What to Watch on Jobs Day: A stronger economy for American workers for Labor Day
Labor Day is a celebration of the labor movement and the contributions working people make to the economy and the country. Today’s unions give workers across the economy the power to improve their jobs; through collective bargaining, working people gain a voice at work and the power to shape their working lives. As we illustrated in a recent research report, unions are associated with higher wages and benefits for workers of all genders, races, and ethnicities, better health and safety practices in a variety of sectors, and lower levels of economic inequality across the economy. Unfortunately, aggressive anti-collective bargaining campaigns and lobbying have eroded union membership, thwarting the ability for workers to organize.
Without stronger collective bargaining—and stronger labor standards in general—it is only in the tightest of labor markets that the vast majority of workers see their wages grow and their working conditions improve. Without strong unions, one of the only ways workers have leverage in the labor market is when workers have good “outside options,” i.e. when business have to woo workers rather than workers having to compete for scarce job openings. And unfortunately, that has not been the case for many years.
Repeal of pay transparency rule will make it easier to discriminate against women and people of color
On Tuesday, the Trump administration announced a “review and immediate stay” of the EEO-1 pay data collection rule, which was an Obama-era rule issued by the Equal Employment Opportunity Commission (EEOC). The rule would have required large companies (with 100 or more employees) to confidentially report to the EEOC information about what they pay their employees by job category, sex, race, and ethnicity. Pay transparency is key in leveling the playing field in order to eliminate employer discrimination.
This move is just another example of how the Trump administration’s campaign rhetoric on supporting working people has been followed by actions that hurt them at every turn. Further, this decision runs counter to what the research shows—inequities have gotten worse, not better. Even among workers with the same level of education and work experience, black-white wage gaps are larger today than nearly 40 years ago and gender pay disparities have remained essentially unchanged for at least 15 years. In both cases, discrimination has been shown to be a major factor in the persistence of those gaps.
As my colleague Marni von Wilpert notes, by staying the equal pay data rule, the Trump administration is making it harder for employers and federal agencies to identify pay disparities and root out employment discrimination—and it will make it more difficult for working people to know when they are being discriminated against. When this rule was first announced, former EEOC Chair Jenny R. Yang stated, “Collecting pay data is a significant step forward in addressing discriminatory pay practices. This information will assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of our federal anti-discrimination laws.” By staying this rule, the Trump administration has shown that it does not value equal pay for equal work.
Is poverty a mindset?
This post originally appeared on the NAACP Legal Defense Fund’s Medium page.
This week, New York Magazine and ProPublica published a scathing article by Alec MacGillis titled, “Is anyone home at HUD?”. Multiple sources — current and former, career, and political staff — described a U.S. Department of Housing and Urban Development in disarray, with severe lack of direction from a Secretary who has said he believes poverty is a mindset. Here, Richard Rothstein digs into the socio-economic conditions that lead to poverty for many low-income children, which policymakers like Secretary Carson would do well to consider.
Ben Carson, Secretary of Housing and Urban Development, told an interviewer recently that poverty results from “the wrong mindset:” low-income persons with strong motivation can escape poverty while those with negative attitudes remain poor.
His own life story seems to illustrate this. Poor children with ambition and self-discipline can occasionally climb the socioeconomic ladder. Luck figures, too, but a child must be on the lookout for it to benefit. Children expecting defeat may never seize opportunities within reach.
Yet as a scientist, Dr. Carson should realize that it’s always dangerous to jump from anecdotes about exceptional cases to generalizations about entire groups. Every human condition has variability. Only some children in Flint got lead poisoning, although all drank the same poisoned water. Even native intelligence is distributed: in any demographic group, some have above average I.Q.s, some are below it, and most are average, around 100.
House Speaker Paul Ryan gets innovative in spreading misleading international tax comparisons
During a town hall on Monday, House Speaker Paul Ryan trotted out a standard and misleading talking point, claiming that the international competitiveness of U.S. corporations is damaged by an allegedly too-high corporate income tax rate.
“I was just meeting with a father/son business in—I was doing office hours in Janesville today. I met with a father/son business in—down in south central Wisconsin. I don’t want to tell their names because I don’t want to, you know, get them grief. But down in Genoa City, they have an electricity business. They make electrical parts for Snap-on and other companies.
Their biggest competitor is Canada, a company in Canada. Their tax rate—they’re a corporation, small business, 35 percent. You know what the Canadian tax rate is? Fifteen percent. Eight out of 10 businesses in America file their taxes as people, as individuals. We call them, like, Subchapter S corporations, LLCs. Their top effective tax rate is 44.6 percent. Canadians are at 15 percent. The Irish at 12.5 percent. China, 25 percent.”
As I noted a couple weeks ago, the most common version of this talking point just compares the statutory U.S. corporate tax rate to the statutory corporate rate in other countries. This is already awfully misleading because what corporations actually pay (their effective rate) is far less than the 35 percent statutory rate, thanks to a corporate tax code riddled with loopholes. It’s hard to come up with an exact number, but studies have found effective federal corporate tax rates ranging between 12.5 and 19.4 percent—a far cry from 35 percent.
Renegotiating NAFTA is putting lipstick on a pig
The first round of the Trump administration’s NAFTA renegotiations began in Washington wrapped up on Saturday. The negotiators will meet again in September in Mexico City and then again in October in Canada. The United States has not yet proposed any specific measures on important issues such as labor rights, currency manipulation, or rules of origin. By all accounts, these negotiations are more likely to hurt than help most working Americans, who would be better served by efforts to target countries with large, global trade surpluses such as China, the European Union (EU) and Japan. Rather than tinkering around the edges of NAFTA, the United States should begin a campaign to realign the U.S. dollar and rebalance global trade.
Over its first 20 years, growing trade deficits with Mexico and Canada from the North American Free Trade Agreement (NAFTA) eliminated 850,000 U.S. jobs, most of them in manufacturing. (American workers suffered far more after China entered the World Trade Organization in 2001, including 3.4 million jobs lost through 2015 alone, due to growing trade deficits with that country.) And trade deficits and job losses are just the tip of the iceberg of the devastation wreaked by bad trade deals, which have also driven down the wages of all 100 million American workers without a college degree, who have suffered losses of just under $2,000 per year for each median wage, full-time worker. Roughly $200 billion per year is being taken from the pockets of working people and middle class families, because the super-rich and huge corporations have been able to game the system at their expense.
NAFTA has created the economic equivalent of a 14-lane freeway to Mexico, paving the way for the outsourcing of jobs and factories to Mexico. In the past twenty years, the U.S. has lost more than 87,000 factories (manufacturing establishments), wiping out nearly one-third of U.S. manufacturing production capacity. Tweaking NAFTA around the edges is not going to change those dynamics. As EPI founder Jeff Faux recently explained, NAFTA created “radical new rules for trade…that shifted the benefits of expanding trade to investors and the costs to workers.” The system that created this deal to benefit rich executives and multinational companies is still in place and, if anything, tilts even further in their interest in an administration led by former Goldman Sachs executives Gary Cohn (Trump’s chief economic advisor) and Treasury Secretary Steve Mnuchin.
Murphy Oil may be the last workers’ rights case the Supreme Court has the opportunity to consider
Yesterday, the National Labor Relations Board (NLRB) filed its brief in NLRB v. Murphy Oil, which will be argued in the Supreme Court in October. The case will determine whether mandatory arbitration agreements with individual workers that prevent them from pursuing work-related claims collectively are prohibited by the National Labor Relations Act (NLRA). The brief makes clear what is at stake for workers if the Supreme Court were to rule against the NLRB in this matter.
The NLRA guarantees workers the right to stand together for “mutual aid and protection” when seeking to improve their wages and working conditions. Employer interference with this right is prohibited. However, increasingly, employers are requiring workers to sign arbitration agreements that force them to waive their rights to collective actions, and handle workplace disputes as individuals. In practice, that means that even if many workers faced the same type of dispute at work, each individual employee must hire their own lawyer, and must resolve their disputes out of court, behind closed doors, with only their employer and a private arbitrator. The NLRB has found these forced arbitration agreements interfere with workers’ right to engage in concerted activity for their mutual aid and protection, in violation of the NLRA.
U.S. corporations pay a far lower effective tax rate than the statutory rate would indicate—and a recent CBO study doesn’t actually contradict this
The conventional wisdom on corporate taxes holds that while the U.S. statutory rate of 35 percent is among the highest of our peer countries, widespread loopholes in the corporate tax system mean that the rate actually paid by U.S. corporations is far lower, and actually firmly in line with these international peers. And this is one of the times where the conventional wisdom is actually correct. Because of a lack of data, it’s hard to put an exact number on it, but it’s clear that the actual rate faced by U.S. corporations is far lower than the headline 35 percent rate.
But recently, some have been trying to refute this conventional wisdom by brandishing a recent Congressional Budget Office (CBO) report. Summary Table 1 in the report has led some to believe that even the effective rates that U.S. corporations actually face are high among peer countries. But as we describe in our recent paper, once you dig into the details of the measures that CBO is reporting, this isn’t actually the case. And in fact, their findings simply bolster conventional wisdom. See EPI’s analysis of the CBO report:
Does a recent CBO report contradict our findings about U.S. effective rates? No—and here’s why.
CBO recently released an updated report comparing corporate income taxes across G-20 countries (CBO 2017). Uncareful readers might be led into thinking that the CBO report overturns the empirical evidence cited above that indicates that corporate taxes actually paid by American companies are not notably high relative to international peers. But a careful read shows that the CBO report does not contradict this other evidence.
The headline findings of the CBO study claim that the United States has the highest statutory corporate tax rate, the third-highest average corporate tax rate, and the fourth-highest effective marginal corporate tax rate. However, when we dig into the study, we are able to show that the latter two claims are simply not true. We’ll take each of the CBO estimates in turn and show why they do not contradict the evidence presented in Figure C.
The statutory tax rate. As we have already noted, it is absolutely true that the United States has one of the highest statutory rates, but widespread loopholes make this rate irrelevant to the broader question of what corporations are actually paying in corporate income taxes.Read more
What to watch on jobs day: Hoping for stronger nominal wage growth as the economy continues to inch toward full employment
This week, I wrote two blog posts about wages in the first half (FH) of 2017. First, I analyzed up-to-date real (inflation-adjusted) hourly wage series from the Current Population Survey (CPS) across the wage distribution and compared it to FH2016, FH2007, and FH2000. Preliminary findings from 2017 suggest more broadly based wage growth—with significant gains at the 10th percentile—associated with an economy approaching full employment as well as state-level increases in the minimum wage. However, that good news is tempered by the fact that the vast majority of workers are, in reality, only beginning to make up for lost ground, rather than getting ahead, and wage inequality is still far greater today than in 2007 or 2000.
Second, I analyzed wages in FH2017 by education level. I found that wages for workers with less than a high school degree or just a high school degree rose faster over the last year than any other group at 1.9 percent and 1.7 percent, respectively. This phenomenon is likely related to the disproportionate increases among lower wage workers, due to some states raising their minimum wage. Somewhat surprisingly, given their unemployment rate of 2.9 percent over the last year, I also found that college wages actually fell slightly between FH2016 and FH2017. This is evidence against the claim that the U.S. economy is experiencing a work shortage, particularly among credentialed workers. If employers had to work harder to attract or retain workers with a college degree, we would surely see it in the wage data.
The Montgomery County minimum wage impact study is absurd junk science
In January, Montgomery County, Maryland County Executive Isiah Leggett vetoed an ordinance passed by the county council that would match the minimum wage in the District of Columbia, raising the county minimum to $15 by 2020. Leggett then commissioned the consulting firm PFM to analyze the likely economic effects. The firm just released their study and their findings are so implausible that they border on the absurd. The study essentially concludes that raising the minimum wage in Montgomery County—even a small amount—would be the most devastating economic shock the county has experienced in a generation, more damaging than the Great Recession. To say that the study has methodological problems would be a gross understatement. No county official, business owner, worker, or resident in Montgomery County—and certainly not editorial boards of local newspapers—should give any credence to this report.
The report posits that the proposed $3.50 minimum wage hike over 5 years will lead to massive losses in jobs, income, and county revenues. Ostensibly wanting to present both the costs and benefits, the authors do also note that “increased wages are associated with improved mental health, reduced hunger, and decreased stress for workers and their families.” Admittedly, I have only skimmed the full 145 page report, but one only needs to read the initial section on job impacts to see how flawed this “study” is. The alleged large negative outcomes for incomes and county revenues all stem from the jobs findings, so there really isn’t need to read much further.
The report’s methodology for how they calculate expected impacts on employment is completely divorced from any actual research. First, the authors go through a long discussion of other localities that have enacted higher minimum wages—such as the District of Columbia, Los Angeles, and San Jose, among others— which they refer to as “comparison jurisdictions,” implying that the impacts of minimum wage hikes in these locations might provide guidance for how a higher minimum wages might affect Montgomery County. Ironically, they note that in virtually all these “comparison jurisdictions,” studies that analyzed the resulting or likely employment effects of the local minimum wage showed that any impact on jobs was negligible. Nevertheless, the authors assert that Montgomery County is not a “twin” of any of these places, thus none of these chosen comparisons should serve as a guide.
Wages for workers with a high school degree or less rose the fastest over the last year
Yesterday, I took an in-depth look at the latest wage data for select percentiles. Today, I’m going to provide a brief look at the latest wage data by educational group for the first half (FH) of 2017 compared to FH2016 and FH2007, before the Great Recession began.[1] While FH data are, by definition, more volatile than full year data, data for this year so far indicate a mild reversal of trend from what I found in The State of American Wages 2016.
The table below shows real average hourly wages in FH2017 dollars for the five main educational groupings and annualized changes over the last year and since FH2007. It is particularly striking that the wages for workers with less than a high school degree or just a high school degree rose faster over the last year than any other group at 1.9 percent and 1.7 percent, respectively. This phenomenon is likely related to the disproportionate increases among lower wage workers. I pointed out earlier this week the likely relationship between strong wage growth at the 10th percentile and the significant number of state-level minimum wage increases that took effect at the beginning of the year.
Average hourly wages by education, FH2007–FH2017 (FH2017 dollars)
| Less than high school | High school | Some college | College | Advanced degree | |
|---|---|---|---|---|---|
| All | |||||
| FH2007 | $13.53 | $17.72 | $20.03 | $31.04 | $39.28 |
| FH2016 | $13.30 | $17.53 | $19.50 | $32.46 | $41.45 |
| FH2017 | $13.55 | $17.83 | $19.41 | $32.40 | $41.58 |
| Annualized percent change | |||||
| 2016-2017 | 1.9% | 1.7% | -0.4% | -0.2% | 0.3% |
| 2007-2017 | 0.0% | 0.1% | -0.3% | 0.4% | 0.6% |
Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata
From the latest wage data, we also see that average wages for workers with some college or a bachelor’s degree fell over the last year. Because of the opposing trends in high school and college wages, the gap between those two groups fell, mildly offsetting the increases we saw between 2015 and 2016. The slight decline in average wages for college graduates is particularly striking as the unemployment rate for that group averaged 2.9 percent over the last year. While not definitive, this is a sign that there is no shortage of credentialed workers in the economy today. If there were, employers would have to offer higher wages to attract and retain the workers they want. It remains to be seen whether this trend will continue through the remainder of the year.