Republican congressional leaders and President Trump have made loud claims about how great the recently passed Tax Cuts and Jobs Act (TCJA) will be for typical American families. When will these families be able to conclusively judge the truth of these claims? Not for a long while. The changes from the new tax law took effect on January 1. Companies now have to figure out how much to change workers’ tax withholdings to comply with the new law. To do that, they need guidance from the Internal Revenue Service (IRS).

But this is the same IRS that has seen its budget cut by 18 percent and its workforce cut by 14 percent since 2010. And it’s the same IRS that would send home over half of its workforce if the government shuts down again. While a deal was reached to end the current shutdown, that deal only funds the government through February 8th. All as the 2018 tax filing system ramps up and 2017 tax returns flood into the agency.

Typically, this shouldn’t be much of an issue. A shutdown would usually only push back the timing of withholding changes. The IRS would understandably take more time to issue guidance, and companies would simply implement the new withholdings later in the year.

But the Trump administration has already been pressuring the IRS to aim for speed over accuracy in new withholdings. Further, they would love companies to err on the side of withholding too little and boosting workers’ take-home pay, even if this meant that these workers have to make large payments back to the government in 2019. After all, the salience of the TCJA is as high as it’s going to be, and this administration is not shy at all about putting political expedience over smart policy. And telling workers that the tax cut is already working for them is awfully expedient in a mid-term election year. If the administration continues to focus on speed, then what was already a risk of under-withholding would be augmented by a government shutdown.

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Yesterday, Pennsylvania Governor Tom Wolf became the first state executive to take action to provide workers overtime protections that help guarantee fair pay for hard work, since a 2016 federal rule to do this at the national level was blocked in the courts by corporate interests. As part of his “Jobs That Pay” initiative, Wolf proposed a state rule change that will modernize the state’s overtime policies, providing new or strengthened overtime protections to 460,000 more middle-income workers by 2023 and ultimately putting close to $53 million more each year into Pennsylvanians’ paychecks.

The Keystone Research Center (KRC), a member of the Economic Analysis and Research Network (EARN), advocated for the Wolf administration to take this action. Stephen Herzenberg, KRC economist and executive director, applauded Wolf’s leadership.

On overtime pay, the governor has authority to act without the state legislature. On another vital measure to improve the lives of working families, raising the minimum wage, legislative action is required—and Pennsylvania still lags its neighboring states. Unlike these six contiguous states, the Pennsylvania legislature has failed to increase the minimum wage above the federal level of $7.25.

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On January 12, 2018, the Maryland legislature successfully overrode Governor Hogan’s veto of a bill granting Maryland workers access to paid sick days across the state. This is great news—it means that nearly 700,000 workers who previously lacked access to paid sick days will no longer have to choose between their health and their paycheck, or even their job. The Maryland legislature’s victory comes after other states, such as Oregon and Rhode Island passed statewide paid sick days laws in in 2015 and 2017.

There is no federal law that provides workers with the right to earn paid leave for sick days or to take time off to care for an ill family member—the federal Family Medical Leave Act simply allows workers to take up to 12 weeks of unpaid leave. In the absence of federal action, with Maryland, nine states have passed paid sick days laws, and five states (and the District of Columbia) have passed paid family leave laws. Local governments, however, have taken up the cause of providing workers with this fundamental need: at least 30 cities and two counties have enacted their own paid leave ordinances in various forms.

But state governments have begun blocking local government efforts to give workers the opportunity to earn paid time off for paid sick days and/or paid family leave through the use of “preemption laws.” “Preemption” in this context refers to a situation in which a state law is enacted to block a local ordinance from taking effect—or dismantle an existing ordinance. The figure below shows that at least 20 states have passed paid leave preemption laws.

Figure A

Paid leave preemption is on the rise: States passing laws preempting local paid leave laws, January 2004–July 2017

Note: In each column, blue boxes represent paid leave preemption laws passed in the given year. Gray boxes represent paid leave preemption laws in effect (passed in previous years).

Source: EPI analysis of preemption laws in all 50 states

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Today, the Maryland legislature successfully overrode Governor Hogan’s veto of a bill granting Maryland workers access to paid sick days at long last. Coalition group Working Matters estimates that nearly 700,000 workers who previously lacked access to paid sick days will no longer have to choose between their health and their job.

While inaction on paid sick days at the national level continues to erode families’ economic security, a group of cities and states are stepping up for working people and serving as models for jurisdictions throughout the country. Maryland is the latest example and the ninth state to guarantee a minimum amount of paid time for eligible workers to care for themselves or their family when they are sick or need medical care.

Roughly 32 percent of the private sector workforce in the United States has no ability to earn paid sick time. Furthermore, access to paid sick days has historically been far more common among high-wage workers, leaving low-wage workers and their families with little protection when they get sick or need to visit the doctor. This important legislation not only protects workers from lost pay or potential job loss when they or their family members get sick, it also protects the public by keeping sick workers, who feel economically compelled to work, from spreading illness to co-workers and customers.

In a paper released last year, we highlighted some of the costs to workers and their families when they are not given the opportunity to earn paid sick time. By examining estimated spending on essential items for families who lack paid sick days today, we quantified how this lack threatens the economic security of low- and moderate-income families.

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The night before his assassination in April 1968, Dr. Martin Luther King spoke before a group of striking sanitation workers in Memphis, Tennessee as they prepared for a march for civil rights, union recognition, and economic justice. The movement behind the strike started earlier that year, when two Memphis garbage collectors, Echol Cole and Robert Walker, were sucked in by a malfunctioning compactor mechanism on a garbage truck and crushed to death. On the same day, when a heavy rainstorm hit, the city sent 22 black sewer workers home without pay while their white supervisors were retained with a full-day’s pay. 12 days later, more than 1,100 black men from the Memphis Department of Public Works went on strike, demanding recognition of their union, better safety standards, and a decent wage. The sanitation workers were led by garbage-collector-turned-union-organizer, T. O. Jones, and supported by the American Federation of State, County, and Municipal Employees (AFSCME).

Memphis Mayor Henry Loeb fought to break the workers’ strike, and “refused to take dilapidated trucks out of service or pay overtime when men were forced to work late-night shifts. Sanitation workers earned wages so low that many were on welfare and hundreds relied on food stamps to feed their families.” As Michael K. Honey writes in Going Down Jericho Road: The Memphis Strike, Martin Luther King’s Last Campaign, one of the things Loeb was most fervent about opposing was the dues-checkoff provisions that the sanitation workers wanted in their union contract. The workers on strike in Memphis knew that a dues checkoff—whereby union members voluntarily authorize the employer to make regular deductions from an employee’s wages to pay their union dues—was crucial to the union’s survival, especially given that Tennessee had passed a so-called “right-to-work” law, which allowed nonunion members to refuse to pay their fair share of dues but still collect the same benefits as union members. Loeb surely knew that the powers conferred to workers in the union contract—including an increase in black sanitation workers’ wages, protections for black workers from race-based employment discrimination, and a procedure for the black sanitation workers to file grievances against their white supervisors—would become wholly ineffective if the union could not collect dues to support its basic operations. More than once, the city had offered to settle the strike on the condition that dues checkoff be prohibited from their contract—but workers persisted, knowing that the “dues checkoff remained crucial, for without it, the union would not survive.” One of the cofounders of the Community on the Move for Equality, Reverend Malcom Blackburn, even embodied dues checkoff in his call to action.

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In December, we published a “snapshot” estimating that 4.5 million workers throughout the country were likely to receive a raise at the beginning of the year as a result of higher state minimum wages going into effect. We estimated that these increases would raise the annual income of affected workers by roughly $5 billion. Subsequently, Mark Perry at the American Enterprise Institute published a blog post critiquing those estimates. He claimed our research methods were flawed and opaque, and that the wage increases for workers impacted by state minimum wage increases in 2018 will be much smaller than our original $5 billion. All of these claims are wrong.

In regards to our research methods, we do make one modeling decision that may strike some as overly optimistic: we assume that new minimum wage levels will largely be enforced. But in regards to the size of minimum-wage-driven raises in 2018 our methods contain one hugely conservative choice. We didn’t fully account for minimum wage changes in New York, and subsequently left out significant wage increases going to workers in New York City and its surrounding counties. We’ll say some more on both of these issues below.

It’s worth noting first that while EPI does not typically publish methodological statements for snapshots—they’re short pieces with a single, informative graphic with minimal accompanying text—the methodology employed in our December snapshot is the same methodology we have used for years in modeling the impact of higher state and federal minimum wages. We’ve published this methodology multiple times, the most recent being this past April in appendix B of our analysis of the proposal to raise the federal minimum wage to $15 by 2024.

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Those hoping to chart a new course in economic policy that delivers real gains, not just cynical rhetoric, to American workers have been closely following electoral politics throughout the country. But elections aren’t the only way change can happen. A case in point is the search currently underway to replace William Dudley as the President of the Federal Reserve Bank of New York.

We have written plenty before about the importance of the Federal Reserve in determining whether or not American workers will have a chance to see serious wage growth in coming years. Put simply, the Federal Reserve controls the economy’s brakes. If they decide the pace of economic growth is fast enough to risk overheating, leading to an outbreak of accelerating inflation, they step on the brake. No other policy has a hope at creating jobs and delivering broad-based wage growth if the Fed uses this brake prematurely. Recent decades have seen exactly this premature use of brakes, and the result has been unemployment kept too high to give typical workers the economic leverage and bargaining power they need to achieve substantial wage gains.

Why has Fed often ridden the economy’s brakes too hard in recent decades? Mostly because they have a loud backseat driver that is terrified of any unexpected inflation: the nation’s financial sector. Unexpected inflation decreases the value of financial assets and transfers resources from creditors to debtors. Wealthy households and creditors—the prime clients of finance—want to avoid this kind of inflation-induced transfer at all costs. And the costs of avoiding it are high indeed. Excess unemployment, justified in the name of putting relentless downward pressure on inflation, is a key reason why inflation-adjusted wages for typical workers have nearly stagnated over most recent decades.

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The United States, Canada, and Mexico are currently in talks over changes to the North American Free Trade Agreement (NAFTA). Renegotiating NAFTA offers an opportunity to create a new labor template based on long overdue and urgently needed labor standards that are consistently enforced and upheld. In order to accomplish this, we need to update and strengthen current language (based on the May 10, 2007 template). Among other things, there should be fewer limitations on the kinds of labor violations that are covered, and each signatory must be in compliance with the standards set forth prior to joining the agreement. The following recommendations constitute some of the steps needed to achieve these essential improvements to the labor chapter:

1. Incorporate explicit references to labor standards reflecting the conventions of the International Labour Organization (ILO), including those concerning the freedom of association, collective bargaining, discrimination, forced labor, child labor, and workplace safety and health.
2. Remove the footnote explicitly limiting the terms of the chapter to the ILO Declaration on Fundamental Principles and Rights at Work.
3. Eliminate the requirement that labor violations under the agreement must be in a manner affecting trade or investment between the parties.
4. Eliminate the requirement that labor violations must be sustained or recurring.
5. Verify that labor standards in the agreement are being honored and enforced by the signatories prior to the agreement going into effect.

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