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.
Moving beyond ACA repeal to address real health reform: Negotiating for lower drug prices under the Medicare Drug Price Negotiation Act
The Republican push to repeal the Affordable Care Act (ACA) seems to be on another hiatus, which is good news. At least some members of Congress are spending the time between efforts to gut the ACA pursuing socially useful reforms. For example, Senators Bernie Sanders (I-Vt.) and Patrick Leahy (D-Vt.), and Representatives Elijah Cummings (D-Md.), Lloyd Doggett (D-Texas), and Peter Welch (D-Vt.) have just announced they will introduce a bill that would instruct the Department of Health and Human Services (DHHS) to negotiate with pharmaceutical companies to get the lowest prices possible for drugs paid for by the federal government under Medicare.
The 2003 law that introduced a pharmaceutical benefit to the Medicare program by creating Part D specifically forbade such negotiation, thereby insuring that the program would be far more expensive than it had to be and that it would generate the maximum possible benefits for pharmaceutical corporations rather than the maximum benefits for America’s seniors. Crucially, the proposed bill to allow negotiation comes with real leverage—instructing the secretary to establish a formulary that will make it substantially harder for manufacturers that do not lower prices sufficiently to be reimbursed by Medicare. 1
A 2013 paper by Dean Baker estimates substantial savings from such a program. He finds that the federal government alone would save between $22–54 billion annually. Including the savings to households (who have to pay co-pays for drugs) and state governments would boost these projected savings to $30 to 70 billion annually. This is real money, even in health care terms.
Proposal to change the H-2A program via appropriations would allow agribusiness to fill hundreds of thousands of permanent, year-round jobs with temporary guestworkers
It’s become a time-honored tradition. Every year for almost a decade, members of Congress—spurred by corporate lobbyists who can’t gather enough support from their fellow colleagues for an immigration policy that will lower wages and degrade working conditions for migrant and American workers—use the appropriations process to get what they want. Few people pay close attention to the deliberations about how to fund the government, so members of Congress can quietly tack their bad idea as a “rider” onto an appropriations bill that is folded into an “omnibus” appropriations bill to keep the government running. If the president vetoes the omnibus budget, the government may shut down. This makes a veto unlikely, which allows riders to become law without facing a debate and vote on the merits of it in the House and Senate.
Appropriations riders have become common in U.S. labor migration policy. President Obama’s attempts to improve wages and working conditions for American and migrant workers in the H-2B guestworker program—for jobs in landscaping, forestry, construction and seafood processing, for example—were thwarted again and again through appropriations riders that lowered minimum wage rates for workers and prohibited the Labor Department from enforcing key rules. Senators Grassley (R-IA) and Feinstein (D-CA) took a bipartisan stand against the practice when it happened again this year. This time around, the rules in the H-2A program—which allows agricultural employers and farmers to hire workers from abroad to fill temporary or seasonal jobs lasting for less than one year—may also be modified via an appropriations rider.
There is no annual limit on the number of H-2A workers that can be hired, and H-2A is the fastest-growing U.S. guestworker program, more than doubling over the past decade, with over 200,000 farm jobs certified in in 2017. The vast majority of H-2A workers are employed on crop farms, picking fruits and vegetables.
The House appropriations committee in charge of funding the Department of Homeland Security (DHS) has now added a rider that would allow H-2A guestworkers to be employed in year-round jobs, thus drastically expanding the scope of this program. By allowing year-round employment, employers could seek to bring in guestworkers for jobs on dairy, livestock, and poultry and egg farms, as well as in nurseries and greenhouses and other non-seasonal agricultural occupations. Next week, the Senate appropriations committee is expected to consider its DHS appropriations bill. If this year-round rider becomes law, there would be a major change in immigration policy, converting the H-2A program from a safety valve for farmers who cannot find enough seasonal workers into a program admitting guestworkers to do year-round, permanent jobs. The H-2A program could radically change in purpose and size without ever being debated in either the House or Senate Judiciary Committees which are responsible for crafting immigration legislation.
The Legal Workforce and Agricultural Guestworker Acts would push down wages and labor standards for Americans and immigrants alike
From the perspective of immigration and the labor market, perhaps the two worst pieces of proposed legislation that we’ll see all year will be considered and marked up in the House Judiciary Committee Committee starting today.
One of the bills is the Legal Workforce Act (H.R. 3711), proposed by Rep. Lamar Smith (R-TX); it would mandate that all U.S. employers use E-Verify, an electronic system used to check if new hires are authorized to be employed in the United States. For a number of reasons, E-Verify is not ready for prime time. First, E-Verify’s accuracy rate is simply not good enough. Many authorized workers, including American citizens, would be erroneously flagged as unauthorized if all employers were required to use it. Moreover, Congress has not set up a procedure or process for workers improperly flagged as unauthorized to contest E-Verify findings. Job seekers—including many of the working poor with few resources—would have to visit Social Security Administration and/or Department of Homeland Security offices on their own time and at their own expense to correct an E-Verify error, or else face losing their jobs. And if they lose their job because of a government error, there is no meaningful recourse for them to get reinstated or sue for lost wages.
Furthermore, E-Verify should not be expanded nationwide until the 11 million unauthorized immigrants in the United States—including 8 million unauthorized immigrant workers—are legalized. While E-Verify might make sense someday as a policy option to deter future unauthorized migration, without making necessary improvements or coupling it with a broad legalization, it will do much more harm to low-wage workers than good. Many unauthorized immigrants will begin working off of formal payrolls, making it nearly impossible for them to contribute to payroll taxes and the social safety net, or to file successful compensation claims when they are injured on the job. Expanding E-Verify without legalizing the 8 million employed unauthorized immigrants would leave 5 percent of the labor market even more exploitable and vulnerable to retaliation based on immigration status than they already are, putting downward pressure on labor standards for U.S. workers who are employed alongside unauthorized immigrants.
The Supreme Court has a chance to restore a critical right to women at work
In 2017, the nation has been publically discussing what many women have known privately for years —there is still a vast amount of sexual harassment and gender discrimination in America’s workplaces. The revelations about Harvey Weinstein are the latest example of predatory sexual conduct against women at work, but the list of business leaders engaging in or condoning a culture of sexual harassment at work is staggering: Fox News Chairman Roger Ailes and reporter Bill O’Reilly, Uber CEO Travis Kalanick, Amazon Executive Roy Price, SoFi CEO Mike Cagney, BetterWorks CEO Kris Duggan, Epic Records chairman Antonio “L.A.” Reid … even the current U.S. president has admitted to sexual assault, and referred to his own daughter in sexually explicit and derogatory terms.
Women are also paid less than men for the same work. The disparities are even worse for women of color. Relative to white non-Hispanic men, white non-Hispanic women are paid only 76 cents on the dollar, but Hispanic women are paid only 68 cents on the dollar and black women are paid only 67 cents on the dollar, even after controlling for education, years of experience and location.
So, what can women do in the face of all of this workplace discrimination? We could take our employers to court, seeking justice through a class-action lawsuit. But it turns out, many of us probably can’t anymore. That’s because many of us have signed away our rights to go to court: 56.2 percent of private-sector nonunion employees are subject to mandatory employment arbitration procedures.
Nominating Kevin Warsh as Fed Chair would be the latest way Trump reneged on promises to put workers’ interests over financial elites
A consistent drumbeat in Donald Trump’s campaign for the presidency was a promise that he would stand up for the American working class against financial elites who had rigged policy to enrich themselves, a message that clearly resonated with some voters. He has reneged on this commitment in virtually every area of public policy, including providing better health care coverage than Obamacare, crafting better trade agreements, making sure tax cuts go to the middle class, and standing up for workers’ rights at work.
This month, workers who supported Trump may see another betrayal. It has been reported that Trump may pick Kevin Warsh, who married into a billionaire family, to replace Janet Yellen as the next Chair of the Federal Reserve Board of Governors (BOG). Decisions made by the Fed’s BOG are extraordinarily important for American workers. In recent years, pressure has built for the Fed to begin applying the brake to America’s economic recovery by raising interest rates. The rationale for this is that the Fed must slow growth to tamp down inflationary pressures. Warsh has consistently been on the side advocating for slowing growth to fight inflation. But these inflationary pressures appear nowhere in either wage or price data. And if the Fed hits the brake prematurely, millions of Americans could lose opportunities to work, and tens of millions could see smaller wage increases.
One underappreciated aspect of raising interest rates is that they will put upward pressure on the value of the U.S. dollar, and this stronger dollar will make U.S. exports less competitive on world markets while making foreign imports cheaper to American consumers. This will in turn lead to rising trade deficits which stunt growth in manufacturing employment. Warsh knows about this argument, but he just doesn’t really care.
“I would say that the academy’s view, the broad view of folks at the IMF and economics departments at elite universities, is that if only the dollar were weaker, then somehow we’d be getting this improvement in GDP arithmetic, we’d have an improvement in exports and we’d be getting much closer to trend. That’s not a view I share. My own views are that having a stable currency, now more than ever, provides huge advantages to the U.S. The U.S. with the world’s reserve currency is a privilege, but it is a privilege that we can’t just look to history to remind us of; it’s a privilege we have to earn and continually re-earn. And so it does strike me that those that think that dollar weakness, made possible by QE as one channel for QE, is the way to achieve these vaunted objectives are going to be sorely disappointed.”