When you hear politicians singing the virtues of deregulation, remember the Grenfell Tower fire. Last month, 80 people, including young mothers and children, died in an inferno that destroyed the 24-story Grenfell Tower apartment building in London. The undisputed cause of this completely avoidable tragedy can teach us important lessons about government regulation and deregulation.
The blaze that devastated the building occurred when a faulty refrigerator near a window ignited the apartment tower’s exterior cladding, a sheath of aluminum and flammable insulation that was recently added. The cladding panels used on Grenfell Tower, which sandwich a layer of polyethylene between two aluminum sheets, are combustible. In most countries, the company that manufactures the panels recommends that they not be used on buildings taller than about 33 feet, or two stories, the reach of a firetruck’s ladder.
In most countries, including the United States, combustible panels like those installed at Grenfell Towers would be illegal. U.S. fire codes require fire testing of the cladding, and as the New York Times reports, “no aluminum cladding made with pure polyethylene – the type used at Grenfell Tower—has ever passed the test.”
In response to the large movements of refugees and migrants around the world, including the dramatic movement of over one million Syrians, Afghans, and Africans from various countries to Europe in 2015, world leaders at a UN Summit for Refugees and Migrants in September 2016 proposed two “global compacts” to improve the governance of international migration: a Global Compact for Safe, Orderly, and Regular Migration and a Global Compact on Refugees. The Global Compact on Refugees already has a normative framework, the 1951 Geneva Convention, which has been ratified by almost every nation, and a lead UN agency in the UNHCR that can assist Member States to improve protections and more equitably share the burden of hosting refugees.
While the Global Compact on Refugees is expected to offer support to countries that host large numbers of refugees by developing a Comprehensive Refugee Response Framework and to develop a plan of action to address refugee issues, the Global Compact on Safe, Regular, and Orderly Migration (also referred to as the Global Compact on Migration or GCM) has a broader challenge. The GCM must offer a framework for protecting the human rights of migrants and integrating them in the places to which they move—often for the purposes of finding employment—while also helping combat xenophobia, racism, and discrimination toward migrants.
Tomorrow, the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) is set to consider President Trump’s nominees to the National Labor Relations Board (NLRB), as well as Trump’s pick for Deputy Secretary of Labor. Both the NLRB and the Department of Labor are critically important agencies for this nation’s workers. Senate Republicans were so concerned about President Obama’s nominees to the NLRB that they refused to allow a vote, leading to a showdown that culminated in then-Senate Majority Leader Reid threatening to use the “nuclear option” to change the Senate rules for confirmations. What a difference a president makes. Now, Senate Republicans have decided to rush the confirmation hearings by consolidating consideration of the NLRB nominees with a nominee to a senior post at the Department of Labor.
As an independent agency, the NLRB members do not report to the president, but rather, serve as neutral arbiters of our nation’s labor law (“umpires rather than advocates,” as Senator Lamar Alexander, the chair of the committee, likes to say). DOL, meanwhile, is a cabinet-level agency—and its leaders report directly to the president. The Deputy Secretary of Labor is a political position whose main role is not neutral interpretation of the law but rather to advance the administration’s policies. Considering these nominees alongside each other, given the incongruous nature of the positions and agencies they will serve, is an abdication of the committee’s responsibility to thoroughly review these nominations.
Rushing this process and consolidating what should be separate hearings on important nominations deprives senators of the opportunity to examine these nominations. Most importantly, it shortchanges U.S. workers who depend on these agencies and the officials who lead them to enforce their rights and protect their freedoms. We deserve a process that enables our representatives to meaningfully consider the nominations. At the very least, the HELP Committee should hold separate hearings on nominees who, if confirmed, would serve vastly different roles in vastly different agencies.
Steel and aluminum trade restraints are good first steps, but not nearly enough to rebuild manufacturing
The Trump administration is poised to impose broad tariffs and/or quotas on imports of steel and aluminum products. As the issues are being pondered, battles are raging between metal-producing and consuming industries, and between the United States and its trading partners. Trade restriction in these sectors could relieve near-term pressure on thousands of jobs and, if done well, could buy valuable time that could lead to global solutions to chronic dumping and overcapacity problems centered in China and a few other countries. But tariffs and quotas in a few industries will never be sufficient to structurally rebalance U.S. trade or rebuild U.S. manufacturing, goals that have been clearly identified by the president and other members of his administration. In order to achieve these goals, the United States needs to realign the dollar to reverse the effects of more than two decades of unfair trade and currency manipulation on world trade and the global economy.
The conclusions in this post are based on the following key observations:
- U.S. steel and aluminum industries have been heavily injured by massive growth of excess capacity and overproduction in China and other countries. More than 13,000 U.S. jobs have been lost in aluminum since 2000—and 14,000 steel jobs disappeared in last two years alone.
- Surging imports of steel and aluminum and diminished domestic production capacity in these industries are a threat to national security because access to reliable sources of these metals is critical to supply of military equipment and critical infrastructure. If current trends persist, in time of war or other national emergency, the United States would find itself dependent on unstable import sources.
- Tariffs and quotas will save jobs in these industries from near-term threats and help domestic producers recover from unfair trade. In the best of cases, tariffs can be used to encourage other importers to develop common policy to address overcapacity and overproduction by China and other major exporters. But trade remedies can have negative consequences too. Increasing costs of steel and aluminum may reduce the competiveness of other domestic producers (both downstream producers of steel and aluminum products, as well as other users such as automakers and aircraft manufacturers), hurting consumers and reducing exports. Imposing trade restraints can also lead to retaliation by other countries, further reducing U.S. exports.
Yesterday, the Consumer Financial Protection Bureau (CFPB), an independent agency that serves as a watchdog for consumers, issued a rule that would ban companies from using mandatory arbitration clauses to deny Americans their day in court. The rule would restore consumers’ ability to band together in class-action suits. Without the ability to pool resources, many people are forced to abandon claims against financial institutions and other powerful companies. Consider that hundreds of millions of contracts for consumer financial products and services include mandatory arbitration clauses. Yet, the New York Times found that between 2010 and 2014, only 505 consumers went to arbitration over a dispute of $2,500 or less. By prohibiting class actions, companies have dramatically reduced consumer challenges to predatory practices.
Mandatory arbitration clauses are also used by employers. Employees are forced give up their right to sue in court and accept private arbitration as their only remedy for violations of their legal rights. Private arbitration clauses tilt the system in the business’s favor: the company is often allowed to choose the arbitrator, who will thus be inclined to side with the business; arbitration also cannot be appealed, leaving workers and consumers in much worse shape than if they had access to the courts. As such, employees who bring grievances against their employers are much less likely to win in arbitration than in federal court. Employees in arbitration win only about a fifth of the time (21.4 percent), whereas they win more than a third (36.4 percent) of the time in federal courts.
Today’s report from the Bureau of Labor Statistics showed the economy added 222,000 jobs in June. If this rate of growth keeps up, we should see the economy heading faster toward full employment over the next year. Meanwhile, the overall unemployment rate ticked up slightly to 4.4 percent. This slight increase happened for the “right” reasons as the labor force participation rate rose slightly to 62.8 percent percentage points and the employment-to-population ratio also rose slightly to 60.1 percentage points. As the economy continues to inch towards full employment, we should expect the recovery to reach all corners of the where workers including young and old, and workers of all races can fully benefit from the economy.
One particularly bright finding in today’s report is the noticeable drop in the black unemployment rate. While the unemployment rate for black workers remains far higher than for white workers (7.1 percent versus 3.8 percent), the black unemployment rate has been falling faster than overall unemployment over the last year. It’s important to not put too much attention on one month’s data because it can be misleading as the black unemployment rate displays a fair amount of measurement-driven volatility. Looking at the longer term trends, black unemployment has fallen 1.5 percentage points over the last year, compared to a 0.5 percentage point drop overall. Previous estimates indicate that the black unemployment rate tends to be more volatile with respect to aggregate labor market changes than the white rate. Still, this improvement is quite a bit stronger than the historical average of roughly a 2 percentage point change in the black unemployment rate for every 1 percentage point change in the overall rate.
Job growth has noticeably slowed, but slack remains
Over the last several months, the pace of job growth has noticeably slowed. May’s payroll job growth of 138,000 brought average monthly job growth down to just 121,000 jobs the past three months, and 162,000 this year so far. In comparison, payroll employment growth averaged 187,000 in 2016 and 226,000 in 2015. While the pace of job growth should be expected to slow as the economy approaches full employment, it’s not clear that we should rest easy that this is the explanation for any recent slowdown. After all, many indicators seem to be telling us that we have not yet reached full employment. For instance, the prime-age employment-to-population ratio remains significantly below its high points in previous recoveries, meaning there is likely still slack from the Great Recession and its aftermath as would-be workers sit on the sidelines and would likely get back in the game as jobs are created and wages increase.
Furthermore, gains in nominal wage growth have slowed in the past few months, with year-over-year wage growth averaging 2.5 percent over the last three months, down from 2.7 percent in the six months prior, which is still far-below the target growth rate of 3.5 percent. While the economy has been adding jobs for years now, a stronger economy would mean higher wages and faster wager growth. At the current rate of growth, it is clear that employers need to do little to attract and retain the workers they want and any significant signs of labor shortages are simply not showing up in the data.
First economic scenario: Treading water
For now, let’s return to the topline payroll numbers. With the publication of the latest CBO projections, we can assess how much job growth we need to not only keep up with population growth (which is the only job growth needed if the economy truly is at full employment), but to see lower rates of unemployment and greater participation in the labor force (assuming that we’re not yet at full employment). For those who just want the quick and dirty answer, please skip to the figure below. For those who want a bit more detail, keep reading.
DHS and DOL should focus on improving protections for H-2B and U.S. workers rather than expanding a flawed guestworker program
ProPublica recently reported that the Department of Labor (DOL) and the Department of Homeland Security (DHS) are being pressed to “find the data” to justify an interim final rule (IFR) to increase the number of visas in the H-2B guestworker program before the end of the fiscal year, as means of securing votes in the Senate for repealing the Affordable Care Act. Such an action would compromise the integrity of what should be an exhaustive and transparent rulemaking process.
There is no good reason for any increase in the H-2B annual numerical limit (also known as the “cap”), but if the administration is set on expanding a flawed guestworker program that leaves migrant workers exploitable while undercutting U.S. workers, it makes sense for DHS and DOL to promulgate an IFR. At present there is no established process or procedure set up for lifting the cap in the way it might play out in the coming weeks as a result of a legislative rider to a government spending bill that gave DHS discretion to raise the cap. Simply publishing a statement or policy directive might be questionably legal or be challenged in the courts, and an IFR will at least offer the public a more transparent process and methodology. DHS should also consider offering the public an opportunity to offer input on any published regulation or IFR on H-2B, even if it is provided after the rule goes into effect.
But first, it is important to remember that the long term labor market trends and indicators do not suggest the United States is experiencing national-level labor shortages in the top H-2B occupations. There is however, ample evidence that the H-2B program needs major reforms to protect migrant and American workers. At present, employers have an incentive to hire indentured and underpaid H-2B workers from abroad who have little power in the workplace, and who have no hope of a path to permanent residence and citizenship.
With federal inaction, states continue to step up in providing paid sick days to their workers and families
While inaction on paid sick days at the national level continues to erode families’ economic security, cities and states are stepping up for working people and serving as models for jurisdictions throughout the country. Rhode Island is the latest example—legislators there have been working to pass legislation to guarantee a minimum amount of paid time for eligible workers to care for themselves or their family when they are sick or need medical care. While there are important differences in the proposals, both the Rhode Island House and Senate have passed measures which would significantly expand the ability for workers there to earn paid sick time. If the governor signs a bill, it will be a big win for working people and their families in Rhode Island, as the state will join Connecticut, California, Massachusetts, Oregon, and Vermont in guaranteeing that working people have the ability to earn paid sick time.
In a paper released earlier this week, Jessica Schieder and I highlighted some of the costs to workers and their families when they are not given the opportunity to earn paid sick time. By examining estimated spending on essential items for families who lack paid sick days today, we quantified how this lack threatens the economic security of low- and moderate-income families.
OSHA has officially announced a proposal to delay the reporting requirements of its “Improve Tracking of Workplace Injuries and Illnesses” recordkeeping rule that was issued last July.
The recordkeeping rule simply requires employers already covered by OSHA’s recordkeeping requirements to send the form 300A (Summary of Work-Related Injuries and Illnesses) to OSHA and then OSHA would publicize the information on its website. The rule also prohibits employers from retaliating against workers for reporting injuries or illnesses.
Employers were originally required to send their information in to OSHA by July 1. OSHA announced its “intention” to delay reporting last month. The non-retaliation part of the standard, which generated intense industry opposition, may not fare as well. That part of the regulation is in effect, but OSHA states in this proposal that it “intends to issue a separate proposal to reconsider, revise, or remove other provisions of the prior final rule.” So stay tuned for that.
OSHA justifies the delay by stating that it “will allow OSHA an opportunity to further review and consider the rule” and that the delay “will allow OSHA to provide employers the same four-month window for submitting data that the original rule would have provided.” OSHA had originally planned to post a website last February so that employers would have four months to submit the data to meet the original July 1 deadline, but the new administration refused to put the website up.
Summer has officially arrived, and with it an influx of interns has come to the nation’s capital. Many of these young men and women will spend the summer working in congressional offices for no pay. While information on the use of unpaid interns is not available for every congressional office, EPI conducted an informal survey and found that at least three-quarters of all House offices use unpaid interns. More than half of all Senate offices, meanwhile, have unpaid interns, according to a survey by the advocacy group Pay Our Interns.
Congress is not alone in its practice of offering unpaid internships—in fact, far from it. Unpaid internships are common in every sector, and have come to be considered a necessary prerequisite for getting a job—despite the fact that most unpaid internships are actually against the law. The Fair Labor Standards Act (FLSA)—the foundation of modern labor law in the United States—requires that anyone doing work for an employer, including interns, be paid at least the minimum wage.
The Department of Labor (DOL) is tasked with enforcing the FLSA and has developed a six-point test to determine whether an internship must be paid as employment covered by the FLSA or is, instead, training or education. In recent years, in a number of high-profile cases courts have upheld and applied the DOL’s test, and determined that an employer had violated the FLSA when it failed to pay its interns for their work. While Congress is exempted from the laws protecting interns, it sets a powerful example by not paying its interns, and the practice has a far-reaching impact on society as well as public policy.
While the new administration in Washington appears to be in a rush to use its executive branch power to undo all the efforts of the previous administration to protect hourly paid employees, a more worker-friendly, forward-looking group in the U.S. Congress has decided it’s time to push back by offering a clearer, alternative approach—by re-introducing the Schedules That Work Act (SWT)—previously S. 1772 and H.R. 3071. The purpose is to address both the causes and consequences of the intensifying use of more unpredictable, last minute scheduling of work—well documented recently in an article in The New York Times.
The national bill attempts to create elements of what some other states and cities in the United States, and developed countries around the globe, have already proposed, legislated or implemented. The Schedules That Work Act entails three main features, with the overarching idea of setting a minimum floor standard that reduces any short-term cost advantage for employers who rely on scheduling practices that shift all the costs of uncertainty in their business on to hourly paid employees.
One, it grants an employee the right to request that his or her employer modify the number of hours or times the employee is required to work or be on call, the location of work, and the amount of notification time he or she receives of work schedule assignments. The process would ensure that employers give due consideration to these requests, in a timely, good faith, and interactive manner. And it protects against employer retaliation for making such adjustment requests. It outlines the grounds for denying a change, if there is a bona fide business reason for denying it, particularly if the request is made because of the employee’s serious health condition, caregiver responsibilities, or enrollment in a career-related educational or training program, or if a part-time employee requests such a change for a reason related to a second job. Such a right to request has worked well in countries such as the U.K. and Australia, and is so successful and harmless for employers that it has been expanded to cover all employees, not just those with caregiving responsibilities. With a recent national survey showing that almost half of U.S. workers have no input into their work scheduling—and only 15 percent can set their own daily start and end times for work—this will help provide workers some voice, if not say, in the scheduling of their daily and weekly work schedules.
For millions of hourly workers, a predictable, stable work schedule is rare. Work hours can vary not just week to week, but even day to day for millions working in retail, restaurant, hospitality, and building cleaning jobs. Two scheduling techniques often used in these industries can wreak havoc on workers: just-in-time and on-call scheduling. Employers use just-in-time scheduling to account for predicted consumer demand, which often leaves workers with just a few days’ notice of their hours. On-call scheduling provides even less notice, as workers know the length of their schedule just hours before a shift starts. These methods make it impossible for people to balance their work with personal responsibilities like taking classes, maintaining another job, caring for a sick relative, or arranging child care. The Schedules That Work Act, which is being introduced today by Representative Rosa DeLauro provides hourly workers with protections they are not often given by their employers: advance notice of schedules and the right to request a schedule change.
Workers in retail and food services are less likely on average to be able to decide, or have any input into, their own schedules. Nearly half of low-wage and/or hourly workers have no input into their work hours, including the inability to make even minor adjustments. Nine-out-of-ten workers in retail and fast food service jobs report variable hours, and part-time workers are even more likely to have variable and unpredictable schedules. The lack of fair scheduling shifts the cost of uncertainty from employers to employees who already carry the burden of low wages and minimal benefits. At the same time, unpredictable schedules lead to higher turnover as workers leave to find a more stable work schedule or are fired due to the inability to meet on-call demands. This turnover is a significant cost to employers in terms of profitability, productivity, and service.
Everyone loves apprenticeships (including me) as a basic model for learning work-related skills, but for the most part, policymakers don’t think very hard about why there’s so little apprenticeship in the United States. For that reason, we’re likely to continue talking about how great apprenticeship is but not making significant investments in it. President Trump’s underwhelming plan to expand apprenticeship, unveiled this past week, won’t change that. His initiative will add $100 million (less than a dollar per U.S. worker) to the budget for apprenticeship and give employers more flexibility (i.e., unilateral control without objective oversight or minimum standards) in structuring new apprenticeships but does little to address the underlying reasons why the United States lags behind our peers when it comes to apprenticeships.
The president likes apprenticeship for some of the same reasons we do. People can “learn while they earn,” without taking on debt—unlike many college graduates. In high-quality apprenticeships, with strong connections to employers and/or unions, people learn skills that are really needed on the job. In a wide range of occupations, including professions, craft and technical work, and caring occupations, a high proportion of critical skills are acquired on-the-job through learning-by-doing and informal mentoring. For that reason, apprenticeship and other models (e.g., internships, coops) that integrate classroom and workplace learning are more effective than years of classroom education followed by work without structured support for learning. Although the president didn’t point this out, apprenticeship also carries with it an implicit message of respect for the occupation—the idea that experienced workers possess significant skills and you need a proven mechanism like apprenticeship to transmit that knowledge to new initiates.
Today, the Acting Solicitor General switched the government’s position in National Labor Relations Board v. Murphy Oil USA, Inc, from arguing in favor of working people to arguing in favor of big business. The move is deeply disappointing, and represents a stark departure from standard practice. It is the clearest indication yet of where the Trump administration stands: with corporate interests and against working people.
The Murphy Oil case is significant for workers. It will determine whether mandatory arbitration agreements with individual workers that prevent them from pursuing work-related claims collectively are prohibited by the National Labor Relations Act (NLRA). These agreements have become increasingly common.
The NLRA guarantees workers the right to join together to improve their terms and conditions of employment and prohibits employers from interfering with or restraining the exercise of these rights. In Murphy Oil, the National Labor Relations Board is arguing that agreements that force workers to waive their right to pursue work-related claims on a class or collective basis interfere with workers’ rights under the NLRA and are prohibited. The Solicitor General argued this position just last October, and there has been no change in the law since then. As a matter of fact, just last month the United States Court of Appeals for the Sixth Circuit held that these mandatory arbitration agreements and class action waivers are prohibited by the NLRA. The only thing that has changed is the administration.
It is worth noting how unprecedented this move is. The most recent example of the Solicitor General changing positions is a Reagan administration-era case, Bob Jones University v. United States. In that case, the government changed its position to advocate in favor of an institution’s right to adopt racially discriminatory policies while enjoying tax exempt status. It was a shameful switch. And, the Solicitor General lost. Today’s decision is also shameful. The Acting Solicitor General is arguing against workers’ rights to join together to advocate for better wages and working conditions. Like the Bob Jones University about-face, this switch, puts the Acting Solicitor General and the Trump administration on the wrong side of history and, hopefully, the wrong side of the Supreme Court in this important case.
It is becoming routine in the Trump administration to assign each week a policy theme. Last week was “infrastructure week,” which sounded promising but for the fact that the Trump administration had already proposed a budget that would slash infrastructure investment. This week is “workforce development” week. Again, in spite of the designation, workforce development does not fare well under the Trump budget proposal, which included significant cuts to job training grant programs. More troubling than the gimmicky, hollow marketing the administration routinely employs to mask these budget maneuvers is the true tradition of the Trump administration and the Republican-controlled Congress: diligently working each week to strip working people of hard-fought rights. This week, the Trump administration and congressional Republicans focused their efforts on taking away workers’ right to join together and bargain for better wages and working conditions.
Union busters get a break
On Monday, the Trump Department of Labor (DOL) announced that it will rescind the “persuader rule.” When workers seek to form a union, some employers choose to hire union-avoidance consultants—known as “persuaders”—who craft and deliver anti-union messages and campaign materials in the workplace. They may directly talk with workers or indirectly influence workers by scripting speeches or developing talking points for managers or supervisors. Just like political campaign disclosure laws, the persuader rule would have helped ensure that workers knew the source of the anti-union views, materials, and messages that they receive during a union organizing campaign. Workers often do not know that their employer has hired a consultant to defeat a union organizing campaign. The persuader rule simply required that employers and the consultants they hire file reports for all persuader activities, to help ensure that workers are given information about the source of campaign material. Scrapping the rule gives union-busting firms a break and robs workers of the ability to make an informed choice in a union election.
This article was originally posted on Good Jobs First’s blog.
When the term “Rustbelt” was coined in the 1980s and activists learned the early warning signs of a plant closing, one of those indicators was tax dodging. If a company knew it was planning to close a factory, it would often challenge its property tax assessment or seek other tax breaks. And why not? If it didn’t expect to be hiring locally in the future, why should an employer care about the quality of the schools?
The national trend today looks like the Rustbelt 1980s on steroids. President Trump’s budget proposal follows the playbook that corporate lobbyists have long pushed in state legislatures: tax cuts for companies and the rich, coupled with dramatic cuts to services that benefit everyone. The resulting permanent damage to those public services begs the question: is Corporate America intentionally disinvesting, abandoning our nation?
In recent years, states and localities across the country have made drastic cuts to essential public services. Texas eliminated over 10,000 teaching jobs, and ended full-day preschool for 100,000 low-income kids. The city of Muncie, Indiana eliminated so many firefighter positions that the area of the city that fire trucks can reach within eight minutes was cut in half. In Milwaukee, budget cuts left the public transit reaching 1,300 fewer employers in 2015 than in 2001.
Last week was “infrastructure week” at the White House. On the face of it, that should be excellent news. But while the president’s rhetoric about the importance of infrastructure was on the mark, his actual plans are empty promises, given that the recently released Trump federal budget plan actually guts infrastructure.
Further, the president did not talk about the men and women who build our roads, schools, and hospitals. He did not talk about the kind of jobs his vague plans would create.
Here in the South, WDP and the EARN network think about jobs all the time. We understand that families are constantly thinking about how they will put food on the table, how they will keep a roof over their children’s heads, and maybe, just maybe, they will be able to put a little money away so they can retire at some point.
Build a Better South focuses on those families.
By rescinding the persuader rule, Trump is once again siding with corporate interests over working people
Yesterday, the Trump administration took yet another step against working people by announcing that the Department of Labor (DOL) will rescind its “persuader rule,” which would have helped level the playing field for workers by letting them know the source of the anti-union messages they receive during union drives.
Unions help union and nonunion workers in countless ways. They raise wages, make workplaces safer, and close the gender pay gap. Most importantly, unions let workers have their voices heard on the job. The ability of people to join together to negotiate for better working conditions and pay is even more important in an era of forced arbitration, where women who are sexually harassed often cannot get justice in a courtroom and workers who are being cheated out of minimum wage often cannot file class action lawsuits. All workers deserve a voice in their workplaces, and a union is one of the best ways for working people to make sure they are getting treated fairly on the job.
But many employers fight unionization efforts at every turn, by hiring professional anti-union consultants—“persuaders”—to bust their employees’ organizing drives with sophisticated anti-union campaigns. Union-busting firms promise to equip employers with “campaign strategies” and “opposition research,” and produce anti-union videos, websites, posters, buttons, T-shirts, and PowerPoint presentations for employers to deploy against their workers’ unionizing efforts. Employers spend large amounts of money to hire anti-union consultants—sometimes hundreds of thousands of dollars.
Policy Watch: Another week of weakening labor laws and making us more susceptible to a financial crisis
In the midst of a chaotic week, Congress and the Trump administration found time to quietly attack important worker protections and undermine the rules and regulations that make our economy fairer for working people and their families. Yesterday, the House passed legislation that makes our economy more susceptible to financial crises in the future, exposes consumers and investors to heightened risk of abuse in their dealings with the financial sector and rolls back the “fiduciary rule,” which requires financial advisers to act in the best interest of their clients. On Wednesday, Secretary of Labor Acosta testified in support of President Trump’s budget request for fiscal year 2018 that slashes funding for the agency that protects workers’ wages and health and safety by 20 percent. And in a symbolic anti-worker move, the Trump administration also withdrew Department of Labor guidance designed to help employers understand their obligations under the law.
Today, the Department of Labor regulation known as the “fiduciary rule” was officially implemented. So, all financial advisers are finally, technically required to act in the best interest of clients saving for retirement. This is a huge win for savers but, while the rule’s fiduciary standard is now in effect, it comes with a couple of catches. Important compliance provisions built into the rule’s exemptions have been delayed until January 1, 2018. DOL has made it clear that it will not enforce the rule until then, either. Until the rule has been fully implemented and is being fully enforced, retirement savers will keep losing money to unscrupulous financial advisers.
People in states represented by the cosponsors of the CHOICE Act lose $12.1 billion each year due to conflicted retirement advice
Yesterday, the Financial CHOICE Act of 2017 passed the House of Representatives along party lines, with 233 Republicans and no Democrats voting in favor of the bill, and 185 Democrats and one Republican voting against it. In the event it were to also pass the Senate and become law, the CHOICE Act would do profound, broad-based damage to the future financial security of America’s working families.
Among the many damaging things the bill does is to repeal of the Conflict of Interest rule, aka the “fiduciary” rule. The fiduciary rule is the regulation that requires that financial professionals advising retirement savers act in the best interest of their clients—like doctors and lawyers are already required to do. The rule prohibits financial advisers from doing things like steering clients into investments that provide the adviser a higher commission but provide the client a lower rate of return. This rule is sorely needed—conservative estimates put the cost to retirement savers of “conflicted” advice at $17 billion a year. It is noteworthy that today is the day that the fiduciary rule was implemented. This is a huge win for retirement savers, though this big step forward comes with a couple of glaring catches.
Today the U.S. House of Representatives begins consideration of the Financial CHOICE Act of 2017, a sweeping bill that would make a number of extensive changes to the institutions that oversee the American monetary and financial system.
The CHOICE Act is frequently (and accurately) described as an effort to undo much of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is the critical banking regulation passed under President Obama after the financial crisis of 2008/2009 to help avert future crises. The provisions in the CHOICE Act that repeal major parts of Dodd-Frank have rightly received a great deal of attention. But, there is more to the CHOICE Act than rolling back Dodd-Frank. Below we highlight two lesser-known but highly concerning components of the bill.
The CHOICE Act would make major and undesirable changes to the governance and conduct of the Federal Reserve.
The status quo of the Federal Reserve should not persist. Governance should become more transparent and representative and policy should weigh the economic interests of low and middle-wage workers more highly. But the reforms proposed in the Financial CHOICE Act go in precisely the wrong direction regarding both governance and policy conduct of the Fed.
In regard to governance, the Financial CHOICE Act proposes expanding the influence of regional Federal Reserve Bank presidents on the Federal Open Market Committee (FOMC), at the expense of the Federal Reserve’s Board of Governors (BOG). Regional presidents are chosen through largely opaque processes led by regional Federal Reserve Bank boards of directors. These regional boards are dominated by financial and corporate interests. Fed Governors, conversely, are nominated by the President and must be confirmed by the Senate. This insures at least some modicum of democratic accountability. Voting rights on the FOMC are supposed to be split 7-5 in favor of the BOG (currently there are two vacancies on the BOG, so the regional banks already have parity).
As the Trump administration considers weakening the long-awaited “fiduciary rule”, industry-backed groups continue to release transparently self-serving “research” purporting to show that the rule, which protects retirement savers against sales pitches disguised as financial advice, will do more harm than good.
Most recently, the U.S. Chamber of Commerce released a report misleadingly entitled, The Data Is [sic] In: The Fiduciary Rule Will Harm Small Retirement Savers. The data actually show nothing of the kind. As the Consumer Federation of America has pointed out, even comparing a partial estimate of the harm done to savers from conflicted advice with an inflated estimate of the cost of implementing the rule shows that the rule’s benefits vastly outweigh its costs.
This hasn’t prevented the Chamber and others from claiming that the rule will harm investors by restricting access to retirement services, limiting investment options, and increasing fees paid for investment advice. These claims are based on surveys of firms with an interest in weakening or overturning the rule, conducted by industry associations and conservative groups who are in many cases ideologically opposed to government regulation. As EPI Vice President Ross Eisenbrey recently told the acting Solicitor of Labor, affected industries invariably predict dire outcomes from regulations they oppose since they are rarely called to account when their predictions prove unfounded.
Even if the industry’s questionable predictions that the rule could cause some retirement savers to experience reduced access to investment products or advice are borne out, it doesn’t follow that investors will be harmed by the fiduciary rule. The rule’s purpose is to ensure that any retirement investment advice serves the investor’s best interest, not the adviser’s self-interest. The fact that salespeople masquerading as financial planners will no longer be able to offer conflicted advice that steers people to costly products doesn’t mean investors will be harmed—to the contrary. And since bad products and services crowd out good ones, the anticipated fiduciary rule—despite the Trump administration’s delay in implementing it—has already expanded the market for low-cost investment options.
It has been declared “infrastructure week” by the Trump administration. On the face of it, that should be excellent news. The U.S. economy would benefit enormously from an ambitious increase in public investment, including infrastructure investment. Such investment would create jobs and finally lock-in genuine full employment in the near-term, and would provide a needed boost to productivity growth (or how much income and output each hour of work generates in the economy) in the medium-term. Further, infrastructure investments would ensure that we do not leave future generations a deficit of underinvestment and deferred maintenance of public assets.
This clear need is why we at EPI have been such enthusiastic backers of the Congressional Progressive Caucus (CPC) plan to boost infrastructure investment. The CPC investment plan is up to the scale of the problem, and it confronts the need to make these investments head-on, without accounting gimmicks or magical thinking about where the money for these investments will come from.
Despite being long-standing and loud proponents of the need for more infrastructure investment, however, we cannot say we expect much from the Trump administration’s infrastructure week. Why not? Because the most common theme in the Trump administration’s approach to infrastructure is pure obfuscation about how it will be paid for. If you’re not willing to say forthrightly how you’re going to pay for infrastructure investments, you really cannot be serious about it. As the old adage goes, “show me your budget and I’ll tell you what you value”.
The recently released Trump federal budget plan guts infrastructure, period. Read the link—the damage the Trump budget would do to public investment and infrastructure is staggering. This alone should make any open-minded person extraordinarily skeptical of their claims to value infrastructure spending.
The Trump campaign plan on infrastructure was notable only for its shallowness and its determination to increase cronyism in infrastructure provision. The plan claimed that the problem with American infrastructure investment was a lack of innovative financing, and that the private sector could somehow be convinced to build infrastructure at no cost to taxpayers. This was obviously false. Even long-standing, bipartisan efforts to leverage private sector financing of infrastructure have ranged from disappointing to disastrous. And in no case did they provide a free lunch to taxpayers—unless taxpayers have a huge preference to paying tolls to private companies rather than the same amount of tolls or taxes to governments.
The problem holding back increased investment in American infrastructure is simple: politicians are simply unwilling to increase public spending in a transparent way. This must be overcome—America needs a significant investment in public assets, and it needs this investment to be transparent, subject to democratic accountability, and long-lived.
The sketch of the new Trump infrastructure effort included in their budget shows clearly that they do not get this. Instead, the plan is more obfuscation and magical thinking. They claim their plan will lead to $1 trillion in new investments. Yet only $200 billion in new federal spending is specified (and again, this must be balanced against the enormous cuts to public investment already embedded in their overall budget plan). Where does the rest of the funding come from? In a word, nowhere. There is hand waving about leveraging the private sector and vague claims that federal “divestment” from infrastructure provision will somehow empower state and local governments to do more (but without any new funding source for these governments!). But like Trump’s campaign plan, this is an unserious document meant to sound like an infrastructure investment plan, but one that would radically underinvest in projects overall, and which would prioritize projects that can provide profits to private entities (like toll roads to airports) rather than projects that provide the largest welfare boost to vulnerable communities (say replacing lead-laced water pipes for communities like Flint, Michigan).
As the Trump administration kicks off “infrastructure week”, remember that its recent budget is an absolute disaster for public investment
Back in March, the Trump administration released its “skinny” budget. The skinny budget laid out the administration’s priorities for the next two years of discretionary spending. This skinny budget made absolutely disastrous cuts to nondefense discretionary (NDD) spending. This matters to most Americans because the NDD portion of the budget is where the vast majority of public investment is funded.
NDD spending is already on an extraordinarily austere path under current law. The Congressional Budget Office (CBO) estimates that by 2027 NDD budget authority as a percentage of GDP will fall by one-fifth, reaching a historic low of 2.4 percent. Trump’s skinny budget wanted us to get to this anemic level by next year.
And the details of the recently released full ten-year budget are far worse.
The Trump administration’s budget would cut NDD budget authority as a percentage of GDP by 56 percent, slashing it to an unprecedented 1.4 percent of GDP by 2027. CBO estimates that NDD spending will account for just 13 percent of all federal spending over the next ten years, but half of it is public investment. The full Trump budget would be an unprecedented disaster for public investment.
Historical and projected nondefense discretionary budget authority as a percentage of GDP, FY1976—FY2027
|Year||President’s Budget||CPC budget||Historic||Current Law||Historical Average*|
*Historical average reflects the average nondefense discretionary budget authority as a share of GDP between FY1980 and FY2007 (the last year before the onset of the Great Recession).
Notes: For the president's budget, this figure uses CBO's projections of GDP. Data for 2016 represent actual spending. Data for 2017 exclude CHIMPs.
Source: EPI Policy Center analysis of Congressional Budget Office and Office of Management and Budget data.
This highlights the enormous gap between Trump administration rhetoric about boosting infrastructure investment and the reality of their policies. Trump campaigned on a $1 trillion infrastructure proposal, but has never backed this up with a real plan. First, the campaign’s original plan was simply not serious, and would not have led to anywhere near $1 trillion in net new investment forthcoming. Next, the skinny budget cut the Department of Transportation by 13 percent. And these are not just cuts to some abstract bureaucracy, included are cuts to actual infrastructure funding. About 21 percent of those cuts come from ending the TIGER discretionary grants program that fund state-level infrastructure projects.
The latest data from the Bureau of Labor Statistics reveals a noticeable slowdown in job growth this year. Adding in May’s 138,000 net new jobs, monthly job growth averaged 162,000 so far in 2017, and just 121,000 over the last three months, down from an average monthly gain of 187,000 jobs in 2016. While employment growth would be expected to slow as the economy approaches genuine full employment, other indicators suggest we are not that close to full employment yet, so this explanation seems insufficient. Specifically, at this point in the recovery, we should be looking to not only add jobs, but also see stronger wage growth in those jobs.
But this is not what we’ve seen. Unfortunately, wage growth has been flat over the last year. The latest data indicates that year-over-year nominal hourly wages grew 2.5 percent in May. In fact, as shown in the figure below, wage growth has averaged 2.5 percent over the last two years. If anything, we’ve seen a bit of a slowdown in wage growth this spring, and it is still below levels consistent with the Federal Reserve’s 2 percent inflation target combined with trend productivity growth of 1.5 percent. So, why has wage growth continued to be below target levels after recovery has gone on so long? The simple answer is that while the recovery has been long, it has also been weak. And this weakness combined with the extraordinary damage done during the Great Recession means that slack remains.
Nominal wage growth has been far below target in the recovery: Year-over-year change in private-sector nominal average hourly earnings, 2007–2017
|Date||All nonfarm employees||Production/nonsupervisory workers|
*Nominal wage growth consistent with the Federal Reserve Board's 2 percent inflation target, 1.5 percent productivity growth, and a stable labor share of income.
Source: EPI analysis of Bureau of Labor Statistics Current Employment Statistics public data series
But, you say, the unemployment rate fell to 4.3 percent in May, its lowest in 16 years! Unfortunately, the unemployment rate fell for the wrong reasons and isn’t fully reflective of the state of the labor market. That is, in the past when unemployment was roughly as low as it is today, the labor force participation rate—notably that of the prime-age population—has been much higher. Today, there are lots of would-be workers on the sidelines not being counted, who would take a job if offered one. And, the drop in the unemployment rate in the past month is more of a sign of people giving up on finding a job than more people becoming employed. In the last month, the labor force participation rate fell 0.2 percentage points and the employment-to-population ratio also fell 0.2 percentage points. Taken together, that means that the slight drop in the unemployment rate is, in fact, due to would-be workers leaving the labor force, not getting jobs.
More and more analysts, including many at the Fed, seem to have decided that the U.S. economy has reached full employment. They might be right, but the data on this is far from a slam dunk—and the costs of prematurely declaring full employment and working to slow the recovery far exceed the costs of waiting too long to restrain growth and allowing some wage and price inflation.
While the unemployment rate has ticked down considerably over the last few years, there still seems to be considerable slack in labor force participation, as evidenced most strongly in quite depressed employment-to-population ratios of even prime-aged (25-54 year old) workers. If this weren’t the case—if the apparent slack in these employment and participation numbers wasn’t real—we would be seeing faster wage growth as employers bid up wages to attract and retain the workers they want. So, what am I looking for in Friday’s jobs report, and what do we need to see to validate judgements that we have attained genuine full employment? Signs of stronger wage growth.
Year-over-year nominal wage growth has picked up over the last several years (as shown in the figure below). It’s now at about 2.7 percent growth, up from 2.4 percent the previous year, and up from an average of about 2.0 percent in 2010 through 2014. While this is certainly a welcome sign, it is still below levels consistent with the Federal Reserve’s 2 percent inflation target combined with trend productivity growth of 1.5 percent.
Under new bill’s election standard, unions would never win an election—and neither would the bill’s cosponsors
Before leaving for recess last week, congressional Republicans introduced a bill that would make it more difficult for workers to form a union and collectively bargain. The misleadingly named Employee Rights Act has been introduced in prior Congresses as well. The legislation would strip workers of many rights under the National Labor Relations Act (NLRA). For example, it would prohibit voluntary employer recognition of a union. (Under existing law, an employer is free to recognize a union and bargain with its workforce when workers show majority support for the union.) The bill also reinstitutes unnecessary delay in the union election process, mandating that parties litigate issues likely to be resolved in the election.
Perhaps most ridiculous is the bill’s requirement that a union win the support of the majority of all workers eligible to vote in the union election—not just those workers who vote. Imagine if the bill’s sponsor, Congressman Phil Roe (R–Tenn.), had had the same requirement in his own election. He would have lost, and so would all of his Republican colleagues who cosponsored the bill.
Votes cast for winning candidate as a share of eligible voters and actual winning share, 2014 and 2016 elections
|Votes cast for winning candidate as share of all eligible voters (Employee Rights Act election requirement)||Winning election results|
|Rep. Phil Roe||TN 01||20.7%||35.5%||82.8%||78.4%|
|Rep. Joe Wilson||SC 02||24.0%||36.2%||62.4%||60.2%|
|Rep. Doug LaMalfa||CA 01||24.1%||33.8%||61.0%||59.1%|
|Rep. Jeff Duncan||SC 03||23.0%||38.8%||71.2%||72.8%|
|Rep. Rob Woodall||GA 07||25.2%||38.6%||65.4%||60.4%|
|Rep. Gus Bilirakis||FL 12||NA||45.9%||Ran unopposed||68.6%|
|Rep. Richard Hudson||NC 08||22.8%||35.6%||64.9%||58.8%|
* US citizens, ages 18 and up are considered eligible voters (see Citizen Voting Age Population from the American Community Survey).
The Employee Rights Act is a clear example of Republican contempt for workers’ rights to organize and bargain collectively. The legislation rigs the union election system, instituting standards for unions that no elected official could survive.
On the same day that Rep. Roe and his colleagues introduced their anti-worker legislation, Democrats introduced a bill to raise the minimum wage to $15 by 2024. The proposal would lift pay for 41 million workers—nearly 30 percent of the U.S. workforce. Raising the minimum wage to $15 per hour would begin to reverse decades of growing pay inequality.
H-2B crabpickers are so important to the Maryland seafood industry that they get paid $3 less per hour than the state or local average wage
Earlier this week, Washington D.C.’s WAMU aired a report highlighting—and celebrating—the hardworking Mexican women on Maryland’s Eastern Shore who pick crabmeat by hand. The Mexican women are in the United States temporarily, on a nonimmigrant guestworker visa called H-2B, which allows employers to hire migrant workers for non-agricultural seasonal jobs. The subheading of the story reads “Maryland crab processors say they couldn’t stay in business without Mexican guestworkers.” A tweet with an accompanying GIF from WAMU suggests that the reason employers hire H-2B workers to pick crab is because they’re so fast at what they do.
— WAMU 88.5 ? (@wamu885) May 22, 2017
Impressive to say the least. I don’t doubt how productive and valuable these workers are. Their bosses say they’re the heart of the crab industry. But upon closer inspection, it seems the seafood companies don’t really think this important work is worth a fair wage. The companies have lobbied tenaciously to make sure that the legal and regulatory framework of the H-2B visa program allows them to legally underpay their workers compared to what they would have to pay to attract workers in the free market—and the two employers featured in the WAMU story are perfect examples.
This week, the Trump administration published its full budget request for fiscal year 2018. The proposal makes it clear that President Trump has no intention of honoring his State of the Union pledge to work to create “jobs where Americans prosper and grow.” The Trump budget would impose a major drag on economic growth and lead to job-losses totaling 1.4 million in 2020. Beyond the stark job-loss numbers, the budget proposal includes severe cuts to anti-poverty programs including food stamps and children’s health insurance. Below is information on the Trump budget cuts to worker protection programs.
The Trump budget reduces funding for the Department of Labor (DOL) by nearly 20 percent. Most of the cuts come from job training programs. However, the Trump budget also severely reduces funding for unemployment insurance program administration. On top of this cut, Trump’s budget would require this already stretched program to administer a new program— six weeks of paid family leave—with no new funding. Currently, only one in four jobless workers collect unemployment benefits and only 21 states have adequate reserves in the event of another recess.
One agency within the DOL would receive a substantial increase in funding under the Trump budget. The Office of Labor-Management Standards (OLMS) would see its funding increase by 20 percent. OLMS is responsible for enforcement of the Landrum-Griffin Act, which requires unions to report on their finances and gives the Secretary of Labor the authority to investigate unions and audit union finances. This budget increase stands in stark contrast to the National Labor Relations Board (NLRB) which would see its funding cut by six percent.. The NLRB is responsible for enforcing workers’ rights under the National Labor Relations Act which gives workers the rights to organize and join unions and bargain collectively with their employers for better pay, benefits, and working conditions. Unlike OLMS, which has jurisdiction only over union activities, the NLRB’s jurisdiction covers the right of all workers—whether union members or not—to seek better wages or working conditions. In spite of this, OLMS gets the additional funding in Trump’s budget while the agency tasked with protecting workers’ rights sees its funding reduced.