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EconomicPolicyInstitute February 3, 2012

Despite a dearth of proof to substantiate claims that right-to-work laws help create jobs and raise wages—and in spite of fierce opposition from activists and groups across the country, including the National Football League Players’ Association—Indiana became the country’s 23rd right-to-work state on Wednesday. With many millions of eyes expected to tune into Sunday’s Super Bowl hosted in Indianapolis, Indiana’s recent passage of right-to-work legislation is all the more striking.

EPI has provided crucial research showing right-to-work legislation reduces wages by $1,500 a year, lowers the likelihood that union and non-union employees receive health care coverage or pensions through their jobs, and has no positive impact on job growth in states that adopt them. As the debate has raged, media outlets have sought EPI’s research and analyses to determine the truth about right-to-work laws.

From the Associated Press: “’On average, right-to-work laws are associated with wages — for everyone, not just union members — that are 3.2 percent lower than they would be without such a law,’ according to an EPI study released earlier this month.”

International Business Times: “There’s also wide variation in how right-to-work states perform. A study by the liberal Economic Policy Institute found that between 2000 and 2009 right-to-work Arizona saw 19 percent employment growth while right-to-work Alabama saw its employment shrink by 5 percent. Non right-to-work New Mexico boasted an 8.2 percent growth rate that outpaced neighboring Oklahoma, which had been the last state to pass a right-to-work law.”

Indianapolis Star: Speaking to Indiana lawmakers, labor law expert Kenneth G. Dau-Schmidt, Indiana University Maurer School of Law professor, cited EPI’s research to rebut claims that right-to-work laws help the economy. “‘The evidence that right-to-work laws are good for the economy is far from settled,’ he said. ‘In fact, the most reliable studies suggest quite the opposite.’ He cited studies from Ball State University, the University of Notre Dame and the liberal Economic Policy Institute.”

Jobs report is nice surprise to start the year, but more is needed

Today’s employment situation report from the Bureau of Labor Statistics (BLS) showed a labor market with all parts seemingly moving in a solid direction. Strong payroll employment growth was matched by a falling unemployment rate, strong employment growth in the household survey, and a growing share of the population with jobs (after removing the effect of BLS’ annual population reweighting).

Nevertheless, EPI labor economist Heidi Shierholz cautioned much more progress must be made to restore the labor market to full health. “It’s important to keep this growth in context—the jobs deficit is so large that even at January’s growth rate, it would still take until 2019 to get back to full employment,” said Shierholz. “We need reports this strong and stronger for the next several years to get back to good health in the labor market,” she concluded.

It’s too early to cut back on unemployment benefits

While today’s BLS report is a move in the right direction, the number of unemployed workers remains soberingly high. As such, lawmakers’ current discussions to cut back on unemployment benefits would prove disastrous for millions. This week’s Economic Snapshot shows that the share of unemployed workers who have been out of work for more than six months, the maximum length of regular benefits in most states, has shot up from a 17.5 percent average in 2007 to a peak of 45.5 percent in March 2011—and currently sits at 42.9 percent.

“The fact that there has been so little improvement in job-finding prospects for unemployed workers shows that it is much too early to begin cutting back on how long unemployed workers can receive benefits,” wrote Shierholz.

Subsidies to Chinese auto-parts industry puts U.S. auto-parts jobs at risk

The auto-parts industry is a cornerstone of the U.S. economy, contributing the most direct jobs to the motor-vehicle manufacturing sector (the second-largest employer among all U.S. manufacturing industries). When combined, the auto-parts and tire manufacturing industry support roughly 1.6 million U.S. jobs.

In Jobs in the U.S. auto-parts industry are at risk due to subsidized and unfairly traded Chinese auto parts, Robert E. Scott, EPI director of trade and manufacturing policy research, explains that the United States lost more than 400,000 jobs in auto parts between 2000 and 2011.  Over the same time period, China’s auto-parts exports have grown, largely because Chinese central and local governments subsidize China’s auto-parts industry.  Many of the subsidies violate international trade treaties, and China’s restriction of sales of U.S. auto parts in China is in violation of their obligations to the World Trade Organization.

Scott details how China’s growing auto-parts trade increasingly puts U.S. auto-parts jobs at risk. He finds that the U.S. trade deficit in auto parts increased from $9.5 billion in 2000 to $31.2 billion in 2010.  Trade deficits tend to increase unemployment, so a growing trade deficit causes displacement of U.S. jobs. In 2010, U.S. imports of tires and auto parts from China exceeded exports by 725 percent.

“Since the depths of the Great Recession, auto sales have increased more than twice as fast as employment in the U.S. auto parts industry,” said Scott. “This discrepancy is in part due to the rapid growth in Chinese auto-part imports.”

In Putting the pedal to the metal: Subsidies to China’s auto-parts industry from 2001 to 2011, Usha C. V. Haley, chaired professor of international business at Massey University in New Zealand, discusses the $27.5 billion in direct and indirect subsidies the auto-parts industry received from 2001 to 2011, as well as planned and committed subsidies for industrial restructuring, technology development, and technology acquisition. Haley also provides an overview of the strategic decisions made by Chinese policymakers and business leaders worldwide that have strengthened the Chinese auto-parts industry.

Already, national and local media outlets, including CNNMoney, Reuters, Detroit News, International Business Times, and the New York Times, have turned to EPI’s just-released research to assess how subsidies to the Chinese auto-parts industry affect U.S. auto-parts jobs.

EPI on the Hill

On Thursday, EPI economist Elise Gould joined Congresswoman Rosa DeLauro (D-Conn)and a group of panelists to discuss the economic importance of the Supplemental Nutrition Assistance Program, or SNAP (historically referred to as the Food Stamp Program).

“Just like unemployment insurance, food stamps bridge the gap to help families make ends meet,” said DeLauro.

“TheFood Stamp Program has been vital, as benefits kept five million people out of poverty and are universally considered some of the most effective fiscal support available to help an economy that is projected to see unemployment rates above 8 percent until 2015,” Gould noted. “Cutting these benefits would simply be a mistake for families and a mistake for the economy,” she said.

EPI applauds State Department

Yesterday, the State Department banned the Council for Educational Travel, USA (CETUSA) from participating in the Summer Work Travel (SWT) program because of its multiple violations of labor and employment laws and program regulations, some of which are still under investigation. Last month, EPI, along with a number of immigrant and worker advocates, urged Secretary Clinton to take this action.

EPI vice president Ross Eisenbrey and EPI immigration policy analyst Daniel Costa, who both provided invaluable research showing the need to reform the SWT program, applauded the State Department’s decision. “We salute the J-1 student-workers for their strength and bravery in taking this action in the face of threats of retaliation by CETUSA and their employers, thank the National Guestworker Alliance for their successful organizing efforts and zealous representation of the student-workers, and commend Secretary Clinton for acting to prevent the exploitation of foreign student-workers,” they said in a joint statement.

EPI in the news

  • EPI macroeconomist Josh Bivens helped explain last week’s gross domestic product report to business reporter Peter Whoriskey of the Washington Post. Bivens was quoted as saying, “There has been really grindingly slow improvement in the prospects of getting a job and almost no prospects of getting a raise.”
  • Speaking with BET News’ Joyce Jones, Algernon Austin, director of EPI’s Race, Ethnicity, and the Economy program, discussed how high unemployment and low wages greatly affect housing patterns for African Americans. While a recent study showed American neighborhoods have become significantly less segregated, African Americans still disproportionately comprise poorer neighborhoods. “The study shows positive signs, but for African Americans, there’s still a long way to go, especially when looking at the largest population areas,” said Austin.

 

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