On January 1^st, thirteen states raised their state minimum wages, lifting the pay of more than 4.5 million workers. Eight of these states (Arizona, Florida, Missouri, Montana, Ohio, Oregon, Vermont, and Washington), have state minimum wages that are “indexed” to inflation so that every year, the minimum wage is automatically increased in order to protect the purchasing power of minimum-wage workers’ incomes. Colorado also automatically increases its minimum wage based on inflation, with the increase occurring each July.

In the remaining 5 states (California, Connecticut, New Jersey, New York, and Rhode Island) citizens voted to raise their state minimum wages during the past year. Voters in New Jersey also chose to index their state minimum wage to inflation so that in January of 2015, New Jersey’s minimum wage workers will see the same paycheck protection afforded workers in the 9 other states with inflation indexing.  The table below details all of these increases.

As the table shows, these increases will give more than $2.7 billion in additional wages to affected workers over the course of the year.  For the states that voted to raise their minimum wages, these additional wages represent a modest, but valuable injection of dollars into the pockets of workers who typically rely on every penny they earn and are likely to spend those dollars right away. For the states with indexing, these new wages ensure that minimum wage workers can still afford the same volume of goods and services that they bought the previous year.

Read more

In keeping with what is as of now an annual tradition to produce some serious click-bait—and to cut through the “conventional wisdom” of inside the Beltway talking heads and commenters—we hereby present our best and worst economic policy ideas of 2013.

Reflecting the fact that fiscal policy in 2013 is a mess, the number of bad ideas on this list far exceed the number of good ones. (A 9-to-4 bad-to-good ratio seemed about right.) We’ll go ahead and put our best foot first.

Best Ideas

1.  “Inequality is the defining economic challenge of our time.” This was said by President Obama in a major address in December. In a period of wide—and rising— income inequality, wage stagnation, a tepid economic recovery, and fiscal policy mired in austerity,  it is absolutely essential to begin put the rise in inequality at the center of policy debates.

2.  Talking about expanding benefits, finally. While the conversation about Social Security in Washington has for far too long focused on how to cut benefits, Sen. Elizabeth Warren and Sen. Tom Harkin both rose up, not just to defend the current level of benefits, but to call for expanding them. This is absolutely the conversation we need to have. Retirement insecurity is growing as two legs of the three-legged “retirement stool” (pensions and personal savings) have become increasingly wobbly. Moreover, since the last major Social Security reform in 1983, the wealth of the bottom 60 percent of Americans actually declined. Even as our country has gotten 63 percent richer, millions of retirees are increasingly dependent on their benefits to get by. It’s a good thing we’re starting to consider increasing their benefits.

Read more

EPI is taking a much-needed break for the holidays. Working Economics will be back on January 2nd. Meanwhile, here’s what we read today:

• Senate Bill Would Lower Contractors’ Compensation Cap (Wall Street Journal)
• How America’s harshest immigration law failed (MSNBC)
• Victims of Misclassification (New York Times)

And don’t forget to check out the 13 Most Important Charts of 2013.

Today’s New York Times published one of the most important stories yet about the Detroit bankruptcy, a story that shines a harsh light on the financial institutions whose tricky deal-making helped tank the city’s finances. At the heart of the story is Detroit’s decision to enter into swap contracts that were spectacularly ill-advised. Mary Williams Walsh gives us the history:

“Detroit entered into the swap contracts back in 2005, when it tapped the municipal bond market for $1.4 billion to put into its workers’ pension funds. Much of the deal was structured with variable-rate debt, and the swaps were intended to work as a hedge, to protect Detroit if interest rates rose. But as things turned out, rates went down, and under those circumstances, the terms of the swaps called for Detroit to make regular payments to UBS and Merrill Lynch Capital Services, now part of Bank of America. Detroit has been doing so, even in bankruptcy. The swaps now cost it about $36 million a year.

“In retrospect, it seems clear that Detroit was already struggling in 2005 and was a poor candidate to borrow the $1.4 billion. The borrowing required an unusual structure to avoid violating the city’s legal debt limit. In 2009, the debt was downgraded to junk, putting the city out of compliance with the terms of the swaps. So Detroit restructured the swap obligations, offering the two banks the tax revenue that it received from local casinos as a backstop.”

Read more

I’m saddened because I wasn’t able to celebrate the passage of comprehensive immigration reform this year when commemorating International Migrants Day on December 18. Nevertheless, for people who care about immigration, 2013 was an intense and interesting year. Following is a quick wrap up of what happened this year, and what to be hopeful for in 2014.

To start, the lopsided share of the Latino vote won by President Obama in his reelection helped put a major federal immigration reform back on the table. Then at the end of 2012, eight members of the U.S. Senate began negotiating a bipartisan federal immigration reform bill. And in 2012 and 2013 anti-immigrant laws in Arizona and Alabama, which sought to make life so miserable for immigrants lacking formal legal status that they would “self-deport” back to their countries of origin, were defeated in the courts one by one.

In mid-2013, the Senate passed a comprehensive immigration bill by a vote of 68 to 32. There is no question that the Senate bill is historic: Both political parties agreed to reform just about every aspect of the U.S. immigration system, and create a legalization program for the 11.7 million unauthorized immigrants in the country. Unauthorized immigrants live in constant fear of deportation and separation from their families, and the 8 million of them in the U.S. labor market go to work every day vulnerable to exploitation because employers can and do threaten them with deportation if they attempt to organize or join a union, or speak out about unfair, unsafe, or illegal working conditions. And we know that as a result, unauthorized immigrant workers suffer from wage theft (i.e., are not paid the wages they are owed under minimum wages and overtime laws) at an astonishingly high rate. Legalizing these workers would not only be just and humane, but would improve wages and working conditions for all low-wage workers and help counter the current race-to-the-bottom pursued by many employers in terms of labor standards.

Read more

I don’t usually associate the American Enterprise Institute with compassion for the unemployed or anything, really, other than pro-business, anti-government policy prescriptions and rhetoric. So I was surprised and heartened by a thoughtful post by AEI Money & Politics blogger James Pethokoukis, who skewers the notion that cutting unemployment benefits will spur job creation.

Pethokoukis analyzes the effect of reductions in weekly benefit levels and total weeks of unemployment compensation enacted in North Carolina this summer—cuts so draconian they led to the state being kicked out of the federal Emergency Unemployment Compensation program that provides weekly benefits to long-term jobless workers. North Carolina Republicans claimed the cuts would force lazy workers to find jobs, thereby solving the state’s unemployment crisis.

Instead, as Pethokoukis shows, tens of thousands of North Carolinians stopped looking for jobs that weren’t there once they were cut off from weekly benefits (which are only paid to people who are actively seeking paid employment). The labor force participation rate fell nearly a full percentage point, as 42,656 workers gave up looking and dropped out of the labor force. If they hadn’t, according to Pethokoukis, “the state’s jobless rate would have increased to 9.1% rather than sharply declining.” University of California at Berkley economist Jesse Rothstein predicted this dropout effect in a 2011 paper he presented at EPI, which disputed the notion that unemployment insurance causes significant unemployment.

Hopefully, the North Carolina experience will help persuade House Republicans like Dave Camp to stop arguing that killing the EUC program will boost employment. As EPI and the CBO have shown, paying out $25 billion in EUC in 2014 will help the economy, not hurt it. Killing the program won’t help a single unemployed person find work, but will instead depress aggregate consumer demand and cost the economy 310,000 jobs.

The Bureau of Labor Statistics has released new employment projections for 2022. These projections are frequently misinterpreted, and the way BLS presents the data can certainly leave the uninitiated confounded. This analysis uses the occupation projections to discuss two issues: whether low-, middle- or high-wage occupations will grow disproportionately, and whether the occupation structure of 2022 relative to 2012 requires substantially more education and training. The answer to both questions is that the occupational structure of 2022 does not look dramatically different than what we have now. This means that the challenge we face is how to make occupations better paid rather than worry about whether the workforce we have is under-skilled or over-skilled for future work. That is, we have a job quality problem, and not a skills deficit problem. (Becky Thiess reached the same conclusions in an analysis of the prior set of projections.)

These projections get used in misleading ways. Some people look at the occupations that grow the fastest and draw conclusions, usually that we all need a lot more education. Others emphasize which occupations create the most number of jobs and find that a large expansion of low-wage work is looming. The BLS press release ricochets back and forth between both approaches, which obscures what one should conclude from the projections. Neither approach—looking solely at either the rate of employment growth or the absolute amount of employment growth—is correct. A fast growing occupation may be relatively small, and therefore inconsequential in the overall economy. A large occupation may generate a lot of absolute employment growth, but if it grew at the average of total employment growth (so its share of total employment did not change), then the overall character of employment (more skill, higher/lower wage) would not change.

Read more

This post originally appeared on the Huffington Post. 

Since the start of the Great Recession in 2007, Native American employment has been lowest in the regions where white employment has been highest. In my research in 2009 and 2010, I found that while whites were doing relatively well in terms of employment in Alaska, the Northern Plains, and the Southwest, Native Americans were doing rather poorly in these very same regions. I also noted that these were the regions where the proportion of Native Americans was relatively high in relation to the proportion of non-Natives. These findings raised the question of whether racial discrimination might play a role in the high level of joblessness among Native Americans.

(Read the detailed analyses of Native American employment and unemployment data.)

In a labor market free of racial discrimination, one would expect whites and Native Americans to have somewhat similar outcomes, not starkly divergent outcomes like we see in Alaska, the Northern Plains, and the Southwest. These divergent outcomes are the first suggestion that racial discrimination might be at play.

Read more

The Murray-Ryan budget deal that passed the House and will approved by the Senate as soon as today provides some marginal and temporary relief from planned spending cuts over the next two years. However, it does nothing to derail the disastrous longer-term march towards cutting discretionary spending to historically low rates over the next decade. And given that the large majority of all federally-financed public investments come out of discretionary spending, these spending cuts are completely inconsistent with any policy that claims to value public investment.

Let’s define “public investment,” as my colleague Josh Bivens did earlier this year, as spending that “builds the nation’s capital stock by devoting resources” to the basic physical infrastructure, innovative activity, green investments, and education “that leads to higher productivity and/or higher living standards.” This sort of spending has a great bang-per-buck ratio in the current economic environment, as it leads immediately toward more jobs by boosting demand, and also helps amp up productivity growth in ways more likely to be broadly distributed across the population.

Read more

In a swift reaction to ugly publicity about suicides, injuries, and mistreatment of workers, Biel Crystal, one of Apple’s most important suppliers of touchscreen cover glass for its iPhones, reached an agreement with the Chinese labor rights group, SACOM, to take three steps toward better conditions by January 2014:

1. Clear work contracts for workers that include details on terms of contract, terms of probation, position, affiliated department.  The company also will not ask workers to turn in the contract when work relation ends.
2. Compensation and assistance for injured workers in accordance with China’s Regulation on Work, related injury insurance and adequate measures to protect workers from work injury.
3. One day off every seven working days.

These very basic protections might seem like minimal progress, but in light of the appalling conditions at Biel Crystal’s plant, even providing limited basic protections is welcome.

The fact that the company has acknowledged such significant shortcomings in these fundamental areas of labor rights shows just how far Apple is from living up to its commitments to decent labor conditions throughout its supplier chain. It should be a reminder to all who follow Apple that the recent report by its hand-picked monitor, the Fair Labor Association, was little more than a whitewash that covered up the truly horrendous labor conditions in the factories that make Apple products. The FLA’s investigation also assessed conditions for less than one-fifth of the workers in Apple’s supply chain and thus missed gross violations at other factories, such as at the Biel Crystal plant.