1.1% 1.9%
Dec-2014 3.7% 1.2% 1.9%
Jan-2015 3.5% 1.2% 2.0%
Feb-2015 3.6% 1.2% 1.9%
Mar-2015 3.6% 1.3% 2.0%
Apr-2015 3.6% 1.3% 1.9%
May-2015 3.5% 1.2% 1.9%

 

ChartData Download data

The data below can be saved or copied directly into Excel.

Note: Shaded areas denote recessions. The hires rate is the number of hires during the entire month as a percent of total employment. The layoff rate is the number of layoffs and discharges during the entire month as a percent of total employment. The quits rate is the number of quits during the entire month as a percent of total employment.

Source: EPI analysis of Bureau of Labor Statistics Job Openings and Labor Turnover Survey

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Supreme Court: Fair Housing Act Bars Policies that Segregate, even if Segregation is not Intentional

In June, Supreme Court decisions on Obamacare and same-sex marriage overshadowed another important decision, this one on housing discrimination, confirming that the Fair Housing Act not only prohibits actions or policies that are intentionally bigoted, but also those that have the effect of disadvantaging minorities, even where no racist intent can be proven.

The decision, whose background and implications I have discussed in more detail for The American Prospect in “The Supreme Court’s Challenge to Housing Segregation,” was widely interpreted as a civil rights victory, but yesterday a New York Times editorial disagreed. Supreme Court experts on Scotusblog, the excellent independent journalistic enterprise devoted to covering the court and its decisions, had in the moments after the court’s opinion was handed down, also denied that the decision was an advance for civil rights. On closer examination, however, the Times/Scotusblog theory doesn’t hold up.

“This might seem to be a ‘liberal’ result”, the Times wrote, “except that 11 federal appeals courts had agreed on this reading for decades. There was no legal dispute, in other words, only the persistent efforts of some justices to reverse accepted law because they didn’t like it.” The Scotusblog experts also noted that although Justice Kennedy’s majority opinion endorsed a prohibition on policies that have a discriminatory effect, it also described so many conditions required for proof of discriminatory effects that it seemed to make it more difficult to win cases where only such effects, not intent, have been proven. In sum, the argument went, the fact that this case was heard at all was a civil rights defeat–it is quite unusual for the court to take up a case where all lower courts are in agreement–and although the civil rights opponents lost the case, it gave these opponents tools to narrow, if not eviscerate, the power of the Fair Housing Act.

Justice Kennedy’s warnings about the narrow circumstances in which policies can be prohibited because of their effects, without provable intent, were generally warnings that were already present in appellate and previous Supreme Court decisions–for example, that a policy does not violate civil rights laws simply because there are statistical differences in how it impacts minorities; it also must be “arbitrary, artificial, and unnecessary”.

In important ways, Justice Kennedy’s opinion may have breathed life into the Fair Housing Law that the law had not previously possessed. The opinion did so by effectively acknowledging that the “Fair Housing Act” is a euphemism–it is not really about “fair” housing, whatever that may mean, but about desegregated housing, which is what the Act was intended to roll back when it was adopted in 1968.

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Professor Hubbard’s Claim about Wage and Compensation Stagnation Is Not True

How to combat the wage stagnation that has afflicted the vast majority of American workers has emerged as a key economic issue addressed in speeches and policy deliberations by politicians and candidates in both parties. This is a very positive development–as we at EPI have been saying for quite a while, wage stagnation ranks beside addressing global climate change as the key economic challenge of our time.

A New York Times editorial points out, however, that Glenn Hubbard, a leading conservative economist and key adviser to GOP candidate Jeb Bush, does not seem to believe there is a wage stagnation problem. As an earlier New York Times article pointed out: “Mr. Hubbard argued that ‘compensation didn’t stagnate,’ citing large increases that employers have paid out in health and pension benefits.”

Hubbard is definitely mistaken, as the New York Times indicates and as I demonstrate below by examining actual wage and benefit trends. Shifting the discussion from wages to compensation (wages and benefits) does not alter any of the salient facts about stagnant pay in recent years, especially for the typical worker or for low-wage workers, and not even for the ‘average’ worker (including high wage as well as low and middle-wage workers). In fact, there has been an even greater growth of inequality in total compensation than there has been in wages alone.

The intuition behind Hubbard’s claim is that the costs of benefits provided by employers–especially those for health care insurance–have risen rapidly, suggesting that compensation has risen far more quickly than wages. What this ignores, of course, is that many workers in the bottom half receive very few health or pension benefits and employers provide fewer and fewer workers with health insurance and pension benefits each year. Hubbard’s intuition also ignores that employers have actually cut back on some benefits, particularly pensions, with a concomitant decline in the quality of those benefits (such as by providing defined contribution rather than defined benefit plans).

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How Overtime Rules Could Help the Middle Class

This post originally ran in the Wall Street Journal’s Think Tank blog.

The overtime rules the Obama administration announced Tuesday target genuine problems that middle-wage households face. They also do not require approval from Congress.

American workers’ hourly wage growth has nearly stagnated in recent decades. While this broad-based stagnation affects essentially thebottom 70% of the U.S. workforce, policy proposals to boost wage growth too often begin and end with increasing legislated minimum wages. Such minimum-wage increases, while important policies, generally will not filter up to most middle-class households.

One specific change that could help these middle-class households was proposed Tuesday: raising the salary threshold that determines eligibility for overtime pay.

This wonky-sounding change could have large ramifications: potentially giving 15 million workers rights to higher pay.

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Public Sector Employment Is Stuck in the Doldrums

A big fat zero. That’s how many jobs the public sector added in June. Zero.

To be clear, zero is better than a negative number, which is what we saw for most of the recession. It looks like public sector job losses finally turned a corner in 2014, when the economy added 74,000 public sector jobs. But growth has flattened out in 2015, adding only 8,000 jobs so far this year.

As a direct result of austerity policy, public sector jobs are still nearly half a million down from where they were before the recession began. Moreover, this fails to account for the fact that we would have expected these jobs to grow with the population–taking that into consideration, the economy is short 1.8 million public sector jobs. This shortfall in public sector jobs in turn removes the multiplier effect on private sector demand, snowballing into an even slower recovery.

 

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