Millions fewer would get overtime protections if the overtime threshold were only $31,000
Federal law requires that people working more than 40 hours a week be paid 1.5 times their rate of pay for the extra hours, but exempts salaried workers who make above a certain salary threshold and are deemed to have “executive, administrative, or professional” duties. The salary threshold is meant to help protect salaried workers with little bargaining power—for example, low- or modestly-compensated front-line supervisors at fast food restaurants—from being forced to work unpaid overtime. But, at $455 per week (the equivalent of $23,660 per year), the overtime threshold has been so eroded by inflation that it is now less than the poverty rate for a family of four. If the rule had simply been adjusted for inflation since 1975, today it would be well over $50,000.
In 2016, the Department of Labor published a highly vetted, economically sound rule that would have increased the threshold to $913 per week ($47,476 per year). However, a district court judge in Texas ruled that the new overtime threshold is invalid. While the Trump DOL plans to appeal the judge’s flawed ruling, they will not defend the $47,476 threshold. Instead, they intend to propose a new threshold, and have asked the court to stay the appeal while they engage in new rulemaking.
DOL officials have repeatedly indicated that they would prefer a salary threshold far below $47,476—rolling back protections for millions of workers. It is likely that they are considering proposing a new threshold of around $31,000.
Supreme Court will decide if women can join together to fight sexual harassment at work
After the news that Hollywood producer Harvey Weinstein had been sexually harassing and assaulting women in the movie industry for decades, millions of women shared their stories with the hashtag #metoo. The social media campaign shined a light on a fact that to many women: sexual harassment is a daily fact of life in the workplace. Many American corporations foster—or at least tolerate—widespread, egregious sexual harassment of their workers, even all these years after U.S. law first recognized sexual harassment as a form of sex discrimination. As the Supreme Court considers the first case of its term, National Labor Relations Board v. Murphy Oil, we hope they have read the stories about Weinstein, Bill O’Reilly and other men, as well as the millions of people who spoke up online.
Just last week, a poll conducted by NBC News and the Wall Street Journal found that 48 percent of currently employed women in this country say that they have personally experienced an unwelcome sexual advance or verbal or physical harassment at work. And, while many corporations have announced zero-tolerance policies for harassment, employers are increasingly preventing workers who experience sexual harassment to join together to seek justice
Today, 24.7 million American workers have been forced to sign contracts that, as a condition of employment, require them to waive their rights to joining a class action lawsuit to address sexual harassment and other workplace disputes—instead these workers must act alone to resolve what is often systemic violations of employment protections. The National Labor Relations Board has determined that these arbitration agreements violate workers’ right under the National Labor Relations Act to join together for “mutual aid and protection.” Business interests—and the Trump administration—disagree. In Murphy Oil, the Supreme Court will decide whether workers have the right to come together to protect themselves from workplace issues like sexual harassment. The case could not be more relevant, or present the Justices with two more starkly divergent options.
New paper on pay-productivity link does not overturn EPI findings
Economists Anna Stansbury and Larry Summers released a new paper today, “Productivity and Pay: Is the Link Broken?” which explores the relationship between economic productivity and compensation.
We welcome further inquiry into the relationship between productivity growth, inequality, and the ability of typical workers to benefit from a growing economy—and what policies are needed to do that. The Stansbury/Summers analysis adds some light but also some confusion and, ultimately, makes oversized claims about the role of productivity, especially since minor changes in specification of one of the three variables—unemployment—both substantially weakens some of their results, and also highlights just what is being missed in this investigation.
What are the issues?
The iconic chart (data here) that Stansbury and Summers are investigating is one showing a typical workers’ hourly compensation (measured as the compensation for production/nonsupervisory workers, roughly 80 percent of payroll employment) grew in tandem with productivity in the 1948-73 period but diverged thereafter. We have presented decompositions of the wedges between productivity and compensation for a typical worker that identifies the contribution to the divergence of: 1) changes of labor’s share of income (gap between average productivity and average compensation); 2) changes in wage/compensation inequality (gap between typical worker’s compensation and average compensation); and 3) differences in price deflators used for productivity and compensation. We find in the most recent period, 2000-2014, that rising inequality—both compensation inequality and reductions in labor’s income share—explains eighty percent of the gap between productivity and a typical workers compensation.
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.