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%

 

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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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Paltry Wage Growth in June Is Another Sign the Economy Is Only Sputtering Along

Average hourly earnings held steady between May and June at $24.95 per hour, a paltry increase of 2.0 percent over June 2014. Annual growth of 2.0 percent is slow by any measure, but is certainly far below any reasonable wage target. In previous months, there had been some indication that wages might show signs of improvement, but this month’s disappointing report clearly illustrates that the economy has not tightened enough for strong wage growth.

Wage growth needs to be both stronger and consistently strong for a solid spell before we call this a strong economy. As shown in the figure 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.

Given the continued slack in the economy, it’s unfortunate that the most effective policy lever at our disposal for generating a faster recovery–fiscal policy–has been pulled in the wrong direction for years now, with austerity dragging on growth over the recovery. The lack of prospects for any additional fiscal stimulus has only left us with monetary policy levers. Pressure is building on the Fed to reverse its monetary stimulus by raising short-term interest rates to slow the recovery in the name of stopping wage-fueled inflation. Today’s data provide further evidence that these rate hikes should not happen any time soon.

Nominal Wage Tracker

Nominal wage growth has been far below target in the recovery: Year-over-year change in private-sector nominal average hourly earnings, 2007-2016

All nonfarm employees Production/nonsupervisory workers
Mar-2007 3.5910224% 4.1112455%
Apr-2007 3.2738095% 3.8461538%
May-2007 3.7257824% 4.1441441%
Jun-2007 3.8062284% 4.1267943%
Jul-2007 3.4482759% 4.0524434%
Aug-2007 3.4940945% 4.0404040%
Sep-2007 3.2827046% 4.1493776%
Oct-2007 3.2778865% 3.7780401%
Nov-2007 3.2714844% 3.8869258%
Dec-2007 3.1599417% 3.8123167%
Jan-2008 3.1067961% 3.8619075%
Feb-2008 3.0947776% 3.7296037%
Mar-2008 3.0813674% 3.7746806%
Apr-2008 2.8818444% 3.7037037%
May-2008 3.0172414% 3.6908881%
Jun-2008 2.6666667% 3.6186100%
Jul-2008 3.0000000% 3.7227950%
Aug-2008 3.3285782% 3.8263849%
Sep-2008 3.2258065% 3.6425726%
Oct-2008 3.3159640% 3.9249147%
Nov-2008 3.6406619% 3.8548753%
Dec-2008 3.5815269% 3.8418079%
Jan-2009 3.5781544% 3.7183099%
Feb-2009 3.2363977% 3.6516854%
Mar-2009 3.1293788% 3.5254617%
Apr-2009 3.2212885% 3.2924107%
May-2009 2.8358903% 3.0589544%
Jun-2009 2.7829314% 2.9379157%
Jul-2009 2.5889968% 2.7056875%
Aug-2009 2.3930051% 2.6402640%
Sep-2009 2.3437500% 2.7457441%
Oct-2009 2.3383769% 2.6272578%
Nov-2009 2.0529197% 2.6746725%
Dec-2009 1.8198362% 2.5027203%
Jan-2010 1.9545455% 2.6072787%
Feb-2010 1.9990913% 2.4932249%
Mar-2010 1.7663043% 2.2702703%
Apr-2010 1.8091361% 2.4311183%
May-2010 1.9439421% 2.5903940%
Jun-2010 1.7148014% 2.5309639%
Jul-2010 1.8476791% 2.4731183%
Aug-2010 1.7528090% 2.4115756%
Sep-2010 1.8410418% 2.2982362%
Oct-2010 1.8817204% 2.5066667%
Nov-2010 1.6540009% 2.2328549%
Dec-2010 1.7426273% 2.0700637%
Jan-2011 1.9170753% 2.1704606%
Feb-2011 1.8708241% 2.1152829%
Mar-2011 1.8691589% 2.0613108%
Apr-2011 1.9102621% 2.1097046%
May-2011 1.9955654% 2.1567596%
Jun-2011 2.1295475% 1.9957983%
Jul-2011 2.2566372% 2.3084995%
Aug-2011 1.8992933% 1.9884877%
Sep-2011 1.9400353% 1.9331243%
Oct-2011 2.1108179% 1.7689906%
Nov-2011 2.0228672% 1.7680707%
Dec-2011 1.9762846% 1.7680707%
Jan-2012 1.7497813% 1.3989637%
Feb-2012 1.8801924% 1.4500259%
Mar-2012 2.0969856% 1.7607457%
Apr-2012 2.0052310% 1.7561983%
May-2012 1.8260870% 1.3903193%
Jun-2012 1.9548219% 1.5447992%
Jul-2012 1.7741238% 1.3333333%
Aug-2012 1.8205462% 1.3340174%
Sep-2012 1.9896194% 1.4351615%
Oct-2012 1.5073213% 1.2781186%
Nov-2012 1.8965517% 1.4307614%
Dec-2012 2.1963824% 1.7373531%
Jan-2013 2.1496131% 1.8906490%
Feb-2013 2.1030043% 2.0418581%
Mar-2013 1.9255456% 1.8829517%
Apr-2013 2.0085470% 1.7258883%
May-2013 2.0068318% 1.8791265%
Jun-2013 2.1303792% 2.0283976%
Jul-2013 1.9132653% 1.9230769%
Aug-2013 2.2562793% 2.1772152%
Sep-2013 2.0356234% 2.1728146%
Oct-2013 2.2486211% 2.2715800%
Nov-2013 2.2419628% 2.3173804%
Dec-2013 1.8963338% 2.1597187%
Jan-2014 1.9360269% 2.3069208%
Feb-2014 2.1437579% 2.4512256%
Mar-2014 2.1830395% 2.3976024%
Apr-2014 1.9689987% 2.3952096%
May-2014 2.1347844% 2.4426720%
Jun-2014 2.0442219% 2.3359841%
Jul-2014 2.0859408% 2.4329692%
Aug-2014 2.2064946% 2.4777007%
Sep-2014 2.0365752% 2.2749753%
Oct-2014 2.0331950% 2.2704837%
Nov-2014 2.1100538% 2.2648941%
Dec-2014 1.8196857% 1.8682399%
Jan-2015 2.2295623% 2.0098039%
Feb-2015 2.057613% 1.7089844%
Mar-2015 2.177486% 1.9024390%
Apr-2015 2.341824% 1.9980507%
May-2015 2.336066% 2.1411192%
Jun-2015 2.044154% 1.9912579%
Jul-2015 2.288517% 2.0358701%
Aug-2015 2.321792% 2.0793037%
Sep-2015 2.403259% 2.1276596%
Oct-2015 2.521350% 2.3648649%
Nov-2015 2.390600% 2.2147328%
Dec-2015 2.640130% 2.6544402%
Jan-2016 2.544426% 2.4987987%
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*Nominal wage growth consistent with the Federal Reserve Board's 2 percent inflation target, 1.5 percent productivity growth, and a stable labor share of income.

Source: EPI analysis of Bureau of Labor Statistics Current Employment Statistics public data series

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The Drop in the Unemployment Rate Is Not a Sign the Tides are Turning

While job growth was decent in June (though the downward revisions to April and May were disappointing), the news on unemployment was actually less welcome. This might seem odd to say given that the unemployment rate dropped from 5.5 to 5.3 percent. But this drop in unemployment was not primarily driven by a rise in employment; instead it was mostly due to a drop in the labor force.

Here’s a breakdown of the data. In June, the number of unemployed workers fell by 375,000. Good news, right? Not so much. The labor force dropped by more than that amount, a fall of 432,000. The White House suggests the weaker numbers may be driven by the earlier-than-normal reference period, which might not be picking up as much as the usual June increase in summer employment, which is largely driven by youth employment. So, let’s turn to the prime-age workforce to get rid of those trends, which primarily affect younger workers and which also get rid of any declines driven by baby boomer retirement.

The prime-age employment-to-population (EPOP) ratio has been flat for the last four months at 77.2 percent. One would expect an improving economy to drive the prime-age EPOP upwards, and between October 2013 and February 2015 there was steady and decent progress on this front. But the recent stagnation has left prime-age EPOPs still far from fully recovered.

Jobs Day

Employment-to-population ratio of workers ages 25-54, 2006-2015

Month Employment-to-population ratio
2006-01-01 79.6%
2006-02-01 79.7%
2006-03-01 79.8%
2006-04-01 79.6%
2006-05-01 79.7%
2006-06-01 79.8%
2006-07-01 79.8%
2006-08-01 79.8%
2006-09-01 79.9%
2006-10-01 80.1%
2006-11-01 80.0%
2006-12-01 80.1%
2007-01-01 80.3%
2007-02-01 80.1%
2007-03-01 80.2%
2007-04-01 80.0%
2007-05-01 80.0%
2007-06-01 79.9%
2007-07-01 79.8%
2007-08-01 79.8%
2007-09-01 79.7%
2007-10-01 79.6%
2007-11-01 79.7%
2007-12-01 79.7%
2008-01-01 80.0%
2008-02-01 79.9%
2008-03-01 79.8%
2008-04-01 79.6%
2008-05-01 79.5%
2008-06-01 79.4%
2008-07-01 79.2%
2008-08-01 78.8%
2008-09-01 78.8%
2008-10-01 78.4%
2008-11-01 78.1%
2008-12-01 77.6%
2009-01-01 77.0%
2009-02-01 76.7%
2009-03-01 76.2%
2009-04-01 76.2%
2009-05-01 75.9%
2009-06-01 75.9%
2009-07-01 75.8%
2009-08-01 75.6%
2009-09-01 75.1%
2009-10-01 75.0%
2009-11-01 75.2%
2009-12-01 74.8%
2010-01-01 75.1%
2010-02-01 75.1%
2010-03-01 75.1%
2010-04-01 75.4%
2010-05-01 75.1%
2010-06-01 75.2%
2010-07-01 75.1%
2010-08-01 75.0%
2010-09-01 75.1%
2010-10-01 75.0%
2010-11-01 74.8%
2010-12-01 75.0%
2011-01-01 75.2%
2011-02-01 75.1%
2011-03-01 75.3%
2011-04-01 75.1%
2011-05-01 75.2%
2011-06-01 75.0%
2011-07-01 75.0%
2011-08-01 75.1%
2011-09-01 74.9%
2011-10-01 74.9%
2011-11-01 75.3%
2011-12-01 75.4%
2012-01-01 75.6%
2012-02-01 75.6%
2012-03-01 75.7%
2012-04-01 75.7%
2012-05-01 75.7%
2012-06-01 75.7%
2012-07-01 75.6%
2012-08-01 75.7%
2012-09-01 75.9%
2012-10-01 76.0%
2012-11-01 75.8%
2012-12-01 75.9%
2013-01-01 75.7%
2013-02-01 75.9%
2013-03-01 75.9%
2013-04-01 75.9%
2013-05-01 76.0%
2013-06-01 75.9%
2013-07-01 76.0%
2013-08-01 75.9%
2013-09-01 75.9%
2013-10-01 75.5%
2013-11-01 76.0%
2013-12-01 76.1%
2014-01-01 76.5%
2014-02-01 76.5%
2014-03-01 76.6%
2014-04-01 76.5%
2014-05-01 76.4%
2014-06-01 76.8%
2014-07-01 76.6%
2014-08-01 76.8%
2014-09-01 76.8%
2014-10-01 76.9%
2014-11-01 76.9%
2014-12-01 77.0%
2015-01-01 77.2%
2015-02-01 77.3%
2015-03-01 77.2%
2015-04-01 77.2%
2015-05-01 77.2%
2015-06-01 77.2%
2015-07-01 77.1%
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Source: EPI analysis of  Bureau of Labor Statistics' Current Population Survey public data

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As Summer Jobs Season Begins, Teens Make Headway for the First Time Since 2012

Summer is typically the time of year when we see the highest rates of employment for teens — young people between the ages of 16 and 19.  This group includes new high school graduates along with others in search of an opportunity to earn a few extra dollars while out of school for the summer.  Based on this month’s jobs report, the 2015 summer job market for teens is off to a better start than last year.  According to seasonally unadjusted teen employment-to-population (EPOP) ratios, 32.1 percent of all teens found employment in June 2015, compared to 30.9 percent in June 2014 (Figure A).  However, this may actually be an understatement of the June 2015 increase.  The White House suggests that an earlier-than-normal reference week for this year’s survey is capturing a smaller share of the usual June gains.  June teen employment rates were essentially flat between June 2012 and June 2014.

Figure A

Unadjusted Employment-Population Ratio, 16-19 years old, (June only) 2000-2015

Year All White Black Hispanic
2000 51.4 56.3 31.6 40.7
2001 48.1 52.9 30.0 40.1
2002 44.6 48.7 28.5 36.7
2003 40.9 45.5 21.7 31.6
2004 40.2 44.5 22.5 31.4
2005 41.0 45.5 24.1 33.0
2006 42.1 46.3 27.0 33.5
2007 39.6 43.9 23.4 30.9
2008 37.1 41.4 21.4 32.0
2009 32.9 36.9 18.0 27.4
2010 28.6 32.1 15.2 21.0
2011 29.2 32.5 16.9 19.3
2012 30.5 34.0 19.2 25.4
2013 30.6 34.3 17.8 24.9
2014 30.9 34.0 18.4 24.6
2015 32.1 35.5 20.8 26.7
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Source: EPI analysis of Bureau of Labor Statistics Current Population Survey public data series

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Racial differences in teen employment rates mirror those of adults – 35.5 percent of white teens were employed in June, compared to 26.7 percent of Hispanic teens and 20.8 percent of black teens.

The relatively improved June 2015 numbers reflect the fact that this summer teens are entering a stronger job market than the last several years.  The average rate of job growth during the 12 months preceding June 2015 (July 2014-June 2015) was 245,000 jobs/month compared to 221,000 jobs/month during the 12 months preceding June 2014 and 175,000 jobs/month during the 12 months leading up to June 2012 (Table 1).  Also, the adult unemployment rate (age 20 and older) is lower heading into the summer of 2015 than in previous years – 5.0 percent in May.

Table 1

Average annual monthly job growth during 12 months preceding June, and adult (age 20 or older) unemployment rate in May, 2010-2015

Average monthly job growth during 12 months preceding June Adult (age 20 or older) unemployment rate in May
2010         -42,000 9.0%
2011         114,000 8.5%
2012         175,000 7.6%
2013         196,000 6.9%
2014         221,000 5.8%
2015         245,000 5.0%

Source: EPI analysis of Bureau of Labor Statistics Current Population Survey and Consumer Employment Statistics public data series

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Despite the uptick in teen employment this June, employment rates for teens and prime age adults (age 25 to 54) remain well below pre-Great Recession levels.  The longer-term pattern in June teen employment rates is consistent with the sharp decline in average annual teen employment rates since 2000.  This partly reflects an ongoing increase in college enrollment (except for a post-2012 decline), but is also the result of relatively weaker labor markets that have persisted since 2000.  Based on a recent EPI report, the share of young high school graduates, age 17 to 20, who are not working and not enrolled in school is also well above the 2000 rate.

Are Disability Benefits Becoming More Generous?

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

In my previous blog post, I questioned Stanford economist Mark Duggan’s Senate testimony that workers’ financial incentives are driving a growth in Social Security Disability Insurance (SSDI) rolls. I showed that there had been no upward trend in age-adjusted disability incidence over the past 20 years, though there had been a modest increase for women offset by a modest decline for men.

Though age-adjusted incidence isn’t rising, it’s possible that financial incentives have prevented it from falling. This blog post will focus on Duggan and Massachusetts Institute of Technology economist David Autor’s claim that disability benefits are replacing a rising share of low-wage workers’ earnings. Though this is a plausible and widely accepted hypothesis, there is surprisingly little evidence to back it up. In any case, this assumes workers are weighing the costs and benefits of working versus applying for disability benefits–a lengthy and difficult process that results in nearly two out of three applicants being denied–even though it’s doubtful that many applicants could instead choose to work.

Are disability benefits becoming more generous? The average benefit awarded is roughly a third of the average wage, a ratio that has remained essentially unchanged since 1985. And as Harvard economist Jeffrey Liebman points out, rising inequality and other factors have reduced the value of disability benefits relative to productivity per worker. As a result, program costs increased only modestly over the three decades preceding the Great Recession as a share of GDP (from 0.55 to 0.68 percent) despite a much faster growth in enrollment.

Though benefits have just kept pace with wage growth and lagged productivity growth, Duggan and Autor (2006) hypothesize that benefits have risen relative to lower-wage workers’ earnings due to rising inequality and a progressive benefit formula. Lower-wage workers are more likely to apply for disability benefits because they tend to be in worse health, are more likely to be in physically demanding or dangerous occupations, and qualify for fewer jobs that accommodate disabilities.

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What to Watch on Jobs Day: The Coast is in Sight, but We’re Still Navigating the High Seas

Are we there? No. Are we moving in the right direction? Yes. How will we know when we get there? See below.

On top of strong job growth, here are my brief thoughts on what we need to continue to look for in the monthly Employment Situation and JOLTS reports in order to be confident that a full recovery and genuine full employment will be attained. My key metrics are bolded.

  1. The labor force participation rate remains cyclically depressed. Nearly three million potential workers continue to be sidelined by the weak economy. The prime-age employment-to-population ratio (EPOP) remains far below pre-recessionary levels (see below). A stronger labor market would mean that the prime-age EPOP returns to pre-recession levels.

Jobs Day

Employment-to-population ratio of workers ages 25–54, 2006–2015

Month Employment-to-population ratio
2006-01-01 79.6%
2006-02-01 79.7%
2006-03-01 79.8%
2006-04-01 79.6%
2006-05-01 79.7%
2006-06-01 79.8%
2006-07-01 79.8%
2006-08-01 79.8%
2006-09-01 79.9%
2006-10-01 80.1%
2006-11-01 80.0%
2006-12-01 80.1%
2007-01-01 80.3%
2007-02-01 80.1%
2007-03-01 80.2%
2007-04-01 80.0%
2007-05-01 80.0%
2007-06-01 79.9%
2007-07-01 79.8%
2007-08-01 79.8%
2007-09-01 79.7%
2007-10-01 79.6%
2007-11-01 79.7%
2007-12-01 79.7%
2008-01-01 80.0%
2008-02-01 79.9%
2008-03-01 79.8%
2008-04-01 79.6%
2008-05-01 79.5%
2008-06-01 79.4%
2008-07-01 79.2%
2008-08-01 78.8%
2008-09-01 78.8%
2008-10-01 78.4%
2008-11-01 78.1%
2008-12-01 77.6%
2009-01-01 77.0%
2009-02-01 76.7%
2009-03-01 76.2%
2009-04-01 76.2%
2009-05-01 75.9%
2009-06-01 75.9%
2009-07-01 75.8%
2009-08-01 75.6%
2009-09-01 75.1%
2009-10-01 75.0%
2009-11-01 75.2%
2009-12-01 74.8%
2010-01-01 75.1%
2010-02-01 75.1%
2010-03-01 75.1%
2010-04-01 75.4%
2010-05-01 75.1%
2010-06-01 75.2%
2010-07-01 75.1%
2010-08-01 75.0%
2010-09-01 75.1%
2010-10-01 75.0%
2010-11-01 74.8%
2010-12-01 75.0%
2011-01-01 75.2%
2011-02-01 75.1%
2011-03-01 75.3%
2011-04-01 75.1%
2011-05-01 75.2%
2011-06-01 75.0%
2011-07-01 75.0%
2011-08-01 75.1%
2011-09-01 74.9%
2011-10-01 74.9%
2011-11-01 75.3%
2011-12-01 75.4%
2012-01-01 75.6%
2012-02-01 75.6%
2012-03-01 75.7%
2012-04-01 75.7%
2012-05-01 75.7%
2012-06-01 75.7%
2012-07-01 75.6%
2012-08-01 75.7%
2012-09-01 75.9%
2012-10-01 76.0%
2012-11-01 75.8%
2012-12-01 75.9%
2013-01-01 75.7%
2013-02-01 75.9%
2013-03-01 75.9%
2013-04-01 75.9%
2013-05-01 76.0%
2013-06-01 75.9%
2013-07-01 76.0%
2013-08-01 75.9%
2013-09-01 75.9%
2013-10-01 75.5%
2013-11-01 76.0%
2013-12-01 76.1%
2014-01-01 76.5%
2014-02-01 76.5%
2014-03-01 76.6%
2014-04-01 76.5%
2014-05-01 76.4%
2014-06-01 76.8%
2014-07-01 76.6%
2014-08-01 76.8%
2014-09-01 76.8%
2014-10-01 76.9%
2014-11-01 76.9%
2014-12-01 77.0%
2015-01-01 77.2%
2015-02-01 77.3%
2015-03-01 77.2%
2015-04-01 77.2%
2015-05-01 77.2%
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Source: EPI analysis of  Bureau of Labor Statistics' Current Population Survey public data

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Majority of Workers Who Will Benefit from Updated Overtime Rules are Women

A lot has changed since 1975. The Soviet Union collapsed, we fought (and are fighting still) several wars in the Middle East, same-sex marriage is now legal across the United States, we have our first African-American President, we have the internet. But what has changed only minimally is the salary level for determining which “salaried’ workers are entitled to overtime. Seriously. While the Bush Administration made a minuscule adjustment in 2004, essentially a political smokescreen to avoid a real increase, that number is finally going to increase in a meaningful way – the Economic Policy Institute deserves a lot of credit for pushing for this long-overdue update. The Department of Labor is announcing a significant increase in the threshold – from $23,660 to approximately double that amount. What that means is that workers earning up to the new level, even if they are not called “hourly,” will get overtime pay for their hours worked over 40 in a work week. In 1975, the salary basis test captured 60 percent of salaried workers; in 2015, only 8 percent of salaried workers fall below this level and earn overtime. While writing my book, Under The Bus: How Working Women Are Being Run Over, I discovered (with help from EPI’s economists) just how much this change will help workers, particularly women of color.

The Fair Labor Standards Act (FLSA) established the requirement of minimum wage and overtime, but in a provision known as the “salary test,” the law provides that employers need not pay either the minimum wage or overtime to workers they designate as “bona fide executive, administrative, professional and outside sales employees,” so long as their daily tasks meet the DOL definition and they make more than $455 per week – which is how $23,660 breaks down as a weekly wage. Clearly, outdated level has given unscrupulous employers a way to avoid paying low-paid staff overtime by calling them “salaried.” Workers have had to challenge their denial of overtime when their employers tried to get out of the requirement by adding “manager” or “leader” to their title when their actual work consisted of serving fast food, shelving merchandise, or ringing up customers’ purchases.

Contrary to the statute’s original purpose, many workers put in the “salaried” category do little if any supervisory work. While in theory, “their duties must include managing a part of the enterprise and supervising other employees or exercising independent judgment on significant matters or require advanced knowledge,” the reality is quite different. This loophole has allowed employers to tell women that as a receptionist or typist they are administrative or professional, while in fact they have little or no supervisory responsibilities. But what they do get, in addition to a nicer title, is the right to work overtime without overtime pay. The Bush administration used regulatory black magic to push more workers into this category in 2004. That DOL rule cost an additional 8 million employees their overtime pay. Even without chicanery, the rules have become so lax that many employees are called “salaried” who should be earning overtime under the FLSA’s original purpose. According to EPI’s Ross Eisenbrey, “under current rules, it literally means that you can spend 95 percent of the time sweeping floors and stocking shelves, and if you’re responsible for supervising people 5 percent of the time, you can then be considered executive and be exempt.”

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What the New Proposed Overtime Rules Mean for Workers

In 2014, President Obama directed the Department of Labor to update the threshold under which all workers are eligible for overtime pay. Today, the Department of Labor announced that it will raise the overtime salary threshold from $23,660 to $50,440 by 2016. The threshold will also be indexed, guaranteeing that the law’s important protections will not be diminished by inflation.

We applaud President Obama and Secretary Perez for this bold action. The new threshold will protect more workers from being taken advantage of by their employers, giving some higher pay for working overtime and others reduced hours without any reduction in pay. This is a significant victory for American workers and will ensure that they get paid for the work they do.

This higher threshold will guarantee 15 million more workers overtime pay on the basis of their salary alone, in addition to the 3.4 million workers who are already guaranteed overtime pay. It will boost wages, which have been largely stagnant for the past 35 years, create hundreds of thousands of jobs, and give more family time to millions of working parents. Overall, 3.1 million mothers and 3.2 million fathers will be guaranteed overtime pay under the new threshold, and 12.1 million children will benefit from their parents’ overtime coverage.

In 1975, the overtime salary threshold covered about 62 percent of all salaried workers–today, it only protects 8 percent. Had overtime kept pace with the 1975 level, it would be about $52,000 today adjusted for inflation, about equal to the U.S. median household income. The new salary threshold puts us back on track to reconnect workers’ wages with gains in productivity.

With today’s announcement, the DOL is opening a comment period that will give workers an opportunity to express their support of the proposed rule change. FixOvertime.org allows workers to use their voice and submit their comment for consideration as the Department of Labor decides whether or not to actually boost overtime in accordance with the proposed rule changes. It also lets workers calculate how much extra they can earn per week under the new overtime rules.

Are Disability Rates Increasing?

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

The Social Security Disability Insurance (SSDI) program is set to be the next big battle in Republicans’ long campaign to dismantle Social Security. Congressional Republicans are trying to block a routine reallocation of funds to the SSDI Trust Fund, insisting that they will only allow reallocation if “reforms” to SSDI are implemented. The intellectual underpinning for their demands is that there is an unfolding fiscal crisis caused by workers who are able to earn a living but are instead choosing to claim disability benefits. A chief proponent of this view, Stanford economist Mark Duggan, testified before the Senate Budget Committee earlier this year, claiming that disability benefits are increasingly attractive to lower-wage workers, who respond by leaving the labor force. According to Duggan, a key piece of evidence supporting this claim is an increase in the share of beneficiaries suffering from musculoskeletal disorders and other “subjective” health conditions who have a “substantial” employment potential.

Claims like these have become a mainstay of attacks on the disability program. However, a closer look at the evidence shows that SSDI benefits have become, if anything, less generous. Moreover, even research cited by critics shows SSDI receipt has a negligible impact on work effort because few applicants, including marginal applicants who were denied benefits, are able to earn a living afterward. Meanwhile, there are good explanations for the increase in the share of beneficiaries suffering from musculoskeletal disorders, including an aging population, rising obesity rates, and fewer workers able to retire early when their health deteriorates.

These topics will be discussed in later blog posts. This post will focus on whether disability incidence has increased in the first place. The evidence shows that while “raw” or unadjusted incidence–the number of new awards per thousand insured persons–increased as the large baby boomer cohort aged into the peak disability years before retirement, age-adjusted incidence hasn’t trended upward over the past 20 years, though it increased during periods of high unemployment. However, incidence has fallen in the wake of the Great Recession and as older baby boomers become eligible for Social Security retirement benefits, including disabled boomers who automatically transition to retirement benefits as they reach the normal retirement age.

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