In the debate over the relationship between economy-wide productivity and typical workers’ pay the numbers are clear: typical workers’ pay hasn’t come close to keeping up with productivity, and a wide gap between the two has developed. There has been no credible challenge to this basic finding.
Some have moved past the debate over the numbers to argue that this divergence is not a sign that the economy, and economic policy, is failing these workers. Instead, they argue that the underlying productivity of most workers must have stagnated, and that it is their productivity stagnation that has driven their wage stagnation. This essentially argues that relatively stagnant pay for typical workers is because most Americans are no more productive now than decades ago, and hence did not deserve to see gains in hourly pay in recent decades. A corollary to this argument is the notion that the pay and productivity divergence therefore requires no policy response other than attempting to raise workers’ productivity.
We noted in our recent paper the glaring lack of any actual evidence for the claim that most workers have not become more productive in the past three decades. In fact, most evidence (which we’ll highlight a bit later) indicates that most American workers have become substantially more productive over time. However, in a recent blog post, Evan Soltas claims to have marshalled evidence indicating that most American workers have not seen productivity gains in recent years. Soltas’ conclusion that most American workers must not have become more productive in recent decades is predicated upon looking at industry-level measures of productivity and average pay. He claims to have found a strong correlation between the growth of industry productivity and industry pay, and then claims this (somehow) implies that we know the divergence between economy-wide productivity and typical workers’ pay must, therefore, have been driven by the failure of typical workers to become more productive in recent decades.
We explain in this post why his suggested empirical test for assessing this question is actually meaningless, and will also show how the execution of his test is flawed, and his empirical conclusions (which would be irrelevant in any case) are false. Estimated correctly, there is no correlation between industry productivity and average industry pay. More importantly, even if there was such a correlation, this would be entirely uninformative about the underlying productivity of individuals. In short, Soltas asked the wrong question and then answered it incorrectly.
The case against the Federal Reserve raising short-term interest rates at the end of the Federal Open Market Committee meetings Thursday is so clearly strong that is should carry the day. The point of raising rates is to rein in an overheating economy that is threatening to push inflation outside the Fed’s comfort zone. But inflation has been running below the Fed’s target for years—and its recent moves have been down, not up.
This subdued price inflation is not a puzzle; it’s the outcome of a labor market that remains so slack that nominal wage growth is running about half as fast as a healthy recovery would be churning out. And this slack is pretty easy to see so long as one is willing to look past the (welcome) progress in reducing the headline unemployment rate. The employment-to-population ratio of prime-age adults (25 to 54 years old) has recovered less than half of its decline during the Great Recession. Worse, progress in boosting this measure has stalled for all of 2015.
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|
*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
Many have asked: Would a 0.25 percent increase really do all that much harm? This is the wrong question. The literal, narrow-minded answer is: No, it wouldn’t do much harm. But the data above show that the Fed should not be tightening at all. A 0.25 percent increase is a small move in the wrong direction—but it’s still the wrong way to go.
Today’s Census Bureau report on income, poverty and health insurance coverage in 2014 shows that with the exception of non-Hispanic white households, median household incomes were not statistically different from 2013. Measured incomes increased among Latino (+$2,162, 5.4 percent) and Asian (+$744, 1.0 percent) households, but declined for African-American (-$497, 1.4 percent) and non-Hispanic white households (-$1,048, 1.7 percent). As a result, no progress was made in closing the black-white income gap between 2013 and 2014—the median black household has just 59 cents for every dollar of white median household income. The Hispanic-white income gap narrowed from 66 to 71 cents on the dollar. Weak income growth between 2013 and 2014 also leaves real median household incomes for all groups well below their 2007 levels. Between 2007 and 2014, median household incomes declined by 10.5 percent (-$4,137) for African Americans, 0.7 percent (-$294) for Latinos, 7.2 percent (-$4,662) for whites, and 8.8 percent (-$7,158) for Asians. Asian households continue to have the highest median income in spite of large income losses in the wake of the recession.
Note: CPS ASEC changed its methodology for data years 2013 and 2014, hence the break in the series in 2013. Solid lines are actual CPS ASEC data; dashed lines denote historical values imputed by applying the new methodology to past income trends. White refers to non-Hispanic whites, black refers to blacks alone, Asian refers to Asians alone, and Hispanic refers to Hispanics of any race. Comparable data are not available prior to 2002 for Asians. Shaded areas denote recessions. To account for the redesign of the CPS ASEC survey, when the difference between the original data for 2013 and the redesigned data for 2013 is small in magnitude (less than a 1 percent difference) and statistically insignificantly different, data for 2013 is an average of the original and redesigned data. When the difference between them is relatively large in magnitude (1 percent or greater) or statistically significantly different, we display a break in the series and impute the ratio between them to historical data. Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement Historical Poverty Tables (Table H-5 and H-9)
Real median household income, by race and ethnicity, 2000–2014
Note: CPS ASEC changed its methodology for data years 2013 and 2014, hence the break in the series in 2013. Solid lines are actual CPS ASEC data; dashed lines denote historical values imputed by applying the new methodology to past income trends. White refers to non-Hispanic whites, black refers to blacks alone, Asian refers to Asians alone, and Hispanic refers to Hispanics of any race. Comparable data are not available prior to 2002 for Asians. Shaded areas denote recessions.
To account for the redesign of the CPS ASEC survey, when the difference between the original data for 2013 and the redesigned data for 2013 is small in magnitude (less than a 1 percent difference) and statistically insignificantly different, data for 2013 is an average of the original and redesigned data. When the difference between them is relatively large in magnitude (1 percent or greater) or statistically significantly different, we display a break in the series and impute the ratio between them to historical data.
Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement Historical Poverty Tables (Table H-5 and H-9)
The primary driving force behind the slow recovery of pre-recession income levels has been stagnant wage growth. Wages have remained essentially flat since 2000, and despite relatively strong job growth in 2014, wages were remarkably unchanged. From the start of the recovery in 2009 through 2014, real earnings of men working full-time, full-year were down for white (-1.5 percent) and Hispanic (-1.5 percent) men, but up for black men (+1.2 percent). As a result, the black-white and Hispanic-white male earnings gaps are unchanged. Black men earned 70 cents for every dollar earned by white men in 2014 (compared to 69 cents/dollar in 2009) and Hispanic men earned 60 cents on the dollar.
Note: Earnings are wage and salary income. White refers to non-Hispanic whites, black refers to blacks alone, and Hispanic refers to Hispanics of any race. Asians are excluded from this figure due to the volatility of the series. Shaded areas denote recessions. To account for the redesign of the CPS ASEC survey, when the difference between the original data for 2013 and the redesigned data for 2013 is small in magnitude (less than a 1 percent difference) and statistically insignificantly different, data for 2013 is an average of the original and redesigned data. When the difference between them is relatively large in magnitude (1 percent or greater) or statistically significantly different, we display a break in the series and impute the ratio between them to historical data. Source: EPI analysis of Annual Social and Economic Supplement Historical Income Tables (Table PINC-07)
Real earnings of full-time, full-year male workers, by race and ethnicity, 2000–2014
Note: Earnings are wage and salary income. White refers to non-Hispanic whites, black refers to blacks alone, and Hispanic refers to Hispanics of any race. Asians are excluded from this figure due to the volatility of the series. Shaded areas denote recessions.
Source: EPI analysis of Annual Social and Economic Supplement Historical Income Tables (Table PINC-07)
Key numbers from today’s new Census reports, Income and Poverty in the United States: 2014 and Health Insurance in the United States: 2014. All dollar values are adjusted for inflation (2014 dollars).
Median earnings for men working full time fell 0.7 percent from 2000 to 2013. In 2014 men’s earnings fell 0.9 percent, to $50,383.
Median earnings for women working full time rose 5.4 percent from 2000 to 2013. In 2014 women’s earnings rose 0.5 percent, to $39,621.
Median earnings for men working full-time
- 2014: $50,383
- 2000–2013: -0.7%
- 2013–2014: -0.9%
Median earnings for women working full-time
- 2014: $39,621
- 2000–2013: 5.4%
- 2013–2014: 0.5%
We learned from the Census Bureau this morning that the decent employment growth in 2014 yielded no improvements in wages and, not surprisingly, no improvement in the median incomes of working-age households or drop in the number of people living in poverty. Wage trends greatly determine how fast incomes at the middle and bottom grow, as well as the overall path of income inequality, as we argued in Raising America’s Pay. This is for the simple reason that most households, including those with low incomes, rely on labor earnings for the vast majority of their income.
The Census data show that from 2013–2014, median household income for non-elderly households (those with a head of household younger than 65 years old) decreased 1.3 percent from $61,252 to $60,462. This decrease unfortunately exacerbates the trend of losses incurred during the Great Recession and the losses that prevailed in the prior business cycle from 2000–2007. Median household income for non-elderly households in 2014 ($60,462) was 9.2 percent, or $6,113, below its level in 2007. The disappointing trends of the Great Recession and its aftermath come on the heels of the weak labor market from 2000–2007, during which the median income of non-elderly households fell significantly from $68,941 to $66,575, the first time in the post-war period that incomes failed to grow over a business cycle. Altogether, from 2000–2014, the median income for non-elderly households fell from $68,941 to $60,462, a decline of $8,479, or 12.3 percent.
Real median household income, all and non-elderly, 1995–2014
|All households||All households- imputed series||All households- new series||Non-elderly households||Non-elderly households- imputed series||Non-elderly households- new series|
Note: CPS ASEC changed its methodology for data years 2013 and 2014, hence the break in the series in 2013. Solid lines are actual CPS ASEC data; dashed lines denote historical values imputed by applying the new methodology to past income trends. Non-elderly households are those in which the head of household is younger than age 65. Shaded areas denote recessions.
Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement Historical Income Tables (Tables H-5 and HINC-02)
On Wednesday, the Census Bureau will release the latest data on income, poverty, and health insurance coverage. As EPI’s research team eagerly awaits this release, there are a few things we will be watching for.
Due to a redesign of the underlying survey (the Current Population Survey Annual Social and Economic Supplement, or CPS ASEC) in 2014, current estimates of incomes and poverty will not be directly comparable to years prior to 2013. This will also be a problem, albeit to a much lesser extent, with data on labor earnings. Since the Census Bureau will provide 2013 estimates based on both the old survey and the redesigned survey, we plan to deal with the break in the data series by focusing on two time periods. The first time period will cover 2000–2013, based on estimates from the old survey format. The second will be based on the redesigned estimates for 2013–2014. While in much of our analysis we will impute recent changes onto the data back to 2000 to get a better sense in that longer term trend, we will provide clear guidance on how the survey redesign affects these trends.
On Wednesday, we are going to most closely examine median earnings for men and women, median household income, and poverty rates. We will be looking not only at what we expect to be some improvement in these metrics between 2013 and 2014, but also what’s been happening since 2000. We know that even in the full business cycle 2000-07, earnings and incomes never fully recovered pre-recession peaks, and when the Great Recession hit, the economic impacts were devastating for many. To the extent the data will allow, we will look at how much the recovery has helped improve the economic lot for Americans, with particular attention to livelihood across racial and ethnic groups.
Next week, the Census Bureau will release its estimates of the number of Americans who lived in poverty in 2014. The official poverty measure is an important metric—particularly since it’s been in place for nearly 50 years, and its measurement methodology hasn’t had major revisions over that time. As shown in the figure below, the share of Americans living at or below the official poverty line fell in the 1960s and stayed within a small range over the last four decades or so, generally rising in recessions and falling in expansions. Since 2000, the official poverty rate has seen a lot more up than down—the poverty rate at the end of the business cycle in 2007 was higher than at the beginning. 2013 was the first year the poverty rate turned the corner and saw some meaningful improvement since the start of the Great Recession. On Wednesday, September 16, we will see whether that progress has continued. While it would be great to see reductions in poverty over the last year, the fact is had economic growth over the last four decades been broadly shared, we could have made much more progress in reducing poverty, rather than just treading water.
Poverty rate, 1959–2013
|Actual poverty rate|
Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement Historical Poverty Tables (Tables 2 and 4), Bureau of Economic Analysis National Income Product Accounts public data, and Danziger and Gottschalk (1995)
Last week the New York Times reported the latest innovation from employers who use the H-2B visa temporary foreign worker program to hire workers to staff traveling carnivals (think your local county or state fair): an employer-created union that collectively bargains with employers on behalf of workers to keep wages artificially low. Thanks to a loophole in H-2B wage regulations, low-wage, low-road employers are permitted to pay their temporary foreign workers dreadfully low wages.
The genesis of the prevailing wage loophole
For about half a decade, thanks to an H-2B wage regulation the George W. Bush administration illegally put in place in 2008, employers of landscapers, dishwashers, tree planters, maids, janitors, carnival workers, and construction workers were allowed to pay their H-2B employees as little as the local 17th percentile wage. (This is legally defined as the “Level 1” prevailing wage, based on Labor Department wage survey data for the job and local area.) After the rule was struck down in federal court in 2010, the Obama administration promulgated a final wage rule in 2011 that would have required employers to pay H-2B workers the local average wage (what’s also known as the Level 3 prevailing wage). However, this effort led to years of federal litigation brought by H-2B employers that stopped the rule in its tracks, and spurred an onslaught of corporate lobbying that convinced members of Congress from both major parties to deny funding to the Labor Department to enforce the rule.
Finally, in April 2013, the wage rule for the H-2B program was re-promulgated as an interim final rule issued jointly by the departments of Labor and Homeland Security. (The fact that the rule was issued jointly negated the main legal challenge, namely that the Labor Department lacked authority to promulgate any H-2B wage regulation.) The 2008 and 2013 H-2B wage rules both required employers to pay their H-2B employees the wage set out in an applicable collective bargaining agreement (CBA). But under the 2008 rule, if no CBA applied, then employers were allowed to pay the 17th percentile wage. The 2011 final H-2B wage rule that Congress blocked would have required employers to pay the higher wage between the CBA wage or the local average wage. Under the 2013 rule, if no CBA covered the H-2B worker, then the employer would have to pay the local average wage.
Today’s Job Openings and Labor Turnover Survey (JOLTS) report corroborates last week’s jobs report, which continued to provide evidence that the economy is at best moving at a slow jog, with meager wage growth and employment growth that’s just keeping up with the growth in the working age population. The rate of job openings increased in July, while the hires rate fell and the quits rate remains depressed.
There continues to be a significant gap between the number of people looking for jobs and the number of job openings. The figure below illustrates the overall improvement in the economy over the last five years, as the unemployment level continues to fall and job openings rise. In a tighter economy (like the one shown in the initial year of data), these levels would be much closer together. So it’s clear that there is still a significant amount slack in the economy. Furthermore, on top of the 8+ million unemployed workers warming the bench, there are still more than three million workers sitting in the stands with little hope to even get in the game.
Job openings levels and unemployment levels, December 2000-July 2015
|Month||Job Openings level||Unemployment level|
Note: Shaded areas denote recessions.
Source: EPI analysis of Bureau of Labor Statistics Job Openings and Labor Turnover Survey and Current Population Survey
The White House sent a Labor Day message from Director of the Office of Management and Budget Shaun Donovan about the many important issues affecting working Americans that will be decided in the next month of congressional budget negotiations. The message is well worth reading.
Donovan describes what he calls a “double-pronged attack on the workers we are celebrating today.” This attack includes deep cuts at the Wage and Hour Division, which protects workers against wage theft by crooked employers, and which collected $250 million in back pay for workers last year. Republicans also want limits on the use of third-party experts to accompany OSHA compliance officers on workplace safety inspections, where they can point out hazards OSHA might miss. They want to cut the budget and limit enforcement of the National Labor Relations Board’s rules to protect workers who join together for better working conditions. They want to block a new OSHA rule that will save thousands of workers from death, disabling lung disease, or cancer from inhaling silica dust. And they are trying to kill a new effort by the Department of Labor to protect retirees from financial advisors who put their own interests ahead of their clients’ interests.
None of the laws protecting working Americans from wage theft, on-the-job injury, unlawful retaliation, or self-dealing by financial advisors is meaningful if the government doesn’t enforce them. That takes resources and staff—investigators and lawyers who can take on big corporations or reckless businesses. Yet congressional Republicans want to cut funding for enforcement of all these laws. At OSHA, for example, Republicans want a 10 percent cut—$57 million, even though OSHA’s inspectors already can’t get to even one percent of workplaces in a year, and negligent employers put workers in harm’s way every day and kill nearly 100 employees a week.
This post originally appeared on SCOTUSblog, as part of a symposium on Fisher v. University of Texas at Austin, the challenge to the university’s use of affirmative action in its undergraduate admissions process.
The Supreme Court’s affirmative action decisions have been suffused with hypocrisy. Justice Ruth Bader Ginsburg called them out, with barely more gentle phrasing, in her lone dissent to the seven-to-one majority opinion the first time Fisher v. University of Texas at Austin (2013) was before the Court. “Only an ostrich,” she observed, “could regard the supposedly neutral alternatives as race unconscious,” and only a (contorted) legal mind “could conclude that an admissions plan designed to produce racial diversity is not race conscious.”
The “diversity” standard in college admissions has gained great popularity because advocates of race-based affirmative action, stymied by the Court since Regents of the University of California v. Bakke, latched onto it as an alternative that could satisfy strict scrutiny. Many proponents have since persuaded themselves that diversity is, after all, a better approach than race-based affirmative action and that if the Court had not required it, we would have had to invent it. Yet while diversity in college classes is certainly an important educational and social goal, its elevation nonetheless dodges the nation’s racial legacy and avoids our constitutional and moral obligation to remedy the effects of centuries of slavery and legally sanctioned segregation. Without acknowledging we were doing so, we have engaged in a legal sleight of hand, substituting enriching the educational experience for remedying past injustice in designing affirmative action policy.
Underlying all this has been the Court majority’s conviction, most recently in Fisher I, that university officials have not identified specific Fourteenth Amendment violations for which their policies are a remedy, and therefore their consideration of race injects, without constitutional justification, a discriminatory racial consideration into the admissions process. The paucity of African Americans at the University of Texas reflects no de jure exclusion, the Fisher I majority believed, but only de factosocial inequality for which there is no race-conscious constitutional remedy. Therefore, including racial diversity in a scheme of skill-based, interest-based, or economic diversity is suspect, requiring very strict scrutiny. Indeed, the conditions set by the Fisher I majority opinion suggest a scrutiny that is strict in theory but fatal in fact. (I discuss the Fisher cases here only as they relate to the treatment of African Americans in affirmative action plans, not to that of other national or ethnic minorities or of disadvantaged economic groups; each has a different history and status, requires different opportunities to succeed, and raises different social policy and constitutional concerns).
African American Youth Experienced the Largest Boost in Summer Labor Force Participation and Employment
As students head back to school this fall, today’s release of the August jobs numbers provides the first complete look at the summer job market for teens. As a whole, the stronger start to the 2015 summer jobs season (compared to last summer) signaled by the June youth employment numbers was sustained throughout the summer. According to seasonally unadjusted teen employment-to-population (EPOP) ratios, averaged for the months of June, July and August, African American youth experienced the largest boost to summer employment compared to last year. Summer employment was up 2.5 percentage points for black teens, compared to a 1.5 percentage point increase for Hispanic youth and a 1.2 percentage point increase for white teens, as shown in the figure below. Though black teens continue to have the lowest rates of employment, the 2015 summer youth employment rate for black teens was closer to its 2007 pre-Great Recession rate than were those of white and Hispanic youth.
Average teenage (16-19 years) summer employment to population ratio, 2007,2014, and 2015
Source: EPI analysis of Current Population Survey
The Bottom Line of this Jobs Report: The Fed Should Hold the Line and Let the Economy Continue to Recover
The official unemployment rate (the U3) is only one data point—one that doesn’t include workers who have left the labor force because of weak opportunities or workers who want to be working full-time but can only get part-time work. The fact is that the economy is still not adding jobs fast enough, and the recovery is not creating strong wage growth. The best advice is for the Federal Reserve to continue doing what they’re rightfully doing—keeping rates low to let the economy recovery. Many pundits have been quick to encourage the Federal Reserve to raise rates, but a close look at the data shows that the economy still needs time to grow.
Nonfarm payroll employment rose by only 173,000 in August. While it’s best not to read too much into one month’s data, this brings average monthly job growth down to 212,000 so far in 2015. 2014 saw faster jobs growth: an average of 260,000. By that measure alone, we aren’t seeing an accelerating recovery. In fact, at this slower rate of growth, a full jobs recovery is still two years away.
A great example of just how slow this job recovery is going is the flat prime-age employment-to-population ratio (EPOP). This means the economy is only adding enough jobs to keep up with prime-age population growth—nothing more, nothing less. It means the economy is moving at a pace where we are not working off any of the joblessness that remains from the Great Recession. The prime-age EPOP in August (77.2 percent) is still below the lowest trough of the last two recessions (78.1 percent). We have a long way to go before this data point says recovery.
This blog post originally appeared on TalkPoverty.org.
Labor Day is a time to honor America’s workers and their contributions to our economy. It is also a time to reflect upon the state of workers’ economic position, and how that position has faltered in recent decades. Except for a short period of across-the-board wage growth in the late 1990s, 2015 marks a general 36-year trend of broad-based wage stagnation and rising inequality in our country, which has had real, adverse effects on low- and middle-income households. This anemic wage growth is closely tied to the stalled progress in reducing poverty since 1979, as many poor people work and their incomes are increasingly dependent upon work. Therefore, along with strengthening the safety net, the goals of anti-poverty advocates should be one in the same with pro-worker advocates: to reverse the decades-long trend of wage stagnation and promote real wage growth for all Americans.
Despite dramatic gains in educational attainment, wages have failed to grow for those at the bottom (and middle) over the last four decades. At the same time, low income household incomes have become increasingly dependent on wages. The figure below shows the major sources of income for non-elderly households in the bottom fifth of the income distribution from 1979 to 2011, using the CBO’s measure of comprehensive income. It shows that incomes of the bottom fifth are increasingly dependent on ties to the workforce. Wages, employer-provided benefits, and tax credits that are dependent on work (such as the EITC) made up 68.3 percent of non-elderly bottom-fifth incomes in 2011, compared with only 58.2 percent in 1979. While government in-kind benefits from sources such as the Supplemental Nutrition Assistance Program (formerly food stamps) and Medicaid increased from 13.2 percent of these bottom-fifth incomes in 1979, to 19.5 percent in 2011, cash transfers such as welfare payments have declined 9.2 percentage points (from 18.6 percent to 9.4 percent).
At the beginning of August, Netflix announced that it would grant its employees “unlimited” parental leave during the first year after a child’s birth or adoption. After the initial praise, though, a darker side of the announcement was revealed: only “salaried streaming employees”—the roughly 2,000 white-collar workers who work in the company’s streaming division—will be covered by the new policy. Employees of Netflix’s DVD distribution centers, meanwhile, will not receive the benefit of paid parental leave.
A few have asked whether or not Netflix’s paid parental leave policy will set a new standard in the American workplace. Unfortunately, the exclusion of its lower-paid workers from the policy already reflects a harsh reality facing U.S. workers: paid family leave is a rarity, and when it is offered, the recipients are much more likely to be high-wage earners.
As the figure above shows, only 12 percent of private sector workers in the United States receive paid family leave, a number that puts us behind our international peers. (Among the 34 OECD nations, for example, the United States is the only nation that does not mandate paid maternity leave.) Which workers receive paid family leave is heavily determined by how much they earn—just like Netflix’s policy. While 23 percent of workers at the top of the wage distribution have access to paid family leave, only 4 percent of workers at the bottom receive the benefit.
This month, the Federal Open Market Committee (FOMC) will meet to decide whether to raise interest rates in order to slow down the economy and ward off incipient inflation, and I know I sound like a broken record, but, the stakes are too high not to keep repeating the same message over and over again. So let me say it again: the economy doesn’t need to cool off. It needs to simmer a while longer. Unfortunately, a serious look at the economy suggests slow growth, and not a hint of acceleration—making a rate hike terribly premature.
In light of the upcoming Federal Reserve decision, the two measures I’ll be closely watching on Friday, when the Bureau of Labor Statistics releases its monthly jobs report, are nominal hourly wage growth and the prime-age employment-to-population ratio (EPOP).
Nominal wage growth is one of the top indicators the Fed should 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. Lately, it’s been teetering in the 1.8 to 2.2 percent range. By any standard, that’s anemic. And there has certainly not been any sign of acceleration in these data.
Last week’s decision by the National Labor Relations Board regarding Browning-Ferris Industries of California (BFI) is a big victory for working people and labor advocates. By holding that BFI is a joint employer with the staffing agency that provides all but a few of the workers at one of BFI’s recycling centers, the decision closes one of the many loopholes corporations use to avoid paying decent wages, Social Security and Medicare taxes, worker’s compensation premiums and unemployment insurance taxes, and to avoid even providing a safe workplace.
Millions of people work for employers that want their time, their sweat, and their creativity —but don’t want to treat them as employees. The companies have put middle-men between themselves and their workers and—– thanks to Reagan-era legal changes—have avoided their responsibilities, including the duty to recognize and bargain with employee unions. Now, after 30 years of watching corporations evade these obligations with the government’s blessing, the key labor agencies of the federal government are saying, “enough is enough.” The NLRB is following the lead of David Weil, the Department of Labor’s Wage and Hour Division administrator, who has begun cracking down on phony independent contractor arrangements.
This victory, like most labor victories these days, is bittersweet. On the one hand, whenever a government agency protects or expands the rights of workers to organize and bargain collectively, or holds a corporation accountable for its treatment of workers, it is a cause for celebration. On the other hand, all the BFI decision does is restore the law regarding joint employers to where it was until 1984. Things weren’t going all that well for the labor movement even before the Reagan era, and the BFI joint employer doctrine won’t level the playing field between workers and corporations. It just turns back the clock to a fairer set of rules.
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.
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.)
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.
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.
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
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.
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?
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.
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.
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.
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.
The job-seekers ratio, December 2000-June 2015
|Month||Unemployed job seekers per job opening|
Note: Shaded areas denote recessions.
Source: EPI analysis of Bureau of Labor Statistics Job Openings and Labor Turnover Survey and Current Population Survey
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.