The summer has begun and greedy employers across the country are searching for people who will work for them for free. Meanwhile, in a few weeks the nation will celebrate the 75th anniversary of the Fair Labor Standards Act, which makes it illegal for most employers to take advantage of their fellow Americans’ work without paying at least the minimum wage for it.
At a time when the real value of the minimum wage is well below the levels of the 1960’s (making entry-level workers quite affordable), when the weak labor market is forcing college graduates in record numbers to take jobs that don’t require a college degree and entry level wages for college grads are already substantially below the levels of 10 years ago, the exploitation involved in not paying employees anything at all is shameful and economically dangerous.
It’s dangerous because the main obstacle to a healthy recovery from the Great Recession is weak consumer demand, and unpaid internships hurt consumer demand in two ways. First, they leave interns without any wage income, reducing their ability to purchase the products and services supplied by businesses. Second, they lower expectations and reduce wage demands by employees who do have paying jobs.
Nevertheless, employers from coast to coast think that simply by calling a job an internship, they can take advantage of young people desperate to start their careers and get the benefit of their talents and work, but not pay them even a measly $7.25 an hour.
How many times have you heard business lobbyists and spokesmen say: “Regulations are killing jobs”? Or how about, “Excessive regulations are driving manufacturers overseas”?
Well think about what’s been happening in Bangladesh, where so many US clothing retailers and garment makers, from Wal-Mart to L.L.Bean, have gone to escape livable wages and regulation. That lack of regulations is killing workers, not in ones and twos, as happens here in the United States several times every day, but hundreds at a time. Factory fires as devastating as the Triangle Shirtwaist fire of a century ago have now been followed by a building collapse that has so far claimed 300 lives, the workers crushed, bleeding to death or suffocating.
Several stories I’ve read report that only one business (a bank) heeded the warnings of police that the eight-story factory building was so unsafe that it had to be evacuated. The other businesses shrugged off the warnings and ordered more than 2,000 people to work in mortal danger.
In a story headlined, “France Drowning in Rules and Regulations, critics say,” WaPo writer Edward Cody presents a caricature of a country with one of the highest standards of living in the world. Based on little more than interviews with disgruntled officials in one small town, Cody variously describes France’s regulatory regime as “strangling,” “smothering,” or “burying” the economy. For example:
“France and its southern European neighbors, such as Italy and Greece, are increasingly being buried in such norms, rules and directives. In the past two decades, the number of legal do’s and don’ts has become so great that businessmen and economists1 warn that it is smothering growth just as the continent tries to dig out of its worst slump in a generation.”
But France is not Italy or Greece, and the truth is almost the opposite of Cody’s claim that, compared with the Scandinavian countries, France discourages business. In fact, the World Bank measures the nations of the world on the ease of starting a new business, and France ranks well above all four of the Scandinavian countries. France also ranks about 80 places ahead of Europe’s economic powerhouse, Germany.
Over the next several days and weeks, I’ll be reviewing the provisions of the 844-page comprehensive immigration reform bill, the Border Security, Economic Opportunity, and Immigration Modernization Act, with an eye on those elements that will particularly affect the operation and outcomes of the labor market.
Let’s start with the most important provision first. Secure Borders delivers on its most important goal: granting legal status to almost all of the eleven million immigrants currently here without authorization to work. Every undocumented immigrant who came before January 2012, who passes a criminal background check and pays $500 will be given a provisional status that will allow them to work.
That single, dramatic step will change their lives for the better, improve the labor market prospects of every other legal resident with whom they compete for jobs, and free their employers from the taint and guilt of an illegal employment relationship. It won’t make these immigrants full citizens or give them the full rights of other residents of the United States, but it will remove them from the precarious status of working illegally, with the terrifying threat of discovery and deportation always hanging over their heads. They will be free to join unions, to ask for, demand, or strike for higher pay, and will be free to quit and look for a better job with another employer. The job lock and fear that keep so many of the undocumented underpaid or underemployed will end immediately.
For that, I take my hat off to the Gang of Eight.
The Republican majority on the House Education and Workforce Committee could raise the minimum wage, cover more employees with overtime protection, pass paid sick days legislation, pass a paid family leave bill, or do a host of other things to make life easier for America’s working families. Instead, as Judith Lichtman of the National Partnership for Women and Families testified last week, they have chosen to weaken overtime protections and shift more power from employees to their bosses.
The Republicans have trotted out a bill introduced back in 1995 and unsuccessfully pushed again by business lobbyists in 2003. They call H.R. 1406 the Working Families Flexibility Act, apparently because it will bend and twist working families even more than they already are as they try to balance the needs of home and work. Rather than give employees the flexibility to take a paid day off when they or their kids are sick, the bill gives their employers the flexibility not to pay them overtime when it is earned.
Lichtman does a great job of pointing out what a sham the bill is, and the National Partnership has also published a good fact sheet that points out that the bill greatly increases the risk that employees will work overtime but never get paid for it. The chance that thousands of businesses will fail each year while holding millions of dollars of unpaid overtime credits in leave banks is very real. Half a million businesses fail in an average year.
Judy Lichtman politely calls H.R. 1406 “smoke and mirrors.” I think it’s fair to call it a fraud, for the truth is that the law already permits the only benefit the bill claims to provide, time off for employees who work overtime. Nothing in current law prevents an employer that makes an employee work overtime from paying for that overtime and then providing unpaid compensatory time off to the employee at a later date.
The student workers who recently went on strike at McDonald’s in Harrisburg, Pennsylvania took a big chance. They could have been fired and then deported from the country. Instead, they got their boss fired and got a meeting with the head of the State Department program that brought them to the U.S. But they aren’t finished: they want to make sure that what happened to them never happens to foreign students again.
My colleagues and I met with four of the young workers last week, who came from Peru, Paraguay, Chile and Argentina. All had been recruited into the State Department’s J-1 summer work travel visa program by GeoVisions, a State Department-approved sponsor, which promised them three months of steady wages for slinging Big Macs, decent housing and a cultural experience, followed by a month of travel wherever they wanted to go.
What they and 14 other students got was an unpredictable mix of work hours—as little as four hours in a week for some and 25 hours in a row for others. They were required to live in the basements of homes owned by their boss, Andy Cheung, who packed six into one house and eight into another, jammed together with little privacy—only a curtain to separate the beds of four young men from four women. They were cheated on wages they earned, overcharged for their housing and forced to walk to work on highways instead of riding in free transportation they’d been promised. At least one was actually in debt to Cheung after almost 3 months of work.Read more
On Tuesday, March 5, Sen. Tom Harkin (D-IA) and Rep. George Miller (D-CA) announced the introduction of The Fair Minimum Wage Act of 2013 to raise the minimum wage from $7.25 an hour to $10.10 an hour over the next three years. Once it reaches $10.10, the minimum wage would be raised automatically each year to account for inflation and ensure that it never loses its purchasing power. The bill also raises the wages of those who rely on tips, phasing in an increase until the “tipped minimum” – currently stuck at $2.13 an hour — reaches 70 percent of the regular minimum wage.
Harkin and Miller spoke eloquently about the need to make work pay, to reward people for the time and effort they put into serving or delivering food, caring for children and the elderly, and cleaning hotel rooms or office buildings.
Citing Economic Policy Institute calculations, Harkin estimated that 30 million workers would get a raise, including 17 million women. He pointed out that nearly 90 percent of minimum wage workers are adults, not teenagers, and that two-thirds are in low or moderate income households.
The two business people and two workers Harkin and Miller invited to the event made an enormous impression. Margot Dorfman, the President of the U.S. Women’s Chamber of Commerce, reiterated her support for the minimum wage, denouncing the idea that raising the minimum wage would be bad for business. “Nothing could be farther from the truth,” she said. “Our sales depend on consumer demand. If people aren’t paid a fair wage they can’t afford to shop in our stores or buy our services.” Dorfman made it clear that the NFIB and US Chamber of Commerce don’t represent small business. “They’re looking out for the big corporations that want to pay workers as little as possible. They want the taxpayers to pay for their workers’ food stamps. That’s not the position of women-owned small businesses.”Read more
Teddy Wayne’s Sunday New York Times article about the exploitation of 20-somethings in the workplace (“The No-Limits Job”) should wake up a lot of young workers and their parents. There is something seriously wrong with a corporate culture that uses extremely low-paid or even unpaid labor and then treats the workers like they own them.
The low point in the article is probably the story of Dalkey Archive Press, of Champaign, Illinois, which not only employs unpaid interns but threatens them with “immediate dismissal” if they come in late or leave early without permission, are “unavailable at night or on the weekends,” or “fail to respond to e-mails in a timely way.” But as Wayne makes clear, round-the-clock, 24-7 internships can be exploitative even when paid.
One of my personal heroes, Ross Perlin, the author of Intern Nation, is interviewed by Wayne and warns about a sinister change in our culture that has made it acceptable to young people to give up their personal time and devote themselves to an employer, totally blurring the line between personal life and work while receiving almost no financial reward. This problem is worst in what Perlin calls the “rock-star professions”—film, TV, publishing, and media—and in creative industries like fashion, but the trend is spreading to other fields as well. Even un-hip businesses like manufacturers and law firms have begun to advertise for and employ unpaid labor, and failure to pay for overtime is endemic in white-collar work.
The Fair Labor Standards Act, which requires payment to employees of at least the minimum wage, is conveniently ignored by employers who rationalize their exploitation and illegality by arguing that the jobs are for the benefit of the interns, who usually do learn something and can put the experience on their resume. However, as Perlin explained in his book and Wayne’s article corroborates, a new phenomenon, the serial intern, is developing.Read more
These stories trace the progress of legal actions against some of America’s best-known tech companies over their attempts to suppress their employees’ wages through anti-competitive “no-poaching” agreements. The Department of Justice found evidence that Intel, Adobe Systems, Google, Apple, Pixar, and Intuit made secret agreements not to call each others’ employees with job offers, thereby reducing job opportunities and salaries in the industry. DOJ induced the six companies to settle an anti-trust suit in 2010 with a promise not to engage in similar restraints on trade in the future. The companies paid no damages and admitted no violations of anti-trust law, but the employees who had been hurt by the practices were not satisfied.
Employees filed suit against the six companies and Lucasfilm in federal court alleging an illegal conspiracy to restrain wages and salaries and seeking damages. When the companies tried to have the suit dismissed, the district court judge sided with the plaintiffs, and in January, according to Phys.org, Judge Lucy Koh ruled that the case should proceed to trial and that Apple CEO Tim Cook, Google Chairman Eric Schmidt and Intel chief Paul Ottelini may be questioned by plaintiffs’ attorneys about their roles in the alleged conspiracy. The trial, reportedly, will take place in November.
I recommend keeping this case in mind when it comes time to evaluate the companies’ claims that their interest in bringing skilled guestworkers to the U.S. has nothing to do with getting cheaper labor. Never mind that the H-1B visa, which ties employees to a single employer for 6 years or more, is a bigger restraint on employee mobility than a no-poaching agreement.
Jordan Weissman put together a nice series of charts in The Atlantic that help us better understand what’s at stake in the debate over tripling the number of “guest” workers admitted to the U.S. each year with college degrees and skills in science or engineering. It’s gotten harder and harder for U.S. PhDs to find work, and especially work that pays a salary that corresponds to the intellect of and investment made by these students, who are truly our best and brightest. A question members of Congress have to answer is: do we want to encourage or discourage U.S. students from pursuing these top degrees? Is NIH paying science post-docs enough? Is industry doing enough to recruit young U.S.-trained scientists? Will the Hatch-Klobuchar plan to admit 300,000 temporary, foreign high tech workers each year make matters better or worse for our young PhDs? Will the addition of as many as 1.8 million new foreign tech workers over six years crowd the U.S. labor market and depress wages?
Most members of Congress know very little about the H-2 guest worker visa programs, and, unfortunately, what they do know is mostly from speaking to a handful of business people who use the program or from listening to lobbyists who market ridiculous “studies” about how H-2 workers help the economy. They might have an image in their minds of “guest” workers lining up to take good jobs in the United States that no one else wants, and happily returning year after year. But Congressmen have little contact with H-2 workers and most are unaware of the widespread and ugly abuses that have marred the programs for decades. If they knew how often the programs have been used to exploit, cheat, and degrade foreign workers, they would realize it is no better than the infamous Bracero program of 50 years ago and should be either drastically reformed or abolished.
The Southern Poverty Law Center has been representing H-2 workers throughout the southern U.S. for years, hearing their stories of abuse and exploitation and suing on their behalf to recover at least some of the wages promised but unpaid, the fees extorted from helpless victims, the travel costs and debts incurred in return for unkept promises of well-paid, steady work. SPLC’s experience is captured in its new report, Close to Slavery 2013, which every journalist and immigration policy expert ought to read.
Every H-2 worker is not mistreated, but as Close to Slavery makes clear, so many workers are so badly abused that the program can’t be allowed to go on as it has. Year after year, international recruiters trick unsophisticated foreigners into borrowing large sums of money for the right to have a good job and substantial earnings in the U.S., only to find themselves locked into rural labor camps, poorly housed and fed, treated like prison labor, paid far less than promised, and then forced to repay recruiters and employers for expenses never mentioned during recruitment. SPLC has represented thousands of abused workers and won tens of millions of dollars in damages, but most H-2 workers have no access to our legal system, and even the judgments won often go unpaid.
Attempts by the U.S. Department of Labor to fix the H-2B non-agricultural program through regulatory improvements have been blocked by senators and congressmen from both parties who either don’t understand or don’t care that allowing these abuses to continue hurts U.S. workers, not just the foreign victims. The government’s failure to fix the well-documented problems in the program’s design makes it clear that any expansion of the program must be defeated. Real immigration reform would include reform of the H-2 visa and much tighter controls on the businesses that compete by exploiting the program and the guest workers themselves.
The most surprising part of the president’s State of the Union address last night was his forthright endorsement of the principle that no one in the United States of America should work full-time and yet still find himself in poverty. That is a statement I often heard from Sen. Edward Kennedy, but I can’t remember any other president—not JFK, not LBJ, not Jimmy Carter, and not Bill Clinton—announcing it so clearly and forcefully.
The president called on Congress to raise the minimum wage to $9.00 an hour, which translates into a full-year income of $18,720, almost enough to meet the federal poverty guideline for a family or household of three people ($19,090), and more than enough to satisfy the guideline for a family of two ($15,130).
Raising the minimum wage is a perfect complement to immigration reform and its promise of legalizing millions of undocumented workers. Many of them are working at wages below even the current $7.25 per hour minimum wage and cannot have amassed much in the way of savings. If they are to pay the penalties and back taxes the immigration bill will require, and pay for English lessons to meet the bill’s other requirement, they will need to be paid fairly for their work.
I hope that Congress sees fit to include a higher minimum wage in any immigration reform bill it enacts.
In a CNN opinion piece published Jan. 28, Tamar Jacoby, the president and CEO of ImmigrationWorks USA, shows amazing disdain for the one-third of Americans working low-wage jobs. She claims that they shouldn’t want the jobs they have because they can find more productive and better paying work. Jacoby thinks a job as a home health aide is beneath the aspirations of native-born Americans. So much for the dignity of work!
Dr. Martin Luther King Jr. criticized Jacoby’s way of thinking about “low productivity” work in a famous speech to striking sanitation workers just before he was assassinated:
If you will judge anything here in this struggle, you’re commanding that this city will respect the dignity of labor. So often we overlook the worth and significance of those who are not in professional jobs, or those who are not in the so-called big jobs. But let me say to you tonight, that whenever you are engaged in work that serves humanity, and is for the building of humanity, it has dignity, and it has worth. One day our society must come to see this. One day our society will come to respect the sanitation worker if it is to survive. For the person who picks up our garbage, in the final analysis, is as significant as the physician. All labor has worth.
The fact is that 40 million Americans work in extremely low wage jobs and are either grateful to have them or unable to find anything better. It’s shocking Read more
AARP unveiled new research from its Middle Class Security Project yesterday, with related papers focusing on topics ranging from rising health care costs to credit card debt. At the release, AARP CEO Barry Rand gave a rousing speech, coming out strongly against a proposed cut in the Social Security cost-of-living adjustment (COLA), echoing a similar stance by the New York Times this Sunday. Rand focused on the need for both solvency and adequacy, emphasizing that Americans don’t want Social Security reform to be part of deficit reduction talks and were willing to contribute more to strengthen the program.
Policy director Debra Whitman, an economist and Social Security advocate Rand hired to replace the too-quick-to-compromise John Rother, said most Americans were surprised at how low Social Security benefits were—less than $14,000 per year on average. In the report, Whitman and her co-authors highlight the fact that benefits would be cut further for future retirees with a scheduled increase in the normal retirement age to 67, equivalent to an across-the-board benefit cut. As a result of this and other negative trends, the report estimates that three out of 10 middle-income workers will become low-income retirees.
This might seem like an obvious place to call for shoring up Social Security benefits for the middle class—or at least halting their decline. But though Whitman and many of her colleagues may prefer to close Social Security’s projected shortfall with revenue increases, AARP continues to avoid ruling out additional benefit cuts or endorsing specific revenue proposals, such as lifting the cap on taxable earnings. This might seem like a wise PR move, given the flak AARP gets for drawing a line in the sand (even when it actually hasn’t). But, like President Obama’s administration, AARP will be attacked as intransigent by some critics no matter how conciliatory they are, so they might as well stake out a clear position, backed up by the facts in this report.Read more
Students and Scholars Against Corporate Misbehaviour (SACOM) reports that on Jan. 10, workers at one of Foxconn’s China plants (in Fengcheng, Jiangxi Province) went on strike. The factory produces Apple’s iPhone connector and products for other companies. SACOM suggests the strike resulted from the sweatshop working conditions at the plant, poor pay, lack of union representation, health and safety violations, and general lack of respect for the workers. The resulting protest by more than 1,000 workers was met with a harsh crackdown, with water cannons and physical violence apparently used against the strikers. SACOM notes the contrast between the ongoing harsh conditions reported by workers and the often-rosy public relations campaign by Foxconn and Apple.
This report deserves careful attention. SACOM is a Hong Kong-based NGO that has enlisted workers in Apple’s Foxconn factories to report on life and work inside the giant complexes. It is the most credible source of information about conditions in Apple’s manufacturing plants in China. SACOM was the organization that first revealed the wave of suicides at Foxconn, the construction of suicide nets, Apple’s use of underage students on its production lines, the continuing use of students compelled to work at Foxconn under threat of being kicked out of school, grossly excessive overtime, and many other abuses.
Laura Rowley has an excellent response to the silly op-ed by Steve Cohen published in Tuesday’s Wall Street Journal. Cohen wrote that paying interns to deliver clothing for photo shoots, run copy machines, or clean the green room at a TV studio is dumb. The young people doing those jobs are not employees, according to Cohen; they’re simply auditioning.
Cohen admits that the grunt work he and his son did in separate internships at a law firm and a magazine was “boring, mindless, repetitious” and yet, “essential to the workings of our offices.” Nevertheless, Cohen says the chance to prove himself a good employee was so valuable to him, as was the exposure to a law office’s operations, that his employer shouldn’t have had to pay him even minimum wage.
Rowley accepts Cohen’s conclusion that his internship was valuable but says the experience shouldn’t be limited to people like Cohen (a former media executive) and his son, who can afford to work for free. What about the kids graduating from college with $50,000 of debt, or the children of factory workers or waitresses who can’t support their grown children in New York City? Should they be denied the audition, the exposure to interesting work environments, the chance to prove themselves? Read more
Michigan’s ‘right-to-work-for-less’ legislation: Bad for workers, undemocratic, fundamentally immoral
The Michigan “right-to-work” law that was enacted in December is bad public policy. Its supporters claim it will attract business to the state and lift incomes, though research shows the opposite is true.
By prohibiting contracts that require union-represented employees to pay dues, “right to work”—or, more accurately, “right to work for less”—gives workers a right to freeload, a right to accept the benefits of a union contract while paying nothing for the cost of organizing the union, winning the contract, or enforcing its terms. Employees can demand that the union represent them in a grievance while paying absolutely nothing for the cost of that representation. This enshrinement of freeloading was matched by the way the bill was passed—by a lame-duck legislature, without committee hearings, without an opportunity for amendment or public input.
In an amazing, impassioned speech, Rep. Brandon Dillon (D-Grand Rapids) condemned both the undemocratic way the right-to-work-for-less bill was jammed through the Michigan legislature and the immorality that animates it. Watch his short but powerful speech below:
Michelle Rhee and her misnamed school privatization organization, StudentsFirst, recently issued a report card on the nation’s schools that has been roundly criticized, and rightly so. Rhee ranks all 50 states and the District of Columbia by how closely they hew to her vision of school “reform,” which involves high stakes testing, maximizing the number of charter schools, expanding voucher programs that use tax dollars to pay for private schools, and eliminating teacher tenure and pension plans. Rhee is so keen to reduce the pensions of teachers and their reward for longevity that she makes their elimination an “anchor policy” and gives it triple weight in her ranking methodology.
She also cares deeply about and grades the states on removing school governance from local control and the influence of democratically elected school boards. She prefers giving governance instead to the kind of mayoral control or state control that put her in charge of the D.C. school system under Mayor Adrian Fenty. That gets triple weight, too.
Curiously, despite Rhee’s love of high stakes testing, student performance as measured by the gold-standard test of student achievement, the National Assessment of Educational Progress (NAEP), plays no role in her ranking of the states. These “rankings” put Louisiana and Florida (both bottom 10 on the NAEP), for example, far ahead of high-achieving states like Massachusetts, Minnesota, and New Jersey, all of which ranked in the top three on the NAEP.
Doug Henwood took a close look at Rhee’s rankings and found they have a negative correlation with success on the NAEP: “[T]he higher the StudentsFirst score, the lower the NAEP reading score. The correlation on math is even worse, -0.25.”
When you consider that Rhee’s rankings actually punish states that limit class size, it’s easy to understand their negative correlation with achievement.
Rhee’s right-wing agenda of privatization, de-unionization, and the funneling of public tax dollars into corporate coffers is becoming clearer to the public—and perhaps even to her own staff. Coupled with her recent stumble over the shootings at the elementary school in Newtown, Conn., her reluctance to oppose a Michigan bill to allow concealed weapons in schools, and the PBS Frontline exposé about cheating scandals during her tenure as chancellor in D.C., Rhee and her agenda may be losing their glitz and appeal.
We can only hope so.
If House Republican leaders John Boehner and Eric Cantor act like Thelma and Louise and drive their convertible over the “fiscal cliff,” some of the only victims in the early weeks of 2013 will be the 2 million unemployed Americans currently receiving Emergency Unemployment Compensation. They will have a hard landing when Congress suddenly cuts them off from the unemployment insurance checks that are temporarily paying their bills and keeping a roof over them and their families.
Unlike in some previous budget fights, the current law says that no benefits will be paid beyond Dec. 28; there will be no phase-down for those who have been unemployed for more than 26 weeks. One week, they receive unemployment insurance—the next, they won’t. And hundreds of thousands of others who would have become newly eligible for EUC in 2013 will receive nothing once their regular state benefits are exhausted.
This will also have an immediate effect on the economy, as both EPI economists Heidi Shierholz and Larry Mishel, and the Congressional Budget Office have shown. Ending $30 billion in EUC payments will remove $48 billion of economic activity from the economy, and take 300,000 to 400,000 jobs along with it.
If reports are correct, Congress and President Obama are currently considering resolving the fiscal showdown by, among other things, cutting Social Security benefits through changing the cost of living adjustment. It is ridiculous. It is outrageous.
Historically, Social Security, defined-benefit (DB) pensions, and private savings successfully formed the foundation of middle-class retirement security. But DB pensions have declined in the private sector: only 18 percent of workers are covered, compared to nearly 40 percent in 1980. And since the early 80s, stagnant wages have caused the net worth of the bottom 60 percent of households to decline; the typical household approaching retirement age has less than the equivalent of two years’ worth of income saved in a retirement account—if they have retirement savings at all. Social Security remains the most reliable and effective part of the nation’s provision of retirement security, and for many households, retiree benefits averaging less than $15,000 a year are their sole source of income.
Our current deficits largely stem from the economic downturn, the Bush tax cuts, overseas wars, an unpaid-for expansion of prescription drug benefits, and a failure to control the excesses and abuses of the financial industry. In fact, over the last few decades, Social Security was running a surplus, providing cover for ill-advised revenue and spending decisions that Republicans now refuse to rescind. And over the long run, Social Security is legally prohibited from adding to the deficit.
So why are Republicans insisting that resolving the fiscal showdown include Social Security benefit cuts? Read more
Ease of doing business in U.S. and record corporate profits contradict Chamber’s regulatory complaints
After years of hearing the Chamber of Commerce and certain other business groups complain about the regulatory burden government imposes, far too many Americans (and politicians) are probably convinced that regulations are excessively burdensome to businesses. Not so, according to two important new pieces of information.
First, after examining 185 nations on 10 key factors, the World Bank’s latest “Ease of Doing Business” study ranks the U.S. No. 4 overall and No. 1 among the 25 largest economies. In the words of the World Bank, “A high ranking on the ease of doing business index means the regulatory environment is more conducive to the starting and operation of a local firm.” Unlike so many business trade associations and lobbyists, the World Bank recognizes that the regulatory environment includes many rules that enhance and protect business activity, and the U.S. ranks especially high in protecting investors, enforcing contracts, and getting credit.
A second fact that contradicts business complaints about burdensome regulations is that corporate profits, which were $1.75 trillion in the third quarter of 2012, are at an all-time high (higher as a percent of GDP than at any time in our history). That corporate America’s bottom line is doing extraordinarily well should, at a minimum, make one skeptical of the seemingly endless studies by business groups which somehow find that regulations are damaging them.
That leads to the central question: Given that the U.S. has one of the most welcoming regulatory environments in the world, why aren’t U.S. businesses creating more jobs instead of hoarding the historic profits they’ve accumulated? The answer, as most economists know, is slack demand. Without customers able and willing to spend, businesses won’t invest. The solution is the same as it was at the start of the recession: because financially squeezed consumers can’t spend and businesses won’t, it is the responsibility of the federal government to make large enough investments in infrastructure and human capital to lift the economy and protect our future prosperity.
The Wall Street Journal’s owner and editors hate unions, so it is no surprise that the newspaper published an editorial on Tuesday gloating over Michigan’s enactment of “right-to-work” legislation to ban contracts between labor unions and employers that require all employees covered by the contract to pay union dues or their equivalent. The editorial is so full of untruths, half-truths and right-wing extremist ideology that a full response would wear out both author and reader. But let’s take a brief look at how the 1 percent defends this ugly attack on employee rights and economic security.
The heart of the editorial is the contention that right-to-work-for-less laws are good for workers, families and state economies, which it supports with various pseudo-scientific studies, including one by the Taxpayers Protection Alliance that—ludicrously—claims the typical Michigan family of four would have had annual income $54,224 greater in 2008 if Michigan had enacted a right-to-work-for-less law in 1977. In 2008, median income for a family of four was about $78,000, so the Journal is proposing that it would have been roughly $132,000! Curiously, only four states had median household income over $100,000 in 2008, and not one was right-to-work-for-less. Read more
The American public wants Congress to get the economy moving and create jobs. Rightly so, given 7.9 percent unemployment and 23 million workers underemployed. So why is Speaker of the House John Boehner focused on something else? Why, for example, does he support continuing the Bush tax cuts for the very rich, which do almost nothing to boost the economy, and oppose continuing Emergency Unemployment Compensation for the long-term unemployed, which is a proven job creator, in addition to being financial life support for millions of families?
Extending just the upper-income Bush tax cuts would boost GDP growth by 0.1 percentage point, increasing nonfarm payroll employment in 2013 by only 102,000 jobs—far less than one-tenth the impact of continuing the temporary ad hoc stimulus measures. Continuing EUC would do three times as much in terms of GDP growth and support 300,000 to 400,000 jobs. In terms of jobs created per dollar of budget deficit, EUC is more than five times as effective as the Bush income tax cuts for the wealthy. Combine them with the Bush estate tax cuts and they are one-seventh as effective as EUC. Read more
Business groups and their allies, including New York Mayor Michael Bloomberg and various non-profit advocacy organizations, have been arguing for years—without real evidence—that the United States is losing a race to attract the world’s best and brightest young scientists, engineers, computer techies and mathematicians. In a report entitled, Immigration of Foreign Nationals with Science, Technology, Engineering, and Mathematics (STEM) Degrees, Ruth Wasem of the Congressional Research Service (CRS) recently reviewed the statistics regarding these highly skilled migrants and concluded: “The United States remains the leading host country for international students in science, technology, engineering, or mathematics (STEM) fields.” The United States has been and continues to be extraordinarily welcoming to foreign students, and especially to those in the STEM fields. CRS reports that the number of foreign graduate students in the STEM fields increased by 50 percent since 1990:
“The number of full-time graduate students in science, engineering, and health fields who were foreign students (largely on F-1 nonimmigrant visas) grew from 91,150 in 1990 to 148,923 in 2009, with most of the increase occurring after 1999. Read more
The Washington Post lead editorial today claims that the chained CPI-U is a better measure of the inflation facing the elderly than the current estimate of consumer prices used for that purpose. The editors argue that using the chained CPI-U is therefore not just an effective way to get substantial budget savings from a major entitlement program, but also a fair way to do so.
If the current COLA is set too high because it is calculated using a measure that systematically overstates inflation, then we ought to change it. But in fact, it doesn’t. Contrary to the Post’s assertions, the chained CPI-U and the current unchained version probably understate inflation for the elderly and disabled because the mix of goods and services they purchase is much more heavily weighted toward medicine and health services, where inflation is very high, than it is for younger consumers. In addition, elderly and disabled beneficiaries spend a greater share of their incomes on necessities like rent and utilities, and are therefore less able to substitute cheaper goods and services in response to price increases.
It is possible that Alan Simpson and Erskine Bowles didn’t know this when they recommended Read more
There is a widely held view in Washington that if employers don’t like the labor force they find in their area, they should be able to replace the locals with foreign workers. If people who live and work where a business is located aren’t willing to work for however little a business owner wants to pay, the business should be able to resort to “guest workers,” foreign workers who are permitted to work only for that employer while they are in the U.S. and who have to leave as soon as the employer has finished with them.
The Washington Post, for example, recently announced that any comprehensive immigration reform would have to give businesses “timely access to adequate numbers of seasonal and agricultural workers.” Francisco Ordonez, a McClatchy News reporter, spoke to Republican leaders who say that if immigration reform is going to happen, “Democrats have to stand up to unions and support an expanded guest-worker program, including some non-agriculture jobs.” The unemployment or underemployment of 15 percent of the U.S. labor force apparently isn’t enough to provide “adequate numbers.” Read more
It’s remarkable how quick people are to blame workers and their unions whenever a company goes bankrupt or goes out of business. On Friday, I heard Rush Limbaugh on the radio blaming the Bakery Workers for the closing of the Hostess bakeries. His insight apparently didn’t require a look at the company’s history of buyouts and downsizing, the CEO and managers’ pay, the competition, the wage cuts the employees had already taken, or even the company’s products, which have contributed more to diabetes and heart disease than nutrition for decades.
The New Yorker‘s James Surowiecki does a better job of considering the many factors that contributed to such a brutal loss of jobs in “Who Killed The Twinkie?” Surowiecki focuses on the inability of Hostess Brands’ s management to adapt to a changing market rather than the supposed greed of the workers who were trying to hang onto pension benefits they had bargained for decades ago.
The election results signaled that the implementation of essential financial regulations can go forward, increasing the likelihood of stable and sustained economic growth. Yet despite this fresh indication of support for curbing the excesses of Wall Street (including the election of Elizabeth Warren, the most powerful consumer advocate in the country and an insightful critic of the financial industry), the lame duck Congress may, under the public radar, act in a contrary fashion. There is some momentum to move forward legislation that would severely hamper financial regulators, over objections by leading regulators at the federal and state level, and without appropriate due diligence about the bill’s effects.
Specifically, one would hope and expect the lame duck Senate to do nothing to compromise the authority of independent agencies like the SEC and the Consumer Financial Protection Bureau as they implement the Dodd-Frank reforms of Wall Street and the financial sector. Nonetheless, as New York Times editorial writer Teresa Tritch warns, the Senate Homeland Security and Government Affairs Committee might quickly take up and approve legislation to diminish the independence of these important agencies and many others, including the Consumer Product Safety Commission and the National Labor Relations Board. Read more
The Center for Immigration Studies issued an alarming-sounding report yesterday that, at first glance, seemed to indicate that immigrants have gotten most of the jobs during the recovery from the Great Recession. In fact, the great majority of jobs gained back since the recession have gone to natives, but clever cherry-picking of the comparison dates by CIS could trick a reader into believing otherwise.
The following figure from the CIS report tells the story:
Employment declined from 2009, when President Obama took office, to early 2010, continuing the employment shrinkage that began in 2007 and escalated in 2008. Natives, who make up 84 percent of the workforce, took the brunt of the recession’s job losses. Read more
Every once in a while, someone will write a column so densely packed with deception and misinformation that it truly astonishes me. Last week, U.S. News and World Report published such a column about government regulation of business by John Allison of the Cato Institute. I feel compelled to respond.
Let’s start with Allison’s use of a thoroughly discredited study that estimated the annual cost of regulation to be $1.75 trillion in 2008. This report, by Nicole and Mark Crain of Lafayette College, has been shown to be based on flimsy data, a flawed methodology based on a misuse of polling data, and an equally discredited estimate of the costs of OSHA regulation whose original data are untraceable. The Small Business Administration funded the research, but the Chairman of the Council of Economic Advisers has condemned it:
“The Council of Economic Advisers has looked at those claims and the $1.75 trillion figure is utterly erroneous. In fact, their [Crain and Crain’s] own data (which come from the World Bank) show that countries with smarter regulations have higher standards of living, and the United States has one of the best regulatory systems in the world.” Read more