Are Disability Rates Increasing?
(This is the first of six blog posts on disability insurance.)
The Social Security Disability Insurance (SSDI) program is set to be the next big battle in Republicans’ long campaign to dismantle Social Security. Congressional Republicans are trying to block a routine reallocation of funds to the SSDI Trust Fund, insisting that they will only allow reallocation if “reforms” to SSDI are implemented. The intellectual underpinning for their demands is that there is an unfolding fiscal crisis caused by workers who are able to earn a living but are instead choosing to claim disability benefits. A chief proponent of this view, Stanford economist Mark Duggan, testified before the Senate Budget Committee earlier this year, claiming that disability benefits are increasingly attractive to lower-wage workers, who respond by leaving the labor force. According to Duggan, a key piece of evidence supporting this claim is an increase in the share of beneficiaries suffering from musculoskeletal disorders and other “subjective” health conditions who have a “substantial” employment potential.
Claims like these have become a mainstay of attacks on the disability program. However, a closer look at the evidence shows that SSDI benefits have become, if anything, less generous. Moreover, even research cited by critics shows SSDI receipt has a negligible impact on work effort because few applicants, including marginal applicants who were denied benefits, are able to earn a living afterward. Meanwhile, there are good explanations for the increase in the share of beneficiaries suffering from musculoskeletal disorders, including an aging population, rising obesity rates, and fewer workers able to retire early when their health deteriorates.
These topics will be discussed in later blog posts. This post will focus on whether disability incidence has increased in the first place. The evidence shows that while “raw” or unadjusted incidence–the number of new awards per thousand insured persons–increased as the large baby boomer cohort aged into the peak disability years before retirement, age-adjusted incidence hasn’t trended upward over the past 20 years, though it increased during periods of high unemployment. However, incidence has fallen in the wake of the Great Recession and as older baby boomers become eligible for Social Security retirement benefits, including disabled boomers who automatically transition to retirement benefits as they reach the normal retirement age.
An Updated Analysis of Who Would Benefit from an Increased Overtime Salary Threshold
If salaried employees are paid less than the overtime salary threshold (currently $23,660 in annual salary), they are entitled to overtime pay when they work more than 40 hours in a week. If however, they make more than the salary threshold, they are entitled to overtime pay only if their primary duty is not executive, administrative, or professional.
In a 2014 analysis, former EPI economist Heidi Shierholz estimated the share of salaried workers who were covered by the overtime salary threshold in 1975 and in 2013. She found that, despite an increase in the threshold in 2004, the share of the workforce covered by the threshold declined from 65 percent in 1975 to just 11 percent in 2013. This is because most of the value of the threshold was eliminated between 1975 and today due to inflation. As a result of Shierholz’s findings, EPI recommended that the overtime salary threshold be increased to the 1975 threshold in today’s dollars (in 2013, this was $51,168), which would have covered 47 percent of the workforce.
Because the analysis focused solely on the salary threshold test–i.e., because the analysis focused on just the salary of workers without regard for the duties of their occupation[1]–increasing the threshold to reflect an amount into today’s dollars wouldn’t mean that all of the workers who fell in between $23,660 and $51,168 would gain overtime protections. Many of these workers would already have been entitled to this protection because their primary job duty was not executive, administrative, or professional.
Now, in updating this analysis, we want to be as precise as possible in identifying the workers who will be affected by the updated salary threshold rule. To do this, we narrowed the sample to those workers who are full-time workers (usually work 35 hours or more at their primary job), expanded the age of the population to all workers 18 years or older (previously limited to those 18-64), and removed certain occupations that are automatically exempt from overtime protections (e.g., medical professionals, lawyers, judges, teachers of all levels, and religious workers).
Refugees Deserve Support in America, Not Just a Home
On World Refugee Day, The Hill published a Contributors piece by the libertarian Cato Institute’s immigration policy analyst, Alex Nowrasteh, headlined, “The US should be a home for refugees.” In it, he offers a brief history of refugee policy and flows into the United States over the past century and suggests that the United States “should … allow more to settle here.” That’s a noble sentiment, but the headline is misleading because it leaves out the substance of what Nowrasteh proposes in order to help make this happen. In short, Nowrasteh wants to welcome more refugees to the United States but proposes abandoning them and letting them fend for themselves once they get here…
Time to End the Vicious Cycle of Inequality Begetting Unequal Education
A new EPI study of the academic preparation of kindergartners by social class and race ended up being less about absolute preparation of children at the beginning of school and more about how prepared they are relative to one another. In short, children do not start school as equals. According to Inequalities at the Starting Gate: Cognitive and Noncognitive Skills Gaps between 2010–2011 Kindergarten Classmates, children’s school preparation is highly unequal, and what determines being better or worse off is a student’s social class.
While inequalities in the cognitive abilities of our young people have been documented by previous research (see EPI’s Inequality at the Starting Gate study from 2002 and Robert Putnam’s new book, Our Kids: The American Dream in Crisis), our study uses a dataset that allowed for examining how prepared children are in both cognitive (reading and math) and noncognitive domains (social skills, persistence, and creativity, among others). The data set (the National Center for Education’s Early Childhood Longitudinal Study of the Kindergarten Class of 2010-2011) also offers information on individual and family demographic characteristics and various enrichment activities that parents undertake with their children, enabling assessment of the importance of these variables for children’s preparation. All in all, the data allowed us to understand the broad school readiness of a recent generation of students. These students were born after—and thus presumably benefited from—the spread of prekindergarten education and other advances in school preparedness research and policymaking. But these children were also raised in a context of economic stagnation.
Consistently, results showed that having less money puts children at a relative disadvantage, in terms of the cognitive and noncognitive skills developed by the age of 5, while having more money benefits them, as skill levels increase along with social class. Most gaps are striking in size and appear for all the examined cognitive, noncognitive, and executive function skills. For example, children in the highest socioeconomic group have reading and math scores that are a full standard deviation larger than the scores of their peers in the lowest socioeconomic group. To give a sense of how large this gap is, it would take up to four independent, “substantively important,” education interventions to close the gap, according to a “classification of effects” from the U.S. Department of Education’s What Works Clearinghouse. The social-class-based gaps in other skills such as working memory, persistence in completing tasks, and self-control are 0.7, 0.4, and 0.5 standard deviations, respectively.
Hall of Shame: 13 Democrats Who Voted to End Debate on Fast-Track Trade Legislation
Fast-track trade legislation is the first step in the process of greasing the skids for the proposed Trans-Pacific Partnership (TPP), and any other trade deal proposed by this president or any other for the next six years. Last month, the 13 democrats listed in the table below voted to end debate on fast track (Trade Promotion Authority, or TPA), allowing a final vote to take place. There are strong arguments against the TPP, which will increase inequality and hurt the middle class.
* The low-impact scenario assumes ending currency manipulation would reduce the trade deficit by $200 billion; the high-impact scenario assumes a $500 billion reduction in the trade deficit. The table shows the hypothetical change in 2015 three years after implementation. Source: Author's analysis of Scott 2014a and Scott 2014bTrade and jobs gained and lost in selected states
Net U.S. jobs displaced due to goods trade with China, 2001–2013
Net U.S. jobs created by eliminating currency manipulation
Low-impact scenario*
High-impact scenario*
Senator
State
State employment (in 2011)
Jobs lost
Jobs lost as a share of employment
Jobs gained
Jobs gained as a share of employment
Jobs gained
Jobs gained as a share of employment
Feinstein, Dianne
California
16,426,700
564,200
3.4%
258,400
1.6%
687,100
4.2%
Bennet, Michael
Colorado
2,492,400
59,400
2.4%
38,300
1.5%
95,700
3.8%
Carper, Tom
Delaware
420,400
5,500
1.3%
6,700
1.6%
16,200
3.9%
Coons, Chris
Nelson, Bill
Florida
8,101,900
115,700
1.4%
110,200
1.4%
274,000
3.4%
McCaskill, Claire
Missouri
2,742,100
44,200
1.6%
47,200
1.7%
116,800
4.3%
Shaheen, Jeanne
New Hampshire
684,800
22,700
3.3%
12,700
1.9%
31,300
4.6%
Heitkamp, Heidi
North Dakota
370,800
2,400
0.6%
7,400
2.0%
17,000
4.6%
Wyden, Ron
Oregon
1,710,300
62,700
3.7%
31,300
1.8%
78,600
4.6%
Kaine, Tim
Virginia
3,860,100
63,500
1.6%
52,500
1.4%
131,300
3.4%
Warner, Mark
Cantwell, Maria
Washington
3,118,000
55,900
1.8%
61,300
2.0%
140,300
4.5%
Murray, Pat
Total jobs at risk in these states**
39,927,500
996,200
2.5%
626,000
1.6%
1,588,300
4.0%
These 13 democrats come from 10 states that lost 996,200 jobs due to growing trade deficits with China between 2001 and 2013, nearly one-third of the 3.2 million jobs eliminated by China trade in the United States in that period. States like Oregon, California, and Colorado were among the hardest hit states in the country. But they are also home or host to Nike (Oregon), Lockheed-Martin (Colorado), and Apple, Google, Intel and other Goliaths of Silicon Valley (California). New Hampshire serve as a bedroom community for many electronics industry workers in nearby Massachusetts, and has lost hundreds of thousands of jobs in recent decades in textiles, shoemaking and small machine making.Read more
Top CEO Compensation Soars, and Why We Do Not Look at “Average CEOs”
Our new study shows the average compensation of CEOs in the largest firms was $16.3 million in 2014, up 3.9 percent since 2013 and 54.3 percent since the recovery began in 2009. More impressively, from 1978 to 2014, inflation-adjusted CEO compensation increased 997 percent, a rise almost double stock market growth and substantially greater than the painfully slow 10.9 percent growth in a typical worker’s annual compensation over the same period. Consequently, the CEO-to-worker compensation ratio was 303-to-1 in 2014, lower than the 376-to-1 ratio in 2000 but far higher than the 20-to-1 in 1965 and any time in the 1960s, 1970s, 1980s, or 1990s, as the Figure shows.
CEO-to-worker compensation ratio, 1965–2014
| Year | CEO-to-worker compensation ratio |
|---|---|
| 1965/01/01 | 20.0 |
| 1966/01/01 | 21.2 |
| 1967/01/01 | 22.4 |
| 1968/01/01 | 23.7 |
| 1969/01/01 | 23.4 |
| 1970/01/01 | 23.2 |
| 1971/01/01 | 22.9 |
| 1972/01/01 | 22.6 |
| 1973/01/01 | 22.3 |
| 1974/01/01 | 23.7 |
| 1975/01/01 | 25.1 |
| 1976/01/01 | 26.6 |
| 1977/01/01 | 28.2 |
| 1978/01/01 | 29.9 |
| 1979/01/01 | 31.8 |
| 1980/01/01 | 33.8 |
| 1981/01/01 | 35.9 |
| 1982/01/01 | 38.2 |
| 1983/01/01 | 40.6 |
| 1984/01/01 | 43.2 |
| 1985/01/01 | 45.9 |
| 1986/01/01 | 48.9 |
| 1987/01/01 | 51.9 |
| 1988/01/01 | 55.2 |
| 1989/01/01 | 58.7 |
| 1990/01/01 | 71.2 |
| 1991/01/01 | 86.2 |
| 1992/01/01 | 104.4 |
| 1993/01/01 | 111.8 |
| 1994/01/01 | 87.3 |
| 1995/01/01 | 122.6 |
| 1996/01/01 | 153.8 |
| 1997/01/01 | 233.0 |
| 1998/01/01 | 321.8 |
| 1999/01/01 | 286.7 |
| 2000/01/01 | 376.1 |
| 2001/01/01 | 214.2 |
| 2002/01/01 | 188.5 |
| 2003/01/01 | 227.5 |
| 2004/01/01 | 256.6 |
| 2005/01/01 | 308.0 |
| 2006/01/01 | 341.4 |
| 2007/01/01 | 345.3 |
| 2008/01/01 | 239.3 |
| 2009/01/01 | 195.8 |
| 2010/01/01 | 229.7 |
| 2011/01/01 | 235.5 |
| 2012/01/01 | 285.3 |
| 2013/01/01 | 303.1 |
| 2014/01/01 | 303.4 |
Note: CEO annual compensation is computed using the "options realized" compensation series, which includes salary, bonus, restricted stock grants, options exercised, and long-term incentive payouts for CEOs at the top 350 U.S. firms ranked by sales.
Source: Authors' analysis of data from Compustat's ExecuComp database, Current Employment Statistics program, and the Bureau of Economic Analysis NIPA tables
Our measure of CEO pay covers chief executives of the top 350 U.S. firms and includes the value of stock options exercised in a given year plus salary, bonuses, restricted stock grants, and long-term incentive payouts. (Full methodological details here)
Our analysis, which shows that CEO pay grew far faster than pay of the top 0.1 percent of wage earners (those earning more than 99.9 percent of wage earners), indicates that CEO compensation growth does not simply reflect the increased value of highly paid professionals in a competitive race for skills (the so-called “market for talent”). CEO compensation in 2013 (the latest year for data on top wage earners) was 5.84 times greater than wages of the top 0.1 percent of wage earners, a ratio 2.66 points higher than the 3.18 ratio that prevailed over the 1947–1979 period. The compensation gains of top CEOs were therefore equivalent to the wages of 2.66 very-high-wage earners.
Don’t worry about all this, says American Enterprise Institute scholar Mark Perry, because our sample, and those used by the Associated Press and the Wall Street Journal, is misleading. Looking at the compensation of CEOs in the largest firms, according to Perry, is not “very representative of the average U.S. company or the average U.S. CEO,” because “the samples of 300–350 firms for CEO pay represent only one of about every 21,500 private firms in the U.S., or about 1/200 of 1 percent of the total number of U.S. firms.” Perry notes, “According to both the BLS and the Census Bureau, there are more than 7 million private firms in the U.S.”
Former Labor Secretaries and EPI Board Members F. Ray Marshall and Robert Reich oppose TPA and TPP
In a jointly authored statement, former EPI board members and U.S. Labor Secretaries F. Ray Marshall and Robert Reich called on Congress to reject Trade Promotion Authority and the Trans-Pacific Partnership because that deal will “harm America’s working people.” Despite this statement, the House today approved a truncated version of Fast Track (TPA) that excludes funding for Trade Adjustment Assistance for displaced workers. But passing TPA without TAA is a risky gamble because many Democrats have demanded that the two move simultaneously.
In their letter to Congress, Marshall and Reich conclude that “Trade can work for working Americans, but only when Americans can effectively know about what is in a trade deal, and only when a trade deal is effectively designed to create more good jobs in America. This Fast Track mechanism toward the Trans Pacific Partnership is a bad deal for America.”
Disney Reverses 35 Layoffs, but No Fairytale Ending for Thousands of Others Displaced by H-1B Visa Program
We learned of some welcome news when Computerworld and the New York Times reported that Disney had reversed a decision to replace 35 American information technology (IT) workers with cheaper H-1B guestworkers at its ABC broadcasting offices in New York City and Burbank, CA. The news comes after a significant spotlight was shined on Disney’s recent replacement of 250 technology workers with H-1B guestworkers at Disney’s Theme Parks division. This is good news for the 35 workers who will keep their jobs for now, and at least in the short term, will not have to train their foreign guestworker replacements. However, this decision by Disney executives does nothing for the 250 workers who have already lost their jobs to workers they were forced to train and who will earn roughly $40,000 less for doing the same job. Nor does it help the approximately 225 Northeast Utilities workers, or the 400 at Southern California Edison (SCE), or the 600 at Xerox, or 900 at Cargill, or 100 at Fossil Group, or tens of thousands of workers who likely suffered a similar fate at hundreds of other places that have never been reported.
It appears that the media attention has shamed Disney into reversing its decision to force more of its American workers out in favor of cheaper guestworkers. Clearly, Disney’s own sense of social responsibility wasn’t enough to convince its executives to do the right thing in the first place. While the reversal of Disney’s layoffs is good news, it hardly makes us sanguine about the future of the H-1B visa program. The payoff for replacing American workers with indentured and underpaid H-1B guestworkers is simply too high: as much as a 49 percent wage savings in some cases. Relying solely on the media to shame firms is insufficient. Simply put, the government must immediately make changes to the program.
We would also like to emphasize two important points about the H-1B that have not been highlighted enough in the recent media coverage. First, the temporary foreign workers employed by the firms hired to replace American workers are blameless in all of these situations, as one American IT worker who was recently replaced by an H-1B at SCE attested to in a recent interview. The blame should be placed squarely on the corporate profiteering that leaves Americans out of a job and foreign workers vastly underpaid for the work they are hired to do. The H-1B workers are simply seeking to advance their careers and to make better lives for themselves in the United States, and are often placed in working situations where they are vulnerable and can be easily exploited.
The True Cost of Low Prices is Exploited Workers
This piece was originally published in the New York Times “Room for Debate” section on May 12, 2015.
The true costs of goods and services is a secondary issue to stagnant and exploitative wages: The cost of certain goods might go up, but more people would be able to afford them with better compensation. The current price of low-cost goods and services in the United States is low-income, exploited workers living in poverty. But the country as a whole isn’t broke, only its workers are — while corporations and C.E.O.s are richer than ever.
The value of the federal minimum wage has declined 24 percent since 1968. If we re-established the relationship between the minimum wage and the overall median wage to its 1968 level, we would raise wages for 35 million people, a full quarter of the workforce.
The situation is even worse for those earning tips, such as nail salon workers. Their pay is set at $2.13 an hour by the federal government. If tips don’t supplement these workers’ paycheck to the regular minimum, they have to ask their employers for the difference. (And good luck with that.)
But low and stagnant wages are not the result of benign, abstract economic forces. They reflect conscious policy choices by lawmakers influenced by powerful corporate lobby groups like the Chamber of Commerce and the National Restaurant Association.
Hatch Should Fix H-1B Visa Program Instead of Expand It
Corporate lobbyists have convinced legislators of both parties that America needs more guest workers in high-tech jobs. Leading the charge in Congress to do their bidding is Utah Sen. Orrin Hatch, who has introduced legislation to double or triple the number of non-immigrant tech workers who can be hired annually on H-1B visas. But his proposal won’t fix the H-1B program’s flaws, which allow American and foreign workers alike to be exploited and underpaid.
Continue reading the rest of this op-ed at the Salt Lake Tribune.