Twenty years ago, the radical wing of the Republican Party announced its “Contract With America,” a set of policies and actions Rep. Newt Gingrich and his caucus pledged to accomplish if they were elected to a majority in Congress. The Contract included eight internal reforms to change congressional operations (things like applying labor laws to Congress and putting term limits on committee chairmen) and ten bills affecting national policy that would be brought to the floor and voted on within the first 100 days of the new Congress.

Gingrich’s early battles ultimately ended in victory for the public and for the environmental and consumer protections he wanted to undo. Gingrich’s bills were made worse as they moved through committee and were amended in the House and Senate, finally resulting in what one senior Republican Senate staffer called “a revolution”—a system that would allow any corporation to escape enforcement through legal or procedural loopholes. Every regulation would be effectively voluntary, and the polluters and producers of unsafe products would have nothing to fear from the EPA, the Consumer Product Safety Commission, OSHA, or any other regulatory agency.

The vehicle for this revolution was one of the first bills considered and passed in the House in 1995, “The Job Creation and Wage Enhancement Act.” Its goal was to subject federal regulations—regardless of statutory mandates to the contrary—to new risk assessment and cost-benefit analysis requirements and to create multiple opportunities for businesses to block federal rules and interfere with their enforcement. Big chemical and pharmaceutical manufacturers didn’t want clean water laws interfering with their profits, the meat industry wanted to prevent new rules about bacteria and contamination, and construction companies didn’t want to have to comply with new workplace safety standards. The legislation would have stopped new rules in their tracks.

Read more

The top line story coming out of today’s jobs report should be about wages. Nominal wage growth remains sluggish—far too slow to set a time frame for raising interest rates, or even start a conversation about it. For more on that, see the most recent monthly wages figure and quarterly data and this explainer.

Job growth, meanwhile, has been solid, but not strong. The unemployment rate is still slowly moving in the right direction. But, we are still far from the economy we had before the great recession began. At the rate jobs were added in October (214,000), it will be 2018 before we return to 2007 normalcy.

The employment-to-population ratio for prime-age workers is a great measure of the economy—and a favorite of my predecessor—which captures a variety of different labor market components. The employment-to-population ratio (or EPOP) is simply the share of the population with a job. This allows us to sidestep the issue of whether potential workers are in the labor force—though we know there are still a lot of missing workers out there (5.75 million at last count). Also, when we restrict our attention to prime-age workers (25-54 years old), it serves the important purpose of avoiding confounding changes in employment that are not due to labor market conditions, but are instead due to longer-run structural factors, such as baby boomers hitting retirement age.

From the figure below, it is clear that jobs are returning—EPOPs have been on the rise. Growing shares of prime-age workers are getting jobs. That is good news, but it’s clear how far we have to go—look at the sharp drop in the EPOP during the great recession. Then, it is clear that we are slowing climbing out, but we have far to go.

Read more

In the BLS report this morning, overall jobs numbers were solid and the unemployment rate continued to show signs of improvement. However, the unfortunate downside of this morning’s release is that wage growth has continued to be sluggish. Average hourly earnings of all employees on nonfarm payrolls and average hourly earnings of production and nonsupervisory employees on private nonfarm payrolls saw 2.0 percent and 2.2 percent growth, respectively, over this last year.

Despite fears from some inflation hawks, the fact is that the weak labor market of the last seven years has put enormous downward pressure on wages, and there has been no significant pickup in nominal wage growth in recent years. Wage growth is far below the 3.5 percent rate consistent with the Federal Reserve Board’s inflation target of 2 percent, and far below the 4 percent rate that could easily be absorbed for a while to restore labor’s share of national income from its current historic lows.

This lackluster wage growth is a clear indicator that there’s still considerable slack in the labor market. With so many Americans looking for work—and millions more who would be looking for work if job opportunities were stronger—employers simply don’t have to offer wage increases to get and keep the workers they need. It’s a positive sign that the economy is growing, but it’s simply not enough for workers to feel the effects in their paychecks.

Jobs Day

Year-over-year change in nominal average hourly earnings of all private nonfarm employees and private production/nonsupervisory workers, 2007–2014

Month	All private employees	Production/nonsupervisory workers
Mar-2007	3.6%	4.1%
Apr-2007	3.3%	3.8%
May-2007	3.7%	4.1%
Jun-2007	3.9%	4.1%
Jul-2007	3.4%	4.1%
Aug-2007	3.5%	4.0%
Sep-2007	3.2%	4.1%
Oct-2007	3.3%	3.8%
Nov-2007	3.3%	3.9%
Dec-2007	3.1%	3.8%
Jan-2008	3.1%	3.9%
Feb-2008	3.0%	3.7%
Mar-2008	3.0%	3.8%
Apr-2008	2.8%	3.7%
May-2008	3.0%	3.7%
Jun-2008	2.7%	3.6%
Jul-2008	3.0%	3.7%
Aug-2008	3.3%	3.8%
Sep-2008	3.3%	3.6%
Oct-2008	3.3%	3.9%
Nov-2008	3.6%	3.9%
Dec-2008	3.6%	3.8%
Jan-2009	3.5%	3.7%
Feb-2009	3.5%	3.7%
Mar-2009	3.2%	3.5%
Apr-2009	3.2%	3.3%
May-2009	2.8%	3.1%
Jun-2009	2.7%	2.9%
Jul-2009	2.6%	2.7%
Aug-2009	2.4%	2.6%
Sep-2009	2.3%	2.7%
Oct-2009	2.3%	2.6%
Nov-2009	2.1%	2.7%
Dec-2009	1.8%	2.5%
Jan-2010	2.0%	2.6%
Feb-2010	1.8%	2.5%
Mar-2010	1.8%	2.3%
Apr-2010	1.8%	2.4%
May-2010	1.9%	2.6%
Jun-2010	1.8%	2.5%
Jul-2010	1.8%	2.5%
Aug-2010	1.7%	2.4%
Sep-2010	1.9%	2.2%
Oct-2010	1.9%	2.5%
Nov-2010	1.7%	2.2%
Dec-2010	1.7%	2.0%
Jan-2011	2.0%	2.2%
Feb-2011	1.8%	2.1%
Mar-2011	1.8%	2.1%
Apr-2011	1.9%	2.1%
May-2011	2.0%	2.1%
Jun-2011	2.1%	2.0%
Jul-2011	2.3%	2.3%
Aug-2011	1.9%	2.0%
Sep-2011	1.9%	2.0%
Oct-2011	2.1%	1.7%
Nov-2011	2.0%	1.8%
Dec-2011	2.0%	1.8%
Jan-2012	1.7%	1.4%
Feb-2012	1.9%	1.5%
Mar-2012	2.1%	1.7%
Apr-2012	2.0%	1.8%
May-2012	1.8%	1.4%
Jun-2012	2.0%	1.5%
Jul-2012	1.8%	1.4%
Aug-2012	1.9%	1.3%
Sep-2012	2.0%	1.4%
Oct-2012	1.5%	1.3%
Nov-2012	1.9%	1.4%
Dec-2012	2.1%	1.6%
Jan-2013	2.2%	1.9%
Feb-2013	2.1%	2.0%
Mar-2013	1.9%	1.9%
Apr-2013	2.0%	1.7%
May-2013	2.1%	1.9%
Jun-2013	2.2%	2.0%
Jul-2013	1.9%	2.0%
Aug-2013	2.2%	2.1%
Sep-2013	2.0%	2.2%
Oct-2013	2.2%	2.3%
Nov-2013	2.2%	2.3%
Dec-2013	1.9%	2.3%
Jan-2014	2.0%	2.2%
Feb-2014	2.1%	2.5%
Mar-2014	2.1%	2.3%
Apr-2014	2.0%	2.3%
May-2014	2.1%	2.4%
Jun-2014	2.0%	2.3%
Jul-2014	2.0%	2.3%
Aug-2014	2.1%	2.5%
Sep-2014	2.0%	2.2%
Oct-2014	2.0%	2.2%

ChartData Download data

The data below can be saved or copied directly into Excel.

The data underlying the figure.

Note: Wage target consistent with Federal Reserve Board's 2 percent inflation target and 1.5% labor productivity  growth assumption.  Light shaded area denotes recession.

Source: Authors' analysis of Bureau of Labor Statistics' Current Employment Statistics, public data series.

Share on Facebook Tweet this chart

Embed

Copy the code below to embed this chart on your website.

<iframe width="100%" height="460" src="https://www.epi.org?p=74739&view=embed&embed_template=charts_v2013_08_21&embed_date=20260707&onp=74792&utm_source=epi_press&utm_medium=chart_embed&utm_campaign=charts_v2" frameborder="0"></iframe>

Download image

This post is the latest in a series that has aimed to question the conventional Beltway wisdom about the supposed harm to the economy inflicted by the corporate tax code. Today, we’ll take on the idea that’s long been fermenting on the right, but now increasingly popping up in more mainstream outlets, to abolish the corporate tax code entirely. While there are reasons the idea of ceasing to tax corporations makes sense, the idea’s proponents have underestimated its drawbacks.

Getting rid of the corporate code entirely has some intrinsic appeal. Because corporate taxes are ultimately paid out of individuals’ pockets, it can seem desirable to tax these individuals directly—without dealing with all of the exemptions, credits, loopholes, and deductions in the corporate code, not to mention the “tax avoidance industry” such provisions support. This could potentially be a more efficient way to raise the same amount of revenue. However, there are three main obstacles that stand in the way of getting rid of the corporate code entirely.

1. The corporate tax code is a progressive revenue raiser. While the corporate code only brings in about 10 percent of federal revenue, that’s still $315 billion in 2014. It’s also really progressive; the lowest fifth of earners pay about 0.9 percent of their income in corporate income tax, while the top 0.1 percent of earners pay 9.7 percent. According to the Congressional Budget Office, about four-fifths of corporate income is held by the top fifth of the income scale, and about half is held by the top 1 percent. Thus, as Jared Bernstein points out, “Unless we could replace it with higher taxes on those same households… scrapping or even just lowering the corporate tax rate would increase after-tax income inequality.” Raising that kind of revenue from the same sources, in the absence of a corporate income tax, is tougher than it may seem. The plan cited by the New York Times’ Josh Barro would replace the corporate tax by taxing individuals’ capital gains at ordinary income tax rates—a proposal long favored by progressives—and that would still only make up half of the lost revenue.
2. Unintended consequences. As we’ve seen this year in Kansas’s experiment with eliminating corporate taxation, the unintended consequences are enormous. For instance, if corporations don’t pay taxes, but people still do, what would stop individuals from simply incorporating themselves for tax reasons—thus paying no taxes until their “corporate” earnings are distributed? (Kansas lost out on almost $300 million of revenue over a two-month period this year, for just this reason.) This maneuver would be just the tip of the tax avoidance iceberg if the corporate code were abolished. Getting rid of the corporate tax code and its myriad opportunities to evade taxes would not necessarily result in a system that’s harder to game.
3. If you win the race to the bottom, you’re still at the bottom. While scrapping the corporate tax code would represent a “victory” in the international race to the bottom, it would undoubtedly be short-lived, as other countries would certainly react by slashing or zeroing their rates as well. This would be like a game of prisoner’s dilemma in which each suspect ratted out the other and everyone ended up in jail for a long, long time. (Jail in this case would be a hypothetical world in which multinational corporations paid no tax to any country at all.) Currently, every developed country levies a corporate income tax. They may tax different kinds of income and at different rates, but these taxes still exist throughout the world because they provide governments with revenue that would be hard to replace by switching to another tax system.

Read more

This morning, the Bureau of Labor Statistics released the 2014 third quarter data from the Employment Cost Index (ECI). Total compensation and wages and salaries for the private-sector workforce both rose 0.7 percent. This is the second straight quarter of faster-than-average growth since the recovery from the Great Recession began. While this is absolutely a move in the right direction, we shouldn’t declare “mission accomplished” in spurring decent wage growth. The figure below shows the year-over-year growth rates of wages from a variety of measures: the ECI, hourly wages of all workers and hourly wages of production and nonsupervisory workers (the latter two from the monthly payroll survey, which will be updated again in a week).

There are two clear trends to note from the graph. First, all the series move fairly consistently with each other over time. In the third quarter, they all measured between 2.0 and 2.3 percent. Second, these growth rates are still far lower than the growth rates in 2007, when the wage growth ranged from 3.1 percent for all workers in the payroll survey to 4.1 percent in the ECI.

Figure A

Year-over-year growth rates of wages, 2002–2014

Date	ECI*, all workers	CES**, production/nonsupervisory workers	CES**, all workers
2002-01-01	3.5%	3.0%
2002-04-01	3.6%	2.7%
2002-07-01	3.1%	2.9%
2002-10-01	2.6%	3.1%
2003-01-01	2.9%	3.2%
2003-04-01	2.4%	2.9%
2003-07-01	2.9%	2.6%
2003-10-01	3.1%	2.0%
2004-01-01	2.6%	1.7%
2004-04-01	2.8%	2.0%
2004-07-01	2.6%	2.1%
2004-10-01	2.6%	2.5%
2005-01-01	2.7%	2.6%
2005-04-01	2.5%	2.6%
2005-07-01	2.3%	2.7%
2005-10-01	2.5%	3.0%
2006-01-01	2.5%	3.4%
2006-04-01	2.8%	3.9%
2006-07-01	3.1%	4.1%
2006-10-01	3.2%	4.1%
2007-01-01	3.5%	4.1%
2007-04-01	3.4%	4.0%	3.6%
2007-07-01	3.3%	4.1%	3.4%
2007-10-01	3.3%	3.8%	3.2%
2008-01-01	3.2%	3.8%	3.1%
2008-04-01	3.1%	3.7%	2.8%
2008-07-01	2.9%	3.7%	3.2%
2008-10-01	2.6%	3.9%	3.5%
2009-01-01	2.0%	3.6%	3.4%
2009-04-01	1.6%	3.1%	2.9%
2009-07-01	1.4%	2.7%	2.4%
2009-10-01	1.4%	2.6%	2.1%
2010-01-01	1.5%	2.5%	1.8%
2010-04-01	1.6%	2.5%	1.8%
2010-07-01	1.6%	2.4%	1.8%
2010-10-01	1.7%	2.2%	1.8%
2011-01-01	1.6%	2.2%	1.9%
2011-04-01	1.6%	2.1%	2.0%
2011-07-01	1.7%	2.1%	2.0%
2011-10-01	1.6%	1.8%	2.0%
2012-01-01	1.9%	1.5%	1.9%
2012-04-01	1.8%	1.6%	1.9%
2012-07-01	1.8%	1.4%	1.9%
2012-10-01	1.8%	1.4%	1.8%
2013-01-01	1.7%	1.9%	2.0%
2013-04-01	1.9%	1.9%	2.1%
2013-07-01	1.9%	2.1%	2.1%
2013-10-01	2.0%	2.3%	2.1%
2014-01-01	1.7%	2.3%	2.1%
2014-04-01	1.9%	2.3%	2.0%
2014-07-01	2.2%	2.3%	2.0%

ChartData Download data

The data below can be saved or copied directly into Excel.

The data underlying the figure.

* Employer Cost Index

** Current Employment Statistics

Note: All series are for private sector workers.

Source: EPI analysis of Bureau Labor Statistics' Employer Cost Trends and Current Employment Statistics

Share on Facebook Tweet this chart

Embed

Copy the code below to embed this chart on your website.

<iframe loading="lazy" width="100%" height="460" src="https://www.epi.org?p=74533&view=embed&embed_template=charts_v2013_08_21&embed_date=20260707&onp=74543&utm_source=epi_press&utm_medium=chart_embed&utm_campaign=charts_v2" frameborder="0"></iframe>

Download image

The fact is that the weak labor market of the last seven years has put enormous downward pressure on wages, and there has been no significant and sustained pickup in nominal wage growth in recent years. Employers still don’t seem to have to offer big wage increases to get and keep the workers they need, when hiring rates and net job creation remain far slower than what’s needed to generate healthy labor market outcomes.

Read more

Next Tuesday is Election Day.  For months, get out the vote campaigns have been under way in communities across the country and the public has endured an endless stream of political ads and robocalls intended to bolster typically sluggish voter turnout during midterm elections.  Arguably, the biggest risk to people showing up at the polls on Tuesday is a basic disbelief that their individual vote counts or will do much to change the status quo.  On one hand, voters might feel justified in holding this view given that neither party has said (or done) much this election cycle to address growing economic inequality and stagnant living standards, issues that have been top of mind for most Americans for at least the past six years.  In fact, the most vocal public figure on this issue in recent months has been someone we didn’t elect – Fed Chair, Janet Yellen.

Just in case reports of strong job growth and declining unemployment this year have lulled our elected leaders into a false sense of security about the public’s level of concern over the economy, they should be reminded that counting matters.  Since January of this year, the U.S. economy has added an average of 227,000 jobs per month and the unemployment rate has fallen from 6.6 percent to 5.9 percent.  But, according to EPI’s monthly measure of “missing workers,” if job opportunities were significantly stronger, there would potentially be an additional 6.3 million people either working or looking for work and the unemployment rate would be 9.6 percent.

A few years ago, sociologists Becky Petit and Bryan Sykes brought to light an important way in which counting matters when it comes to measuring African American progress.  Specifically, Petit and Sykes called into question the accuracy of social and economic indicators used to gauge how well different groups within American society are doing.  Most of these indicators are based on the civilian non-institutionalized population.  While this is a term few people give any thought to, by definition it excludes people who are in jails, prisons, mental institutions, nursing homes or on active duty in the Armed Forces.

Read more

This post originally ran on the Wall Street Journal‘s Think Tank blog.

The Commerce Department’s Bureau of Economic Analysis reported Thursday that gross domestic product–the widest measure of U.S. economic activity–grew at an annualized rate of 3.5% in the third quarter. For the past six months GDP has been growing at a rate of 4.1%. If sustained, this would clearly constitute the recovery shifting into a higher gear.

Sadly, there’s not a lot of evidence that it will be sustained.

For one thing, even with the expansion in the two most recent quarters, growth so far in 2014 has averaged just 2%. Much of the growth in the past six months likely represents bounceback from the 2.1% contraction in the first 3 months of this year.

Read more