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EconomicPolicyInstitute June 23, 2009

New data released Friday by the Bureau of Labor Statistics showed that five more states — Florida, Illinois, Indiana, Kentucky, and Tennessee — had crossed into double-digit unemployment, while Michigan’s unemployment rate rose from 12.9% to 14.1% in a single month. With 14 U.S. states now in double-digit unemployment and many continuing to see large increases month to month, EPI convened experts from three of the hardest-hit states — Michigan, Ohio, and Oregon — who discussed what these staggering job losses had meant for their local economies and shared their concerns that the pain could last long after the recession ends. Michigan’s job situation, for instance, has gone from bad to worse with the recent bankruptcies of GM and Chrysler, while in Oregon, May unemployment of 12.4% represents a 33-year high.

Although officials from Oregon say they are starting to see a slowdown in the pace of job loss, they also fear that jobs will remain scarce well into the next decade. A front-page Washington Post story on June 21 described the same trend nationwide and said new jobs were the missing ingredient in a long-awaited economic recovery. The Post story quoted EPI President Lawrence Mishel saying that regardless of forecasts that the recession could end later this year, “there is a ton of pain in the pipeline.”

The most equitable way to reform Social Security
“All else being equal, I too would prefer to live in a world without taxes, but all else is not equal,” EPI Research and Policy Director John Irons told a U.S. Senate Special Committee on Aging on June 17, explaining why raising the cap on the Social Security tax would be the best way to reverse a projected shortfall. The current cap on Social Security taxes is $106,800, although 6% of the U.S. population has income above that level. Irons argued that a higher cap would be preferable to cutting Social Security benefits or raising the retirement age above the current age of 67. Due to a growing income inequality in recent years in which low- and middle-income wages have stagnated and most earnings growth has occurred at the top end of the wage spectrum, the share of earnings above the Social Security tax cap has risen from 10% in 1982 to more than 16% in 2006, Irons said. Raising the tax cap could help Social Security recapture some of those earnings.

Two former labor secretaries call for passage of Employee Free Choice Act
Arguing that well paying and secure jobs would be the foundation of a sustainable economy, Ray Marshall and Robert Reich published an editorial in the Chicago Tribune on June 18, calling for the passage of the Employee Free Choice Act, which would make it easier for workers to form unions to bargain for better pay and benefits. Marshall, an EPI board member who served as secretary of labor under Jimmy Carter, and Reich, who was Bill Clinton’s labor secretary, stressed that increased union membership is also good for the overall economy, correlating with increased productivity and shared prosperity.

EPI Vice President Ross Eisenbrey made the case for “The Union Solution” June 18 at the University of Louisville’s Brandeis School of Law, where he debated the Employee Free Choice Act with D. Patton Pelfrey, chair of the Labor and Employment Law Department at Frost Brown Todd LLC. Eisenbrey argued that growth based on better incomes for all workers was more sustainable than the growth based on inflated stock and housing prices seen in recent years. Eisenbrey also showed how, for more than 30 years, growth in hourly compensation has lagged productivity growth, and how the gap has gotten wider in recent years.

Black job seekers still face discrimination
While overall U.S. unemployment stands at a high 9.4%, the rate of joblessness among black workers is a much higher 14.9%. In a June 19 panel discussion at the Center for American Progress, EPI’s Director of Race, Ethnicity, and Economy, Algernon Austin, shared data showing that, even among people with the same level of education, whites were significantly more likely to be employed than blacks. Austin said that criminal records were more likely to have an impact on black job seekers, and that individuals with so-called “black names” had a lower call-back rate than “white names.”

“Play-or-Pay” health care would be good for the job market
A paper published last week by EPI and the Institute for America’s Future found that a play-or-pay policy that taxed employers who did not provide health insurance to their workers would create more jobs than it would eliminate. Under the proposed play-or-pay system, the taxes collected would be used to fund a public health insurance plan for people who did not have employer-provided coverage. Author Phillip Cryan of the University of California, Berkeley, said concerns that such a system would result in significant job losses were unfounded.

U.S. steel industry hurt by China’s unfair trade practices
The American steel industry has lost 50,000 jobs since 2000 and is currently operating at capacity utilization levels well under 50%. In a June 16 testimony to the Congressional Steel Caucus, EPI senior international economist Robert Scott argued that unfair trade practices by China and other countries had helped create a large and growing international trade deficit. Scott called for increased attention to and enforcement of international trade law. Aside from the direct threat posed to the U.S. steel industry, Scott maintained that “cheap Chinese steel also threatens a wide swath of U.S. manufacturing, in products ranging from auto and aircraft parts to machine tools and consumer and industrial machinery of all types.”

Upcoming events
On June 25, EPI will host Broader, Bolder Accountability: Meaningful School Improvement in the Post-NCLB Era. With widespread recognition that No Child Left Behind is seriously flawed, a new system is needed for holding schools accountable for student performance without relying excessively on standardized tests. The discussion will feature Tom Payzant of the Harvard Graduate School of Education and a former secretary of education in the Clinton administration, and Christopher Cross, the former president of the Council for Better Education and an assistant secretary of education under George H.W. Bush. It will run from 10:00 a.m. to 11:30 a.m. at EPI’s headquarters. To register, click here.

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