We Have Skilled Construction Workers−They Need Jobs
The next time you read in the newspaper or hear on TV that there is a shortage of construction workers and we have to import tens of thousands of workers from abroad in order to have enough construction labor, remember this memo from Jason Furman, Chair of the Council of Economic Advisers:
“Construction employment rose by 11,000 in October and is up 185,000 over the past year, but remains 1.9 million jobs below its previous peak, underscoring the importance of continued strengthening in housing markets and investments in infrastructure. Of the 185,000 increase in construction employment over the past year, the bulk (104,000) is in residential construction, while 65,000 are in non-residential construction, and 16,000 are in heavy and civil engineering construction. The gains in residential construction are consistent with the recovery we have seen unfolding in the housing sector, but additional steps still must be taken to create a more durable and fair system that promotes responsible homeownership. Moreover, the fact that employment in non-residential and heavy and civil engineering construction has grown slowly is an important reminder that we should also be looking for opportunities to invest in America’s roads, bridges, and schoolhouses.”
Indian IT Outsourcing Firm Pays Biggest Immigration Fine in History
The lengths to which businesses will go to get cheap labor are boundless. Tech firms, despite their luster, are no better in this regard than landscaping firms, hotels, or construction companies. Most tech firms want to reduce their labor costs (except for their executives), and a surprising number seem to treat the law as an obstacle to get around. I’ve written about the Justice Department’s settlement with 6 of the most famous information technology (IT) companies in America over anti-trust charges involving a conspiracy to suppress wage demands, and a subsequent lawsuit filed by the employees who would have been harmed by the conspiracy.
A newer case came into the spotlight last week. The Justice Department’s $35 million settlement of civil fraud charges against Infosys, a firm whose business model is largely based on the outsourcing and offshoring of IT work to India, facilitated by using the H-1B guestworker visa, exposed a pervasive scheme of visa abuse in the H-1B and B-1 “business visitor” visa categories. This scandal lends support to the efforts of Sen. Charles E. Schumer (D-N.Y.), Sen. Richard J. Durbin (D-Ill.), and Sen. Charles Grassley (R-Iowa) to put new limits on IT outsourcing firms.
Don’t Blame the Robots for Slow Job Growth In 2000s
There is a lot of talk about robots these days, as if technological change has led to weak job creation, caused wage inequality, and even caused the profit share of the economy to increase as workers’ share (compensation) falls. We have definitely had problems with employment growth and growing wage inequality, alongside a profit boom not just during the Great Recession and its aftermath but since 2000—and for wage inequality, for two decades prior. Is technology driving all this? I think not.
This post tackles the issue of whether robots slowed job growth in the 2000s (my colleague Josh Bivens has addressed this previously, but for the recovery). In the near future I will be addressing whether robots are responsible for our current wage inequality. Spoiler alert: they aren’t.
MIT professors Andrew McAfee and Erik Brynjolfsson wrote the influential book Race Against The Machine, which has driven much of this conversation. They label the disconnect between employment growth and productivity growth in the 2000s the “Great Decoupling.” Moreover, they argue that there has been an “acceleration of technology” that has “hurt wages and jobs for millions of people” even as “digital progress grows the overall economic pie.” Brynjolfsson and McAfee know a lot more about technology and its impact on firms and work than I do, but attributing the job slowdown in the 2000s to robots or digitalization overlooks a simple alternative answer: slow aggregate output growth caused by the bursting of asset bubbles. In fact, they do not offer much evidence to connect the technological trends (robots and digitalization) they document to the aggregate job, wage and inequality trends they, and I, care about.
Health Insurance Exchanges Will Go a Long Way Toward Fixing the Broken Health Care System
The non-elderly population across the country relies on employer-sponsored health insurance (ESI) as their primary form of health coverage. In eleven of the last twelve years, however, ESI coverage has declined. Across the country, on average, ESI coverage for the under-65 population fell 10.8 percentage points from 2000 to 2012. Translated into raw numbers, if the ESI coverage rate had not declined over this period, 29 million more Americans would be covered today by their employers. Twenty-two states experienced losses in excess of 10 percentage points over the period. The largest declines in coverage occurred in Nevada, Michigan, Georgia, Ohio, Wisconsin, and Indiana, each with losses of at least 13 percentage points.
As a result of these losses, the average coverage rate in 2012 was down to 58.4 percent. The map below compares ESI coverage for the entire under-65 population across states in 2011/2012.1 Massachusetts has the highest rate of ESI coverage at 70.8 percent. It is followed by New Hampshire (70.0 percent), Connecticut (69.7 percent), Minnesota (69.0 percent), North Dakota (67.6 percent), and Maryland (67.3 percent). In contrast, less than half of New Mexico’s non-elderly population has ESI, at 47.2 percent.
Employer-sponsored health insurance coverage by state, population under 65 years old, 2011–2012
| State | ESI Coverage |
|---|---|
| Alabama | 57.9% |
| Alaska | 57.0% |
| Arizona | 54.8% |
| Arkansas | 50.1% |
| California | 52.6% |
| Colorado | 61.4% |
| Connecticut | 69.7% |
| Delaware | 64.4% |
| District of Columbia | 57.6% |
| Florida | 51.8% |
| Georgia | 54.5% |
| Hawaii | 65.9% |
| Idaho | 56.7% |
| Illinois | 60.8% |
| Indiana | 63.0% |
| Iowa | 64.5% |
| Kansas | 59.9% |
| Kentucky | 57.5% |
| Louisiana | 53.0% |
| Maine | 60.9% |
| Maryland | 67.3% |
| Massachusetts | 70.8% |
| Michigan | 62.5% |
| Minnesota | 69.0% |
| Mississippi | 53.7% |
| Missouri | 60.6% |
| Montana | 51.5% |
| Nebraska | 63.0% |
| Nevada | 56.4% |
| New Hampshire | 70.0% |
| New Jersey | 66.0% |
| New Mexico | 47.2% |
| New York | 59.6% |
| North Carolina | 55.9% |
| North Dakota | 67.6% |
| Ohio | 61.4% |
| Oklahoma | 54.0% |
| Oregon | 57.1% |
| Pennsylvania | 64.6% |
| Rhode Island | 62.6% |
| South Carolina | 56.8% |
| South Dakota | 59.0% |
| Tennessee | 56.0% |
| Texas | 52.1% |
| Utah | 66.3% |
| Vermont | 60.9% |
| Virginia | 64.0% |
| Washington | 59.3% |
| West Virginia | 59.2% |
| Wisconsin | 64.7% |
| Wyoming | 61.1% |
Source: Author's analysis of Current Population Survey Annual Social and Economic Supplement microdata
These huge losses almost surely explain the increasing demand for health reform that characterized the years leading up to the passage of the ACA, and highlight why health reform was so important. The fact is the employer-based health insurance system was fraying rapidly in the decade before health reform was implemented. Even before the ACA’s implementation, many of those losing ESI found shelter in public insurance, which disguised the precipitous drop in employer coverage. Indeed, from 2000 to 2012, public insurance, primarily in the form of Medicaid and CHIP, helped counteract the erosion in employment-based coverage and is the only reason why the uninsured rate did not rise one-for-one with the fall in ESI. However, many Americans, particularly those of working age, are still falling through the cracks. Fortunately, once the (admittedly too large) kinks are worked out, the health insurance exchanges created under the ACA will make it easier and more affordable for Americans to secure and maintain health insurance coverage, even if ESI continues the decline that has characterized the last decade.
Endnotes
1. Because of sample size requirements, I combined two years of data 2011 and 2012.
A Daily Reminder That Thousands Die In Preventable Workplace Deaths Every Year
Five days a week, I receive the Cal-OSHA Reporter News Digest, which compiles reports of deaths and injuries in California as well as other states. It’s a regular reminder that I am a lucky man to have worked my entire life in think tanks, government offices, and law firms. Every issue is filled with grim stories of workers mangled by machinery, suffocated by corn in a silo, killed in falls or struck by a careless driver as they worked on the highway, or sometimes, killed in ways so horrible that it beggars the imagination. On any given day, dozens of people are killed in the workplace, and the Cal-OSHA reporter captures only a few of these stories. It does not, and cannot, begin to capture the extent of workplace injuries, since for every one death there are a thousand injuries. And the toll from occupational illness is too slow and insidious to capture, though silicosis, black lung, asbestos disease, and cancer from hundreds of toxic chemicals kill an estimated 50,000 workers every year. Today’s Cal-OSHA Reporter was typical—a perfect reminder that American workers are not sufficiently protected from harm, that OSHA and its sister agencies in the states face an overwhelming challenge with far too few resources, and that employers that put their employees’ lives at risk and take them from their families forever are rarely punished in a way that meets the enormity of what they did or allowed to happen.
Transatlantic Free Trade Agreement: Job Claims Are Pure Baloney
The Senate Finance Committee held hearings this week on the proposed Transatlantic Trade and Investment Partnership (TTIP). The committee chair, Sen. Max Baucus, claimed that the TTIP could boost U.S. exports to the EU by a third, adding “more than one hundred billion dollars annually to U.S. GDP,” and that it “could support hundreds of thousands of new jobs in the United States.” The statement is remarkable for its sheer audacity in the face of massive evidence of the failure of similar deals to deliver promised benefits. U.S. trade with Mexico after the North American Free Trade Agreement (NAFTA) has cost the United States nearly 700,000 jobs through 2010. U.S. trade with China has certainly failed to deliver on the promised benefits of growing exports. Since that country entered the World Trade Organization (WTO) in 2001, the U.S. has lost 2.7 million jobs through 2011 due to growing trade deficits with China. And the Korea-U.S. Free Trade Agreement (KORUS) has also resulted in growing trade deficits with that country and the loss of more than 40,000 U.S. jobs. Most of the trade-related job losses are concentrated in manufacturing, and growing trade deficits are responsible for a large share of the decline in U.S. manufacturing employment over the past fifteen years.
Using estimates of changes in two-way trade between the U.S. and the EU under the agreement reveals that TTIP is projected to result in a growing U.S. trade deficit with the EU and the loss of at least 71,000 additional U.S. jobs. Senator Baucus, citing advice from Benjamin Franklin, advises the U.S. to “jump quickly at opportunities.” When it comes to evaluating trade deals, Congress and the public would be better served by the common law principle of ‘Caveat Emptor,’ or, let the buyer beware. Congress has a duty to perform their due diligence in evaluating proposed trade and investment agreements before jumping at the next “great deal.” In particular, members should note that Sen. Baucus’s claims that the TTIP “could support hundreds of thousands of new jobs” are pure baloney.
Dear Tim Cook: Fraction of Icahn Request Could Significantly Address Apple’s Labor Rights Violations
As the size of Apple’s cash reserves continues to mount, the company has come under increasing pressure to return more of those reserves to shareholders, through dividends and/or stock buy backs. The attention became particularly heated in February 2013 when hedge fund manager David Einhorn took up this position. In April, Apple did double its “capital return” program to $100 billion, to be distributed to shareholders by the end of 2015. This step muted the debate, until billionaire investor Carl Icahn began to acquire large amounts of Apple stock and to argue that Apple should return an additional $150 billion to its shareholders. Icahn pressed this case publicly and privately with Apple CEO Tim Cook, including in a letter to Cook just last week. It is in this context that the following letter was just sent to Mr. Cook. For more information on the working conditions facing Apple workers, see www.AppleLabor.com.
Dear Mr. Cook:
Another consideration should take precedence over Apple’s assessment of Carl Icahn’s suggestion that the company return $150 billion to its shareholders through a stock buyback, which would be on top of the $100 billion already pledged to Apple shareholders through the capital return program. This other consideration is much less expensive, yet far more justified.
New Research Yields Old Results
The Joint Committee on Taxation (JCT), Congress’s official score keeper on revenue bills, recently issued a new report that details how they are changing how they calculate the distribution of the burden of the corporate income tax among taxpayers. This is important because talk of corporate tax reform is in vogue. In deciding on changes to corporate taxes, Congress should have an idea who will pay higher taxes, who will pay lower taxes, and who will be unaffected.
The burden of the corporate income tax falls on somebody, and much research has been devoted to determining who that somebody is. The candidates are capital owners (that is, corporate shareholders), workers, and customers. Most tax analysts scratch customers from the list, leaving capital owners and labor. Until a few years ago, most tax analysts read the weight of economic evidence as suggesting that capital bore 100 percent of the corporate tax burden.
During the George W. Bush administration, some tax analysts began producing analyses that attributed 60, 90, 100, and even 400 percent of the burden of the corporate income tax to labor. Subsequent studies, however, called much of this research into question and confirmed the earlier near-consensus that the burden of the corporate income tax is indeed overwhelmingly borne by capital. But the 2000s-era research did have some influence—government agencies that deal with tax policy (the Department of Treasury, the Congressional Budget Office, and JCT) made modest changes to their methods of calculating the distribution of the burden of the corporate income. CBO now attributes 75 percent of the burden to capital and the rest to labor. Treasury settled on 82 percent of the burden on capital and 18 percent on labor. JCT has now concluded that 75 percent falls on capital and 25 percent on labor.
DC Minimum Wage Part 2: The Tipped Minimum Wage—Separate, But Not Equal
Following up on my previous blog post, there was considerable debate at Monday’s DC Council hearing on whether the city should raise the tipped minimum wage. One area restaurant owner in particular was adamant that there should be no change to the city’s current tipped minimum wage of $2.77 per hour. He argued that the council was attempting to “fix something that [was not] broken”—in that all of his tipped employees already earn far more than minimum wage under the current system, and if they did not, he was legally obligated to make up the difference. This is, by law, how the system should work. Notwithstanding the fact that his particular restaurant is a high-end nightclub where the average bill (and thus the average tip) is likely to be quite high, the evidence suggests his characterization reflects the exception rather than the norm for tipped workers.
Under current federal law, workers who customarily receive at least $30 from tips per month may be paid a base wage of only $2.13 per hour by their employer, so long as the their weekly earnings—tips plus base wage—equal an hourly rate of at least the regular federal minimum wage of $7.25. In other words, when you go to a restaurant in most places in the country, the server or bartender who serves you is only being paid something between $2.13 and $5 per hour by their employer, depending on the state. There are 18 states where the tipped minimum wage is $2.13, eight states where the tipped minimum wage is equal to the regular minimum wage, and 26 states with a tipped minimum somewhere in between. In the District of Columbia, the regular minimum wage is $8.25, and the tipped minimum wage is $2.77.
Comparing the DC Minimum Wage Proposals
On Monday, I testified before the DC Council in support of the Minimum Wage Amendment Act of 2013, one of several bills being considered to raise the District’s minimum wage from its current value of $8.25 per hour up to rates ranging from $10.25 per hour to $12.50 per hour. The various bills have different phase-in schedules, i.e., some reach their final targets sooner than others, and some are “indexed” so that that they will automatically be adjusted for inflation in the years after reaching their target value.
Here’s a quick rundown of the bills, with the principal author in parenthesis:
B20-438, the “Minimum Wage and Accrued Sick and Safe Leave Amendment Act of 2013” (David Catania, Councilmember At-Large): Raises the city minimum wage to $10.50 per hour over three years; no indexing.
B20-459, the “Minimum Wage Amendment Act of 2013” (Vincent Orange, Councilmember At-Large): Raises the city minimum wage to $12.50 per hour over 4 years beginning in 2015; indexes the value to the Consumer Price Index for all urban consumers (CPI-U) thereafter; raises the “tipped” minimum wage in the District to 70% of the regular minimum wage.
B20-460, the “Living Wage for All Act of 2013” (Tommy Wells, Ward 6): Raises the city minimum wage to $10.25 per hour over 2 years; indexes the value to the CPI-U thereafter; increases the standard deduction for taxpayers in the District.