On Wednesday, Jim Tankersley reported on a new study from the Heritage Foundation claiming that the apparent broken link between wages and productivity is actually just a statistical artifact.

Most of the report simply notes that compensation, not just wages, matters to American workers, that productivity and wage (compensation) growth are often calculated using different price deflators, and that one should take depreciation into account while calculating productivity.

All these are fair enough as matters of arithmetic (though we may have more to say on our interpretation of these issues, which differs a lot from the Heritage report1), and we have generally taken these factors into account in our work showing the growing gap between wages and productivity (and so have other careful analysts). So what’s the big difference between our work and the Heritage report? It’s something they spend a lot less time on.

At EPI, we don’t look simply at average compensation, but (generally) at median compensation, the compensation of a worker in the middle of the pack who makes more than half the workforce but less than the other half. This really matters;  when, say, LeBron James walks into a bar average compensation rises a lot even though  the compensation of the median person in the bar is likely unaffected.

So, average compensation does indeed track productivity growth much more closely (though not perfectly) than does median compensation. But this is just another way to make what is the entire point of the compensation/productivity gap analysis: rising inequality has kept typical Americans from seeing their compensation  track productivity.

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There’s a heat wave in Washington this week. Here are some cool articles we read:

• Wal-Mart Is Scared of These True Stories From Its Own Employees (Gawker)
  
• Thanks To Obamacare, New Yorkers’ Health Insurance Premiums Will Plunge 50 Percent (ThinkProgress)
• Denny’s restaurants settles foreign workers’suit for $1.4 million (Toronto Star)

McDonald’s recently partnered with Visa to put out what they call the Practical Money Skills Budget Journal (pdf), a “helpful” tool for McDonald’s employees to keep track of their earnings and expenses. There have been a flurry of responses to the “McBudget” including realistic comparisons, snarky analysis, and talk of unicorns as a means for transportation. Others have defended the budget, claiming that it gives low-wage workers the necessary tools for financial planning.

Coincidentally enough, we also recently released an online tool related to family budgets—along with Elise Gould and Nicholas Finio, we developed EPI’s Family Budget Calculator, a measure of just how much income it takes for families to buy the necessities for an adequate but modest lifestyle. Our basic budgets include the cost of rent, food, health care, child care, transportation, other necessary expenses and taxes in each of 615 communities across the country. While families at these budget levels may be able to pay their bills and put food on the table, our family budgets imply a pretty austere lifestyle. There is no savings, no vacations, no cable or internet service, and, certainly, no restaurant visits.

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The health insurance premiums announced today for the new health insurance exchanges for New York were far lower than their current individual health insurance market. This is great news for the thousands of New Yorkers who will see their premiums fall, and for the many more thousands who will be able to find affordable coverage when they couldn’t before. This is a promising sign that the health insurance exchanges established in the Affordable Care Act (at least in states taking implementation seriously) could work as planned and improve the range of affordable choices available to consumers.

On the flip side, today, the US House of Representatives voted to postpone implementation of the individual mandate, the provision of the ACA that requires that Americans are covered by health insurance, even if they have to buy their own. Postponing this provision would be a huge mistake.

A key feature of the ACA is that it requires that insurers offer coverage to everybody, and at a common price (subject to some variation based on age and whether or not you’re a smoker). If these requirements existed without a provision to stop free-riding (the individual mandate), too many healthy people would wait until they got sick before they enrolled in insurance and started paying premiums. This means that the insurance pool at any point in time would be less healthy, and thus more expensive, than it would be under the mandate. Simply put, the individual mandate makes health reform considerably more efficient.

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A disturbing report in the Huffington Post serves to remind us what abuse and exploitation of undocumented immigrant workers looks like in the U.S. labor market. Antonio Vanegas, an undocumented immigrant worker who complained to the Department of Labor (DOL) and spoke out publicly by testifying to the Congressional Progressive Caucus about alleged wage and hour violations committed by his employer, Quick Pita (in Reagan National Airport), soon thereafter found himself in detention and deportation proceedings. And this happened despite the fact that DOL agreed to investigate Quick Pita based on Vanegas’s claims that he was earning $6.50 an hour (the local minimum wage is $8.25) and working 60 hours per week without being paid for overtime. Occurrences like these are probably not uncommon and are a legitimate reason for all U.S. workers to be concerned. If S.744, the comprehensive immigration reform legislation passed by the Senate, becomes law, some of the bill’s provisions would protect vulnerable undocumented workers like Vanegas and improve the labor market for American workers too.

The situation Vanegas found himself in illustrates how employers use the immigration status of undocumented workers to keep them from demanding that their employers obey the law or from engaging in union organizing activities. As cases in the past have demonstrated, however illegal its own conduct might be, an employer can simply fire an undocumented worker without justification and without worrying about being held accountable for retaliating or other legal violations, or for paying back wages. Or an employer can fire undocumented workers as the result of a “self-audit” of the company’s employment records, or after inviting the government’s immigration authorities to conduct an audit. Ultimately, the undocumented worker is terminated, deported, or both, and has limited access to legal remedies. Although ironically Vanegas worked for years in a building that also houses the Department of Homeland Security’s immigration authorities, he never had a problem until he advocated that his employer comply with the law. Almost immediately after that, he was put in a cage for four days and subjected to deportation proceedings.

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Yesterday, it appeared that the Senate was on the verge of “going nuclear”—amending its rules mid-session to prevent the use of filibusters to block the president’s appointment of executive branch officials. The use of parliamentary tactics by a minority of senators to prevent the popularly elected President of the United States from appointing the heads of agencies that enforce key laws has reached unprecedented levels and threatens the ability of the president to govern. The Senate has been in gridlock ever since President Obama was re-elected. A concerted effort by Republican senators has prevented the passage of key legislation, blocked confirmation of federal appeals court judges, and blocked confirmation of President Obama’s nominees for Secretary of Labor, Administrator of the Environmental Protection Agency, Director of the Consumer Financial Protection Board, or any of the five nominees to the National Labor Relations Board (NLRB).

Today, it appears that a compromise has been reached that will allow the president most of his appointees, but not all. The Senate’s compromise forces the president to choose new nominees for the NLRB.

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Happy Friday! Here’s a bit of what we read this week:

• The generation we love to dump on (CNN)
• You’ve Been Warned (New York Times)
  
• Sequestration Pushes Head Start Families To The Precipice (Huffington Post)

On Wednesday, the Washington, DC, City Council passed the Large Retail Accountability Act (LRAA), a bill that will require large retail corporations—specifically businesses with more than $1 billion in sales and retail locations of at least 75,000 square feet—to pay their workers a minimum wage of $12.50 per hour. The bill’s passage may only be a temporary victory for proponents, however, as there is speculation that DC Mayor Vincent Gray may veto the bill now that Walmart, the primary target of the bill, has said that they will cancel construction of three planned stores in the District if the legislation becomes law.

It’s hard to view Walmart’s threat to scuttle the three stores, made literally the day before the Council vote, as anything but outright bullying by the largest and one of the most profitable corporations in the world. Walmart has alleged that the bill unfairly singles them out, although a few other retailers—Macy’s, Costco and Home Depot—would also be affected by the bill. But Walmart does deserve special scrutiny because of their unique track record in driving out smaller retail businesses, depressing wages (pdf), and siphoning off public tax dollars.

To be clear, Walmart is not the only big-box retailer that has shut down smaller competitors, but Walmart’s market dominance in many regions, and their role as the largest private employer in the United States, gives them a unique ability to affect living standards for significant segments of the population. Unfortunately, their typical wages are abysmally low. The minimum wage of $12.50 required under the LRAA is just below the average wage of Walmart employees nationwide: $12.67 per hour. And when companies like Walmart don’t pay sufficient wages for workers to make ends meet, the American taxpayer picks up the tab. In nearly every state where it operates, Walmart has more employees on Medicaid than any other company. In some states, its employees are also the largest groups of food stamp and other cash assistance recipients.

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A recently concluded trial highlights how weaknesses in the country’s guestworker programs can facilitate human trafficking. Last week, a federal jury convicted Kizzy Kalu, a Denver-area man, of “89 counts of mail fraud, visa fraud, human trafficking and money laundering.” While both progressives and conservatives have complaints about the Senate immigration bill, it’s important to point out that the Senate took an important step forward in terms of new rules that would protect vulnerable foreign workers like the ones recruited by Kalu from abroad through guestworker programs.

The workers Kalu recruited thought they were coming to the United States to work full-time at an American university as “nurse instructor supervisors” through the H-1B guestworker program, which allows U.S. employers to hire workers from abroad for occupations requiring at least a college degree. But Kalu lied to the government and the foreign workers, and with disastrous results. According to the Department of Homeland Security (DHS), the university that was supposed to be the employer “existed largely in name only and had no genuine need for nurse instructor supervisors.” Thus, the workers had no jobs, and had to look for work on their own (although Kalu would not even let them travel freely). H-1B workers are legally required to be paid a “prevailing” wage, but the workers who were able to find jobs ended up working in nursing homes (not as instructors) earning less than the prevailing wage. Some were not able to find a job at all. On top of that, Kalu required the workers to pay him “between $800 to $1,200 per month or face deportation” and required them to sign employment contracts specifying the workers would owe Kalu “$25,000 if they left his employment.”

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It looks like House Republicans are at it again. With another deadline for a congressional vote to raise the debt ceiling looming this fall, recent reporting confirms that House Republicans are strategizing on how to best hold hostage the full faith and credit of the United States in return for even more spending cuts. (Note: The CBO reports that congressional action on the debt ceiling will be necessary sometime in October or November, after the Treasury has exhausted its full arsenal of extraordinary measures to stay under the current debt limit, which is just under $17 trillion.)

Recall that in August 2011 the GOP threatened sovereign default in order to force their agenda—dollar for dollar spending cuts in exchange for their votes to raise the debt ceiling, a habitually pro forma vote (see Table 7.3 for a record of how many times the debt ceiling has been voted on). President Obama ultimately capitulated to this bribe, signing the Budget Control Act (BCA) in exchange for a debt ceiling increase and thus solidifying our country’s pivot from prioritizing post-recession job creation policies to instead pushing policies of austerity. That debt ceiling showdown and the legislation it generated has not only stymied our recovery, but additionally led to a slew of other bad stuff, including the downgrading of our credit rating and the implementation of one of the worst pieces of fiscal legislation to come out of the Obama Administration: sequestration and the discretionary spending caps.

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