The National Retail Federation Hates the Proposed Overtime Rules (Even Though No One Knows What They Are)
The National Retail Federation (NRF) doesn’t know what the U.S. Department of Labor’s new rules concerning exemptions from overtime protections will be, but they know they’re against them. Claiming to speak on behalf of managers who might be affected by the not-yet-released rules, NRF says: “Retail managers say the proposed changes to the federal Fair Labor Standards Act regulations show the Department greatly misunderstands their roles in the workplace and would effectively strip retail managers of their salaried status, generating negative consequences for the entire industry.”
But unless someone has leaked the proposed rule to them, NRF is just making things up! What are “the proposed changes to the federal Fair Labor Standards Act regulations” that the managers disapprove? NRF doesn’t say. Equally important, what did NRF tell the managers it surveyed? Why do “75 percent of respondents” say “the changes would diminish the effectiveness of training and hinder managers’ ability to lead by example”? I personally doubt very much the proposed rule, if it is ever issued, will say anything about training.
Some of the NRF report’s “key findings” are pretty wild. For example, “Duties and salary are not effective litmus tests for successful management.” The Fair Labor Standards Act requires employers to pay an overtime premium to all employees, including managers, unless they are bona fide executives, administrators, or professionals. The definition of “executive” has always, since the FLSA was enacted in 1938, used duties tests and the salary level to determine who is a bona fide executive. That is the case today, so the “key finding” is nonsense. The question for the Department of Labor is what salary level is an executive salary? Is it $70,000 a year, or is it the current $23,660 threshold set by the Bush administration in 2004?
The Senate Judiciary Committee explored important economic questions this week. Should businesses be able to lay off qualified U.S. tech workers and replace them with lower paid foreign workers? Is there a shortage of skilled Science, Technology, Engineering and Math (STEM) workers—or an oversupply? And even if there is such a shortage, should we import temporary non-immigrant labor from abroad, or would it be better to let the free market work long enough for wages to rise and more students to be attracted to these fields?
The committee’s Republican and Democratic members disagreed with each other without regard to party labels. No senator, in fact, seemed more concerned about the rights of U.S. workers and their economic outcomes—and more skeptical of claims made by the business community—than Sen. Jeff Sessions of Alabama, a conservative, anti-union Republican. Two Democrats, Sen. Amy Klobuchar (D-MN) and Sen. Chuck Schumer (D-NY) took the side of big business, along with Sen. Orrin Hatch (R-UT), Sen. John Cornyn (R-TX) and Sen. Jeff Flake, while Sen. Dick Durbin (D-IL) and Sen. Chuck Grassley (R-IA) defended the interests of U.S. workers.
Most Americans probably think it is illegal to lay off an U.S. worker and replace him with a temporary foreign worker. Yet Prof. Ron Hira and several other witnesses testified that this is not just a common practice, it is the primary use of the H-1B visa program. (Hira points out that most of the top 10 users of the H-1B visa are firms that outsource and offshore U.S. IT jobs.) When Ben Johnson of the American Immigration Council said replacing U.S. workers should not be prohibited, Sens. Hatch, Klobuchar, and Flake all agreed; in fact, they voted in 2013 to remove language from the immigration bill that would have made it illegal to use the H-1B visa to replace U.S. workers. And all three are sponsors of the “I-Squared” bill, which would triple the number of temporary non-immigrant foreign workers replacing Americans.
Republicans in Congress are trying to pass a joint resolution of disapproval to prevent the National Labor Relations Board (NLRB) from updating the rules that govern union elections. Republicans used fast track procedures to pass the resolution in the Senate, and held a hearing on Wednesday to begin moving the resolution through the House. If it were to pass, it would repeal the NLRB’s updates and prevent the agency from ever issuing a similar rule.
The House Education and Workforce Committee hearing was a painful experience. The NLRB is updating obsolete election rules that fail to recognize modern developments like e-mail, and which encourage excessive litigation and delay. Yet a panel stacked with anti-union lawyers attacked the rules as if they were ending American democracy. Meanwhile one witness, a registered nurse from California, offered an opposing view.
What do the new NLRB rules do? First, they require employers to share e-mail addresses and phone numbers with the union seeking an election, so that the union will have more equal access to voters. For many decades the law has required employers to share home addresses, and the NLRB sensibly thinks it is less intrusive to have union supporters call or email than to have them visit you at home. But the panel and the Republican members treated this as if it were the end of privacy as we know it (has even one of them complained about NSA spying on Americans’ phone records or calls?). Brenda Crawford, the registered nurse who testified, said her employer bombarded employees with e-mails and texts in the weeks before the election, in addition to daily anti-union messages at work, including captive audience meetings where nurses were called away from patient care to hear anti-union harangues. When she tried to put out union literature in the employee break room, it was removed. She testified that the company’s ability to campaign throughout the workday, and electronically when the workday ended, overwhelmed the nurses and their union, who had no way to respond.
The fact that unions are responsible for workplace benefits, higher wages, and the right to overtime pay is the very reason Wisconsin Governor Scott Walker, the Koch Bothers, and other corporate interests hate them. Walker hates unions so much he compared them to ISIL terrorists, so it’s no wonder that he and Wisconsin’s Republican legislature are rushing through a “right-to-work” (RTW) bill.
RTW laws were originally designed by business groups in the 1940s to reduce union strength and finances, and over the years they’ve been successful. As Melanie Trotman of the Wall Street Journal pointed out to me this morning, none of the 10 states with the highest rates of unionization are right-to-work. The Illinois Economic Policy Institute calculates that RTW reduces union coverage by 9.6 percentage points, on average. Unsurprisingly, weakening unions leads to lower wages and salaries for union and non-union workers alike. Heidi Shierholz and Elise Gould showed that RTW is associated with a $1,500 reduction in annualized wages, on average, even when the analysis takes into account lower prices in those states. (On average, wages in RTW states are nearly $6,000 less.)
Nevertheless, RTW supporters look at the very recent experience of Michigan and Indiana, which passed RTW laws in 2013 and 2012, respectively, to argue that RTW doesn’t inevitably lead to wage reductions. It’s a misguided argument, since no critic claims that the effects of RTW are immediate: It takes a little time for RTW to reduce dues collections, weaken union finances, undermine organizing, and weaken the bargaining position of workers. The law hasn’t even begun to apply to many contracts in Michigan.
Dear Mr. Secretary:
Several newspapers and journals, including Computerworld and the L.A. Times, have reported that Southern California Edison (SCE), a public utility, has laid off hundreds of its U.S. employees and replaced them with H-1B guestworkers employed by the India-based IT services firms Infosys and Tata Consultancy Services. As my colleague, Ron Hira, has written, “Adding to the injustice, American workers losing their jobs are being forced to do “knowledge transfers,” an ugly euphemism that means being forced to train your own foreign replacement.”
As you know, the law (the Immigration and Nationality Act) forbids the hiring of H-1B temporary foreign guestworkers whose employment would “adversely affect the wages and working conditions of U.S. workers comparably employed.” Clearly, taking away the jobs, wages and benefits of the laid-off SCE employees does adversely affect their wages and working conditions.
You have authority under the Immigration and Nationality Act to investigate this case, but I have seen no announcement that you intend to do so or that you share my sense of outrage that the H-1B program is being abused in such an egregious way. I hope that we will soon learn that the Department of Labor intends to investigate and remedy this harm to skilled U.S. workers who have pursued education and training in a technical field, worked hard, and played by the rules. Our government should, at the very least, ensure that its programs, including its visa programs, are not used to destroy the careers and financial security of its people.
Economic Policy Institute
Rampant wage theft in the United States is a huge problem for struggling workers. Surveys reveal that the underpayment of owed wages can reduce affected workers’ income by 50 percent or more. Most recently, a careful study of minimum wage violations in New York and California in 2011 commissioned by the U.S. Department of Labor (DOL) determined that the affected employees’ lost weekly wages averaged 37–49 percent of their income. This wage theft drove between 15,000 and 67,000 families below the poverty line. Another 50,000–100,000 already impoverished families were driven deeper into poverty.
The extensive weekly minimum wage violations uncovered by the DOL study in California and New York alone amount to an estimated $1.6 billion–$2.5 billion over the course of a full year. Given that the combined population of California and New York is 18.5 percent of the U.S. total, it is reasonable to estimate that minimum wage violations nationwide amount to at least $8.6 billion a year, and as much as $13.8 billion a year. On the one hand, violations in these two states might be less frequent because the wage and hour enforcement effort in New York and California is greater than in most states and violations might be deterred (Florida, for example, does not have a state labor department). But on the other hand, their large immigrant populations might increase the prevalence of wage theft—the DOL study found that non-citizens were 1.6 to 3.1 times more likely to suffer from a minimum wage violation.
The DOL study vastly understates the total impact of wage theft because it reported only on minimum wage violations, which are more frequent than overtime violations but usually involve smaller per violation dollar amounts than many overtime pay violations. A bookkeeper, for example, earning an annual salary of $45,000, who works 10 hours of unpaid overtime a week might lose $325, whereas a minimum wage worker forced to work “off-the-clock” unpaid for 10 hours would lose “only” $72.50, or ten times the state minimum wage if it were higher than the federal minimum. (Overtime violations are very frequent among low wage workers: a 2009 study found that on a weekly basis, 19 percent of front-line workers in low wage industries were cheated out of overtime pay to which they were entitled.)
DOL’s new study shows the need for much greater efforts to ensure employer compliance. Helpfully, the president has called for increases in the budget and staffing of the Wage and Hour Division, but Congress should revisit the obsolete penalties for non-compliance: repeated or willful violations of the minimum wage and overtime requirements are subject to a maximum fine of only $1,100.
In March 2014, President Obama directed Secretary of Labor Tom Perez to prepare an update of the regulations that govern exemptions from the Fair Labor Standards Act (FLSA) requirement that employers pay time-and-a-half for work beyond 40 hours in a week. The so-called “white collar” exemptions for professionals, executives, and administrators include a threshold salary below which every employee is guaranteed overtime pay regardless of his or her work duties. Above that salary level, the employer doesn’t have to pay anything for overtime hours—not even minimum wage—if the work performed meets certain criteria.
The salary threshold has rarely been increased, and since 1975, its real value has been eroded by inflation. It currently stands at $455 a week, or $23,660 a year—below the poverty level for a family of four and nothing like a true executive or professional salary. Whereas 65% of salaried workers were guaranteed overtime coverage by the salary threshold in 1975, just 11% are covered today.
In the past year, four significant proposals have been made to update the salary threshold, and each would guarantee coverage to a different number of workers. The figure and table below show that as the threshold increases, millions more employees are guaranteed overtime coverage.
For 5 years, the Obama administration has been trying to make reasonable improvements to one of the United States’ main guestworker program for lower skilled workers. The H-2B visa is used by businesses that want low-cost gardeners, hotel maids, cooks and dishwashers, forestry workers, workers to pick and pack crab meat, and various other kinds of laborers. The businesses that hire H-2B workers don’t want U.S. workers who expect a decent wage and they don’t want U.S. workers who might get sick of poor working conditions and quit to find a better job. They want migrant laborers from abroad, who may think being paid a poverty-level wage is a great windfall and who can’t quit—no matter how abusive the working conditions are—because they will be deported if they try to switch jobs. Many H-2B workers secure their temporary jobs in the United States by paying labor recruiters thousands of dollars to connect them to U.S. employers. The employers that ultimately hire them benefit from this arrangement because H-2Bs workers are so indebted to recruiters that their lives will be in danger if they return home before their contract is finished. Businesses call this a “reliable” workforce.
The Bush administration issued rules for the H-2B visa that gave businesses what they wanted: below-market wages so they could discourage U.S. workers from applying and underpay the migrants who did apply. EPI’s analysis has shown that the Bush rules led to wages that fell more than 25 percent below the true prevailing wage. Migrant advocates sued to have the Bush rules thrown out, and a federal court agreed. So the Obama administration set out to rewrite the rules to protect both U.S. workers who might want some of these jobs and the mostly Mexican migrants who come to work with H-2B visas. The Department of Labor issued rules to require more honest recruiting of U.S. workers before a business can look abroad, rules to protect the migrants against exploitation by recruiters and businesses, and—most importantly—a rule to set a true prevailing wage that businesses using the H-2B visa have to offer and pay to U.S. and migrant workers alike.
Matt O’Brien hit the nail on the head in a Wonkblog post about non-compete agreements for doggy day care workers yesterday. Camp Bow Wow, as Dave Jamieson reports, forces new hires to agree not to work for a competing business within 25 miles of their location’s “franchise territory” for two years after leaving the company. Dog sitters obviously don’t learn valuable trade secrets that have to be protected from competitors, so something else is motivating the chain’s non-compete clause—just as trade secrets were not driving Jimmy John’s to restrict where its employees could work when they moved on from the sandwich shop. That motivation is wage suppression. As O’Brien puts it:
“Non-competes create a Balkanized labor force where you’re not a sandwich maker, but either a Jimmy John’s or Subway sandwich maker. Workers, in other words, are being forced to pledge fealty to companies that can still fire them at will. The payoff, of course, is that workers who, practically-speaking, can’t switch jobs are workers who can’t ask for raises.”
It’s common sense that increased experience in an occupation should eventually lead to higher wages and that if, for example, Camp Bow Wow doesn’t sufficiently reward an employee’s experience, some other dog care chain will. The employee might look around and find that experienced dog sitters are paid $1.00 an hour more at Camp Canine. But a non-compete agreement keeps the employee from jumping ship to take the better-paying job. A two-year restriction on competing dog-care employment means the employee has to leave the area to get the benefit of her experience. It’s not slavery, but as O’Brien points out, it’s not the kind of freedom capitalism promises, either. (If the National Right to Work Committee weren’t simply a union-hating sham, it would take up the cause of workers who are being forced to accept such contracts.)
Limiting the right to quit and take another job leaves the employer with ever more bargaining power. How do you negotiate a raise if your employer knows you can’t take your experience and knowledge elsewhere?
American workers are increasingly concerned about how their employers schedule their work time, and for good reason. The spread of just-in-time scheduling, facilitated by computer programs that match employee shifts with customer traffic, is making life harder for the employees whose schedules are constantly changed, who report for work after long commutes only to find their hours have been cut—say from an expected eight that day, down to only one or two—and right at the last minute. That can make it close to impossible for workers to plan arrangements for child care, class schedules, or even transportation to and from work. Other employees are taken advantage of by employers who schedule them for long hours without advance notice, disrupting the same child care, education, and transportation schedules(though at least the excessive hours result in higher pay, if they’re covered by overtime protections and entitled to time-and-a-half for hours in excess of 40 in a week).
Politicians have two kinds of responses to these problems. Some are interested in real solutions, like the San Francisco Predictable Scheduling ordinance approved yesterday, which outlaws unpredictable scheduling practices at retail chain stores and promotes equal treatment of part-time workers. State law in California already requires employers to compensate employees who report to work but are given less than half their scheduled hours, and requires employers to pay for an extra hour of work when there are unpaid interruptions of the work day longer than a bona fide meal period.
Other politicians only pretend to do something for workers without doing it—or even make matters worse. A perfect example of that kind of fraudulent response is H.R. 1406, the House Republicans’ perennial answer to demands for improvements in the work-family balance. They call their bill the “Working Families Flexibility Act,” but the only flexibility it provides is to employers, rather than to employees. It gives employers the right not to pay anything for overtime hours in the week in which they are worked, but to instead consider giving time-and-a-half off with pay at some later point in the year. If it never turns out to be convenient, the employer has to repay the employee for her overtime at the end of 12 months. In effect, the bill authorizes an interest-free loan of the employees’ overtime pay with no guarantee of any time off.
Twenty years ago, the radical wing of the Republican Party announced its “Contract With America,” a set of policies and actions Rep. Newt Gingrich and his caucus pledged to accomplish if they were elected to a majority in Congress. The Contract included eight internal reforms to change congressional operations (things like applying labor laws to Congress and putting term limits on committee chairmen) and ten bills affecting national policy that would be brought to the floor and voted on within the first 100 days of the new Congress.
Gingrich’s early battles ultimately ended in victory for the public and for the environmental and consumer protections he wanted to undo. Gingrich’s bills were made worse as they moved through committee and were amended in the House and Senate, finally resulting in what one senior Republican Senate staffer called “a revolution”—a system that would allow any corporation to escape enforcement through legal or procedural loopholes. Every regulation would be effectively voluntary, and the polluters and producers of unsafe products would have nothing to fear from the EPA, the Consumer Product Safety Commission, OSHA, or any other regulatory agency.
The vehicle for this revolution was one of the first bills considered and passed in the House in 1995, “The Job Creation and Wage Enhancement Act.” Its goal was to subject federal regulations—regardless of statutory mandates to the contrary—to new risk assessment and cost-benefit analysis requirements and to create multiple opportunities for businesses to block federal rules and interfere with their enforcement. Big chemical and pharmaceutical manufacturers didn’t want clean water laws interfering with their profits, the meat industry wanted to prevent new rules about bacteria and contamination, and construction companies didn’t want to have to comply with new workplace safety standards. The legislation would have stopped new rules in their tracks.
When I read recently that General Mills had tried to impose binding arbitration on people who used Facebook to like its cereals, I thought the company was stupid, and didn’t much care because I don’t buy their products anyway. But when I learned that an ever-increasing number of corporations are sneaking forced arbitration clauses into the fine print of their purchase agreements, I became more concerned. How can I be forced to give up the right to sue if a product hurts me or my family, just because I bought the product?
Today, I’m totally alarmed and outraged, after watching the Alliance of Justice’s film “Lost in the Fine Print.” The film tells the story of consumers who were harmed by for-profit schools, credit card companies, and employers, but were then prevented from suing in court by the arbitration clauses hidden in the fine print of their contracts. Denied any access to the courts, their only choice was arbitration before an arbitrator hand-picked by the company. The consumers all lost, but one of them lost more than just her case: she was forced to pay the company’s $362,000 in legal fees and costs! It’s no surprise the outcomes are so lopsidedly in favor of the corporations, given that they choose and pay the arbitrators, who depend on the corporations for business.
AFJ’s Nan Aron, who hosted a showing of the film at the Women’s National Democratic Club, told us that 93% of consumers who try to use company-mandated arbitration lose. Worse, when a small business in California challenged the imposition of a forced arbitration clause by American Express, the US Supreme Court upheld the clause last year, despite a stinging dissent by Justice Elena Kagan. Now, as far as the companies are concerned, there’s nothing to stop them: Comcast, Wells Fargo, AT&T, Amazon, and Verizon are just a few of the companies that impose binding arbitration on their customers. The Court vindicated the arbitration clause even though by requiring individual arbitration actions it made it so expensive for Amex’s small business customers to challenge unfair fees that they effectively had no remedy. According to Justice Scalia, under the Federal Arbitration Act, the fact that there is no remedy is irrelevant. Now, as far as the companies are concerned, there’s nothing to stop them: Comcast, Wells Fargo, AT&T, Amazon, and Verizon are just a few of the corporations that prohibit class actions and impose binding arbitration on their customers, without their knowledge.
The last barricades in the right wing’s fight to prevent increases in the minimum wage are starting to fall, as even the businesses that minimum wage opponents are supposedly protecting from having to pay a decent wage are saying, “Enough! It’s time to raise the minimum wage.”
The American Sustainable Business Council and Business for a Fair Minimum Wage conducted a national phone poll of 555 small business employers and found support for raising the minimum wage to $10.10 an hour in every region of the country. Two thirds of surveyed businesses in the Northeast were in favor, and even in the South, 58 percent of small businesses approve of President Obama’s proposal to raise the minimum wage in steps and then index it to inflation.
Unsurprisingly, these business owners are not simply being altruistic. Most of them understand that their businesses will benefit in two ways when millions of poorly paid employees get a raise. First, higher pay would mean lower employee turnover, increased productivity and higher customer satisfaction—all of which helps employers’ bottom line. Second, most of the owners surveyed agree that a higher minimum wage would increase consumer purchasing power and help the economy. Putting money in the pockets of millions of potential customers means more sales and higher profits.
Integrity Staffing Solutions, which runs a warehouse operation for Amazon, makes employees go through a “security check” at the end of each working day, where they are searched for stolen goods. Even though employees spend 25 minutes being processed—and would be fired if they tried to skip the screening—Integrity doesn’t pay them a penny for their time. The employees sued and won, and the case has gone to the U.S. Supreme Court. Now, the Justice Department and Labor Department have filed a brief that takes the side of the Amazon subcontractor over its employees. This is a shame.
Over the past year, President Obama and Secretary of Labor Tom Perez have seemingly done everything within their power to lift wages and discourage the exploitation of workers. Obama has issued executive orders raising the minimum wage and requiring decent labor practices from federal contractors, Perez has issued a rule covering home-care workers under the minimum wage and overtime rules, and Obama directed Perez to update overtime rules so more salaried employees would have the right to overtime pay. So why are they fighting the employees in this case?
It doesn’t look like a matter of legal principle to me. Certainly, the application of the Portal to Portal Act, which frees employers from the obligation to pay for certain preliminary and postliminary activities such as traveling to the work site or changing from a uniform into civilian clothes, isn’t obvious in this case. The court of appeals found that the search for stolen property was integral and necessary to the business operation of the warehouse, and that seems right to me. If the screening isn’t “integral and necessary” to the business operation, why would the employer fire employees who skip it? If making employees remove work clothes and shower after work to remove toxins has to be compensated (and the Supreme Court has said that it does), why isn’t making them remove belts and shoes and other clothing to prevent theft? (Cases finding that making employees—and everyone else—go through airport security screenings aren’t analogous because the employees are only being required to do what everyone has to do. It isn’t integral and necessary to the business operation, it’s a general requirement of federal law.)
So if it’s a close legal question, why didn’t the Obama administration side with the workers and ask the Supreme Court to uphold the Court of Appeals decision in their favor? I’m afraid it’s because the federal government is doing the same thing as Integrity, and doesn’t want to be sued. The brief of the United States includes a “Statement of Interest” explaining why it wanted to file a friend of the court brief. Here’s what it says, in part:
“The United States also employs many employees who are covered by the FLSA, 29 U.S.C. 203(e)(2)(A), and requires physical-security checks in many settings. The United States accordingly has a substantial interest in the resolution of the question presented.”
In other words, as an employer, the government wants to be able to get away without paying its own workers for their time. This is wrong.
The Los Angeles City Council’s vote to raise the minimum wage for hotel workers is another herald of big changes coming in the way the United States deals with low wages and inequality. The Council voted 12 to 3 to raise the minimum wage for workers at large hotels to $15.37 an hour by 2017, which is more than the national median wage for women ($15.10 in 2013). Mayor Eric Garcetti will sign the bill after it receives a confirming second vote next week.
The LA County AFL-CIO, UNITE HERE Local 11 (the LA area union of hospitality workers), and the Los Angeles Alliance for a New Economy, which led the campaign, don’t intend to rest on their laurels and will push for an across-the-board minimum wage increase to $13.25 an hour, far above the national minimum wage of $7.25 an hour. Mayor Garcetti strongly supports that bill, too.
As in Seattle, where a union-led coalition won a $15 minimum wage, the people of Los Angeles realize that many businesses will not share revenues fairly with their workers unless they are required to do so. Even businesses that want to pay their employees a living wage feel constrained by their competitors: How can they compete with a competitor paying its workers $5.00 an hour less? The only way to break through these constraints is to reset labor standards to a level that provides a decent living. As Franklin Roosevelt said when he first sent minimum wage legislation to Congress in 1933: “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country… By living wages, I mean more than a bare subsistence level. I mean the wages of decent living.”
The National Association of Manufacturers (NAM) is a cynical organization. It knows that few journalists will read a lengthy paper on the cost of regulation and realize that it is dressed-up junk economics, so it has published a re-run of the truly meretricious report that Mark Crain and Nicole Crain issued four years ago. The new report is even worse than its predecessor, in the sense that the authors have chosen not to respond to any of the criticism of their earlier work—even though it has been shown to be based on bad research, unreviewable and probably biased data, and faulty assumptions about the relationship between regulation and GDP.
EPI’s Josh Bivens and others will deal with the main methodological problems with the Crains’ analysis. I want to focus just on the Crains’ re-use of the same indefensible research concerning the cost of OSHA regulation, which we first exposed in 2011. The Crains claim that OSHA regulations cost businesses $71 billion a year, even though the cost for new regulations since 2001 is only $733 million. How is it that the previous years’ regulation cost nearly 100 times as much? The Crains don’t have an explanation—they simply rely on someone else’s discredited work.
Joseph M. Johnson published “A Review and Synthesis of the Cost of Workplace Regulations” in 2005. Johnson’s paper makes many serious mistakes, but the biggest is the application of a cost “multiplier” derived from yet another analyst’s work. Harvey S. James, Jr. estimated that the true cost of OSHA rules is not the cost estimated by the agency at the time of rulemaking (which often turns out, in reality, to be too high), but a cost 5.5 times greater because of “fines for violations and the costs of the many non-major regulations for which no cost estimates exist.” This multiplier is ludicrous on its face, both because OSHA fines have never amounted to very much (even today the maximum fine that can be assessed for a willful or repeat violation is only $70,000, and the amount paid is usually far less than what is initially assessed) and because the costs of non-compliance should not be double-counted as compliance costs.
The Tennessean reported yesterday on the miserable work life of a 17-year old migrant worker named Ivan Alvarez, who lost three fingers when a tobacco farmer’s makeshift shearing machine sliced them off. How did the farmer treat him? He gave him a check for $100 and fired him. No worker’s compensation, no disability insurance, and no compassion.
Young Alvarez was one of six migrant teenagers working at Marty Coley Farms in Macon County, Tennessee. He lived with 13 adult men in a vermin-infested three-bedroom house, and was paid less than minimum wage for six days a week of work. Why did Alvarez and the others put up with such mistreatment? As undocumented immigrants, they were trapped.
A recorded conversation between the farm’s owner and one of the employees after the amputation shows how employers use the threat of deportation to oppress their workers and drive labor standards to the bottom. When the worker said he was leaving to take a better-paying job at another farm, the farmer, Marty Coley (one of the largest tobacco growers in the county), threatened him with deportation.
“I’ll tell you what,” Coley said. “You all go there and I’m going to call immigration and clean the whole damn bunch out.”
It adds insult to injury to learn that, as The Tennessean reported, Marty Coley Farms has received more than half a million dollars in federal tobacco price support subsidies over the past ten years.
One often hears that employers hire undocumented migrants because no American wants to do the kind of work they’re hired to do. Clearly, no American wants to live in overcrowded and disgusting quarters, be paid a subminimum wage, and have his fingers cut off. The answer isn’t to let this kind of exploitation continue—it’s to improve pay and working conditions enough that Americans will do the work, and to give immigrants the right to reject a job that degrades rather than rewards their labor. As long as the undocumented workforce is subjected to the threat of deportation, Marty Coley Farms and other low-road employers will continue to abuse and exploit them, to the detriment of every American.
For 12 months, McClatchy reporters have been carefully digging into a pit of corruption, gathering payroll records in 28 states and interviewing hundreds of workers and business owners about an epidemic of tax cheating, wage theft, and exploitation in the construction industry. The extraordinary report of their investigation was published Thursday, and it’s hair-raising. More than one-third of the employees working on federally-funded projects in Texas and Florida, overseen by public housing authorities and monitored by the U.S. Department of Labor, were improperly classified as independent contractors. The contractors misclassified them in order to escape paying worker’s compensation premiums, unemployment insurance taxes, and FICA taxes, to avoid complying with immigration document requirements, and to avoid liability for labor law violations. In just Florida, Texas, and North Carolina, McClatchy estimates that half a million workers were misclassified, and that the state and federal governments were cheated out of approximately $2 billion in taxes as result.
The stories make the damage this does to the labor market utterly clear. Construction wages were lower in 2012 than they were in 1980, despite rising productivity and huge profits in the industry. Even skilled tradesmen like plumbers and electricians earned 12 to 14 percent less than thirty years ago. Labor law offers no protection to independent contractors, who are not entitled to the minimum wage, overtime pay, or the right to join a union and bargain collectively. Exploited workers—many of them undocumented immigrants who live in fear of deportation—work without adequate safety protections, sometimes receive far less than the pay they were promised, and are deprived of the safety net’s protections if they lose their jobs, are injured or disabled, or reach retirement age. They often live in slum conditions, even while working on luxurious and glitzy new housing.
The last several decades have been hard on working men and women in the United States. The decline of unions (which now represent just a little more than one sixteenth of private sector workers), job loss to Mexico, China, and other low wage countries, and a series of bad court decisions weakening the rights to effectively bargain a contract have left working Americans nearly defenseless, as wages stagnate or fall and traditional pension coverage disappears. The results are ugly: since 2000, 70 percent of Americans have seen no gain in wages, and wages have fallen for the bottom 40 percent. Traditional pensions are disappearing, to the point that less than 18 percent of workers still have this crucial benefit.
Despite that grim background, there is cause for hope, and three events this past week brought a big smile to my face and lifted my spirits. The biggest lift came from two court decisions in California and Oregon (I’m a lawyer, I can’t help it!), where a U.S. Court of Appeals struck down one of corporate America’s longest-running and most outrageous schemes to cheat workers and scam the government. FedEx, a giant in package delivery industry, has avoided payroll taxes, prevented union organizing, and escaped the laws that give workers meal breaks, overtime pay, sick leave, and family leave by entering into sham contracts with its 27,000 drivers in which it declares them to be independent contractors. Employees have employment rights, but independent contractors don’t.
An employer has to pay Social Security and Medicare taxes for employees, as well as unemployment insurance taxes and worker’s compensation premiums—but not for independent contractors. So FedEx, while maintaining control over the minutest aspects of their working lives, called its drivers contractors—shifting all of the costs and risks off of FedEx and onto its employees. As described by Judge William Fletcher, FedEx “contracts with drivers to deliver packages to its customers. The drivers must wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx’s appearance standards. FedEx tells its drivers what packages to deliver, on what days, and at what times. Although drivers may operate multiple delivery routes and hire third parties to help perform work on those routes, they may do so only with FedEx’s consent.”
I was saddened to learn of the death of Sen. Jim Jeffords of Vermont this week. He was the rare politician who combined intelligence, humility, and a sense of humor, with a deep love for his state and his country. Like Sen. Paul Wellstone, Jeffords never held himself above the congressional staff who worked for him and around him, and he certainly didn’t hold himself above the people he represented, despite his Harvard and Yale degrees and his elevated position, which ultimately included service as chairman of the Senate Committee on Health, Education, Labor and Pensions and the Committee on Environment and Public Works.
When I first met Jeffords in 1982, he was a senior Republican on the House Education and Labor Committee, already exercising an independent streak by opposing Ronald Reagan’s efforts to eliminate any role for the federal government in employment and training programs. He supported the Job Training Partnership Act, and got involved in the bill’s minutiae, sitting late at night with mostly Democratic staffers as the formulas for distributing funds to the states and local entities were worked out. By pushing to give greater weight to factors like poverty, unemployment, long-term unemployment, or total population in the formulas, a state like Vermont could see its funding change dramatically, and Jeffords made sure the staff assigned to negotiate and draft the bill pushed the right buttons for his state. He was the only member of Congress in the room.
I read two pieces about the STEM (science, technology, engineering, and math) workforce this morning: an op-ed in USA Today and an editorial in the Washington Post. Both reference a recent Census Bureau study, which found that only a quarter of bachelor’s degree graduates in STEM fields end up working in those fields. But from there, the two pieces head in very different directions.
The Post says Census got the number of STEM jobs wrong, because, in fact, one out of every five jobs requires STEM skills, even if the students end up working outside their field. That’s stretching definitions, though the idea that many STEM grads can use what they learn outside their field of study is certainly true. But, amazingly, the Post also says the numbers don’t really matter: “Whatever the number generated, it should not be seen as determining the need for STEM education.” Whether one STEM worker in four finds a job in his field of study, or only one in ten, the education is so valuable we can’t have too many STEM majors, according to the Post editorial. Why, even farmers should have STEM degrees because, “many farmers rely on genetic modification of crops.” That’s just silly. Many truck drivers rely on civil engineering, but they don’t need engineering degrees any more than a farmer planting hybrid corn needs a math or genetics degree.
The Post’s editors believe there’s no such thing as an oversupply of STEM graduates, but their editorial doesn’t review the boom and bust history of STEM graduate oversupply, or even mention what effect oversupply might have on the earnings or aspirations of the students who have paid for and worked to complete STEM bachelor degrees. By contrast, the USA Today authors (some of whom have done research with EPI before), all of whom are academics with close ties to actual students, do care about what happens to STEM grads after they leave school and look for work. They are rightly concerned that the wages of IT personnel have been flat for 16 years, and they worry that overproducing STEM grads, coupled with industry’s immigration proposal to triple the number of IT guestworkers, will suppress wage growth and deny IT workers the middle class security most would like, let alone a fair share of the tech industry’s fabulous profits.
Anyone who knows the shameful history of the U.S. response to Jewish refugees before World War II wants to avoid repeating it. As the Nazi genocide progressed, the United States turned its back on the Jews, infamously forcing the St. Louis, a ship with more than 900 German-Jewish refugee passengers, to sail back to Europe in June 1939 after it was refused entry to Cuba, rather than issuing visas to the refugees. President Franklin Roosevelt could have intervened through executive action, but chose not to in the face of the public’s anti-Semitism, worries about competition for scarce jobs, and isolationism. More than 250 of the St. Louis’s passengers eventually died in the Holocaust.
At the same time, Congress refused to take steps to save Jewish children who were fleeing Nazi violence and persecution. Bills introduced in the House and Senate to admit 20,000 German-Jewish children beyond the existing quotas were allowed to die in committee.
The United States had no role in the rise of the Nazis, but we are deeply involved in the political instability of Central America. We took sides in a civil war in El Salvador and supported a coup in Honduras. The United States bears a large part of the responsibility for the drug violence and armed conflict in Central America that are driving so many children from their home communities. We are the consumers of the drugs whose sale and transshipment enriches the drug gangs and fuels the drug wars. Without our insatiable consumption of illegal drugs, the drug violence would diminish. Moreover, as Jeff Faux has argued, without our militarization of the region and our billions of dollars of support for violent, right-wing governments and militias, large parts of the population would not live in terror. And finally, without our trade policies, which have disrupted the Central American economies and displaced tens of thousands of agricultural workers, there would be less of an economic incentive to immigrate to the United States.
Anti-government conservatives have been attacking public employees and their pensions for years, but the attacks picked up after the financial crisis in 2008, when the stock market crashed, leaving many public plans—and private plans, too—temporarily underfunded. Rather than going after Wall Street and searching for ways to prevent a repeat of the sub-prime mortgage crisis or too-big-to-fail banking, which threatened the entire economy (and not just public employee pensions), conservatives are trying to use the crisis to cut pension benefits. They want to claim that the current state of public pensions is somehow inevitable, even though it is unprecedented and clearly the result of the market crash. They want people to ignore the cause of the pension plans’ underfunding and simply do away with them, replacing them with individual accounts, just as they want to destroy Social Security and replace it into private accounts.
As part of this anti-pension campaign, National Review Online recently published a story with the provocative headline, “How the High Costs of Public-Sector Pensions Affect States’ Economic Growth.” The story, in fact, has nothing to do with economic growth. Instead, it describes a report that simply ranks the states on the size of their pension plans’ underfunding, while admitting that its data are out-of-date, which “argues for caution in interpreting this or any study on current public pension funding.”
The Court’s Harris v. Quinn Decision Undermines Home Health Care and Further Weakens Collective Bargaining Rights
Monday’s Supreme Court decision in Harris v Quinn was destructive in several ways. It undermines the unionization that has been transforming home health care from a rock-bottom, minimum wage job with no respect and no benefits into something much better. That, in turn, could worsen the care provided the disabled by lowering pay, making the profession less attractive, and worsening turnover. The nakedly political decision damages the constitution and the credibility of the Court. And the majority opinion foretells even greater damage for public employee unionization and collective bargaining when the Court revisits these issues again.
The Court held that the historically disadvantaged , mostly female home-care workers (“personal assistants”) and their union have lesser rights than “full-fledged public employees” because the state is not their employer for all purposes—though it is for the crucial purposes of bargaining their wages and benefits. Because of that, in the Court’s view the employees’ union and the state don’t have a great enough interest in labor stability to enforce a provision in the collective bargaining agreement that requires all covered employees to pay their fair share of the costs of bargaining and enforcing the contract (an agency fee). Dissenting employees get a free ride, because in the Court’s view, their right not to pay the agency fee is more important than the right of the majority of home-care workers to have an effective union that will raise their wages far beyond the cost of the agency fee. That balancing is plainly wrong and reflects Justice Alito’s 19th century dislike of unions, his hostility to the government’s duty to “promote the general welfare,” and his contempt for majority rule. (So what if a majority of the employees voted to require the fair share provision?)
The Supreme Court is about to issue a decision on a case that could hit working people—especially working women—right in the paycheck. Harris v. Quinn is about isolating individual workers so they are weak and unable to protect themselves in a labor market that fails to reward their hard work. By weakening the unions that have organized home care workers, given them a voice, and helped them win wage and benefit increases that are lifting many of them out of poverty, Harris v. Quinn could block the road to economic opportunity for a largely female, economically disadvantaged workforce. Right-wing groups want the public to think Harris v. Quinn is as a case about freedom of speech and association; they pretend it is about protection of the individual—but how does it protect an individual if the end result is a smaller paycheck?
American workers, by and large, have suffered from stagnant wages for decades. At the same time, the percent of working Americans in unions or covered by union contracts has been falling. Studies suggest that a substantial part of this wage stagnation is the result of eroded unionization, as fewer workers, both union and nonunion, benefit from the unions’ ability to improve wage standards in particular industries and occupations. The consequence: profits have reached historic highs, CEO pay is in the stratosphere, but workers are not sharing in the nation’s ever-increasing wealth.
Almost anything that worsens these trends ought to be avoided, including anything that weakens unions or makes it harder for workers to bargain successfully. Americans need a raise: more pay for the work they do, better benefits, and more regular hours, and they need help in getting it. On their own, the ability of individual Walmart cashiers, for example, or Amazon’s warehouse workers to get a raise is negligible. But collectively, if they can join together and bargain as a group, they would have a chance to exert enough leverage to make the companies listen to their demands. The players in the NFL, MLB and NBA all know that what they have won had to be wrested from management.
Today, Sen. Tom Harkin (D-IA) and eight co-sponsors introduced legislation to restore overtime protections for low- and mid-wage salaried workers. The Restoring Overtime Pay for Working Americans Act would guarantee overtime pay for millions of salaried workers earning less than $52,000 a year.
Americans are working longer hours and are more productive than ever—yet wages are largely flat or falling. Indeed, the median worker saw a wage increase of just 5.0 percent between 1979 and 2012, despite overall productivity growth of 74.5 percent. One reason Americans’ paychecks are not keeping pace with their productivity is that millions of middle-class and even lower-middle-class workers are working overtime and not getting paid for it. This is because the federal wage and hour law is out of date—and especially the regulation that sets the salary level below which all employees must be paid time-and-a-half for their overtime hours.
Updating overtime rules is one important step in giving Americans the raises they deserve. If the threshold is raised from its current $455 per week ($23,660 annually) to $984 per week ($51,168 per year, the threshold’s 1975 level, adjusted for inflation) millions of salaried workers would be guaranteed the right to overtime pay if they work more than 40 hours in a week.
This bill would go above and beyond the recent announcement by President Obama in strengthening overtime pay regulations. I salute Sen. Harkin for taking up this issue and calling for a reasonable salary level, indexed for inflation, along the lines Jared Bernstein of the Center on Budget and Policy Priorities and I have advocated. Sen. Harkin led the battle in Congress in 2004 to block a set of very detrimental changes the Bush administration made to the overtime rules. While Sen. Harkin was not entirely successful, he did force the Bush Labor Department to issue a final rule that was less damaging than its first proposal. It’s heartening to see that both Sen. Harkin and his colleagues, along with the Obama administration, continue to believe that low and mid-level workers should be paid when they work overtime. If more workers were paid time-and-a-half when they worked overtime, it would boost the economy and show that in America, hard work pays off.
If I told you that the legislature of State X is going to make it easier for workers in the state, including public employees, to earn overtime pay, you might wonder what effect that would have on employment in the state. What if the cost to employers from having to pay more workers time and a half for overtime is so high that it causes businesses to move to a neighboring state that has a weaker requirement? Or what if it raises costs and employers respond by laying off employees?
Those fears are being raised by groups like the National Retail Federation, the Heritage Foundation, and the CATO Institute, all of which oppose President Obama’s plan to revise the Fair Labor Standards Act regulations that govern the right to overtime pay. The president wants to make it easier for relatively low-paid employees to earn overtime pay when they work more than forty hours in a week, but the conservative business lobbyists are already yelling about job loss—with no real explanation or evidence that job loss is a realistic outcome.
Fortunately, California provides a kind of natural experiment about what happens when more workers have a right to overtime pay, and the results are reassuring. Regardless of their job duties, California law guarantees overtime pay to employees earning less than $640 per week, while its neighboring states—Arizona, Nevada, and Oregon—only guarantee overtime pay to workers paid less than $455 per week, less than a poverty level wage for a family of four. Other rules in California make it harder for employers to deny overtime pay to even better paid workers whose jobs include duties that could be considered managerial or professional. In California, but not in its neighboring states, an employee has to spend a majority of his time doing managerial or professional work in order to be excluded from the right to receive overtime pay.
The Supreme Court is expected to decide Harris v. Quinn, a case of major importance for American workers, in the next few days. Many observers predict a disastrous decision that will cripple union organizing and collective bargaining for home health aides, child care workers, and other direct care aides. But the Court could go much further and threaten the ability of all public employees to form unions and bargain collectively with any state or local government.
The case involves the ability of public employees to bargain for a provision in their contracts (known as an agency fee) requiring every covered worker to pay his or her fair share of the cost of maintaining the union, negotiating a contract, and enforcing its provisions. A majority of states allow such provisions, but so-called right-to-work states do not.
Why is this so important? Wages in most occupations have stagnated or fallen since 2000, even as profits have climbed to historic heights and inequality has worsened. The erosion of the minimum wage, rising CEO pay, and many other factors have played a role, but the decline of unions is near the top in importance. Business and conservative groups have lobbied around the nation to impose right-to-work as a way to weaken unions and keep wages low. It’s a successful strategy: research shows that workers in right-to-work states are paid $1,500 a year less, on average, than employees where unions are free to bargain for agency fees. Negotiating and administering union contracts, organizing employees, and winning elections is expensive, especially when outside groups and politicians mount well-funded opposition campaigns, as recently occurred at Volkswagen in Chattanooga, TN. Right-to-work laws allow employees to get the benefits of union contracts without paying their fair share, drying up a key source of the funds unions need to survive.
A recent story from NPR’s Andrew Schneider, about a construction boom and skilled labor shortage in Texas, is missing some of the links needed to understand what is happening there and why. The elements are all there: the huge loss of construction jobs following the financial crisis in 2008, the energy boom creating jobs regionally even while construction employment nationally remains about a million and a half jobs lower than its peak, a decline in unauthorized immigration, and contractors grudgingly increasing pay to attract workers.
The two missing links are the role of the construction owner, like Chevron, in crushing the unions that provide skilled journeymen in the construction trades, and a clear discussion of the wage levels needed to attract skilled workers from parts of the country the recovery hasn’t reached. The story says wages are rising in Texas, but from what to what? Are wage levels high enough to persuade a journeyman electrician from Michigan or Los Angeles to relocate to Houston? Or are they unreasonably low, given the scarcity of skilled workers and the years of training required to produce a journeyman? How do union wages compare with non-union wages? The story never says.
Oil giants like Chevron can afford to have their construction contractors pay well for skilled work, but they resist. Organizations they fund, such as the Business Roundtable, have led a decades-long campaign to weaken or destroy the building trades unions that actually train the greatest number of skilled tradesmen. Chevron, Koch Industries, ExxonMobil and many other energy industry corporations fund the American Legislative Exchange Council and its legislative efforts to kill unions and eliminate labor standards. It’s hard to hear Chevron complain about a labor shortage when Chevron and other Fortune 500 companies themselves are a major cause. They don’t merely fight unionization, they also oppose the state and federal prevailing wage laws that protect construction wages from being driven lower and allow union apprenticeship programs to continue providing the best-trained workers.
Schneider is wrong to suggest that community college vocational training programs are the long-term solution to the shortage of skilled labor in Texas. The real solution is to restore the power and reach of the unions, raise wages to attract more workers, and grow the only proven way to develop the necessary skilled labor—apprenticeship programs funded by employers and jointly administered by unions and employers.
No Sign of Labor Shortages in Construction: There are Seven Unemployed Construction Workers for Every Job Opening
The National Association of Home Builders wants you to believe their members face a serious shortage of construction workers, even though construction employment is more than 1.7 million jobs below its pre-recession peak, and unemployed construction workers outnumber job openings in construction by well over seven-to-one. More and more news stories, even in respected sources like NPR and the Wall Street Journal, repeat the builders’ talking points and toss around wage figures with very limited resemblance to reality. (A healthy dose of skepticism is in order when employers complain about high wages. How many tile setters make “$100,000 a year,” which the WSJ story suggests is now the pay for experienced workers in Denver? Not many. The median hourly wage for tile setters in Denver is less than $18 an hour, and nationally, even the 90th percentile wage for tile setters is only $73,510 a year.)
The best way to identify a tight labor market, let alone a market beset by actual labor shortages, is to examine wages. Basically, if wages aren’t rising, the labor market isn’t tightening; if they don’t rise strongly, there are no shortages. As Adam S. Posen and David Blanchflower argue in a recent paper, if wages aren’t rising, it’s a sign of labor slack, weak demand, and a weak economy.
So what’s happening in residential construction? The Wall Street Journal describes a frenzied search for skilled labor, causing pay to soar “to boom-time levels and beyond.” While it’s true that construction wages have risen over the past two years, they’ve risen from such a deep depression that they are still well below the levels of 2009. In fact, the real hourly wages of residential building workers are still 4.2% below 2009, a loss significantly deeper than that of the overall private sector workforce, whose wages are 0.9 percent below 2009.