The signal the unemployment rate provides can change a lot over time: EPI Macroeconomics Newsletter

In 2019 the unemployment rate was below 4% for the second straight year, the first time this has happened since 1968 and 1969. Despite the current stretch of low unemployment, by many other measures the labor market does not seem particularly tight. Most obviously, wage growth has been accelerating a bit, but is still disappointing relative to what wage growth we would expect at this level of unemployment.

Productivity growth has firmed up slightly in recent years, but employers still aren’t acting like labor costs are something they’re particularly worried about containing through investments in capital equipment or better processes.

The late 1990s is an obvious reference for highlighting how unresponsive wage and productivity growth have been to low unemployment in recent years. In these years, low unemployment coincided with notable accelerations in both wage and productivity growth. In this newsletter, we highlight some reasons why the headline unemployment rate measured in the late 1990s does not provide quite the expected apples-to-apples comparison with the unemployment rate of today. Key findings are:

  • The unemployment rate that signifies labor market tightness falls as the workforce gets older and becomes better educated. All else equal, a workforce that is growing older and more educated should steadily, over time, reduce the unemployment rate that is consistent with a given wage target. These compositional changes in the workforce have occurred and have reduced unemployment by roughly 0.3 percentage points since 2000, meaning that an unemployment rate of 3.7% today is equivalent in its effect on wage growth to a 4.0% unemployment rate in 2000.
  • Today’s measured unemployment rate captures fewer jobless workers than it used to. Growing nonresponse in the survey used to calculate the unemployment rate has reduced the unemployment rate consistent with a given wage target over time by another 0.3 percentage points since 2000. Growing evidence shows that nonresponse to this survey is not random: rather it is jobless workers who are less likely to respond to the survey that is used to calculate unemployment. This biases the measured unemployment rate downward.
  • There may be a bigger pool of workers competing for jobs than the unemployment rate suggests. Adults not in the labor force today seem substantially more substitutable with adults officially classified as “unemployed” than was the case in the late 1990s recovery. For example, the share of newly employed workers who enter employment from out of the labor force is substantially higher in recent years than in past periods of low unemployment, and the downward pressure that adults not participating in job searches put on wages is higher now than in the late 1990s. In short, many potential workers today are not being classified as unemployed, and hence may be missed by focusing only on the unemployment rate as a measure of labor slack.

The rest of this brief highlights evidence on these three points.

A lower unemployment rate is needed to signify labor market tightness with an older and better-educated workforce

All else equal, workers with more experience and education credentials have lower rates of unemployment. The economic intuition for this is that more experienced and more educated workers have skills that are in greater demand by employers at any given level of economy-wide slack. This demand premium for more experienced workers holds in the aggregate despite the fact that age discrimination afflicts many workers, i.e., the unemployment/age gradient is clearly downward sloping.

Lower unemployment among more experienced and educated workers means that a given unemployment rate (say 4%) achieved in two different years can signify different things about the labor market if the composition of the workforce has changed. An unemployment rate of 4% might signal a moderate degree of slack for a highly educated and more experienced workforce, but may signal a very tight labor market for a workforce that is younger and with fewer credentials. Figure A shows the actual unemployment rate and the composition-adjusted unemployment rate for two time periods: 1997–2000 and 2016–2019. Both periods saw unemployment below 5%. In the first period, the difference between actual and composition-adjusted unemployment is trivial (essentially by construction—we fix the demographic composition of the workforce at its 1995 level, as described in the note to the figure). By the 2016–2019 period, the composition-adjusted unemployment rate is nearly 0.3 percentage points higher. In essence, after controlling for age and education, the unemployment rate today has to be roughly 0.3 percentage points lower to signify the same level of labor market slack as it did during the late 1990s recovery. We also adjusted unemployment by race, ethnicity, and gender (not shown in the figure), but this changed the composition-adjusted unemployment rates only trivially compared with the effects of age and experience.

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On EITC Awareness Day, remember that the EITC and minimum wage work together to raise incomes

Today is Earned Income Tax Credit (EITC) Awareness Day, an effort to make low-income taxpayers aware of the tax credit that provides an important boost to low- and moderate-income families. It also provides the opportunity to address a common misconception around the EITC.

Policy discussions sometimes describe EITC expansions and minimum wage increases as alternative, competing policies for helping low-income workers. But, as economist Jesse Rothstein and I explain in a new report, this framing is incorrect. The two policies are actually complementary. A minimum wage increase and EITC expansion are more effective together than either is on its own.

Federal, state, and local increases in minimum wages have raised the incomes of low-wage workers and their families. The best published scholarship estimates that a $12 an hour minimum wage in 2017—very similar in real terms to current proposals for a gradual increase to a $15 an hour federal minimum wage—would have lowered the number of individuals living in poverty by six million, with disproportionately large effects for people of color.

In contrast, the EITC is a refundable tax credit available to low-income families who have positive earned income: Eligible households receive a net tax refund that supplements their earnings. In 2018, over 22 million working families and individuals received an average credit of nearly $3,200. Like the minimum wage, a large body of research indicates that the EITC reduces poverty, and the tax credit also improves health and educational outcomes. In addition, the EITC can also raise total incomes above the low floor guaranteed by the minimum wage in many parts of the country. The current EITC refund adds 39%—or about $5,800—to the pretax earnings of a single parent with two children working full-time at the federal minimum wage.

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Wilbur Ross’s comments and Trump administration trade policies offer few answers for growing, job-destroying China trade deficit

This morning, Commerce Secretary Wilbur Ross claimed that the coronavirus outbreak in China “will help accelerate the return of jobs to North America.” This comment is not only cruel and inhumane, but it’s also a testament to just how little the Trump administration understands about America’s trade problems and how to solve them. Even the administration’s less off-the-cuff plans for rebuilding U.S. manufacturing have little chance of working. For example, as I noted previously, President Trump’s “phase one” trade deal with China is unlikely to significantly reduce the massive U.S. job losses that have resulted from growing U.S. trade deficits with China.

A new EPI analysis shows that growing trade deficits with China cost 3.7 million U.S. jobs between 2001 and 2018, including 700,000 jobs lost in the first two years of the Trump administration. Job losses occurred in all 50 states, every congressional district, and every industry. Manufacturing was hit the hardest, with 2.8 million jobs lost. Given this toll and the Trump administration’s rhetoric, you’d think they’d look for real solutions. Instead, Trump appears desperate to sign his deal, any deal, so that he can claim progress on reducing trade deficits. But he is shortsighted on trade because his arrangement with Beijing ignores at least two key problems. First, it assumes that China will suddenly obey trade rules and commitments it has never previously respected. And second, it limits Washington’s ability to respond to the currency misalignment currently hampering U.S. exporters.

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Weakened labor movement leads to rising economic inequality

The basic facts about inequality in the United States—that for most of the last 40 years, pay has stagnated for all but the highest paid workers and inequality has risen dramatically—are widely understood. What is less well-known is the role the decline of unionization has played in those trends. The share of workers covered by a collective bargaining agreement dropped from 27 percent to 11.6 percent between 1979 and 2019, meaning the union coverage rate is now less than half where it was 40 years ago.

Research shows that this de-unionization accounts for a sizable share of the growth in inequality over that period—around 13–20 percent for women and 33–37 percent for men. Applying these shares to annual earnings data reveals that working people are now losing on the order of $200 billion per year as a result of the erosion of union coverage over the last four decades—with that money being redistributed upward, to the rich.

The good news is that restoring union coverage—and strengthening workers’ abilities to join together to improve their wages and working conditions in other ways—is therefore likely to put at least $200 billion per year into the pockets of working people. These changes could happen through organizing and policy reform. Policymakers have introduced legislation, the Protecting the Right to Organize (PRO) Act, that would significantly reform current labor law. Building on the reforms in the PRO Act, the Clean Slate for Worker Power Project proposes further transformation of labor law, with innovative ideas to create balance in our economy. Read more

The Trump administration’s new housing rules will worsen segregation

In “The Neighborhoods We Will Not Share,” an article published online at The New York Times, I describe how the Trump administration has proposed a rule that will make it virtually impossible to challenge many policies that reinforce residential racial segregation.

This is no small matter. Segregation underlies many of our most serious social problems. Educators can’t seem to make significant progress in their efforts to close the racial gap in academic achievement that persists in large part because we enroll the most socially and economically disadvantaged children in poorly resourced schools, located in poorly resourced neighborhoods. Health disparities by race stem, in part, from so many African Americans consigned to areas where they have less access to healthy air and healthy foods, and are more subject to stressful conditions. Black men’s high and unjustifiable rates of incarceration depend significantly on their concentration in segregated neighborhoods without good employment opportunities in the formal economy or the transportation to access good jobs. And segregation prevents us from overcoming our very dangerous and frightening political polarization, highly correlated with race. How can we ever develop the common national identity essential to the preservation of our democracy if so many African Americans and whites live so far from each other that we have no ability to understand and empathize with each other’s life experiences?

In my book The Color of Law, I described how 20th century federal, state, and local policies—explicitly racial—created, reinforced, and sustained racial boundaries in every metropolitan area in the United States. These unconstitutional government activities still predict today’s segregated landscape. For example, the explicit exclusion of black working class families from single-family homes, for which white working class family purchases were subsidized, bears substantial responsibility for the black-white wealth gap—while black family incomes are about about 60% of white family incomes, the median black household wealth is less than 10%of white household wealth, an enormous disparity that was propelled by the equity appreciation of white property while African Americans were consigned to neighborhoods where no similar appreciation occurred. The wealth gap predicts much of our contemporary racial inequality.Read more

Yes, David Brooks, there really is a class war

New York Times columnist David Brooks, in an article sub-titled “No, Virginia, there is no class war,” recently trotted out an old argument about why wage growth has been so sluggish for so many U.S. workers for so long: they’re just not very good workers. Specifically, he argues that “wages are still mostly determined by skills and productivity.” Ergo, if there is growing inequality in wages, it must be driven by inequality in workers’ own productivity.

But the evidence he cites is totally unconvincing on this.

First, he notes that wages for lower-wage workers have recently grown more rapidly than for middle-wage workers. But it’s been shown again and again that this is driven in large-part by those states that have raised their minimum wages. It’s also been shown that tighter labor markets disproportionately benefit the lowest-paid workers. The argument that changes in relative bargaining power and economic leverage have been the prime mover of wage trends in recent decades is not an argument that wages can never rise, period. When policies change—like minimum wages increase and the Fed allows labor markets to tighten without slamming on the interest rate brakes—good things happen. We just need to change a lot more policies.

Second, he cites a study that looks at wage and productivity growth in high-skill and low-skill industries between 1989 and 2017. The first odd bit of this evidence is that the wage growth he reports the study claims for high and low-skill industries is essentially identical: 26 percent versus 24 percent. The second odd bit is that this means even high-skill industries only gave average annual wage increases of 0.8 percent over that time, even as aggregate productivity grew by almost twice as fast over that time (about 1.4 percent annually). Finally, and most important, using industry-level productivity growth to infer anything about the productivity of individuals working in these industries cannot be done. To put it most simply, productivity growth within an industry can occur because each input used in production gets more productive, or, there is a shift in the mix of inputs. This might sound wonky but I’ll explain a bit more in the next paragraph:Read more

This MLK Day, remember Emmett Till and voter suppression

“We can never be satisfied as long as the Negro is the victim of the unspeakable horrors of police brutality…We cannot be satisfied as long as the Negro in Mississippi cannot vote and the Negro in New York believes he has nothing for which to vote.” —Martin Luther King Jr.

Two historic events occurred in American history in different years on August 28. In 1955, Emmett Till was lynched in Mississippi—and in 1963, Martin Luther King Jr. addressed the nation from Washington, D.C., with his I Have a Dream” speech. While both events have been ingrained in many Americans’ memories, few are aware that they share a common link between brutality and voter suppression.

The prevailing belief of the circumstances surrounding 14-year-old Emmett Till’s killing is that he was accused of whistling at a white woman. Yet, the truth is he was lynched as an act of voter intimidation. After being acquitted by an all-white jury, one of Emmett Till’s killers confessed to the lynching and gave voting as the first reason he killed Emmett.

“But I just decided it was time a few people got put on notice. As long as I live and can do anything about it, [racial slur] are gonna stay in their place. [Racial slur] ain’t gonna vote where I live. If they did, they’d control the government.”—J.W. “Big Milam”

Although Emmett Till was brutally lynched 65 years ago, historical events like his killing continue to suppress the political participation of black Americans. Using data on historical lynchings and present-day voter registration of blacks in southern states, Figure A shows that blacks who live in counties that experienced more lynchings in the past are less likely to register to vote today.Read more

China trade deal will not restore 3.7 million U.S. jobs lost since China entered the WTO in 2001

The White House has announced plans for a ceremony to sign a “phase one” trade deal with China on Wednesday, although details of the agreement have yet to be announced. As one analyst noted, this deal may not amount to more than a hill of soybeans. It is unlikely to significantly reduce massive U.S. job losses due to growing U.S. trade deficits—the difference between imports and exports—which are dominated by trade deficits in manufactured goods. As shown in a forthcoming EPI report to be released later this month, growing U.S. trade deficits with China eliminated 3.7 million U.S. jobs between 2001 and 2018 alone (see Figure A), including 2.8 million jobs in manufacturing (details will be provided in the forthcoming report).

Figure A

U.S. jobs displaced by the growing goods trade deficit with China since 2001 (in thousands of jobs)

Year  Jobs displaced (thousands)
2001 0.0 
2002 218.1
2003 445.7
2004 852.1
2005 1,306.1
2006 1,651.5
2007 1,964.5
2008 2,030.4
2009 1,686.2
2010 2,295.0
2011 2,616.8
2012 2,764.6
2013 2,812.3
2014 2,993.2
2015 3,197.9
2016 2,965.2
2017 3,339.8
2018 3,704.7
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Source: Authors’ analysis of U.S. Census Bureau American Community Survey data, Bureau of Labor Statistics Employment Projections program data, and U.S. International Trade Commission Interactive Tariff and Trade DataWeb database. Adapted from Rob Scott and Zane Mokhiber, Growing China Trade Deficits Cost 3.7 Million American Jobs between 2001 and 2018, Economic Policy Institute, forthcoming.

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Trade deficits and jobs losses with China continued to grow during the first two years of the Trump administration—despite the administration’s heated rhetoric and imposition of tariffs. The U.S. trade deficit with China rose from $347 billion in 2016 to $420 billion in 2018, an increase of 21.0%. U.S. jobs displaced by those China trade deficits increased from nearly 3.0 million jobs lost in 2016 to 3.7 million jobs lost in 2018, an increase of more than 700,000 jobs lost or displaced in the first two years of the Trump administration.

Although the bilateral trade deficit with China has declined in 2019 (through November), the overall U.S. trade deficit in non-oil goods, which is dominated by trade in manufactured and farm products, has continued to increase, suggesting that trade diversion has grown in importance. These are important topics for future research.

While growing exports support some American jobs, growing imports eliminate existing jobs and prevent new job creation—as imports displace goods that otherwise would have been made in the United States by domestic workers. As a result, growing trade deficits result in increasing U.S. job losses. The top half of Table 1 shows just how much the trade deficit has grown: The U.S. trade deficit with China increased from $83.0 billion in 2001 to $420 billion in 2018. While U.S. exports to China increased in this period, growing exports were overwhelmed by the massive growth of imports from China, which increased by $437 billion in this period. Read more

The labor market continues to improve in 2019 as women surpass men in payroll employment, but wage growth slows

Today’s Bureau of Labor Statistics (BLS) jobs report provides the opportunity to look at 2019 as a whole and in comparison with previous years. As the recovery has strengthened over the last several years, we’ve generally seen improvements in most measures of the labor market: employment, unemployment, and wage growth. These measures tell a consistent story—an economy on its way to full employment, but not there yet. Wage growth continues to be the lagging indicator, which is not as strong as would be expected given the health of the labor market and actually slowed through much of 2019.

Payroll employment growth in December was 145,000, bringing average job growth in 2019 to 176,000. This is a bit softer than the 223,000 average for 2018, but still more than enough to keep up with growth in the working-age population and pull in thousands of workers off the sidelines every month.

Figure A

Average monthly total nonfarm employment growth, 2006–2019

Year Average monthly total nonfarm employment growth
2006 175
2007 95
2008 -296
2009 -421
2010 86
2011 173
2012 181
2013 192
2014 251
2015 227
2016 193
2017 179
2018 223
2019 176
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Source: Data are from the Current Employment Statistics (CES) series of the Bureau of Labor Statistics and are subject to occasional revisions. This chart was based on data accessed in January 2020.

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For the first time in nearly 10 years, women’s share of payroll employment has just surpassed that of men’s. The figure below shows payroll employment for both men and women since 2000. From 2000 to 2007, men’s share of total employment was about 1–2% higher than women’s. In the recession, employment fell markedly in male-dominated professions—notably manufacturing and construction—and women’s share of employment rose in kind. Since 2010, women’s and men’s employment have both increased, with men’s growing faster than women’s initially. In the last couple of years, women’s payroll employment has grown just a bit faster than men’s.

We can turn again to a sector approach as one explanation for why women’s employment has now just surpassed men’s in December. Men make up 77% of employment in construction and manufacturing combined. Coincidentally, women make up 77% of employment in education and health services. Between 2018 and 2019, construction and manufacturing together increased by 356,000, but education and health services employment increased much more—by 603,000. Furthermore, manufacturing employment has faltered late in the year, helping women’s employment eke ahead of men’s in December.

It is important to note that in absolute terms the shares of men’s and women’s employment haven’t changed that dramatically. But, it holds true that women’s payroll employment is now 50.04% of the total, the first time it has been a majority since the depths of the (construction and manufacturing-led) Great Recession.

Figure B

Women’s share of payroll employment ekes ahead of men’s in December 2019: Payroll employment, men and women, 2000 to 2019

Date Payroll employment, women Payroll employment, men
Jan-2000 62861 68159
Feb-2000 62936 68200
Mar-2000 63087 68522
Apr-2000 63294 68606
May-2000 63499 68619
Jun-2000 63457 68622
Jul-2000 63444 68803
Aug-2000 63521 68719
Sep-2000 63635 68729
Oct-2000 63624 68741
Nov-2000 63755 68815
Dec-2000 63791 68931
Jan-2001 63863 68849
Feb-2001 63922 68882
Mar-2001 63894 68867
Apr-2001 63964 68511
May-2001 63995 68431
Jun-2001 63951 68361
Jul-2001 64022 68165
Aug-2001 63979 68064
Sep-2001 63958 67833
Oct-2001 63790 67678
Nov-2001 63676 67482
Dec-2001 63619 67378
Jan-2002 63645 67223
Feb-2002 63622 67130
Mar-2002 63627 67105
Apr-2002 63593 67043
May-2002 63569 67078
Jun-2002 63582 67113
Jul-2002 63572 67032
Aug-2002 63621 66982
Sep-2002 63573 66951
Oct-2002 63600 67043
Nov-2002 63630 67002
Dec-2002 63574 66914
Jan-2003 63592 67004
Feb-2003 63604 66857
Mar-2003 63489 66757
Apr-2003 63501 66693
May-2003 63472 66738
Jun-2003 63429 66780
Jul-2003 63421 66786
Aug-2003 63308 66859
Sep-2003 63460 66819
Oct-2003 63523 66950
Nov-2003 63551 66939
Dec-2003 63604 67001
Jan-2004 63645 67142
Feb-2004 63666 67178
Mar-2004 63773 67383
Apr-2004 63873 67553
May-2004 63996 67714
Jun-2004 64036 67771
Jul-2004 64037 67827
Aug-2004 64007 67948
Sep-2004 64135 67977
Oct-2004 64287 68179
Nov-2004 64327 68194
Dec-2004 64397 68247
Jan-2005 64512 68279
Feb-2005 64611 68439
Mar-2005 64662 68510
Apr-2005 64823 68713
May-2005 64895 68811
Jun-2005 65025 68932
Jul-2005 65121 69193
Aug-2005 65171 69346
Sep-2005 65276 69307
Oct-2005 65214 69459
Nov-2005 65321 69691
Dec-2005 65327 69841
Jan-2006 65394 70052
Feb-2006 65466 70287
Mar-2006 65552 70511
Apr-2006 65587 70634
May-2006 65546 70715
Jun-2006 65577 70765
Jul-2006 65811 70727
Aug-2006 65938 70775
Sep-2006 66064 70796
Oct-2006 66180 70690
Nov-2006 66317 70765
Dec-2006 66468 70800
Jan-2007 66585 70908
Feb-2007 66733 70840
Mar-2007 66835 70975
Apr-2007 66916 70944
May-2007 67058 70954
Jun-2007 67135 70953
Jul-2007 67174 70881
Aug-2007 67273 70759
Sep-2007 67352 70762
Oct-2007 67417 70773
Nov-2007 67484 70815
Dec-2007 67623 70786
Jan-2008 67630 70792
Feb-2008 67662 70678
Mar-2008 67703 70589
Apr-2008 67683 70373
May-2008 67671 70201
Jun-2008 67627 70079
Jul-2008 67628 69880
Aug-2008 67480 69749
Sep-2008 67349 69420
Oct-2008 67166 69122
Nov-2008 67018 68543
Dec-2008 66805 68052
Jan-2009 66554 67520
Feb-2009 66317 67015
Mar-2009 66068 66461
Apr-2009 65822 66013
May-2009 65704 65787
Jun-2009 65550 65476
Jul-2009 65423 65262
Aug-2009 65348 65153
Sep-2009 65239 65020
Oct-2009 65173 64888
Nov-2009 65128 64945
Dec-2009 65063 64741
Jan-2010 65082 64725
Feb-2010 65006 64709
Mar-2010 65072 64823
Apr-2010 65076 65056
May-2010 65296 65370
Jun-2010 65168 65362
Jul-2010 65080 65362
Aug-2010 65026 65411
Sep-2010 64956 65417
Oct-2010 65047 65595
Nov-2010 65085 65680
Dec-2010 65106 65733
Jan-2011 65115 65744
Feb-2011 65157 65915
Mar-2011 65237 66067
Apr-2011 65391 66234
May-2011 65364 66356
Jun-2011 65443 66512
Jul-2011 65466 66550
Aug-2011 65484 66654
Sep-2011 65558 66816
Oct-2011 65654 66924
Nov-2011 65712 66998
Dec-2011 65777 67137
Jan-2012 65952 67317
Feb-2012 66061 67470
Mar-2012 66147 67622
Apr-2012 66187 67665
May-2012 66289 67662
Jun-2012 66316 67707
Jul-2012 66402 67774
Aug-2012 66463 67883
Sep-2012 66543 67992
Oct-2012 66617 68076
Nov-2012 66704 68147
Dec-2012 66791 68297
Jan-2013 66876 68407
Feb-2013 66956 68606
Mar-2013 67067 68631
Apr-2013 67189 68701
May-2013 67265 68849
Jun-2013 67332 68963
Jul-2013 67449 68951
Aug-2013 67593 69049
Sep-2013 67688 69143
Oct-2013 67767 69289
Nov-2013 67920 69403
Dec-2013 67967 69423
Jan-2014 67977 69590
Feb-2014 68054 69681
Mar-2014 68156 69829
Apr-2014 68309 70003
May-2014 68395 70138
Jun-2014 68491 70366
Jul-2014 68567 70517
Aug-2014 68657 70615
Sep-2014 68833 70750
Oct-2014 68964 70877
Nov-2014 69097 71030
Dec-2014 69246 71150
Jan-2015 69327 71282
Feb-2015 69478 71379
Mar-2015 69538 71396
Apr-2015 69660 71574
May-2015 69831 71722
Jun-2015 69930 71793
Jul-2015 70052 71964
Aug-2015 70108 72030
Sep-2015 70202 72069
Oct-2015 70378 72232
Nov-2015 70503 72342
Dec-2015 70646 72479
Jan-2016 70762 72453
Feb-2016 70950 72497
Mar-2016 71100 72581
Apr-2016 71213 72679
May-2016 71296 72611
Jun-2016 71454 72735
Jul-2016 71672 72853
Aug-2016 71783 72877
Sep-2016 71931 72999
Oct-2016 71968 73090
Nov-2016 72017 73211
Dec-2016 72133 73310
Jan-2017 72208 73487
Feb-2017 72285 73551
Mar-2017 72327 73636
Apr-2017 72399 73777
May-2017 72453 73851
Jun-2017 72546 73987
Jul-2017 72683 74054
Aug-2017 72761 74163
Sep-2017 72795 74147
Oct-2017 72885 74317
Nov-2017 73012 74410
Dec-2017 73098 74498
Jan-2018 73234 74533
Feb-2018 73421 74676
Mar-2018 73520 74759
Apr-2018 73646 74829
May-2018 73837 74908
Jun-2018 73999 75008
Jul-2018 74091 75094
Aug-2018 74229 75238
Sep-2018 74329 75246
Oct-2018 74480 75372
Nov-2018 74605 75443
Dec-2018 74724 75551
Jan-2019 74890 75697
Feb-2019 74994 75649
Mar-2019 75119 75677
Apr-2019 75233 75779
May-2019 75329 75745
Jun-2019 75381 75871
Jul-2019 75549 75869
Aug-2019 75668 75969
Sep-2019 75832 75998
Oct-2019 75958 76024
Nov-2019 76107 76131
Dec-2019 76246 76137
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Source: EPI analysis of Bureau of Labor Statistics' Current Employment Statistics public data series

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Turning to the household survey, the labor market continues to not only absorb population growth, but also chip away at the slack remaining in the labor market—namely workers who continue to be sidelined and who I expect will enter or re-enter the labor market as opportunities for jobs and better pay expand. As the unemployment rate has continued to fall between 2018 and 2019, labor force participation has increased as people re-enter the labor market and find jobs. Since December 2018, the unemployment rate dropped 0.4 percentage points (3.9% to 3.5%) while the employment-to-population ratio, or the share of the population with a job, rose 0.4 percentage points (60.6% to 61.0%). This means the unemployment rate over the last year fell for the right reasons—not because workers gave up looking, but because more would-be workers actually found jobs.

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What to watch on jobs day: An assessment of the 2019 labor market

The last Bureau of Labor Statistics (BLS) jobs report of 2019 comes out on Friday, giving us a chance to step back and look at how working people fared over the entire year. The report also marks the 12th anniversary of the official start of the Great Recession. My expectation is that the December data will confirm that the economy has nearly recovered its immediate pre-Great Recession health—the last year before the Great Recession hit. Wage growth, which slowed over the last year, is a notable exception.

However, as I have often noted, 2007 should not be considered a benchmark for a fully healthy economy for America’s workers. Almost all labor market measures were notably weaker in 2007 than they were at the previous business cycle peak in 2000. There was very little reason to think that the U.S. economy in 2007 was at full employment. If one looks at the stronger business cycle peak of 2000 as a more appropriate benchmark, the economy in 2019 looks even further from full employment. Many working people are still not seeing the recovery reflected in their paychecks—and the economy will not be at genuine full employment until employers are consistently offering workers meaningfully higher wages.

In this blog post—and Friday when the December numbers come out—I’m going to look at average payroll employment growth over the last several years. Because there is always a bit of volatility in the monthly data—especially in the household series that has a smaller sample size—taking a year-long approach allows us to smooth out the bumps and take stock of the key measures: payroll employment growth, the unemployment rate, the employment-to-population ratio, and nominal wage growth.

The figure below shows average nonfarm employment growth for 2007–2018 and for the first 11 months of 2019. With an average of 180,000 new jobs being added each month, job growth in 2019 is a bit softer than 2018 and more in line with what we saw in 2017. This pickup in 2018 can be attributed to the shift in federal policy from austerity to stimulus in the form of both tax cuts and an increase in government spending. In particular, Congress boosted spending by almost $150 billion, contributing significantly to economic growth in 2018. But, in 2019, spending held steady at $150 billion, meaning there was no additional government spending to continue stimulating demand, and we saw a mild softening of employment growth.

Figure A

Average monthly total nonfarm employment growth, 2006–2019

Year Average monthly total nonfarm employment growth
2006 175
2007 95
2008 -296
2009 -421
2010 86
2011 173
2012 181
2013 192
2014 251
2015 227
2016 193
2017 179
2018 223
2019 180
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Note: Because full 2019 monthly employment data are not yet available, the chart compares average monthly job growth between January and November for 2019.

Source: Data are from the Current Employment Statistics (CES) series of the Bureau of Labor Statistics and are subject to occasional revisions. This chart was based on data accessed in January 2020.

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At the current pace of growth, however, the labor market continues to not only absorb population growth, but also chip away at the slack remaining in the labor market—namely workers who continue to be sidelined and who I expect will enter or re-enter the labor market as opportunities for jobs and better pay expand. As it turns out (and what we’ve long argued), workers who left or never entered the labor force during the Great Recession and its aftermath were not necessarily permanently sidelined, but have systematically been returning to the labor market as job opportunities have strengthened. Over the last few years, the newly employed have been coming both from the ranks of the unemployed as well as from outside the labor force, those who were not actively seeking work the month prior to finding a job. In fact, as the figure below illustrates, the share of newly employed workers who did not look for work the previous month is at a historic high. About three-fourths of newly employed workers are coming from outside the labor force.

Figure B

Share of newly employed workers who said that they were not actively searching for work in the previous month

date Share of newly employed workers who said that they were not actively searching for work in the previous month
Apr-1990 61.9%
May-1990 62.6%
Jun-1990 62.0%
Jul-1990 62.0%
Aug-1990 61.6%
Sep-1990 62.3%
Oct-1990 61.0%
Nov-1990 61.2%
Dec-1990 60.4%
Jan-1991 59.9%
Feb-1991 59.0%
Mar-1991 58.5%
Apr-1991 57.7%
May-1991 57.6%
Jun-1991 57.2%
Jul-1991 58.0%
Aug-1991 57.8%
Sep-1991 57.7%
Oct-1991 57.3%
Nov-1991 56.9%
Dec-1991 57.0%
Jan-1992 56.8%
Feb-1992 57.1%
Mar-1992 57.1%
Apr-1992 57.2%
May-1992 57.3%
Jun-1992 56.6%
Jul-1992 56.4%
Aug-1992 56.1%
Sep-1992 55.9%
Oct-1992 55.7%
Nov-1992 55.8%
Dec-1992 56.1%
Jan-1993 56.6%
Feb-1993 57.7%
Mar-1993 58.3%
Apr-1993 58.4%
May-1993 58.2%
Jun-1993 58.1%
Jul-1993 57.5%
Aug-1993 57.5%
Sep-1993 58.0%
Oct-1993 58.9%
Nov-1993 58.5%
Dec-1993 58.3%
Jan-1994 58.8%
Feb-1994 59.2%
Mar-1994 59.1%
Apr-1994 58.7%
May-1994 58.3%
Jun-1994 58.5%
Jul-1994 58.6%
Aug-1994 59.0%
Sep-1994 59.1%
Oct-1994 59.8%
Nov-1994 60.1%
Dec-1994 60.3%
Jan-1995 60.4%
Feb-1995 59.5%
Mar-1995 59.7%
Apr-1995 59.7%
May-1995 59.2%
Jun-1995 59.5%
Jul-1995 59.5%
Aug-1995 60.0%
Sep-1995 60.2%
Oct-1995 59.9%
Nov-1995 60.6%
Dec-1995 59.9%
Jan-1996 59.8%
Feb-1996 60.3%
Mar-1996 60.7%
Apr-1996 61.0%
May-1996 60.7%
Jun-1996 60.8%
Jul-1996 61.5%
Aug-1996 60.8%
Sep-1996 60.9%
Oct-1996 60.2%
Nov-1996 60.6%
Dec-1996 59.6%
Jan-1997 59.1%
Feb-1997 58.9%
Mar-1997 60.3%
Apr-1997 61.4%
May-1997 61.8%
Jun-1997 61.1%
Jul-1997 60.4%
Aug-1997 61.3%
Sep-1997 61.9%
Oct-1997 62.5%
Nov-1997 62.7%
Dec-1997 62.8%
Jan-1998 63.3%
Feb-1998 62.7%
Mar-1998 62.9%
Apr-1998 62.4%
May-1998 63.5%
Jun-1998 63.2%
Jul-1998 64.2%
Aug-1998 64.0%
Sep-1998 65.2%
Oct-1998 65.1%
Nov-1998 65.1%
Dec-1998 64.9%
Jan-1999 65.6%
Feb-1999 65.5%
Mar-1999 64.2%
Apr-1999 65.3%
May-1999 66.1%
Jun-1999 67.4%
Jul-1999 66.4%
Aug-1999 65.7%
Sep-1999 65.3%
Oct-1999 65.5%
Nov-1999 65.3%
Dec-1999 65.1%
Jan-2000 64.4%
Feb-2000 65.4%
Mar-2000 65.7%
Apr-2000 65.9%
May-2000 65.6%
Jun-2000 65.9%
Jul-2000 65.4%
Aug-2000 65.5%
Sep-2000 65.6%
Oct-2000 66.5%
Nov-2000 67.4%
Dec-2000 68.1%
Jan-2001 69.0%
Feb-2001 68.6%
Mar-2001 67.9%
Apr-2001 66.9%
May-2001 65.8%
Jun-2001 65.3%
Jul-2001 65.7%
Aug-2001 66.2%
Sep-2001 66.6%
Oct-2001 65.5%
Nov-2001 64.4%
Dec-2001 62.9%
Jan-2002 62.6%
Feb-2002 62.3%
Mar-2002 61.7%
Apr-2002 61.9%
May-2002 62.8%
Jun-2002 64.4%
Jul-2002 64.5%
Aug-2002 64.0%
Sep-2002 63.1%
Oct-2002 63.1%
Nov-2002 63.7%
Dec-2002 64.1%
Jan-2003 64.2%
Feb-2003 64.2%
Mar-2003 64.5%
Apr-2003 64.3%
May-2003 63.7%
Jun-2003 63.5%
Jul-2003 63.1%
Aug-2003 63.2%
Sep-2003 63.4%
Oct-2003 64.3%
Nov-2003 64.7%
Dec-2003 63.7%
Jan-2004 63.6%
Feb-2004 63.4%
Mar-2004 64.9%
Apr-2004 64.3%
May-2004 64.3%
Jun-2004 63.7%
Jul-2004 64.2%
Aug-2004 64.5%
Sep-2004 64.1%
Oct-2004 64.2%
Nov-2004 64.0%
Dec-2004 64.4%
Jan-2005 64.6%
Feb-2005 64.8%
Mar-2005 64.9%
Apr-2005 65.1%
May-2005 65.8%
Jun-2005 66.1%
Jul-2005 66.6%
Aug-2005 65.9%
Sep-2005 66.5%
Oct-2005 66.2%
Nov-2005 66.0%
Dec-2005 65.9%
Jan-2006 65.8%
Feb-2006 67.3%
Mar-2006 67.3%
Apr-2006 67.6%
May-2006 67.3%
Jun-2006 67.2%
Jul-2006 66.7%
Aug-2006 66.4%
Sep-2006 65.9%
Oct-2006 66.9%
Nov-2006 67.6%
Dec-2006 68.3%
Jan-2007 68.0%
Feb-2007 67.0%
Mar-2007 66.5%
Apr-2007 65.8%
May-2007 66.2%
Jun-2007 67.6%
Jul-2007 67.7%
Aug-2007 67.6%
Sep-2007 66.9%
Oct-2007 67.0%
Nov-2007 67.5%
Dec-2007 66.6%
Jan-2008 66.4%
Feb-2008 65.4%
Mar-2008 65.6%
Apr-2008 64.7%
May-2008 65.1%
Jun-2008 64.9%
Jul-2008 65.3%
Aug-2008 64.2%
Sep-2008 62.9%
Oct-2008 62.1%
Nov-2008 61.9%
Dec-2008 62.3%
Jan-2009 62.2%
Feb-2009 61.6%
Mar-2009 60.8%
Apr-2009 59.8%
May-2009 59.6%
Jun-2009 58.3%
Jul-2009 57.5%
Aug-2009 57.0%
Sep-2009 56.8%
Oct-2009 57.6%
Nov-2009 56.7%
Dec-2009 57.7%
Jan-2010 57.9%
Feb-2010 58.8%
Mar-2010 58.7%
Apr-2010 57.4%
May-2010 56.4%
Jun-2010 56.6%
Jul-2010 57.2%
Aug-2010 58.4%
Sep-2010 58.8%
Oct-2010 58.9%
Nov-2010 58.9%
Dec-2010 58.4%
Jan-2011 59.1%
Feb-2011 59.5%
Mar-2011 60.1%
Apr-2011 60.4%
May-2011 60.2%
Jun-2011 59.7%
Jul-2011 59.8%
Aug-2011 59.6%
Sep-2011 60.6%
Oct-2011 59.8%
Nov-2011 59.8%
Dec-2011 59.1%
Jan-2012 59.2%
Feb-2012 59.1%
Mar-2012 59.4%
Apr-2012 60.3%
May-2012 60.9%
Jun-2012 61.6%
Jul-2012 61.8%
Aug-2012 62.3%
Sep-2012 62.3%
Oct-2012 62.0%
Nov-2012 61.8%
Dec-2012 62.5%
Jan-2013 62.2%
Feb-2013 61.5%
Mar-2013 61.6%
Apr-2013 63.1%
May-2013 63.5%
Jun-2013 63.2%
Jul-2013 62.3%
Aug-2013 62.9%
Sep-2013 63.5%
Oct-2013 64.3%
Nov-2013 64.1%
Dec-2013 63.6%
Jan-2014 63.9%
Feb-2014 63.6%
Mar-2014 63.9%
Apr-2014 62.8%
May-2014 64.2%
Jun-2014 64.5%
Jul-2014 66.0%
Aug-2014 65.5%
Sep-2014 65.3%
Oct-2014 64.9%
Nov-2014 65.3%
Dec-2014 65.8%
Jan-2015 67.2%
Feb-2015 67.8%
Mar-2015 68.4%
Apr-2015 68.0%
May-2015 68.5%
Jun-2015 68.2%
Jul-2015 69.0%
Aug-2015 68.6%
Sep-2015 68.8%
Oct-2015 68.6%
Nov-2015 68.6%
Dec-2015 69.0%
Jan-2016 68.6%
Feb-2016 69.8%
Mar-2016 70.5%
Apr-2016 70.7%
May-2016 69.7%
Jun-2016 69.1%
Jul-2016 68.9%
Aug-2016 69.4%
Sep-2016 69.2%
Oct-2016 68.2%
Nov-2016 67.7%
Dec-2016 68.8%
Jan-2017 69.4%
Feb-2017 69.1%
Mar-2017 68.8%
Apr-2017 69.4%
May-2017 70.2%
Jun-2017 70.7%
Jul-2017 70.2%
Aug-2017 70.7%
Sep-2017 70.4%
Oct-2017 70.7%
Nov-2017 70.8%
Dec-2017 70.7%
Jan-2018 71.2%
Feb-2018 71.0%
Mar-2018 70.6%
Apr-2018 70.7%
May-2018 71.2%
Jun-2018 72.6%
Jul-2018 73.1%
Aug-2018 73.0%
Sep-2018 72.9%
Oct-2018 73.0%
Nov-2018 73.3%
Dec-2018 73.1%
Jan-2019 72.5%
Feb-2019 72.4%
Mar-2019 71.6%
Apr-2019 71.7%
May-2019 72.7%
Jun-2019 73.6%
Jul-2019 74.2%
Aug-2019 73.9%
Sep-2019 73.7%
Oct-2019 74.6%
Nov-2019 74.6%
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Note: Because of volatility in these data, the line reflects three month moving averages

Source: Bureau of Labor Statistics, Labor Force Flows: Unemployed to Employed (16 Years and Over) [LNS17100000], and Not in Labor Force to Employed (16 years and over) [LNS17200000], retrieved from FRED (Federal Reserve Bank of St. Louis).

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Further evidence of a steadily improving economy is the unemployment rate, which—after falling steadily for eight years from its peak in the fourth quarter of 2009—continued to fall through 2019 to a low of 3.5% in November, an average of 3.7% for the first 11 months of the year. It is now far below its Great Recession peak (10.0%), and significantly below its pre-Great Recession low of 4.4% in the spring of 2007. But despite today’s low water mark, there is still room for improvement. And evidence suggests that the unemployment rate may be overstating the strength of the labor market. The previous figure supports this claim, given that a record high share of newly employed workers are coming from outside the labor force and are not counted in the official measure of unemployment in the previous month, despite clearly being ready and willing to work.Read more

College athletes and Ph.D. students both work for the university, but only one earns a salary

Beginning in January 2021, new rules will go into effect that will allow NCAA student-athletes to profit from the use of their names, images, and likeness. While the details of these new rules will require much deliberation among each NCAA division, one thing will not be considered—salaries for college athletes from the universities.

Why won’t college athletes be paid a salary?

Several reasons are floating around. One reason is the NCAA does not consider college athletes employees of the universities. Another reason is that these players are given a lot of perks. In a recent Los Angeles Times article, Dan Radakovich, athletic director at Clemson University, argued against paying college athletes since they have access to “world-class facilities, world-class coaching, and incredible academic support.”

But there already exists a group of students who are employees of the university, have access to world-class facilities, teaching, and academic support, and no one calls them selfish when they receive their salaries. Who are these students? Ph.D. students.

Wait, are you saying Ph.D. students receive a salary?

Yes, because they work for the university. A large percentage of Ph.D. students are funded via fellowships or assistantships. Funding, which covers tuition and provides a stipend, varies across institutions and doctoral programs due to what can be viewed as “educational hierarchy.” Assistantships require that Ph.D. students’ work anywhere from 20 to 40 hours per week that include duties such as grading, managing labs, or lecturing. Additionally, doctoral students are awarded (or sometimes apply for) money that allows them to attend international or out-of-state conferences to present their research and network with others in their field.

In short, Ph.D. students sign a contract with an institution, agree to work a certain number of hours per week, maintain a certain GPA, and conduct research. In exchange, the university covers their tuition and pays them a salary. What do college football players do? Sign a contract (you may have seen signing day on ESPN), maintain a certain GPA, and kick butt on Saturday, which requires countless hours of practice! Additionally, their success can help recruit up to tens of thousands of students and generate millions of dollars for the institution.

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Nearly 7 million workers will start the new year with higher wages

Note: This post was updated to clarify that Delaware’s minimum wage increase took effect on October 1, 2019.

At the start of the new year, minimum wages will have gone up in 22 states, lifting pay for 6.8 million workers across the country.i In total, workers affected by the increases will earn an extra $8.2 billion over the course of 2020 as a result of the changes. The increases range from a $0.10 inflation adjustment in Florida to $1.50 per hour raises in New Mexico and Washington. Affected workers who work year-round will see their annual pay go up between $150 and $1,700, on average, depending on the size of the minimum wage increase in their state.

The map and table below describe the increases in each state. Note that these estimates do not account for changes in local minimum wages separate from state law.ii There are 22 cities and counties with higher minimum wages taking effect on January 1, all of which can be found in EPI’s Minimum Wage Tracker. The estimates also do not include any “indirectly affected workers” making just above the new minimum wage who may receive raises as employers adjust their overall pay scales.

Figure A

State minimum wage increases will raise pay for nearly 7 million workers on January 1: States with minimum wage increases effective January 1, 2020, by type of increase

State Share of workforce directly benefiting Type of increase New minimum wage as of Jan. 1, 2020 Amount of increase Total workers directly benefiting Total increase in annual wages Average increase in annual earnings of year-round workers
Alabama -1 0.00%
Connecticut 0 0.00%
Georgia -1 0.00%
Hawaii 0 0.00%
Idaho -1 0.00%
Indiana -1 0.00%
Iowa -1 0.00%
Kansas -1 0.00%
Kentucky -1 0.00%
Louisiana -1 0.00%
Mississippi -1 0.00%
Nebraska 0 0.00%
Nevada 0 0.00%
New Hampshire -1 0.00%
North Carolina -1 0.00%
North Dakota -1 0.00%
Oklahoma -1 0.00%
Oregon 0 0.00%
Pennsylvania -1 0.00%
Rhode Island 0 0.00%
South Carolina -1 0.00%
Tennessee -1 0.00%
Texas -1 0.00%
Utah -1 0.00%
Virginia -1 0.00%
Washington D.C. 0 0.00%
West Virginia 0 0.00%
Wisconsin -1 0.00%
Wyoming -1 0.00%
Ohio 1 1.60% Inflation adjustment  $                   8.70  $       0.15                        84,000  $        12,303,000.00  $                                        150.00
South Dakota 1 1.70% Inflation adjustment  $                   9.30  $       0.20                          7,300  $           1,560,000.00  $                                        220.00
Florida 1 1.90% Inflation adjustment  $                   8.56  $       0.10                      160,700  $        23,766,000.00  $                                        150.00
Montana 1 1.90% Inflation adjustment  $                   8.65  $       0.15                          8,900  $           1,588,000.00  $                                        180.00
Minnesota 1 2.40% Inflation adjustment  $                 10.00  $       0.14                        68,100  $        11,030,000.00  $                                        162.00
New Mexico 2 2.70% Legislation  $                   9.00  $       1.50                        22,900  $        20,736,000.00  $                                        900.00
Alaska 1 3.00% Inflation adjustment  $                 10.19  $       0.30                        10,500  $           5,348,000.00  $                                        510.00
Illinois 2 3.30% Legislation  $                   9.25  $       1.00                      192,900  $      173,533,000.00  $                                        900.00
Michigan 2 3.40% Legislation  $                   9.65  $       0.20                      147,000  $        32,907,000.00  $                                        220.00
Delaware 2 4.00% Legislation  $                   9.25  $       0.50                        17,200  $        10,811,000.00  $                                        630.00
New York 2 4.00% Legislation  $                 11.80  $       0.70                      411,700  $      399,246,000.00  $                                        970.00
Vermont 1 5.20% Inflation adjustment  $                 10.96  $       0.19                        16,200  $           3,932,000.00  $                                        240.00
Missouri 3 5.40% Ballot measure  $                   9.45  $       0.85                      153,600  $      123,505,000.00  $                                        800.00
Maryland 2 7.60% Legislation  $                 11.00  $       0.90                      204,300  $      216,530,000.00  $                                    1,060.00
Arkansas 3 11.00% Ballot measure  $                 10.00  $       0.75                      119,300  $      113,142,000.00  $                                        950.00
Washington 3 11.60% Ballot measure  $                 13.50  $       1.50                      386,000  $      655,972,000.00  $                                    1,700.00
New Jersey 2 11.70% Legislation  $                 11.00  $       1.00                      460,400  $      480,308,000.00  $                                    1,040.00
Massachusetts 2 12.00% Legislation  $                 12.75  $       0.75                      420,600  $      409,981,000.00  $                                        970.00
Colorado 3 12.10% Ballot measure  $                 12.00  $       0.90                      318,400  $      382,354,000.00  $                                    1,200.00
California 2 16.90% Legislation  $                 13.00  $       1.00                  2,950,200  $  4,376,241,000.00  $                                    1,480.00
Maine 3 16.90% Ballot measure  $                 12.00  $       1.00                      102,900  $      130,250,000.00  $                                    1,270.00
Arizona 3 17.70% Ballot measure  $                 12.00  $       1.00                      511,900  $      653,915,000.00  $                                    1,300.00


Notes: *The New York minimum wage changes take effect on December 31, 2019. Delaware's minimum wage increase took effect on October 1. “Legislation” indicates that the new rate was established by the legislature. “Ballot measure” indicates the new rate was set by a ballot initiative passed by voters. “Inflation adjustment” indicates that the new rate was established by a formula, reflecting the change in prices over the preceding year.

Directly affected workers will see their wages rise because the new minimum wage rate exceeds their current hourly pay. This does not include additional workers who may receive a wage increase through “spillover” effects, as employers adjust overall pay scales.

Estimates for New York reflect changes in the minimum wage applicable to upstate New York ($11.80) and Nassua, Suffolk, and Westchester counties ($13.00). New York City's minimum wage reached $15 at the end of 2018 and there are no further increases scheduled.

Population growth between the data period and January 2020 estimated using state-specific projections for growth in the total population or the population ages 15—69, where available. Nominal wage growth between the data period (2017) and January 2020 estimated using the 3-year average of nominal wage growth of the bottom 20 percent of wage earners in each state from 2015 to 2018.  A full methodology is available in Minimum Wage Simulation Model Technical Methodology.


Source: Economic Policy Institute Minimum Wage Simulation Model using data from the Census Bureau, Bureau of Labor Statistics, and Congressional Budget Office. See Minimum Wage Simulation Model technical methodology [].

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In seven states, the changes are the result of automatic annual inflation adjustments. Alaska, Florida, Minnesota, Montana, Ohio, South Dakota, and Vermont all have provisions in their state minimum wage laws that require the wage be adjusted annually to reflect changes in prices over the preceding year. Doing so ensures that the minimum wage never declines in purchasing power, and workers paid the minimum wage can afford the same amount of goods and services year after year. 10 other states and the District of Columbia have enacted similar automatic adjustment provisions in their minimum wage laws that will begin after their minimum wages reach a higher statutory level in the coming years.

The increases in nine states—California, Delaware, Illinois, Maryland, Massachusetts, Michigan, New Jersey, New Mexico, and New York—are the result of legislation passed by state lawmakers to raise their state’s wage floors. Lawmakers in six of these states—California, Illinois, Maryland, Massachusetts, New Jersey, and New York—enacted legislation that will eventually bring their state minimum wages to $15 an hour. For 2020, minimum wages in these states will range between $11.00 and $13.00.

In six states—Arizona, Arkansas, Colorado, Maine, Missouri, and Washington—the January 1 raises result from ballot measures passed by the state’s voters. In the last several election cycles, voters have increasingly passed higher minimum wages, often in the face of inaction by their state legislatures. In fact, voters in Missouri passed a higher state minimum wage at the ballot box after state lawmakers nullified city minimum wage ordinances that had been enacted by local governments in Kansas City and St. Louis.Read more

Top 1.0% of earners see wages up 157.8% since 1979

Newly available wage data for 2018 show that annual wages for the top 1.0% were nearly flat (up 0.2%) while wages for the bottom 90% rose an above-average 1.4%. Still, the top 1.0% has done far better in the 2009–18 recovery (their wages rose 19.2%) than did those in the bottom 90%, whose wages rose only 6.8%. Over the last four decades since 1979, the top 1.0% saw their wages grow by 157.8% and those in the top 0.1% had wages grow more than twice as fast, up 340.7%. In contrast those in the bottom 90% had annual wages grow by 23.9% from 1979 to 2018. This disparity in wage growth reflects a sharp long-term rise in the share of total wages earned by those in the top 1.0% and 0.1%.

These are the results of EPI’s updated series on wages by earning group, which is developed from published Social Security Administration data and updates the wage series from 1947–2004 originally published by Kopczuk, Saez and Song (2010). These data, unlike the usual source of our other wage analyses (the Current Population Survey) allow us to estimate wage trends for the top 1.0% and top 0.1% of earners, as well as those for the bottom 90% and other categories among the top 10% of earners. These data are not top-coded, meaning the underlying earnings reported are actual earnings and not “capped” or “top-coded” for confidentiality.

Figure A

Cumulative percent change in real annual wages, by wage group, 1979–2018

Year Bottom 90% 90th–95th 95th–99th Top 1%
1979 0.0% 0.0% 0.0% 0.0%
1980 -2.2% -1.3% -0.2% 3.4%
1981 -2.6% -1.1% -0.1% 3.1%
1982 -3.9% -0.9% 2.2% 9.5%
1983 -3.7% 0.7% 3.6% 13.6%
1984 -1.8% 2.5% 6.0% 20.7%
1985 -1.0% 4.0% 8.1% 23.0%
1986 1.1% 6.4% 12.5% 32.6%
1987 2.1% 7.4% 15.0% 53.5%
1988 2.2% 8.2% 18.4% 68.7%
1989 1.8% 8.1% 18.2% 63.3%
1990 1.1% 7.1% 16.5% 64.8%
1991 0.0% 6.9% 15.5% 53.6%
1992 1.5% 9.0% 19.2% 74.3%
1993 0.9% 9.2% 20.6% 67.9%
1994 2.0% 11.2% 21.0% 63.4%
1995 2.8% 12.2% 24.1% 70.2%
1996 4.1% 13.6% 27.0% 79.0%
1997 7.0% 16.9% 32.3% 100.6%
1998 11.0% 21.3% 38.2% 113.1%
1999 13.2% 25.0% 42.9% 129.7%
2000 15.3% 26.8% 48.0% 144.8%
2001 15.7% 29.0% 46.4% 130.4%
2002 15.6% 29.0% 43.2% 109.3%
2003 15.7% 30.3% 44.9% 113.9%
2004 15.6% 30.8% 47.1% 127.2%
2005 15.0% 30.8% 48.6% 135.3%
2006 15.7% 32.5% 52.1% 143.4%
2007 16.6625450273242% 34.0650819079098% 55.3586221137521% 156.174314731946%
2008 16.0% 34.2% 53.8% 137.5%
2009 16.0% 35.3% 53.5% 116.2%
2010 15.2% 35.7% 55.7% 130.8%
2011 14.5% 36.2% 56.9% 134.0%
2012 14.6% 36.3% 58.3% 148.3%
2013 15.1% 37.1% 59.4% 137.5%
2014 16.6% 38.7% 62.3% 149.0%
2015 20.5% 43.1% 67.9% 156.2%
2016 21.0% 43.5% 68.1% 148.1%
2017 22.2% 44.2% 69.3% 157.3%
2018 23.9% 45.7% 71.3% 157.8%
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Source: EPI analysis of Kopczuk, Saez, and Song (2010, Table A3) and Social Security Administration wage statistics

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As Figure A shows, the top 1.0% of earners are now paid 157.8% more than they were in 1979. Even more impressive is that those in the top 0.1% had more than double that wage growth, up 340.7% since 1979 (Table 1). In contrast, wages for the bottom 90% only grew 23.9% in that time. Since the Great Recession, the bottom 90%, in contrast, experienced very modest wage growth, with annual wages—reflecting growing annual hours as well as higher hourly wages—up just 6.8% from 2009 to 2018. In contrast, the wages of the top 0.1% grew 19.2% during those nine years.Read more

Three Republican-appointed white men are now deciding whether you have rights on the job

Yesterday marked the end of Democratic National Labor Relations Board (NLRB) Member Lauren McFerran’s term. McFerran ended her term offering the lone dissenting voice in the Trump board’s efforts to slow down union elections to give employers more time to campaign against the union, give employers the ability to make unilateral changes without bargaining with their workers’ union, weaken remedies when employers break the law, and more.

McFerran is the former Chief Labor Counsel for the Senate Committee on Health, Education, Labor, and Pensions (HELP Committee) and is widely respected by both labor and management. Her departure leaves a second open seat on the board that the Trump administration is tasked with filling. However, the Trump administration has not yet acted to nominate McFerran for a second term, nor has it nominated a Democrat to fill the other vacant Democratic seat that has been open since August 2018. The failure of the Trump administration to act is not for lack of a qualified nominee with widespread support. Former deputy general counsel and longtime NLRB career attorney Jennifer Abruzzo has reportedly been under consideration.

As a result, the NLRB has only Republican appointees for the first time in its 85-year history, and the three Republicans are all white men—two lawyers who represented corporations before coming to the NLRB, and one former Republican congressional staffer. There is no Democratic appointee to offer alternative views on workers’ rights under the National Labor Relations Act (NLRA), or to issue dissenting opinions when the Trump board goes off track. And there are no women or people of color participating in these decisions, even though women and people of color make up the majority of workers.

EPI previously reported on the unprecedented rollback of workers’ rights happening at the hands of these three NLRB appointees. The U.S. Chamber of Commerce—the nation’s largest business lobby—is 10 for 10 in winning action on its top 10 “wish list” for the Trump board. Unfortunately, things are likely to get worse, not better. With no Democratic appointee there to provide an alternative or dissenting viewpoint on the Trump board’s actions, we are likely to see a continued rollback of workers’ rights under this bedrock statute that, after all, is supposed to protect workers’ rights.

On its second anniversary, the TCJA has cut taxes for corporations, but nothing has trickled down

It’s been two years since Republicans passed their Tax Cuts and Jobs Act (TCJA), enough time for its effects to have come into full view. As we lay out in a report released today with the Center for Popular Democracy, the economic data that has come in since its passage has not been kind to the argument of the TCJA’s proponents.

The centerpiece of the TCJA was a large cut in the corporate tax rate. Supporters of the TCJA made the supply-side argument that higher corporate profits would juice investment, which would eventually trickle down to faster productivity growth that would mechanically boost workers’ wages. The theory behind this relied on a long chain of economic events occurring, and it was clear from the very beginning that there was little reason to trust a single link in the chain.

Despite some disingenuous and cynical arguments surrounding wages and bonuses, if the TCJA is to work as its supporters claimed, then the first thing we would see is a substantial uptick in investment. After two years, there is no evidence of any investment boom. Instead, investment growth followed along its pre-TCJA trend for a couple of quarters and then cratered. Year-over-year investment growth has sunk from 5.4% at the time of the TCJA’s passage to just 1.3% in the most recent quarter.


Figure A

More evidence the Trump tax cuts aren’t working as advertised: Change in real, nonresidential fixed investment shows no investment boom

Years Real, nonresidential fixed investment
2003-Q1 -2.3%
2003-Q2 1.6%
2003-Q3 4.0%
2003-Q4 6.8%
2004-Q1 5.2%
2004-Q2 4.9%
2004-Q3 5.7%
2004-Q4 6.5%
2005-Q1 9.2%
2005-Q2 8.2%
2005-Q3 7.4%
2005-Q4 6.1%
2006-Q1 8.0%
2006-Q2 8.2%
2006-Q3 7.8%
2006-Q4 8.1%
2007-Q1 6.5%
2007-Q2 7.0%
2007-Q3 6.8%
2007-Q4 7.3%
2008-Q1 5.8%
2008-Q2 3.8%
2008-Q3 0.2%
2008-Q4 -7.0%
2009-Q1 -14.4%
2009-Q2 -17.1%
2009-Q3 -16.1%
2009-Q4 -10.3%
2010-Q1 -2.3%
2010-Q2 4.1%
2010-Q3 7.5%
2010-Q4 8.9%
2011-Q1 8.0%
2011-Q2 7.3%
2011-Q3 9.3%
2011-Q4 10.0%
2012-Q1 12.9%
2012-Q2 12.6%
2012-Q3 7.2%
2012-Q4 5.6%
2013-Q1 4.3%
2013-Q2 2.3%
2013-Q3 4.4%
2013-Q4 5.4%
2014-Q1 5.5%
2014-Q2 8.1%
2014-Q3 8.4%
2014-Q4 6.9%
2015-Q1 5.3%
2015-Q2 3.0%
2015-Q3 1.3%
2015-Q4 -0.1%
2016-Q1 -0.3%
2016-Q2 -0.1%
2016-Q3 0.7%
2016-Q4 1.8%
2017-Q1 3.6%
2017-Q2 3.6%
2017-Q3 2.9%
2017-Q4 4.8%
2018-Q1 6.4%
2018-Q2 7.4%
2018-Q3 7.5%
2018-Q4 6.5%
2019-Q1 4.5%
2019-Q2 2.9%
2019-Q3 2.7%
2019-Q4 1.4%
2020-Q1 -1.3%
2020-Q2 -8.9%


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Note: Chart shows year-over-year change in real, nonresidential fixed investment from 2003Q1 to 2020Q2.

Source: Adapted from Figure A in Hunter Blair, "The Tax Cuts and Jobs Act Isn’t Working and There’s No Reason to Think That Will Change," Working Economics (Economic Policy Institute blog), October 31, 2019.

Source: Adapted from Figure A in Hunter Blair, The Tax Cuts and Jobs Act Isn’t Working and There’s No Reason to Think That Will Change, Economic Policy Institute, October 2019. Data are from EPI analysis of data in Table 1.1.6 from the National Income and Product Accounts (NIPA) from the Bureau of Economic Analysis (BEA).

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To be blunt, this means that the $4,000 annual boost to average incomes that the White House Council of Economic Advisers promised to working families because of the TCJA did not—and will not—happen. While it’s been worse-than-advertised for working families, the TCJA has been an even bigger boon to large corporations and rich households. In fact, corporate tax revenues have come in even lower than the Congressional Budget Office originally projected, allowing corporations and their shareholders to make out like bandits.


The Farm Workforce Modernization Act allows employers to hire migrant farmworkers with H-2A temporary visas for year-round jobs: Impacts are unknown and other wage-setting formulas should be considered

My last blog post described in detail how the Farm Workforce Modernization Act (FWMA)—a bipartisan piece of legislation in the House of Representatives that would legalize unauthorized immigrant farmworkers, make major reforms and expansions to the H-2A temporary work visa program, and require farm employers to use E-Verify—included an updated H-2A wage rule that could lower wages for migrant farmworkers. I also called on the House of Representatives to further assess the impacts of that the FWMA could have on the farm labor market by holding public hearings in the relevant committees of jurisdiction with expert testimony before voting on the bill. One of the other major provisions in the bill that also desperately needs a closer look is the FWMA’s proposal to allow H-2A jobs—which currently must only offer temporary or seasonal work—to become eligible for year-round agricultural occupations.

A look at annual average employment in in the Bureau of Labor Statistics’ (BLS) Quarterly Census of Employment and Wages (QCEW) data set shows there were just over 419,000 year-round jobs in agriculture, mostly in greenhouse and nursery production (155,000) and animal production and aquaculture (264,000), which represent the major year-round occupational categories in agriculture. Farm employers have been clamoring for years for Congress to allow them to hire temporary H-2A workers for many of these 419,000 permanent, year-round jobs, especially on dairies. Since they haven’t had the requisite support to pass legislation that would accomplish this, members of Congress have attempted multiple times to circumvent the regular legislative process by pushing to make the change through legislative riders on annual omnibus appropriations bills.

The FWMA contains provisions to make H-2A year round: For the first three years after enactment, 20,000 three-year H-2A visas per year would be made available for year-round agricultural jobs—meaning 60,000 after three years—with half allocated for the dairy industry. Although the maximum allowed number of year-round H-2A jobs seems relatively small at first, the number could rise rapidly—in years four through 10, the cap could increase by 12.5% per year—and after the tenth year, the cap could be eliminated.

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Looking for evidence of wage-led productivity growth: EPI Macroeconomics Newsletter

While unemployment rates are sitting at their lowest levels in decades, wage growth (adjusted for inflation) remains slower than in previous periods of comparably low unemployment. Part of the reason why wage growth remains subdued is that productivity growth has been generally weak since the Great Recession ended. This week’s newsletter provides some guidance on a key question for macroeconomic policymakers like the Federal Reserve: do we need to take this slow rate of productivity growth as a given, or can we nudge productivity upward by allowing unemployment to sink even lower for longer?

Specifically, I address the widespread speculation about the possibility of “wage-led productivity growth”—the hypothesis that tight labor markets that push up labor costs lead firms to invest more in labor-saving equipment and practices. Some suggestive evidence of this wage-led productivity growth has been shown in patterns of macroeconomic data. This newsletter provides some more suggestive evidence from patterns of productivity growth broadly but also across a set of very detailed industries when the labor share of industry income rises and falls. Here are the key findings:

  • At the aggregate level, a rise in the labor share of corporate-sector income is associated with a small but significant rise in the pace of average productivity growth over the subsequent two years.
  • At detailed industrial levels (looking at 124 industries mostly in manufacturing), this relationship is even stronger: a 1 percentage-point rise in the labor share of industry income is associated with a 0.1 percentage-point increase in the average pace of productivity growth over the subsequent two years.
  • These relationships between labor share of income and productivity growth are consistent with a scenario in which firms try harder to make labor-saving investments and organizational changes when labor becomes scarcer and the need to pay higher wages threatens to pinch profits. If the labor share of corporate-sector income rose from today’s 78% to the 82% that characterized the tight labor markets of 2000, this would imply a boost to productivity of roughly 0.4 percentage points—an amount that would cut almost in half the gap between the productivity growth in recent years and the productivity growth of the late 1990s.

These results are obviously suggestive, not dispositive. The key challenge to testing the causal link that runs from higher pressure labor markets to increased effort by firms to find and adopt labor-saving practices and investments is finding truly exogenous changes in labor market tightness. This search for exogenous changes in the cost pressures firms face should be a prime preoccupation for macroeconomic policymakers in the near future. In the rest of this newsletter, we’ll describe our findings in a bit more detail and discuss their potential implications.Read more

House vote imminent on the bipartisan Farm Workforce Modernization Act—which would lower wages for migrant farmworkers: Hearings and assessments of impacts still needed

On October 30, Representatives Zoe Lofgren (D-Cal.) and Dan Newhouse (R-Wash.), along with dozens of other bipartisan cosponsors, introduced the Farm Workforce Modernization Act (FWMA), a compromise bill negotiated between representatives of agribusiness, farmworker advocates, and unions that would legalize unauthorized immigrant farmworkers, make major reforms and expansions to the H-2A temporary work visa program, and require farm employers to use E-Verify, an electronic employment verification system, to verify whether newly hired workers are authorized to be employed in the United States. The FWMA could legalize hundreds of thousands of unauthorized farmworkers while restructuring the landscape for farm employment. The House of Representatives looks set to vote on the FWMA as early as this week.

The FWMA would solve an important farm labor issue—perhaps the most important issue—legalizing unauthorized farm workers and their families. But it would also change the rules of a problematic temporary work visa program, H-2A, where migrant workers are indentured to their employers, often abused and exploited in the fields, paid low wages and robbed of their wages, sometimes live in substandard housing, and have at times been victims of human trafficking.

The H-2A rule changes in the FWMA would expand the H-2A program to year-round occupations, prohibit wage growth that might otherwise occur in the free market, and codify into law most of a new H-2A wage regulation that was recently put into place by the Trump administration—which is geared towards lowering the wages of most migrant workers in the H-2A program—and which many worker advocates opposed publicly. These provisions should raise concerns about the impact of the FWMA on the H-2A program and the future farm labor force but have not yet been explored in any congressional hearing focusing on the FWMA or through the publication of any government reports, or even credible research by non-governmental organizations.

Considering the large and emerging role of H-2A in farm labor, perhaps the single biggest question about the FWMA from a labor standards perspective is: what will happen to H-2A wage rates under the bill? The FWMA updates and codifies a new H-2A wage rule—known as the Adverse Effect Wage Rate or AEWR. In the absence of any existing credible analysis of the FWMA, I offer some comments below outlining my concerns with some of the H-2A wage provisions in the bill. In order to understand its possible impact however, a brief discussion of the current AEWR and the recently proposed Trump H-2A wage rule is needed because the FWMA mostly incorporates the proposed Trump H-2A wage rule.Read more

What to watch on jobs day: Concerning slowdown in job growth and weakening wage growth

As we approach the end of 2019, it’s important to keep the long-run perspective on economic health in mind, but also investigate new trends that have emerged in the last several months that need to be closely monitored. Two concerning trends are the slowdown in nominal wage growth as well as the slowdown in payroll employment growth.

Let’s start with payroll employment growth. On its face, the pace of job growth in 2019 hasn’t been particularly troubling. The economy continues to move in the right direction—though at a slightly slower pace than the last couple of years—soaking up sidelined workers as the unemployment rate remains at historically low levels. But, when you factor in the preliminary benchmark revisions—which showed a half million fewer jobs created between April 2018 and March 2019—the data indicate weaker employment growth this year than originally reported. The final benchmark revisions won’t be released until the January 2020 employment numbers are released in February, but the preliminary release is troubling. And large downward revisions are sometimes associated with early signs of a recession because it means the Bureau of Labor Statistics (BLS)’s model for predicting the births and deaths of firms is off, often accompanied by a turning point in the economy. These revisions don’t tell us a recession is necessary on the immediate horizon, but they are certainly something to keep in mind as the year winds down.

While the topline numbers are important to track, it’s also important to look under the hood. Manufacturing employment, for instance, has exhibited a notable slowdown in employment growth this year. The figure below shows the month-to-month change in manufacturing employment over the last two years with two important modifications. First, I’m using a three-month moving average to smooth the volatility in the series. Second, I’m removing the effect of the 46,000 striking GM workers that depressed the October numbers.

Figure A

Manufacturing employment growth tapers off: Manufacturing monthly employment growth, in thousands, three month moving average, October 2017–October 2019

Date Three month moving average
2017-10-01 23.3
2017-11-01 19.3
2017-12-01 26.0
2018-01-01 24.7
2018-02-01 25.0
2018-03-01 22.3
2018-04-01 24.3
2018-05-01 21.0
2018-06-01 25.0
2018-07-01 24.3
2018-08-01 20.0
2018-09-01 15.3
2018-10-01 18.3
2018-11-01 24.7
2018-12-01 25.3
2019-01-01 21.3
2019-02-01 15.0
2019-03-01 7.3
2019-04-01 2.7
2019-05-01 0.7
2019-06-01 5.0
2019-07-01 5.3
2019-08-01 5.3
2019-09-01 0.3
2019-10-01 2.3
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Note: Adjusted for striking workers:

Source: EPI analysis of Bureau of Labor Statistics' Current Employment Statistics public data series

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This obvious slowdown in manufacturing employment is troubling in itself, but the reason to look more closely at manufacturing isn’t simply because it’s a significant share of the economy (10% of private-sector employment) and historically has been a place for decent non-college jobs—largely due to the relatively high levels of unionization in that sector in the past. Manufacturing is one of the most cyclical sectors, bested only by construction (among major industries) in its prediction of upcoming economic slowdowns. And, construction isn’t looking too hot either. Average monthly construction job growth so far in 2019 is about half as fast as it was in 2018. This does not mean we are necessarily headed toward a recession, but this is certainly an indicator to keep an eye on in coming months.

The Federal Reserve is doing the right thing by cutting the federal funds rate this year, helping to keep the economy from stalling and for workers to hopefully see stronger wage growth. The figure below shows year-over-year nominal wage growth over the last several years. After rising to 3.4% in February 2019, the rate of growth has been tapering off. Wage growth is now back down to 3.0% over the year, significantly lower than levels consistent with inflation targets and productivity potential. This is slower than expected given that the unemployment rate has been at or below 4.0% for 20 months in a row. All else equal, the relative scarcity of workers should be driving up wages as employers have to compete to attract and retain the workers they want.Read more

OECD highlights temporary labor migration: Almost as many guestworkers as permanent immigrants

The 2019 edition of the Organization for Economic Cooperation and Development’s (OECD) annual International Migration Outlook report included a new chapter, “Capturing the ephemeral: How much labour do temporary migrants contribute in OECD countries?” It’s a good question, and one that had not yet been answered.

There is a dearth of data on temporary labor migration programs (TLMP) or schemes—aka guestworker programs, where migrants are employed temporarily in a country outside their own—and it hinders the ability of policymakers to make informed decisions. The OECD declared TLMPs are “a core concern in the public debate across OECD countries” but warns that their impacts are “understudied.” This information deficit exists despite the fact that TLMPs are controversial and make up an increasing share of labor migration, and in the United States in particular have been at the center of debates about how to reform the U.S. immigration system.

Why are TLMPs controversial and at the center of public debates? First, their size. One of OECD’s key findings is that the 4.9 million temporary labor migrants that entered OECD countries in 2017 is “almost as many… as permanent migrants in all categories combined.” Ignoring temporary labor migration in the OECD means ignoring nearly half of all migration.

Many employers want larger TLMPs and fewer regulations governing their use. But there are high economic, social, and psychological costs for the migrant workers who participate in temporary programs, including frequent human rights violations suffered in both countries of origin and destination. Further, some abuses that are technically legal are facilitated by the legal frameworks of TLMPs. In most TLMPs, employers control the visa status of their temporary migrant employees or “guestworkers”—which means getting fired makes them deportable. In part, that’s why TLMPs have been called things like “The New American Slavery.”

TLMPs raise technical issues that are not easily resolved. For example: Which industries are permitted to hire migrant workers? How will appropriate numerical limits in TLMPs be determined? What rights will migrants have once they’ve been admitted into receiving country labor markets? Can they bring their families? Will migrants be tied to one employer or be allowed to change jobs and employers? How will receiving country governments ensure that migrants return after their employment contracts end, or will migrants be allowed to become permanent residents? Do citizens in receiving countries have first preference for jobs that employers want to fill with migrants? Will migrants be paid the same wages as similarly situated local workers?Read more

Workers will lose more than $700 million annually under proposed DOL rule

In October, the Trump administration published a proposed rule regarding tips which, if finalized, will cost workers more than $700 million annually. It is yet another example of the Trump administration using the fine print of a proposal to attempt to push through a change that will transfer large amounts of money from workers to their employers. We also find that as employers ask tipped workers to do more nontipped work as a result of this rule, employment in nontipped food service occupations will decline by 5.3% and employment in tipped occupations will increase by 12.2%, resulting in 243,000 jobs shifting from being nontipped to being tipped. Given that back-of-the-house, nontipped jobs in restaurants are more likely to be held by people of color while tipped occupations are more likely to be held by white workers, this could reduce job opportunities for people of color.

The background: Employers are not allowed to pocket workers’ tips—tips must remain with workers. But employers can legally “capture” some of workers’ tips by paying tipped workers less in base wages than their other workers. For example, the federal minimum wage is $7.25 an hour, but employers can pay tipped workers a “tipped minimum wage” of $2.13 an hour as long as employees’ base wage and the tips they receive over the course of a week are the equivalent of at least $7.25 per hour. All but eight states have a subminimum wage for tipped workers.

In a system like this, the more nontipped work that is done by tipped workers earning the subminimum wage, the more employers benefit. This is best illustrated with a simple example. Say a restaurant has two workers, one doing tipped work and one doing nontipped work, who both work 40 hours a week. The tipped worker is paid $2.50 an hour in base wages, but gets $10 an hour in tips on average, for a total of $12.50 an hour in total earnings. The nontipped worker is paid $7.50 an hour. In this scenario, the restaurant pays their workers a total of ($2.50 + $7.50) * 40 = $400 per week, and the workers take home a total of ($12.50 + $7.50) * 40 = $800 (with $400 of that coming from tips).

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Analyses claiming that taxes on millionaires and billionaires will slow economic growth are fundamentally flawed

In recent weeks, a number of policy analyses of progressive economic policies—a surtax on high-incomes, a wealth tax, and Social Security expansion—have claimed these policies would damage economic growth. Policymakers should give these analyses very little weight in debates about these issues, for a number of reasons.

First, and most important, is the fact that all of these analyses are grounded in an economic view of the world that sees growth as constrained by the economy’s productive capacity (or the supply side of the economy) and not by the spending of households, businesses and government (the economy’s demand side). These estimates have other problems too—they are not even particularly convincing supply-side estimates and even if the economy’s growth really was constrained by supply, these estimates would still be misleading about the effects of these policies on welfare. But the biggest reason why policymakers should give these analyses zero weight is because they assume that growth is almost never demand-constrained.

Before the Great Recession, the assumption that growth was nearly always supply constrained was almost universally held by economists and macroeconomic policymakers. It was recognized that demand (or aggregate spending) could occasionally be too weak to fully employ the economy’s productive capacity and hence cause rising unemployment, but it was generally thought that such periods were rare and would end quickly after the Federal Reserve sensibly cut interest rates. Because shortfalls of demand relative to supply were rare and short and easy to fix, the reasoning went, any real constraint on the economy’s growth over the long-run must be the pace of growth of supply. Growth in supply is generally driven by growth in the quality of the workforce, the productive stock of plants, equipment and research, and growth in technological progress, which together lead to growing productivity—or the amount of income or output generated in an average hour of work.

The assumption that supply constraints are much more likely to bind overall growth than demand constraints drove almost all macroeconomic policymaking in the decades before the Great Recession. For example, the Federal Reserve for decades feared lower unemployment far more than lower inflation. Lower unemployment was a signal that demand was rising relative to supply, and if one thinks growth was generally supply-constrained, this meant that demand growth would quickly outstrip supply growth and lead to rising inflation. Lower inflation, conversely, meant that supply growth was outpacing demand growth—but that was always a temporary and easy-to-fix condition. The decades-long bipartisan overreaction to rising federal budget deficits is also a byproduct of assuming the economy’s growth is supply constrained. Deficits boost demand growth. If one assumes that demand is generally marching in lock-step with supply, then larger deficits that boost demand imply that supply constraints will soon bind and cause inflation (or interest rate increases). Smaller deficits, conversely, reduce demand growth. But if the danger of demand growth slowing too much is low and easy-to-fix, then that’s not a problem.Read more


Bipartisan Senate budget bill could damage the economy during recessions

Last week, the Senate Budget Committee passed a bipartisan set of budget reforms out of committee. While they include some important steps forward, such as effectively eliminating the archaic debt limit, their centerpiece is a deeply damaging provision that, if passed into law, would make recessions far more damaging by forcing Congress to consider steep cuts just when the economy would be most hurt by them.

Under the reforms, instead of passing a budget every year, Congress would be on a two-year budget cycle. This is not totally objectionable. The damaging provisions are the “special reconciliation instructions“ provided in the second year of this budget cycle. In the first year, the Congressional Budget Office (CBO) would project the debt-to-GDP ratio from the budget. In the second year, CBO would report on whether the federal government is meeting those debt-to-GDP targets, and if not, trigger the special reconciliation instructions. These instructions would require the Senate Budget Committee to recommend an amount of deficit reduction in response to missing the debt-to-GDP targets and create a fast track for passing those deficit reductions.

Others have rightly focused on the extent to which this could line up budget cuts to programs that U.S. families rely on, like Medicaid, Medicare, and the Affordable Care Act. For example, revenues have come in even lower than CBO expected following the Republican Tax Cuts and Jobs Act (TCJA). If this reform bill were in place, Congress would be expected to respond to these larger-than-expected tax cuts for the rich with deficit reduction. This has been in the Republican leadership playbook all along, as they have made it abundantly clear that cuts to vital programs for low- and moderate-income families are the intended next step after passing regressive tax cuts for the rich and corporations. Read more

Where do the Democratic presidential candidates stand on migrant workers and labor migration?

The Trump administration’s harsh enforcement tactics and human rights violations at the border have rightly gotten most of the attention in press coverage about immigration lately, and enforcement has been the basis for the very few questions that Democratic presidential candidates have been asked about immigration so far in the primary debates. What’s gotten less attention and no discussion after five Democratic primary debates are the 17% of workers in the U.S. labor force who are foreign-born, including the 5% of the workforce who are vulnerable to wage theft and other abuses because they lack an immigration status, or the 1% who have an immigration status that is mostly owned and controlled by their employer, by virtue of being employed through U.S. temporary work visa programs.

Only a miniscule number of mentions have been made in the candidates’ published immigration plans about the intersection of immigration and the labor market, and there’s been no discussion on the debate stages about what the Democratic candidates would propose to reform future U.S. labor migration—i.e., migration for the purpose of work. In the past this has sometimes been referred to as “future flows” of migrants: the pathways available to persons from abroad who want to come to the United States to be employed, or avenues for employers that wish to hire migrants, either through temporary work visa programs or as permanent immigrants.

The fifth Democratic Presidential Primary Debate on November 20 was no different than the past four: virtually no discussion of immigration in general—with only one narrow question about the border wall—and no discussion at all about labor migration. Will this change during the sixth debate in December? I hope so, because a positive vision of U.S. labor migration that is fair to immigrants and Americans and fosters solidarity—rather than a corporate-driven race to the bottom on wages and labor standards, which employer groups often push for—is something worth talking about and an argument that progressives can win.

Migrants in the United States are living and working during a time when the president in office clearly doesn’t value their contributions, but nevertheless benefits economically from their labor: President Trump has hired undocumented workers at his companies—some of whom have alleged they were exploited—as well as guestworkers with temporary visas in programs he has expanded, where migrant workers are tied to employers and often underpaid—all while demonizing and scapegoating migrants as criminals and rapists. For the most part, President Trump has gotten a pass on his blatant hypocrisy.

By failing to bring up labor migration issues, the Democratic presidential candidates have not managed to expose Trump’s glaring weakness on the issue. While a significant share of the blame for not discussing the topic at the debates falls at the feet of the moderators, the candidates are making a mistake by not mentioning the contributions that migrant workers make or the challenges they face in the workplace. The candidates also haven’t offered many details about how they would re-make the immigration system so that future migrant workers can enter the U.S. labor market with equal rights and fair pay in their plans for immigration that are published on their campaign websites. A quick summary of what’s included in the immigration plans of a few of the major candidates makes this abundantly clear.Read more

Latina workers have to work nearly 11 months into 2019 to be paid the same as white non-Hispanic men in 2018

November 20 is Latina Equal Pay Day, the day that marks how long into 2019 a Latina would have to work in order to be paid the same wages her white male counterpart was paid last year. That’s nearly 11 months longer, meaning that Latina workers had to work all of 2018 and then this far—to November 20!—into 2019 to get paid the same as white non-Hispanic men did in 2018. Put another way, a Latina would have to be in the workforce for 57 years to earn what a non-Hispanic white man would earn after 30 years in the workforce. Unfortunately, Hispanic women are subject to a double pay gap—an ethnic pay gap and a gender pay gap. And, this pay gap widened over previous year when it “only” took until November 1 for Hispanic women catch up to non-Hispanic men.

The date November 20 is based on the finding that Hispanic women workers are paid 53 cents on the white non-Hispanic male dollar, using the 2017 March Current Population Survey for median annual earnings for full-time, year-round workers. We get similar results when we look at average hourly wages for all workers (not just full-time workers) using the monthly Current Population Survey Outgoing Rotation Group for 2018—which show Hispanic women workers being paid 56 cents on the white male dollar.Read more

Welcome developments on limiting noncompete agreements: A growing consensus leads to new state laws, a possible FTC rule making, and a strong bipartisan Senate bill

There is a growing bipartisan consensus that noncompete agreements harm workers and the economy. This bipartisanship scarcely seemed possible back in 2015 when we were government lawyers coordinating investigations by the Offices of the Illinois and New York Attorneys General into Jimmy John’s use of noncompete agreements for sandwich makers and delivery drivers. But earlier this month, in what seems like the first bipartisan federal effort in far too long, Senators Todd Young (R-Ind.) and Chris Murphy (D-Conn.) introduced a bipartisan bill that would effectively stop the abuse of noncompete agreements. This builds on a year in which six state legislatures also passed significant noncompete reforms.

The growing use of noncompete agreements

Employer use of noncompete agreements has mushroomed in recent years. These agreements prevent people from working for their former employer’s competitors, and they were once used sparingly to prevent, for example, executives with trade secrets or confidential business information from sharing them with new employers. Now, they’re often used indiscriminately to chill job mobility for employees with no access to such information. A 2015 study found that 40% of Americans have had a noncompete agreement at some point in their career. As lawyers, we’ve worked on cases involving noncompete agreements used for janitors, receptionists, customer service workers, fledgling journalists, even employees of a day care center.

Why are noncompete agreements so bad? They fly in the face of our fundamental American belief that anyone can work hard, gain skills, and move on to a better opportunity to build a better life. Noncompete agreements can trap workers in jobs they want to leave—whether because of sexual harassment or other poor working conditions, or even just a bad boss. They limit the talent pool, preventing employers from hiring the best worker for the job. Noncompete agreements can also stifle economic dynamism, blocking people from starting their own businesses.

Workers’ inability to leave their jobs because of noncompete agreements and similar limitations has also contributed to the wage stagnation of recent decades. Two studies released just last month found that noncompete agreements adversely affected wages and job mobility. This makes sense, given that the agreements erode the leverage that workers typically get from the threat of leaving their jobs to work elsewhere. That threat is now empty for millions of Americans subject to these provisions, showing that noncompete agreements aren’t really about trade secrets anymore. They’re about limiting workers’ bargaining power.Read more

The Tax Cuts and Jobs Act isn’t working and there’s no reason to think that will change

Proponents of the Tax Cuts and Jobs Act (TCJA) made bold claims about the effects that the TCJA’s corporate rate cuts would have on the paychecks of U.S. households. The economic theory rests on corporate rate cuts bringing forth enough additional savings to finance new investment spending. Specifically, higher after-tax corporate profits are passed down to shareholders in the form of higher dividends. These higher dividends attract more savings from abroad and incentivize U.S. households to save more. These extra savings finance new investments in plants and equipment, which boost the productivity of workers, and eventually that increased productivity boosts workers’ wages.

We pointed out at the time that in practice, this theory wasn’t likely to hold. After the TCJA passed, we indicated that by increasing deficits, the specifics of the TCJA didn’t even conform to the economic theory that was supposed to support it.

But that wasn’t enough to stop the TCJA’s proponents from making disingenuous arguments about the effects it was having on the economy. Proponents pointed to corporate claims that they were giving out bonuses or raising wages in the wake of the TCJA. The economic theory above shows clearly how this was nothing but a corporate PR ploy. Even in theory, it takes time for corporate profits to trickle down into worker wages, and we weren’t the only ones pointing this out. Unsurprisingly, data since then show those bonuses didn’t materialize for workers.Read more

What to Watch on Jobs Day: Anticipated distortions to payroll employment and wage growth

The uneasy question on everyone’s lips these days seems to be about when the next recession is coming. Ironically, every month that gets added to the longest economic recovery in modern history brings increasing scrutiny to even the slightest sign of a downturn. As we turn our attention to the Bureau of Labor Statistics (BLS) October Employment Situation Report this week, two of those signs—a drop in payroll employment and a slowdown in nominal wage growth—are deserving of deeper exploration.

First, we expect some noise in the October payroll estimates due to two temporary, but fully anticipated and measurable effects. According to the BLS CES Strike Report, October payroll estimates will be reduced by 46,000 because of the General Motors (GM) strike, which started in mid-September 2019 and ended last Friday. What that means, in practical terms, is that private sector payroll employment for the month of October, in the absence of the GM strike, was actually 46,000 higher than what will be reported. Another event that could have some effect on the number of jobs added in October will be temporary hiring for the Decennial Census, which could potentially inflate the number of public sector jobs.

While the October jobs report may not be the most straightforward indicator of current job growth patterns, in August BLS reported a major downward revision in the number of jobs added over the past year. Specifically, the release of the preliminary estimate of its benchmark revision to payroll employment revealed that there were a half million fewer jobs created between April 2018 and March 2019 than was originally reported. Given weaker private sector employment growth in September relative to the prior 3- to 6-month averages, we will be watching for whether October employment growth, net of the effects of the GM strike and Census hiring, is stronger or weaker than recent trends.Read more

Wage growth targets are good economics—if you get the details right: EPI Macroeconomics Newsletter

Josh Bivens, director of research at EPI

Earlier this month, Olivier Blanchard—the former chief economist at the International Monetary Fund and an influential figure in macroeconomics—suggested that the Federal Reserve should consider targeting inflation in nominal wages rather than (or in addition to) inflation in prices. I was predictably intrigued by this: I proposed a nominal wage inflation target for the Fed a few years back.

This edition of the newsletter quickly sketches out the logic of a nominal wage inflation target to guide Fed decision-making on interest rates, and it highlights one particularly important detail: the assumed rate of productivity growth used to specify the target. If the rate of productivity growth is endogenous to the degree of labor market slack (as some evidence indicates), then using real-time estimates of productivity growth as an input into the wage target could threaten to lock in the damage to wage growth done by too-slack labor markets.

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A little-known agency that is supposed to protect workers is instead eroding workers’ basic labor rights

Donald Trump ran for president promising to uplift workers. But his actions have done the exact opposite.

According to a new EPI report, Trump appointees on the board of a small, independent agency called the National Labor Relations Board (NLRB)—and the NLRB’s Trump-appointed general counsel (GC)—are working hard to undermine workers’ rights to join together in collective action to improve pay and working conditions.

“Scabby the Rat,” Chad Laird, licensed under CC BY-NC-SA 2.0

As authors Celine McNicholas, Margaret Poydock, and Lynn Rhinehart warn, Trump’s appointees have ticked off one by one the 10 items on a U.S. Chamber of Commerce hit list of NLRB policies to overturn. And they’re not done yet: The NLRB plans to go after more worker protections in the months ahead.

Under the National Labor Relations Act (NLRA), most nonsupervisory private-sector workers have the right to join together in collective action—whether that is through forming a union or some other means—to negotiate with employers about the terms and conditions of their employment. The NLRB was established to safeguard those rights by investigating and prosecuting violations of the law.

Instead, the three Trump appointees to the agency’s board and the agency’s Trump-appointed GC are systematically rolling back workers’ rights through a flurry of employer-friendly case decisions, rulemakings, and guidance memos. At the same time, the agency has downsized by 10 percent of its staff: The ratio of covered workers to NLRB staff is now roughly 96,000-to-1, up from 65,000-to-1 in 2011.

Here, in general terms, are just a few of the things the Trump NLRB is doing (those of you who know your way around labor law can go directly to the report):Read more