Veterans fought for the right to collectively bargain—Congress should defend it
This weekend, Americans will observe Veterans Day, honoring the 20.9 million men and women who have served in our nation’s armed forces. Over the last several years, many of these veterans have seen their job opportunities improve as the economy recovers from the Great Recession. Unfortunately, a large number of veterans are working in low-wage jobs. In fact, 1 out of every 5 veterans would benefit from raising the federal minimum wage to $15 an hour by 2024. In addition to raising the minimum wage, Congress should ensure that workers who have fought to preserve our freedoms return to workplaces where they have the freedom to join together to bargain for better wages and working conditions. On average, a worker covered by a union contract earns 13.2 percent more in wages and is much more likely to have health and retirement benefits than a peer with similar education, occupation, and experience in a nonunionized workplace in the same sector. A testament to the importance of union for wages and working conditions, veterans are disproportionately more likely to work in a unionized workplace. Compared to a 12 percent coverage rate overall, 16 percent of veterans—or 1.2 million veterans—are in a union or covered by a union contract.
Despite the benefits of collective bargaining for workers, unions have been under increasing attack. Since 2010, legislators in more than twenty states have introduced so-called “right-to-work” bills barring unions from requiring workers in the private sector who are represented by unions to pay the cost of that representation. In 2011 and 2012 alone, over a dozen states passed laws restricting public employees’ collective bargaining rights. It is worth noting that nearly 1 in 5 employed veterans, including 1 in 3 with a service-connected disability, work in the public sector. Private employers, too, have intensified their opposition to collective bargaining. During the union election process, it is standard practice for workers to be subjected to threats, interrogation, harassment, surveillance, and retaliation for union activity.
Real world data continues to show no link between corporate cuts and wage increases
With today’s release of the Republican tax plan, the debate over tax policy has finally officially begun. The Trump administration’s Council of Economic Advisers (CEA) has been doggedly campaigning for corporate tax cuts by claiming, unconvincingly, that these cuts will off a cascade of economic changes that lead to higher wages for American workers. Earlier this week the CEA released a second report claiming to marshal evidence showing the benefits of corporate tax cuts for economic growth and wages. This post first notes a key flaw that undermines much of the CEA’s review of this evidence, and then moves on to data from U.S. states that demonstrates (yet again) that there is no reliable link between cutting corporate taxes and raising wages.
The key flaw undermining much of the CEA report from earlier this week is that they completely ignore how their tax cuts will be financed in the long-run. The economic theory relating corporate rate cuts to higher wages rests on these cuts leading to a drop in interest rates (or a related concept, the “user cost of capital”, or UCC) which in turn spurs businesses to invest in productivity-enhancing plants and equipment. The new report cites a number of papers that estimate the effect of a lower user cost of capital (UCC) on economic outcomes.
The first thing to note about these claims is that the size of the effect of a lower UCC on economic outcomes is a contested issue in macroeconomics. But even if it was not, and even if there were universal agreement that a lower UCC significantly boosted growth, there is no reason to believe that enacting the Republican tax plan announced today would result in a lower UCC.
What to Watch on Jobs Day: Signs of tightening across the economy
Today is Latina Equal Pay Day, marking how far into 2017 a Latina worker would have to work in order to be paid the same wages as her white male counterpart was paid in 2016. As I illustrated in great detail, it is obvious that this wage gap between Latina workers and white non-Hispanic male workers is significant and persists across the wage distribution, within occupations, and among those with the same amount of education. Sizable gaps in the economic outcomes of various U.S. populations are striking and significant. This is one reason why it is imperative that the economy returns to full employment.
On Friday, the BLS will report the latest numbers on the labor market. Payroll employment growth was particularly weak (i.e. negative) the previous month due in part to the hurricanes, particularly in Texas. I expect there to be some bounce back in the October numbers. To uncover the meaningful trend, I would urge analysts to average the last two months rather than take either one as independent information. In order to just keep up with the working-age population growth, the U.S. economy needs to add at least 90,000 jobs a month. Given that September saw a drop of 33,000 jobs, I hope to see strong enough payroll growth in October that would be indicative of a return to the road to full employment.
The last time the U.S. economy was at genuine full employment was 2000 when the unemployment rate averaged 4.0 percent over the year and fell below 4.0 percent for five months, notably without sparking an inflationary spiral. While the overall unemployment rate is a useful metric, it masks important differences across the economy. The value of a full employment economy is even greater for workers with historically higher unemployment rates, for instance, young workers and workers of color. Young workers, for instance, experience unemployment rates about two times as high as prime-age workers and nearly three times as high as older workers.
Strengthening collective bargaining is essential to reforming the rigged economy
Yesterday, Democratic lawmakers released another plank in their “Better Deal” agenda. The policy proposals included focus on strengthening workers’ collective voice and ability to negotiate for better wages and working conditions. These are critical components of any meaningful attempt to reform an economy that is rigged against working people. They are essential to creating a fair economy. And they stand in stark contrast to Republican efforts to further advantage those at the top with a tax proposal that would provide 80 percent of its benefits to the top 1 percent—households that currently have incomes of around $730,000 or more.
While the Republican tax proposals will do nothing to help boost workers’ wages or overall economic leverage, today’s “Better Deal” agenda would help to address these issues by promoting workers’ freedom to organize and bargain collectively. The steady decline in unionization over the last 40 years has led to rising inequality and stagnant wages for the American middle class. Not only do union workers earn higher wages, unions have strong positive effects on the wages of comparable nonunion workers, as unions help to set standards for industries and occupations.
Union membership and share of income going to the top 10 percent, 1917–2015
| Year | Union membership | Share of income going to the top 10 percent |
|---|---|---|
| 1917 | 11.0% | 40.3% |
| 1918 | 12.1% | 39.9% |
| 1919 | 14.3% | 39.5% |
| 1920 | 17.5% | 38.1% |
| 1921 | 17.6% | 42.9% |
| 1922 | 14.0% | 42.9% |
| 1923 | 11.7% | 40.6% |
| 1924 | 11.3% | 43.3% |
| 1925 | 11.0% | 44.2% |
| 1926 | 10.7% | 44.1% |
| 1927 | 10.6% | 44.7% |
| 1928 | 10.4% | 46.1% |
| 1929 | 10.1% | 43.8% |
| 1930 | 10.7% | 43.1% |
| 1931 | 11.2% | 44.4% |
| 1932 | 11.3% | 46.3% |
| 1933 | 9.5% | 45.0% |
| 1934 | 9.8% | 45.2% |
| 1935 | 10.8% | 43.4% |
| 1936 | 11.1% | 44.8% |
| 1937 | 18.6% | 43.3% |
| 1938 | 23.9% | 43.0% |
| 1939 | 24.8% | 44.6% |
| 1940 | 23.5% | 44.4% |
| 1941 | 25.4% | 41.0% |
| 1942 | 24.2% | 35.5% |
| 1943 | 30.1% | 32.7% |
| 1944 | 32.5% | 31.5% |
| 1945 | 33.4% | 32.6% |
| 1946 | 31.9% | 34.6% |
| 1947 | 31.1% | 33.0% |
| 1948 | 30.5% | 33.7% |
| 1949 | 29.6% | 33.8% |
| 1950 | 30.0% | 33.9% |
| 1951 | 32.4% | 32.8% |
| 1952 | 31.5% | 32.1% |
| 1953 | 33.2% | 31.4% |
| 1954 | 32.7% | 32.1% |
| 1955 | 32.9% | 31.8% |
| 1956 | 33.2% | 31.8% |
| 1957 | 32.0% | 31.7% |
| 1958 | 31.1% | 32.1% |
| 1959 | 31.6% | 32.0% |
| 1960 | 30.7% | 31.7% |
| 1961 | 28.7% | 31.9% |
| 1962 | 29.1% | 32.0% |
| 1963 | 28.5% | 32.0% |
| 1964 | 28.5% | 31.6% |
| 1965 | 28.6% | 31.5% |
| 1966 | 28.7% | 32.0% |
| 1967 | 28.6% | 32.0% |
| 1968 | 28.7% | 32.0% |
| 1969 | 28.3% | 31.8% |
| 1970 | 27.9% | 31.5% |
| 1971 | 27.4% | 31.8% |
| 1972 | 27.5% | 31.6% |
| 1973 | 27.1% | 31.9% |
| 1974 | 26.5% | 32.4% |
| 1975 | 25.7% | 32.6% |
| 1976 | 25.7% | 32.4% |
| 1977 | 25.2% | 32.4% |
| 1978 | 24.7% | 32.4% |
| 1979 | 25.4% | 32.3% |
| 1980 | 23.6% | 32.9% |
| 1981 | 22.3% | 32.7% |
| 1982 | 21.6% | 33.2% |
| 1983 | 21.4% | 33.7% |
| 1984 | 20.5% | 33.9% |
| 1985 | 19.0% | 34.3% |
| 1986 | 18.5% | 34.6% |
| 1987 | 17.9% | 36.5% |
| 1988 | 17.6% | 38.6% |
| 1989 | 17.2% | 38.5% |
| 1990 | 16.7% | 38.8% |
| 1991 | 16.2% | 38.4% |
| 1992 | 16.2% | 39.8% |
| 1993 | 16.2% | 39.5% |
| 1994 | 16.1% | 39.6% |
| 1995 | 15.3% | 40.5% |
| 1996 | 14.9% | 41.2% |
| 1997 | 14.7% | 41.7% |
| 1998 | 14.2% | 42.1% |
| 1999 | 13.9% | 42.7% |
| 2000 | 13.5% | 43.1% |
| 2001 | 13.5% | 42.2% |
| 2002 | 13.3% | 42.4% |
| 2003 | 12.9% | 42.8% |
| 2004 | 12.5% | 43.6% |
| 2005 | 12.5% | 44.9% |
| 2006 | 12.0% | 45.5% |
| 2007 | 12.1% | 45.7% |
| 2008 | 12.4% | 46.0% |
| 2009 | 12.3% | 45.5% |
| 2010 | 11.9% | 46.4% |
| 2011 | 11.8% | 46.6% |
| 2012 | 11.2% | 47.8% |
| 2013 | 11.2% | 46.7% |
| 2014 | 11.1% | 47.3% |
| 2015 | 11.1% | 47.8% |
Sources: Data on union density follows the composite series found in Historical Statistics of the United States; updated to 2015 from unionstats.com. Income inequality (share of income to top 10 percent) data are from Thomas Piketty and Emmanuel Saez, “Income Inequality in the United States, 1913–1998,” Quarterly Journal of Economics vol. 118, no. 1 (2003) and updated data from the Top Income Database, updated June 2016.
NLRB’s $21 million settlement reminds us why working people need strong unions and robust labor law enforcement
On October 30, the National Labor Relations Board (NLRB) announced that it had reached a $21.6 million settlement with VIUSA, Inc. and the Teamsters Local 89. Established in 1935, the National Labor Relations Board is an independent federal agency that protects the right of private sector employees to join together, with or without a union, to improve their wages, benefits and working conditions. The NLRB conducts hundreds of union elections and investigates thousands of unfair labor practice charges each year.
In this case, workers who are represented by the Teamsters have been working at Ford’s assembly plant in Louisville, Kentucky since about 1952. Recently, Ford had awarded a contract to Auto Handling, Inc. to perform the vehicle processing and inventory management services at the plant. Auto Handling, and all of its predecessor employers, had employed the workers represented by the Teamsters and negotiated collective-bargaining agreements with the union. When Auto Handling’s contract with Ford ended in 2012, VIUSA won the new contract. But VIUSA sought to pay wages far below what Auto Handling had paid to its Teamsters-represented employees. VIUSA refused to hire any of the Teamsters workers who had submitted applications to keep their jobs, and instead hired a staffing agency (Aerotek, Inc.) to find other workers to fill these jobs, at lower wages.
Federal law protects unionized workers during the tumultuous times when the company they work for changes owners. As the Supreme Court has stated, “during a transition between employers, a union is in a peculiarly vulnerable position.” Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 40 (1987). The law states that if the new employer maintains generally the same business and hires a majority of its employees from the predecessor employer, then it must recognize and bargain with the employees’ union. This makes sense, the Court explained, “when one considers that the employer intends to take advantage of the trained work force of its predecessor.” The Court has also stated, however, that a successor employer is not required to hire the employees of its predecessor, subject to the bedrock rule of labor law that it cannot discriminate against union employees in its hiring practices. This is an important rule because, as the Court explained, “with the wide variety of corporate transformations possible, an employer could use a successor enterprise as a way of getting rid of a labor contract.”
Latina workers have to work 10 months into 2017 to be paid the same as white non-Hispanic men in 2016
November 2nd is Latina Equal Pay Day, the day that marks how long into 2017 a Latina would have to work in order to be paid the same wages as her white male counterpart was paid last year. That’s just over 10 months longer, meaning that Latina workers had to work all of 2016 and then this far—to November 2nd!—into 2017 to get paid the same as white non-Hispanic men did in 2016. Unfortunately, Hispanic women are subject to a double pay gap—an ethnic pay gap and a gender pay gap. On average, Latina workers are paid only 67 cents on the dollar relative to white non-Hispanic men, even after controlling for education, years of experience, and location.
The wage gap between Latina workers and white non-Hispanic male workers persists across the wage distribution, within occupations, and among those with the same amount of education. Figure A below shows wages for Hispanic women and white non-Hispanic men at select points in their respective wage distributions. The 10th percentile Latina wage identifies the wage at which 10 percent of Latina workers earn less while 90 percent of Latina workers earn more. At the 10th percentile, Latina workers are paid $8.53 per hour, or 85 percent of the white male wage at the 10th percentile ($10.03 per hour). This wage gap—15 percent—is the smallest the gap gets, likely due to the wage floor set by the minimum wage. The gap rises to 41 percent at the middle of the wage distribution, and to 55 percent at the 95th percentile. That means that even the best paid Latinas are paid half as much as the best paid white non-Hispanic men.
Latinas are, thus, vastly over-represented in low-wage jobs and relatively under-represented in high-wage jobs. In fact, Latinas’ median wages are just above those of white men’s 10th percentile wage. In other words, nearly half of all Latina workers are paid less than the 10th percentile white male worker. Meanwhile, by comparing the white male median to the 80th percentile Latinas’ wages, you can see that more than half of white men are paid over $20 an hour while fewer than 20 percent of Latinas are. At the high end, only 1-in-20 Latina workers are paid more than white male workers at the 80th percentile.
Yellen can and should help rectify the big mistake Trump will make if he doesn’t reappoint her as chair of the Federal Reserve
Recent reports indicate that President Trump will not re-appoint Janet Yellen as the chair of the Federal Reserve’s Board of Governors (BOG). Instead, the reports indicate that he will appoint a current member of the BOG, Jerome Powell.
Choosing to pass over Yellen is an obvious mistake. Yellen is a world-recognized expert in macroeconomics and has enormous experience as a policymaker. Her performance as Fed chair has been widely and correctly praised. She takes the Fed’s mandate to maximize employment seriously and is data-driven. To be clear, I think she’s made a misstep or two in specific interest rate decisions, but in Yellen, those arguing with economic data have a real chance to be heard. Her recent speech at the Federal Reserve conference in Jackson Hole, Wyoming also provided an admirable signal that she continued to take the Fed’s role as chief financial sector watchdog seriously. This commitment to the Fed’s full employment mandate and its role as regulator of finance is exactly what we should want from a Fed chair. Replacing her in this role is, simply, a dumb mistake.
Jerome Powell has served seriously and well as a member of the BOG in recent years. He has been a consistent defender of the Yellen-charted path of the Fed. He is substantially better than the other non-Yellen candidates floated for the job.
But on the downside, Powell is a lawyer, not an economist (this is not a generic criticism—stay with me). In recent years, he has (correctly) followed the path of Yellen in making monetary policy decisions. If the Trump reshaping of the BOG that is underway surrounds Powell with less-wise voices, one worries that he could be swayed into charting a different path.
Wages rose for the bottom 90 percent in 2016 as those for top 1 percent fell
Newly available wage data show that the annual wages of those in the bottom 90 percent grew 0.5 percent from 2015 to 2016, and did so because wage growth disproportionately favored the vast majority of wage earners. At the same time, the highest earners, those in the top 0.1 percent, saw a 6.3 percent drop in their annual wages. How is that for a change! Annual wages averaged over all workers remained basically unchanged in 2016, but the share of all wages earned by the bottom 90 percent increased in 2016, resulting in improved wages for that group. Who says reducing inequality does not matter!
These are the results of EPI’s updated series on wages by earning group developed from Social Security Administration data. These data, unlike the usual source of our wage analyses (the Current Population Survey) allow us to estimate wage trends for the top 1.0 and top 0.1 percent of earners, as well as those for the bottom 90 percent and other categories among the top 10 percent of earners.
Looking back further, the top 1.0 percent of earners certainly fared well over the 1979 to 2007 period, seeing their annual wages grow by 156.2 percent (Figure A), with those in the top 0.1 percent seeing more than double that wage growth, 362.5 percent (Table 1). In contrast, wages for the bottom 90 percent only grew 16.7 percent in that time. Since the Great Recession, we have seen very modest wage growth across the board, with wages up just 4.0 percent over the nine years from 2007 to 2016. Wages fell furthest among top 1.0 percent of earners during the financial crisis, declining by 15.6 percent from 2007-09, but then recovered fully by 2015. The fall in top 1.0 and top 0.1 annual wages in 2016 leaves both groups with wages that are below pre-recession 2007 levels. Annual wages for the bottom 90 percent, meanwhile, fell slightly after 2007 and didn’t return to their 2007 level until 2014, and then grew roughly 4 percent since then.
Don’t believe the news of a new “top rate” in the forthcoming Republican tax plan: Their enormous “pass-through” loophole makes it largely irrelevant
House Republicans look set to unveil their tax bill on November 1. The “Unified Framework” previewing their plan included only three tax brackets: 12, 25, and 35 percent. But given that all independent analysis of their plan shows it adds enormously to deficits, they have publicly contemplated adding a fourth tax bracket above 35 percent to boost revenue. That top bracket may stay at the current 39.6 rate or be lower than the current rate while remaining above 35 percent. But when the tax plan is unveiled, no one should be tricked by this rate. The rate they choose doesn’t really matter all that much thanks to another loophole they’ve added, which all but ensures that that high income households won’t be paying more than 25 percent. They have disguised the loophole as helping small businesses since it’s targeted at so-called “pass-through income.” But while all small businesses are “pass-throughs”, not all pass-throughs are small businesses—lots of them include wildly rich businesses like hedge funds and private equity firms and boutique law firms. 86 percent of households with pass-through income already pay 25 percent or less—think of these as genuine small businesses. But 49 percent of all pass-through income goes to just the top 1 percent of households. This means that lowering the pass-through rate to 25 percent clearly makes this a tax cut for hedge funds, law firms, and private equity partners, not genuine small businesses. But from that egregiously tilted starting point, the loophole will still get worse, as it leads to rich individuals hiring accountants to re-classify other forms of income as pass-through income.
This means that rich households won’t be paying the top rate on ordinary income, wherever Republicans set it. Instead, their lawyers and accountants will ensure that the income they earn is routed through pass-through businesses like LLCs. This will allow rich households to pay a 25 percent top rate instead of 35 or 39.6.
International evidence shows that low corporate tax rates are not strongly associated with stronger investment
The Trump administration’s Council of Economic Advisers (CEA) released a paper last week arguing that cuts in the statutory corporate tax rate would lead to gains in business investment, productivity, and wages. I noted in a piece released yesterday why this was unlikely to be true.
The key piece of evidence the CEA claimed was “highly visible in the data” and showed the wage-boosting effect of corporate tax cuts was simply a graph that showed faster unweighted wage growth in just two years in a set of “low-tax” countries relative to a set of “high-tax” countries. I noted in my paper yesterday why this was so unconvincing: a serious test of this claim would look at corporate tax rate changes (not levels), would look over a longer time-period than four years, and would not allow three countries with a combined national income that is less than 0.4 percent of American national income to drive the results.