President Trump’s alternative facts have foreigners and bureaucrats, not the top 1 percent, reaping the gains from economic growth
It’s no secret that we at EPI have been skeptical about President Trump’s commitment to a policy agenda that would deliver the goods for low and middle-income Americans. His campaign proposals were nearly across-the-board great for high-income households and corporate business, but bad for most American workers. His nominees for key economic posts have been consistently hostile to policies that boost bargaining power for low and middle-wage workers. And now we have his inaugural speech, in which he specifies the groups he thinks have won and lost over recent decades in the American economy.
This speech is clarifying in that he identifies foreigners and “a small group in our nation’s Capital [sic]” as the big winners. Totally absent from his speech is the “small group” that has actually done very well and whose gains genuinely crowded-out potential growth for the vast majority of American households: the top 1 percent.
It’s unclear what evidence Trump could be referring to when decrying that “small group in our nation’s Capital” as the winners in recent decades. Since the recovery from the Great Recession began, for example, federal spending has grown more slowly than in nearly every other post-war recovery.
The increased diversity of New York City union construction employment
This blog post presents some early findings of a forthcoming report* on the race and ethnic diversity of construction employment—union and nonunion—in New York City, updating some of my research released in 2013. The issues were clarified in the earlier research:
“Construction is a sector that has historically excluded black workers—including the unionized portion of the industry. Giving minority workers access to good jobs is an important part of closing our large and persistent racial wage inequities, so this is a critical issue. It was on this basis that many progressives have been hostile to infrastructure spending in the past: it provided jobs in a sector where it was well known and documented that black workers had been excluded from opportunities. Some people, such as National Black Chamber of Commerce CEO Harry C. Alford, contend that ‘construction sites are still close to Jim Crow.’
It is worth asking whether and to what extent construction work is racially exclusionary, especially the unionized sector as Alford also contends. After all, there have been changes over the years, with unions increasing the number of minorities admitted into apprenticeship programs, and undertaking project labor agreements that incorporate community agreements that bring excluded populations into the industry. What does the current situation look like and how does the union sector compare to the nonunion sector? It turns out that, at least in one of our largest and heavily unionized cities, New York City, Alford’s characterization is quite outdated.”
So-called “right-to-work” laws will lower wages for union and nonunion workers in Missouri
The Missouri legislature is poised to pass bills to weaken unions and clear the way for corporate dominance in the state. So-called “right-to-work” laws force unions to represent employees who pay nothing toward the costs of collective bargaining. It’s bad enough that these laws allow them to get the benefits of higher wages and better fringe benefits without paying their fair share. What’s worse is that these laws force unions to defend non-dues payers when they need to be defended against unjust discipline or being fired. Arbitration can cost thousands of dollars, including the cost of hiring lawyers.
These bills won’t lead to more manufacturing plants or better jobs or anything good. They lead only to weaker unions, less bargaining power for Missouri workers, and lower wages.
Wages are 3.1 percent lower in so-called “right to work” (RTW) states, for union and nonunion workers alike—after correctly accounting for differences in cost of living, demographics, and labor market characteristics. The negative impact of RTW laws translates to $1,558 less a year in earnings for a typical full-time worker.
Washington University in St. Louis professor Jake Rosenfeld finds that the dramatic decline in union density since 1979 has resulted in far lower wages for nonunion workers, an impact larger than the 5 percent effect of globalization on their wages. Specifically, nonunion men lacking a college degree would have earned 8 percent or $3,016 annually, more in 2013 if unions had remained as strong as they were in 1979.
Between 1979 and 2013, the share of private sector workers in a union has fallen from about 34 percent to 11 percent among men, and from 16 percent to 6 percent among women. The authors note that unions keep wages high for nonunion workers for several reasons: union agreements set wage standards and a strong union presence prompts managers to keep wages high in order to prevent workers from organizing or their employees from leaving. Moreover, unions set industry-wide norms, influencing the moral economy.
Rosenfeld’s report shows that working class men have felt the decline in unionization the hardest; their paychecks are noticeably smaller than if unions had remained as strong as they were almost 40 years ago. Rebuilding collective bargaining is one of the tools we have to reinvigorate wage growth, for low and middle-wage workers.
That’s why the so called “right-to-work” efforts make no sense. We need workers to have more bargaining power, to negotiate for higher wages. The RTW laws are designed by the business lobby to benefit corporate titans.
One wonders why state legislators go along with them when they hurt the vast majority of their constituents.
Another reason women will march on Saturday—for better wages and greater economic security
As thousands of women gather on the National Mall to advocate for women’s rights, here’s one issue that policymakers can address: wage growth. By closing the gender wage gap and eliminating the inequality that has kept nearly all workers’ pay from rising with productivity, we could raise women’s median hourly wages by 69 percent—from $15.67 to $26.47.
Over the last several decades, women have entered the workforce in record numbers and made great strides in educational attainment. Nevertheless, when compared with men, women are still paid less, are more likely to hold low-wage jobs, and are more likely to live in poverty. Typical women are paid only 83 cents for every dollar paid to a typical man. Gender wage disparities are present at all wage levels and within education categories, occupations, and sectors—sometimes to a grave degree. For example, relative to white non-Hispanic men, black and Hispanic women workers are paid only 65 cents and 58 cents on the dollar.
Closing the gender wage gap is absolutely essential to helping women achieve economic security. But in order to bring genuine economic security to American women and their families, we must do more. In particular, we must reverse the decades-long trend of stagnant wages for the vast majority of workers. Indeed, while the gender wage gap has persisted, hourly wage growth for the vast majority of workers has stalled, as the benefits of increased productivity have accrued to those at the top. This is the result of intentional policy decisions that have eroded the leverage of the vast majority of workers to secure higher wages.
Paid sick leave provides economic and health security to over a million federal contract workers
Due to an executive order by President Obama, all federal contractors with new contracts (or renewals) after January 1, 2017, are required to provide paid sick leave to their employees. The Department of Labor estimates that this final rule will provide paid sick leave to about 1.15 million workers employed by federal contractors. Similar in magnitude to the DOL estimates, our research indicates that paid sick leave for federal contractors will improve job quality for many hundreds of thousands of workers across the country. As the rule reaches all federal contractors, our estimates suggest that between 694,000 and 1,053,000 employees of federal contractors will directly benefit by receiving additional paid sick leave, including an estimated 450,000 to 775,000 who would receive no paid sick leave without it.
The rule on paid sick days helps protect employees of federal contractors by giving them the ability to earn paid sick time to care for their own medical needs, a family member’s medical needs, or for purposes related to domestic violence, sexual assault, or stalking. Evidence from the private sector and the states and cities with paid sick leave laws demonstrates that paid sick days improve employee retention, reduce workplace contagion and injury, and increase productivity. The cost savings associated with paid sick days serve the purpose of the final rule to promote economy and efficiency in federal contracting. Furthermore, as with existing state and local paid sick leave laws that are very similar to the final rule, the proposed rule will benefit workers, their families, and public health.
Low-wage workers are less likely to have access to paid sick days: Percent of private industry workers with access to paid sick days, by wage group, 2016
| Category | Share of workers who have access to paid sick days |
|---|---|
| Bottom 25% | 39% |
| Second 25% | 65% |
| Third 25% | 75% |
| Top 25% | 84% |
| Bottom 10% | 27% |
| Top 10% | 87% |
Source: Bureau of Labor Statistics' National Compensation Survey--Employee Benefits in the United States, July 2016 (Table 6)
Paid sick days for federal contract workers will also help level the playing field between those fortunate enough to have such benefits and those who aren’t so lucky. According to the latest data, 36 percent of private sector workers do not have access to paid sick leave. Fortunately, state and local public policies continue to make a difference for working families, and the rate of coverage has increased over the last year, from 61 to 64 percent of private sector workers. Particularly of note is the rate of increase for low-wage workers who increased their coverage from 31 to 39 percent. Unfortunately, access to paid sick leave remains vastly unequal, as shown in the figure below. Only 27 percent of the lowest wage workers (the bottom 10 percent) have the ability to earn paid sick time to care for themselves and their family as opposed to 87 percent of the highest wage workers (the highest 10 percent).
Because there are federal contractors across the economy, workers in certain sectors are likely to see the biggest boost in their sick time coverage. While the order will be executed uniformly, those sectors with lower rates of coverage are most likely to see a greater change in benefits for their workers. We estimate that over half of federal contract workers in accommodation and food services; administrative and support and waste management; arts, entertainment, and recreation; and retail trade will gain coverage.
Why taxpayers are getting a bargain from public-sector workers
The American Enterprise Institute’s Andrew Biggs reacted to my critique of his Yankee Institute study on public-sector pay in Connecticut with a lengthy response (see also my related blog post). I take this as a good sign: Maybe facts do matter, even in the Trump era.
Before delving into methodological issues, however, I’ll answer one pointed question Biggs had: No, my critique of his research wasn’t commissioned by labor unions, though EPI does receive about a quarter of its funding (27 percent, to be precise) from unions, who helped found EPI and are represented on our board. Most of the rest of our funding comes from foundations.
As it happens, Biggs’s study was brought to my attention by an advocacy group, Connecticut Voices for Children, that receives most of its funding from community foundations and almost none from unions. Connecticut Voices asked for my help in understanding Biggs’s methodology. Since this ended up taking longer than expected, I decided to write a report for which EPI didn’t receive any dedicated funding. I did share a late draft with an expert in public-sector compensation at the National Education Association in Washington, who had no influence on my analysis. I actually think my job would have been easier and the report better if I’d consulted with union representatives in Connecticut, though I understand why Biggs might not agree.
Now that I’ve come clean, I’d be curious to know who commissioned Biggs’s report and who he received feedback from—AEI board member and Education Secretary nominee Betsy DeVos, by any chance?
Sen. Tom Cotton misses the mark on immigration and wages
Senator Tom Cotton’s (R-Ark.) recent NY Times op-ed on immigration—“Fix Immigration. It’s What Voters Want.”—gets a few things right, but the ultimate analysis is off the mark. Cotton’s thesis is that immigrants have flooded the labor market to such an extent that immigration is largely to blame for decades of wage stagnation. Immigration does sometimes have negative impacts on American workers—and we need to be clear about who the economic winners and losers are—but contrary to Cotton’s claims, there is scant evidence that immigration overall has kept wages low. Furthermore, Cotton ignores the real reasons wages have failed to rise for so many American workers.
But first, credit where credit is due.
Sen. Cotton deserves credit for calling out businesses that warn of looming labor shortages in low-skilled jobs despite any observable evidence that this is imminent (while research shows the opposite has been true during at least the past decade). Cotton claims, however, that these businesses mainly support immigration so that they can add additional workers to the labor market in order to lower wages. There’s a kernel of truth in that, but in reality, employers care more about hiring workers without power or a voice in the workplace; that’s what puts downward pressure on wages in low-skilled jobs.
Most Americans do want immigration fixed. They reject a system that leaves families terrified of separation because they fear deportation of undocumented moms, dads, brothers, and sisters, even if they’ve resided in the United States for decades and have jobs and (otherwise) clean criminal records. Cotton doesn’t mention any of this. He instead laments a “generation-long influx of low-skilled immigrants that undermines American workers.”
The real problem isn’t immigration, it’s a legal framework that leaves all low-wage workers and millions of migrant workers—both authorized and unauthorized—vulnerable to wage theft and exploitation. We have allowed employers to race to the bottom toward lower and lower labor standards.
A tale of two states (and what it tells us about so-called “right-to-work” laws)
In 2011 and 2012 two states, New Hampshire and Indiana, debated the same bill: so-called “right-to-work” legislation, pushed by corporate lobbyists and the American Legislative Exchange Council (ALEC), designed to weaken unions financially and pave the way for greater corporate dominance of state politics. New Hampshire’s governor vetoed the bill in 2011. Indiana, by contrast, enacted it in 2012. It is instructive to compare the two states. By almost any measure, the economy of New Hampshire is stronger and its citizens are better off, on average, than the citizens of Indiana. Right-to-work did not improve the Indiana economy relative to New Hampshire’s, and no one should be fooled into thinking that passing right-to-work now will improve the New Hampshire economy.
So-called “right-to-work” laws prohibits unions and employers from agreeing to collective bargaining agreements that require employees covered by the agreement to pay their fair share of the costs of negotiating and enforcing it. The only right that “right-to-work” creates is the right for free riders to get the benefit of higher union wages and protections against unfair discipline without contributing any dues or fees for that privilege.
EPI published two reports critical of the New Hampshire legislation, one in 2011 and another in 2012, pointing out that the only real purpose and effects of these laws are lowering wages and weakening unions. As the figure below suggests, such laws do nothing to create jobs, and they don’t give anyone a right to work, but they are associated with lower wages—lower on average by more than 3 percent, or $1,500 per worker.
The Obama legacy on wages
The closing days of the Obama years give us a chance to assess the president and his administration across a range of issues. Given that we at EPI have repeatedly called broad-based wage growth the central economic challenge of our time, it seems appropriate for to assess the administration’s performance in pushing policies to generate this growth.
We have generally organized the policies that would boost wages for most workers into three broad buckets: generating full employment and a “high-pressure” labor market, supporting or creating institutions and standards that boost workers’ bargaining power, and providing a countervailing force against the power of the top 1 percent to claim excess shares of economic growth.
Economic and political context
Before we assess the Obama administration along the key dimensions highlighted above, it’s crucial to provide the larger economic and political context of the past eight years. Even if an administration did everything right on policy efforts to boost wages, wages still might not rise if the overall economy was damaged when the incoming administration inherited it. This is clearly the case for the Obama administration. In February 2009, the first full month of the Obama administration, the economy had been in recession for 13 months, and the severity of the economic crisis was accelerating. In the six months ending in February 2009, the economy lost 650,000 jobs each month on average.
The economy has made great strides since the recession began, but there is still work to be done
Today’s jobs report gives us an opportunity to compare how the economy is treating Americans today compared with December 2007, when the recession began. As the recovery has strengthened we’ve seen improvements in all measures of employment, unemployment, and wage growth. All measures indicate a consistent story—an economy on its way to full employment, but not there yet. Taking a data-driven approach to policymaking would mean continuing to push, keeping interest rates low and letting the economy recover for Americans across genders, races, ethnicities, and levels of educational attainment.
In December, the unemployment rate edged up slightly to 4.7 percent because of a small but positive increase in the labor force participation rate. The unemployment rate peaked at 10.0 percent during the recession, and at 4.7 percent it is now below where it was before the recession began (5.0 percent). Meanwhile, the unemployment rate for black workers hit 7.8 percent in December. This is its lowest point so far in the recovery, but it’s still slightly above its pre-recession low in August 2007 (7.6 percent). Likewise, the unemployment rate for Hispanic workers (5.9 percent) has stagnated for much of the year and remains significantly above its pre-recession low point of 4.7 percent in October 2006. The underemployment rate—which adds in workers who are part-time for economic reasons and those marginally attached—was 9.2 percent in December and still hasn’t reached its pre-recession level (8.8 percent). So, while the economy is the strongest it’s been in years, there are still a lot of workers sitting on the sidelines and underutilized, and a lot of communities that are not feeling the full extent of the recovery.