Jim Tankersley has an amusing piece about Jamie Dimon, the CEO of JPMorgan, who is trying to distract attention from JPMorgan’s London Whale fiasco, its $13 billion settlement of charges relating to abusive trading in mortgage backed securities, and its role in the Madoff Ponzi scheme, by talking about the ”skills gap.“ Tankersley is appropriately skeptical about the so-called skills gap, which has become the chief excuse of the 1% for wage stagnation and rising inequality. His story’s first line is: “Jamie Dimon has no problem finding skilled workers to hire.”
Dimon himself admits, there’s not much evidence of a skills gap in the banking business: “If I travel all around America, a lot of people talk about the skills gap. We don’t see it ourselves that much.” So what about the rest of American industry? Apparently, Dimon doesn’t really know much, other than hearsay: “But if you go to Silicon Valley, they will talk about nothing but the lack of—they used to call them computer engineers, now they call them software writers. If you go to some of the manufacturing companies, they’ll talk about the lack of technical skills.” Silicon Valley companies do “talk” about a skills gap, but the claim that there are severe IT shortages is contradicted by a good deal of economic evidence that suggests the talk is self-serving.
Today’s New York Times published one of the most important stories yet about the Detroit bankruptcy, a story that shines a harsh light on the financial institutions whose tricky deal-making helped tank the city’s finances. At the heart of the story is Detroit’s decision to enter into swap contracts that were spectacularly ill-advised. Mary Williams Walsh gives us the history:
“Detroit entered into the swap contracts back in 2005, when it tapped the municipal bond market for $1.4 billion to put into its workers’ pension funds. Much of the deal was structured with variable-rate debt, and the swaps were intended to work as a hedge, to protect Detroit if interest rates rose. But as things turned out, rates went down, and under those circumstances, the terms of the swaps called for Detroit to make regular payments to UBS and Merrill Lynch Capital Services, now part of Bank of America. Detroit has been doing so, even in bankruptcy. The swaps now cost it about $36 million a year.
“In retrospect, it seems clear that Detroit was already struggling in 2005 and was a poor candidate to borrow the $1.4 billion. The borrowing required an unusual structure to avoid violating the city’s legal debt limit. In 2009, the debt was downgraded to junk, putting the city out of compliance with the terms of the swaps. So Detroit restructured the swap obligations, offering the two banks the tax revenue that it received from local casinos as a backstop.”
I don’t usually associate the American Enterprise Institute with compassion for the unemployed or anything, really, other than pro-business, anti-government policy prescriptions and rhetoric. So I was surprised and heartened by a thoughtful post by AEI Money & Politics blogger James Pethokoukis, who skewers the notion that cutting unemployment benefits will spur job creation.
Pethokoukis analyzes the effect of reductions in weekly benefit levels and total weeks of unemployment compensation enacted in North Carolina this summer—cuts so draconian they led to the state being kicked out of the federal Emergency Unemployment Compensation program that provides weekly benefits to long-term jobless workers. North Carolina Republicans claimed the cuts would force lazy workers to find jobs, thereby solving the state’s unemployment crisis.
Instead, as Pethokoukis shows, tens of thousands of North Carolinians stopped looking for jobs that weren’t there once they were cut off from weekly benefits (which are only paid to people who are actively seeking paid employment). The labor force participation rate fell nearly a full percentage point, as 42,656 workers gave up looking and dropped out of the labor force. If they hadn’t, according to Pethokoukis, “the state’s jobless rate would have increased to 9.1% rather than sharply declining.” University of California at Berkley economist Jesse Rothstein predicted this dropout effect in a 2011 paper he presented at EPI, which disputed the notion that unemployment insurance causes significant unemployment.
Hopefully, the North Carolina experience will help persuade House Republicans like Dave Camp to stop arguing that killing the EUC program will boost employment. As EPI and the CBO have shown, paying out $25 billion in EUC in 2014 will help the economy, not hurt it. Killing the program won’t help a single unemployed person find work, but will instead depress aggregate consumer demand and cost the economy 310,000 jobs.
In a swift reaction to ugly publicity about suicides, injuries, and mistreatment of workers, Biel Crystal, one of Apple’s most important suppliers of touchscreen cover glass for its iPhones, reached an agreement with the Chinese labor rights group, SACOM, to take three steps toward better conditions by January 2014:
- Clear work contracts for workers that include details on terms of contract, terms of probation, position, affiliated department. The company also will not ask workers to turn in the contract when work relation ends.
- Compensation and assistance for injured workers in accordance with China’s Regulation on Work, related injury insurance and adequate measures to protect workers from work injury.
- One day off every seven working days.
These very basic protections might seem like minimal progress, but in light of the appalling conditions at Biel Crystal’s plant, even providing limited basic protections is welcome.
The fact that the company has acknowledged such significant shortcomings in these fundamental areas of labor rights shows just how far Apple is from living up to its commitments to decent labor conditions throughout its supplier chain. It should be a reminder to all who follow Apple that the recent report by its hand-picked monitor, the Fair Labor Association, was little more than a whitewash that covered up the truly horrendous labor conditions in the factories that make Apple products. The FLA’s investigation also assessed conditions for less than one-fifth of the workers in Apple’s supply chain and thus missed gross violations at other factories, such as at the Biel Crystal plant.
Farmworker Justice, the tiny but tireless organization that advocates for migrant and seasonal farmworkers, held a briefing on Capitol Hill yesterday to celebrate the 30th anniversary of the Migrant and Seasonal Agricultural Protection Act (AWPA), a federal law designed to help farmworkers get paid and obtain safe transportation to the fields without fear of retaliation. I worked on the legislation and the implementing regulations 30 years ago as a staffer for Rep. Bill Ford, so I listened with mixed emotions as lawyers familiar with the Act outlined both how the law has helped and where it has fallen short.
AWPA did not change the basic powerlessness of migrant farmworkers, especially the undocumented workers from Mexico and Central America who do most of the farm work in the West and Southwest. As Hector Sanchez of the Labor Council for Latin American Advancement and Mary Bauer, a legal aid attorney from Virginia, put it, farmworkers still live and work in Third World conditions here in the U.S., the richest country on earth. They are often housed in shacks, trailers, cars, or even chicken coops with no plumbing.
On Monday, Paul Krugman dissected the Republican view that emergency unemployment insurance should be ended, throwing 1.3 million jobless workers into immediate financial crisis. Sen. Rand Paul (R-KY), for example, claims that unemployment compensation keeps workers from taking jobs and that people should be cut off from unemployment benefits after six months to keep them from becoming dependent. The fact is, as Krugman points out, there are far more people looking for work than there are job openings, and for two out of three unemployed workers it is literally impossible to find a job, no matter how hard they work or how small a paycheck they are willing to work for.
The notion that people would rather get unemployment compensation than a job ignores how low weekly benefits actually are. In many states with unemployment rates above the national average, the average pay replacement rate is far lower than the national average. Mississippi, for example, has 8.5% unemployment and a UI pay replacement rate of 28.6%. Tennessee’s unemployment rate is 8.4% and its UI pay replacement rate is 28.2%. And Arizona’s unemployment is 8.2%, while its UI pay replacement rate is a near-rock bottom 24.9%. It’s hard to argue that such stingy benefits are keeping anyone from taking a job. The average weekly benefit in Mississippi in 2013 was $194, which works out to less than $5 an hour for a 40-hour work week.
No one should be surprised that the 5th U.S. Circuit Court of Appeals reversed the National Labor Relations Board’s decision in D.R. Horton, Inc. v. NLRB and sided with the corporation against the interests of its employees. (The decision lets employers refuse to hire employees unless they agree to give up any right to file a lawsuit in court or to file a class action or joint grievance before an arbitrator when their employment rights are violated.)
By and large, that is what courts do when they are presented a choice between corporate interests and the rights of workers—especially their rights to unionize or act collectively. The history of American law is an almost unbroken train of cases where courts have trampled the rights of workers to organize against more powerful employers. Even when Congress or state governments act explicitly to protect working families and equalize the balance of power in the workplace, the courts usually take the side of the corporations (they’re people, too, after all). In the 19th century, the courts treated unions as conspiracies in restraint of trade and applied the anti-trust laws against them. When Congress amended the anti-trust laws in 1914 to free unions from anti-trust regulation, the courts nevertheless found ways to outlaw boycotts, strikes, and picketing. Congress had to pass a new law in 1932 that barred federal courts from issuing injunctions in peaceful labor disputes.
Apple’s ugly labor problems aren’t limited to its Foxconn factories, and they aren’t going away.
The labor rights group Students and Scholars Against Corporate Misbehaviour (SACOM) first exposed the wave of employee suicides at Apple’s Chinese contractor, Foxconn, and the grueling conditions in which hundreds of thousands of employees work. SACOM has regularly revealed Apple’s failure to abide by its so-called code of conduct, and along with another watchdog group, China Labor Watch, has monitored Apple’s failure to live up to its announced intention to clean up sweatshop conditions at its factories in China and to stop the use of indentured student labor.
In April, China Labor Watch reported that two more Apple/Foxconn workers had committed suicide by jumping from buildings to their death. China Labor Watch also found labor law violations at ten other Apple suppliers, including Pegatron.
Now SACOM has released a new report that details the serious labor rights violations at another Apple supplier, Biel Crystal, which reportedly makes 60 percent of Apple’s touch screens. SACOM reports that five Biel Crystal workers employed at its Huizhou factory have killed themselves since 2011. One possible cause is the stress of working horrific hours—11 hours a day, seven days a week, with only a day off in a month. This is a gross violation of Chinese labor law, which limits overtime to 39 hours a month. The Biel Crystal employees work more than twice as much overtime as the law allows.
When will American consumers wake up to Apple’s crushing exploitation of Chinese workers?
Yesterday’s NYT column by David Carr about internships doesn’t just bury the lede, it takes it hostage and heads off in the opposite direction before revealing that Carr thinks businesses ought to pay their interns and will be rewarded for it. Carr starts out by seeming to make fun of young people who think they’re too good to get someone else’s coffee and drycleaning and seems in particular to have no patience for an intern who moved to New York to work for Vogue only to find herself being abused and undervalued—and crying into her pillow at night. He argues that lawsuits enforcing interns’ right to be paid might be ill-conceived.
But the column takes an abrupt turn when Carr describes the experience of The Atlantic Media, which ended its practice of hiring unpaid interns soon after the Labor Department issued a Fact Sheet declaring most unpaid internships at for-profit companies illegal. The Atlantic began paying its interns (Carr doesn’t mention that it provided backpay to previous interns who had been unpaid) rather than doing away with internships altogether. It created year-long fellowships involving mentoring and education, substantive work, and honest compensation. Far from suffering financially, the company has thrived. The fellows are diverse, smart, creative, and bring new energy to the company.
Last week, I wrote that Congress has been tying the hands of the Postal Service by limiting its ability to develop new products or to price its services competitively. Worse, Congress filled the Postal Service’s pockets with weights to drag them down financially, adding tens of billions in costs for retiree health insurance on a schedule no other corporation has to live with, while charging it more than $50 billion for pensions earned before the Postal Service was incorporated in 1971—costs that the federal government should bear, not the Postal Service.
It’s a recipe for killing the Postal Service, and postal management has sometimes seemed like a willing victim. Most notoriously, they’ve pushed to end six-day delivery of mail, even though customers love it.
But this weekend brought good news. Recognizing the strength their unparalleled, universal delivery system represents, postal management has negotiated something new: not subtracting, but adding a day of package delivery on Sunday. For now it’s limited to delivering packages for Amazon in New York and Los Angeles, but once these deliveries have been extended to the rest of the nation, who knows what other customers will decide to take advantage of this new opportunity?
I firmly believe that if the Postal Service is freed to compete more fairly, without having obstacles strewn in its path by a hostile Congress, it can rise to the challenge of maintaining universal delivery at a price that customers can afford. The Postal Service and its hundreds of thousands of employees deserve the chance.
The next time you read in the newspaper or hear on TV that there is a shortage of construction workers and we have to import tens of thousands of workers from abroad in order to have enough construction labor, remember this memo from Jason Furman, Chair of the Council of Economic Advisers:
“Construction employment rose by 11,000 in October and is up 185,000 over the past year, but remains 1.9 million jobs below its previous peak, underscoring the importance of continued strengthening in housing markets and investments in infrastructure. Of the 185,000 increase in construction employment over the past year, the bulk (104,000) is in residential construction, while 65,000 are in non-residential construction, and 16,000 are in heavy and civil engineering construction. The gains in residential construction are consistent with the recovery we have seen unfolding in the housing sector, but additional steps still must be taken to create a more durable and fair system that promotes responsible homeownership. Moreover, the fact that employment in non-residential and heavy and civil engineering construction has grown slowly is an important reminder that we should also be looking for opportunities to invest in America’s roads, bridges, and schoolhouses.”
The lengths to which businesses will go to get cheap labor are boundless. Tech firms, despite their luster, are no better in this regard than landscaping firms, hotels, or construction companies. Most tech firms want to reduce their labor costs (except for their executives), and a surprising number seem to treat the law as an obstacle to get around. I’ve written about the Justice Department’s settlement with 6 of the most famous information technology (IT) companies in America over anti-trust charges involving a conspiracy to suppress wage demands, and a subsequent lawsuit filed by the employees who would have been harmed by the conspiracy.
A newer case came into the spotlight last week. The Justice Department’s $35 million settlement of civil fraud charges against Infosys, a firm whose business model is largely based on the outsourcing and offshoring of IT work to India, facilitated by using the H-1B guestworker visa, exposed a pervasive scheme of visa abuse in the H-1B and B-1 “business visitor” visa categories. This scandal lends support to the efforts of Sen. Charles E. Schumer (D-N.Y.), Sen. Richard J. Durbin (D-Ill.), and Sen. Charles Grassley (R-Iowa) to put new limits on IT outsourcing firms.
Five days a week, I receive the Cal-OSHA Reporter News Digest, which compiles reports of deaths and injuries in California as well as other states. It’s a regular reminder that I am a lucky man to have worked my entire life in think tanks, government offices, and law firms. Every issue is filled with grim stories of workers mangled by machinery, suffocated by corn in a silo, killed in falls or struck by a careless driver as they worked on the highway, or sometimes, killed in ways so horrible that it beggars the imagination. On any given day, dozens of people are killed in the workplace, and the Cal-OSHA reporter captures only a few of these stories. It does not, and cannot, begin to capture the extent of workplace injuries, since for every one death there are a thousand injuries. And the toll from occupational illness is too slow and insidious to capture, though silicosis, black lung, asbestos disease, and cancer from hundreds of toxic chemicals kill an estimated 50,000 workers every year. Today’s Cal-OSHA Reporter was typical—a perfect reminder that American workers are not sufficiently protected from harm, that OSHA and its sister agencies in the states face an overwhelming challenge with far too few resources, and that employers that put their employees’ lives at risk and take them from their families forever are rarely punished in a way that meets the enormity of what they did or allowed to happen.
In a New York Times article about a drive led by the United Automobile Workers (UAW) to unionize Nissan’s workforce at a factory in Canton, Mississippi, various local businessmen are quoted extolling the value to Mississippi of being a “right-to-work state” and maintaining a “non-union environment.” Given the economic condition of Mississippi, one has to wonder who, exactly, has benefited from Mississippi’s anti-unionism.
Mississippi has been a “right-to-work” state for nearly 60 years, plenty of time to benefit from its non-union environment, but its per capita income in 2012 was the lowest in the United States—not just low, but dead last.
Mississippi has the highest poverty rate in the nation, as well. 1 out of 5 Mississippi households has income beneath the official poverty line. (“Right-to-work” seems to be associated with high poverty since 9 of the 10 highest poverty states are “right-to-work.”)
Does the future look brighter? Not much. In terms of education, Mississippi is at the bottom again, ranking last in test scores on the gold standard National Assessment of Education Progress. Mississippi is the only state in which fewer than 1 out of 5 eight graders is proficient in math and reading.
Mississippi’s low rate of unionization has not led to prosperity. It might be time to try something new.
People wrongly think the economy is like the weather, a natural force outside of our control. So thinking about problems like high unemployment and declining wages leave people feeling hopeless because they seem to result from large historic forces that we can’t affect like globalization.
The truth, however, is that the economy isn’t like the weather: It’s entirely man-made and the rules are set by politics, not God or nature. Globalization is real, but the terms of globalization—the rules for how the internationalization of trade and production operates and affects workers and companies—are set by politicians and the organizations they’ve created through international treaties. We can change those rules and shape globalization so it does less harm to working people in the United States and around the world.
One of those rules changes would prevent companies from manipulating their currencies to make their exports cheaper while simultaneously making goods imported from other countries more expensive. China, Japan, and other countries have done this for years, buying hundreds of billions of U.S. dollars to weaken their own currencies and making it cheaper and easier to export goods to the United States. This strategy has been very successful, and together, China, Singapore, Taiwan and several other countries, including Japan, export hundreds of billions of dollars more to the United States in manufactured goods than we send to them, leaving us with a huge trade deficit that costs jobs and undermines wages here. The Peterson Institute for International Economics estimates that foreign currency manipulation has cost the United States between one million and five million jobs.
The National Parks–Yellowstone, Yosemite, Great Smokey Mountains and all the rest—are shutting down, along with much of the government, because what Politico called a “hard-line faction of House GOP lawmakers” can’t accept the results of the last election or the fact that Congress enacted the Affordable Care Act. They are carrying obstructionism to a disastrous new low.
This is a personal nuisance, since my wife and I planned a seven-night stay in Yellowstone that would have started Saturday night. Luckily, we checked ahead and learned that, as this Q and A from Bloomberg News recounts, everyone will be kicked out of the park, vacation be damned!
“Q. What about my trip to Yellowstone?
A. You’re out of luck. According to the Interior Department’s shutdown contingency plan: “All areas of the National Park and National Wildlife Refuge Systems would be closed and public access would be restricted.”
The U.S. Department of Labor issued final regulations today that extend minimum wage and overtime protections under the Fair Labor Standards Act to about two million previously excluded home care workers—personal care assistants for the frail elderly and the disabled, home health aides, and other direct support paraprofessionals working in the homes of patients and clients needing personal help with needs ranging from changing the dressings on wounds and administering non-injectable medications to personal hygiene and ambulation. The home care workforce is growing fast as the population ages and more people are cared for in their homes, rather than in costlier institutional settings. These jobs need to be decent jobs that pay a living wage.
Although domestic workers, like nannies, chauffeurs and housekeepers, were first covered by the FLSA in 1974, most home care aides have been excluded from minimum wage and overtime protections by the Act’s vague “companionship” exemption, which was never meant to cover people providing services for pay, while in the employ of a third party, rather than in a direct relationship with the patient or elderly client. An agency—and there are very large agencies, some employing tens of thousands of home care workers—could therefore ignore FLSA rules about paying for travel time when an aide moved between one client’s home and another’s, ignore the rules governing break time, and avoid paying time and a half for overtime when an aide worked more than 40 hours in a week. Some employers have even paid less than the miserably low federal minimum wage of $7.25 an hour.
Vincent Gray’s statement in support of his veto of the Local Retailer Accountability Act was a collection of non-sequiturs, half-truths, vague promises, and nonsense. He divides his critique of the LRAA into six sections.
- “The bill is not a living wage bill because it would raise the minimum wage only for a small fraction of the District’s workforce.” The Mayor says he wants, instead, “to raise the minimum wage for all District residents.” Of course, the District could do both: require a higher minimum wage for billion-dollar corporations and a lower one for other businesses, including mom and pop stores. But the fact is that Mayor Gray hasn’t put forward any minimum wage increase, and the level that Councilmember Tommy Wells has suggested is $10.25—far below a “true living wage.” Each member of a 2-parent family with two kids would need to earn nearly $20 an hour to have a true living wage in the District.
- “The bill is a job killer, because nearly every large retailer now considering opening a store in the District has indicated they will not come here or expand here if this bill becomes law.” The Mayor should identify the expansions Target, Home Depot, Wegmans, Lowe’s, Walgreens, Harris Teeter, AutoZone and Macy’s will make if the bill doesn’t pass. If they have such plans, why haven’t they announced them? And how credible is this threat? What billion-dollar retailer would invest here with a minimum wage of $10.25 an hour but not with a minimum wage of $12.50 that gives a credit for other benefits? The Mayor is either being dishonest, or gullible, or is simply unwilling to stand up to corporate bullies.Read more
Washington, DC, Mayor Vincent Gray has not announced a decision yet on whether he will veto the bill to require big, billion-dollar retailers to pay a fair wage to their employees in the District of Columbia. The writing seems to be on the wall, however, given that Gray’s deputy mayor for planning and economic development, Victor Hoskins, is holding the bill up as a “job killer.”
Why is a bill that requires total compensation far below the national median wage ($16.30) considered a job killer? The Large Retailer Accountability Act would require the biggest retailers to pay $12.50 an hour in total compensation (wages and benefits), barely more than the federal poverty income threshold of $23,550 for a family of four and nowhere near what it costs to live in the District. The LRAA is flexible and permits a lower wage: it would permit an $11.50 an hour wage, for example, if the business paid other benefits like health care or a pension contribution that equaled at least $1.00. How is that a job killer for a billion dollar corporation? Well, it just is, says Walmart, which has threatened to abandon plans for three new stores in DC if the bill is enacted.
For politicians, the prospects of visible new jobs (no matter how poorly they pay) are almost irresistible, so any threat to the three Walmart stores, however much it smacks of bullying and exploitation, makes some of them blind to the other implications of Walmart jobs paying about $8.90 an hour.
Juliet Lapidos had a nice editorial in The New York Times on Saturday that took on the issue of unpaid internships—based on the recent news about Sheryl Sandberg’s Lean In foundation using Facebook to find a “part-time, unpaid” intern “with editorial and social chops” as well as “Web skills.” Lapidos reports that the ensuing uproar made the foundation reconsider and promise to pay the rather skilled employee they were looking for. Given that an estimated two-thirds of unpaid interns are women, and given that unpaid internships on average lead to much poorer employment prospects than do paid internships (fewer job offers and much lower salary offers), Lean In’s attempt to exploit this sketchy alternative to paid employment was embarrassing. The way to help young women get ahead is to pay them for their work, for their “editorial chops” and for their web skills, not to exploit them.
Lapidos made an important point about what’s needed to change the culture that makes this exploitation seem OK. A recent spate of lawsuits has brought the law to the attention of many employers for the first time, and it is dawning on some of them that there is a risk to cheating young workers out of the minimum wage. But interns looking for references for their resumes are unlikely to sue, and most cases–even if meritorious–don’t involve enough back pay to be worth a private lawyer’s time. What’s needed is energetic enforcement by the U.S. Department of Labor and the various state departments of labor. Very little effort would be required to make a difference. If investigators scanned Craigslist they could find plenty of cases to prosecute, and with appropriate publicity and media attention it wouldn’t take long for employers to catch on and clean up their act.
As Lapidos put it, “proper enforcement of labor law shouldn’t depend on exploited interns’ willingness to suffer through courtroom ordeals.” That’s what we pay government lawyers for.
No week seems to go by without an imbalanced attack on regulatory protections by a trade association, a “think-tank,” a member of Congress, or a journalist. These attacks frequently feature a reference to the growth in the Code of Federal Regulations, even though it is a meaningless measure of whether we’re overregulated. In offering another bill to diminish regulation, Sen. Angus King, for example, wrote yesterday that, “According to a recent study by the Progressive Policy Institute, the number of pages of federal regulations has increased by 138 percent since 1975, from 71,224 pages to 163,301 in 2011.”
That might sound like a lot of pages, but if you’re not using methylene chloride, polyvinyl chloride or hexavalent chromium, the hundreds of pages devoted to regulating those chemicals have no effect on you or your business. The same goes for IRS transfer pricing regulations, the Department of Agriculture’s beef slaughtering regulations, or OSHA’s crane safety regulations. No one in a small retail business, the tourism industry, or Maine’s lobster industry cares about or need worry about any of them.
Like most of his colleagues, Sen. King denounces “excessive and unnecessary regulations” without identifying examples. If he has a legitimate example, he should let the secretary of the appropriate agency know about it, or work to repeal it legislatively.
Instead, he and his colleague, Sen. Roy Blunt, propose the creation of a 9 member commission that would identify regulations “in need of streamlining or repeal.” The commission would report their recommendations to Congress in the form of a bill that would be “fast-tracked” (protected from many of the normal motions and procedures) and that could not be amended. This proposal is flawed in a number of ways.
Bankruptcy Judge Should Respect Michigan’s Constitution Even If Michigan Governor Rick Snyder Doesn’t
Gov. Rick Snyder is corrupting Detroit’s recovery even before it begins. By ignoring the state’s constitution and its protection for accrued public employee pensions, Snyder is undermining the rule of law and adopting the kind of “ends justify the means” reasoning that usually precedes violations of public trust. Snyder has violated his oath to uphold and defend the state’s constitution by asking a federal court to reduce the pensions of Detroit’s public employees, including many who risked their lives for years in service of the city.
The Michigan constitution is unambiguous. Section 24 states:
“The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.”
Yet, Gov. Snyder has set in motion a bankruptcy process whose aim is to do exactly what the constitution forbids – to diminish that contractual obligation and pay Detroit’s pensioners and retirees less than the full financial benefits they earned.
One can only hope that U.S. Bankruptcy Court Judge Steven Rhodes will rule, instead, that Emergency Manager Kevyn Orr and Gov. Snyder did not have the authority to file a bankruptcy petition that would unconstitutionally impair the city’s pension obligations.
So much is wrong in Stephen Richter’s NYT op-ed today, called “What Really Ails Detroit,” starting with his grossly inaccurate timeline. Richter says Detroit’s (and the United States’) “day of reckoning” came in the 1970s when American car manufacturers began facing competition on their home soil for the first time. That’s 20 years after the Big 3 started to abandon Detroit for the suburbs and Detroit began to hemorrhage its white population. As I said in an earlier blog post, “Between 1947 and 1958, the Big Three built twenty-five new plants in the Detroit metropolitan area, all of them in suburban communities, most more than fifteen miles from the center city. As the jobs moved away, so did the city’s residents. From 1.85 million in 1950, the city’s population declined to 1.62 million in 1960 and 1.51 million in 1970.” That’s a loss of more than 300,000 residents in two decades. The exodus of white residents (the entire decline was accounted for by whites, since the number of black residents increased), of jobs, and of wealth has never stopped. Detroit now has a population under 700,000, but the white population has declined by more than 1.4 million since 1950.
What ails Detroit is not the skills gap that Richter posits, but abandonment by its white population and by the owners of capital, starting with the auto industry, but including retail corporations, insurance companies and almost everyone else who had previously invested in the city. Detroit’s unemployment rate is the highest of any of the 50 largest cities because almost no one is investing there. When corporations do invest, as Chrysler did with its new Jefferson North assembly plant, they will find plenty of employees with the skills to make manufacturing a success again.
Detroit’s current citizens and the public employees who serve them are not the cause of Detroit’s fiscal problems. They are the victims of forces beyond their control, including globalization, capital flight and racism. No one can, with any seriousness, blame Detroit’s librarians, social workers, garbage collection workers or street cleaners for the city’s catastrophic loss of population and tax base, the long decline and near-collapse of the Big 3 auto companies, or the 1967 riots, which launched a frantic exodus of businesses, white residents, and money from the City of Detroit to the suburbs.
As the suburbs grew and new highways encouraged sprawl in the 1950s and 1960s, Detroit’s manufacturing employment base and population—and especially its white population—began to decline. As Thomas Sugrue has pointed out, between 1947 and 1958, the Big Three built twenty-five new plants in the Detroit metropolitan area, all of them in suburban communities, most more than fifteen miles from the center city. As the jobs moved away, so did the city’s residents.
From 1.85 million in 1950, the city’s population declined to 1.62 million in 1960 and 1.51 million in 1970. By 1980, white flight was nearly complete: whites, who made up 83% of the population in 1950, were only 34% of the population, one million fewer than in 1950. The terrible riots in 1967 accelerated the movement of white families to the suburbs, but a combination of opportunity and racism had spurred hundreds of thousands to leave Detroit well before the U.S. Army occupied it. The hostility of whites toward blacks, their fear, and economic self-interest as they understood it led them to refuse to live in integrated neighborhoods, spurring them to sell their homes and abandon the city.
Now that the Senate has confirmed the appointments of a full slate of members of the National Labor Relations Board (the quasi-judicial body that decides labor relations cases and protects the right of workers to organize unions), the 18-month long fight over the president’s nominations looks ridiculous. Despite precipitating a mini constitutional crisis over the president’s right to make recess appointments, and coming close to the parliamentary equivalent of nuclear war in the Senate, the end result is little different than if the Senate had simply confirmed President Obama’s original nominees. On the other hand, a lot of damage has been done along the way.
For those who haven’t followed closely, Senate Republicans filibustered the nominations of two Democrats, Sharon Block and Richard Griffin, who strongly support the National Labor Relations Act’s mission of encouraging collective bargaining. They were targeted because Republicans sought to demonize the Board and President Obama over a case involving Boeing’s decision to open new facilities in South Carolina. In that case, the NLRB filed a complaint against Boeing because company officials had described the decision to locate the plant in South Carolina as punishment for the Machinists union’s exercise of its legally protected right to strike. Even though no Board member ever ruled on the case, which Boeing and its union eventually settled, Sen. Lindsay Graham and others made it a cause celebre and fabricated an election campaign story that President Obama was trying to prevent investment in right-to-work states like South Carolina. Sen. Graham even suggested that the NLRB should be put out of business.
Rep. Susan Bonamici of Oregon has a great idea that will simultaneously help young people with limited means pay for college, get them job experience, and stimulate our stumbling economy. She proposes to have the federal government pay for tens of thousands of internships, making them available to low-income, Pell Grant-eligible students who could otherwise not afford to take them. Under Bonamici’s Opportunities for Success Act, H.R. 2659, the federal government would send funds to colleges and universities, which would use them to provide stipends equaling at least the minimum wage, but potentially more in situations where a student was not currently attending school (such as a summer internship) and would have to pay for food, lodging and transportation. The maximum grant would be $5,000.
The need for such a program is clear. Paid internships are increasingly important to the ability of college students to gain skills, make professional connections, and find jobs after graduation. As Rep. Bonamici says in the bill’s “Findings” section:
- Many students struggle to make ends meet; 66 percent of young community college students dedicate more than 20 hours a week to an outside job, and the need of many students to maintain a part-time or full-time job reduces or eliminates the time available for an internship.
- Internships often require significant time commitments or temporary relocation, which many students are unable to afford; these additional living expenses include housing, meals, and travel, and these costs make unpaid internships with employers like non-profit organizations and government even more inaccessible for those with low and middle incomes.
Unless we want to exclude students from low-income and middle-income families from important opportunities to participate in government, to make important connections, and to get their foot in the door for future paid employment opportunities, it is particularly important that we provide a means of supporting them financially while they work in government internships. This is not just a matter of economic justice but a way to ensure full democratic participation and to combat economic elitism.
Yesterday, it appeared that the Senate was on the verge of “going nuclear”—amending its rules mid-session to prevent the use of filibusters to block the president’s appointment of executive branch officials. The use of parliamentary tactics by a minority of senators to prevent the popularly elected President of the United States from appointing the heads of agencies that enforce key laws has reached unprecedented levels and threatens the ability of the president to govern. The Senate has been in gridlock ever since President Obama was re-elected. A concerted effort by Republican senators has prevented the passage of key legislation, blocked confirmation of federal appeals court judges, and blocked confirmation of President Obama’s nominees for Secretary of Labor, Administrator of the Environmental Protection Agency, Director of the Consumer Financial Protection Board, or any of the five nominees to the National Labor Relations Board (NLRB).
Today, it appears that a compromise has been reached that will allow the president most of his appointees, but not all. The Senate’s compromise forces the president to choose new nominees for the NLRB.
The New York Times obituary for Douglas C. Englebart, identified as the “Computer Visionary Who Invented the Mouse,” is fascinating reading, in part because Englebart, an Oregon farm boy, was in many ways the father of modern networked computing. Beginning in the early 1960s, he put together a team of engineers and computer scientists, funded by the federal government, that developed a prototype for most of the computer tools we all take for granted today. He unveiled them at a conference in San Francisco in December 1968, which “set the computing world on fire.” In the words of the Times obituary:
“Dr. Engelbart was developing a raft of revolutionary interactive computer technologies and chose the conference as the proper moment to unveil them.
For the event, he sat on stage in front of a mouse, a keyboard and other controls and projected the computer display onto a 22-foot-high video screen behind him. In little more than an hour, he showed how a networked, interactive computing system would allow information to be shared rapidly among collaborating scientists. He demonstrated how a mouse, which he invented just four years earlier, could be used to control a computer. He demonstrated text editing, video conferencing, hypertext and windowing.”
Englebart was a visionary, but his ground-breaking work was not supported by venture capital and his innovations were not the result of the private market or corporate enterprise. His innovations were not spurred by the prospects of incredible income and wealth, all lightly taxed. Rather, the work was funded and organized by a visionary bureaucracy in the U.S. government. As the Times describes it, “during the Vietnam War, he established an experimental research group at Stanford Research Institute (later renamed SRI and then SRI International). The unit, the Augmentation Research Center, known as ARC, had the financial backing of the Air Force, NASA and the Advanced Research Projects Agency, an arm of the Defense Department.”
Seventy-five years ago today, President Roosevelt signed into law the historic Fair Labor Standards Act. The Fair Labor Standards Act established the minimum wage, legislated a standard workweek, and outlawed oppressive child labor. President Roosevelt called it, after the Social Security Act, “the most far-reaching, far-sighted program for the benefit of workers here or in any other country.”
Prior to the passage of the Fair Labor Standards Act, both adults and young children often worked brutally long hours only to earn starvation wages. This was especially true during the Great Depression. As the Depression endured, firms not only laid off hundreds of thousands of workers, but also implemented significant wage rate cuts. Despite low wages, or perhaps because of them, many workers (including children) continued to work long hours in unjust conditions. Workers often labored in what were essentially sweatshops, only to earn low wages. While campaigning for a second term, President Roosevelt received a note from a young girl that read: “I wish you could do something to help us girls….We have been working in a sewing factory,… and up to a few months ago we were getting our minimum pay of $11 a week… Today the 200 of us girls have been cut down to $4 and $5 and $6 a week.” Thousands of children, as young as seven years old, were denied a basic education and instead worked in mines, mills and factories for a pittance. During his first re-election campaign, President Roosevelt publically committed to eliminating child labor and improving labor standards for all working Americans.
Roosevelt and Frances Perkins, U.S. Secretary of Labor from 1933 to 1945 and the first woman appointed to the U.S. Cabinet, devised the Fair Labor Standards Act with two goals in mind. First, the administration aimed to improve job quality through the abolition of child labor, the establishment of a floor on wages, and a ceiling over hours worked. Second, the administration hoped the Fair Labor Standards Act would create new jobs for millions of the nation’s unemployed by reducing overtime and forcing employers to hire more employees to compensate. The ultimate version of the Fair Labor Standards Act, signed into law by President Roosevelt on June 25, 1938, established a 25-cent minimum wage (that would rise to 30 cents beginning in October 1939), introduced a 44-hour maximum work week (that would first fall to 42 hours in October 1939 and would then fall to 40 hours in October 1940), and set the general age of workforce entry at 16.