Ongoing joblessness: A national catastrophe for African American and Latino workers
As my colleague Heidi Shierholz has noted, the recent “hold steady” jobs report represents an ongoing disaster for all workers. But historically, and since the Great Recession, unemployment has inflicted significantly more pain on black and Hispanic workers. EPI recently released five reports on unemployment through the recession that reveal the depth of suffering among black and Hispanic workers in states with large minority populations, focusing particularly on black and Hispanic unemployment in Michigan, Mississippi, New Mexico, North Carolina, and Texas. Coupled with historic barriers to employment for people of color, the economic collapse of the recession and painfully slow recovery have taken a much greater toll on African Americans and Hispanics than whites.
The figure below shows the significant disparities in black-white and Hispanic-white unemployment in the U.S. over the last 34 years. African American unemployment rates have almost always been at least twice—and sometimes more than two and a half times—that of whites since 1979. Even at the depths of the Great Recession, when white unemployment was much higher, the black unemployment rate was 1.88 times that of whites. At this disparity’s peak in 1989, the black unemployment rate was 2.71 times the white unemployment rate. Likewise, Hispanic unemployment rates have been at least one and a half times (and, throughout the 90s, more than twice) that of whites since 1979. The Hispanic-white unemployment gap peaked in 1998 when the Hispanic unemployment rate was 2.12 times that of whites. At the end of 2012, the black unemployment rate was more than twice (2.11) that of whites, and the Hispanic unemployment rate stood at more than one and a half times (1.56) that of whites.
No cause for relief—austerity will indeed drag hard on the economy in 2013 and 2014
The normally excellent Neil Irwin and Ylan Q. Mui at Wonkblog are mostly wrong, I think, in arguing that the economy is “holding up surprisingly well” in a year of austerity. The data they cite to make this judgment are rising prices in both the stock market and home prices and falling gasoline prices.
But rising stock prices are actually pretty irrelevant to most American families, and today they mostly reflect the stunningly high profit margins of American corporations. These profit-margins in turn are boosted by extremely weak wage-growth, as inflation-adjusted wages for the vast majority of American workers have fallen in each of the last three years. In short, one could easily make the case that today’s high stock prices are actually mostly a sign of bad news for American workers.
Why we should tax overseas corporate income
This week, we learned that Apple is sitting on over $100 billion in untaxed overseas cash, and this cash will remain untaxed until and unless Apple repatriates this income (that is, brings the cash home to the United States).
In a blog post, Jared Bernstein asked about how we can stop this sort of international tax avoidance. The simplest and most direct way of taxing offshore income would be to simply end deferral entirely. Taxing the overseas income of U.S. multinationals would raise revenue, helping ease current budget pressures, and eliminate incentives for complicated tax avoidance schemes.
Not only do millionaires have low tax rates, so do many corporations, with some large corporations paying less in taxes than the typical middle-class American taxpayer. So how do large multinational corporations avoid paying taxes? The full answer is as complicated as the tax code; the short answer involves profit-shifting and deferral.
Differences between House Republicans’ and Senate Democrats’ proposed funding allocations reveal their priorities
Although the House and Senate have yet to reconcile their respective budget resolutions, the House Appropriations Committee forged ahead and recently approved a GOP spending plan for fiscal year 2014, capping base discretionary funding at $967 billion—the level set by the sequestration. The committee also defeated a Democratic proposal that would have set the top-line discretionary funding allocation at $1.058 trillion—the same level of spending called for in both President Obama’s budget request and the Senate budget resolution.
We know that the two chambers of Congress will not likely reach agreement on spending levels for FY2014. But where exactly do they differ? The chart below indicates that there are very minor differences between the House and Senate on Defense, Homeland Security, and Military Construction-Veterans Affairs appropriation levels. (The latter two allocations are the only without disagreement between the two chambers.) The biggest relative differences occur in funding levels for the Financial Services and General Government, Labor-Health and Human Services-Education, and State and Foreign Operations subcommittee allocations. The biggest dollar difference in proposed appropriations between the two chambers is for the Labor-HHS-Education subcommittee allocation, which the House GOP recommends funding $44 billion below both the Senate and the administration’s budget requests for FY2014.
In one chart: we have a demand problem, not a skills problem
The large increase since 2007 in the unemployment and underemployment rate of young college grads, along with the large increase in the share of employed young college graduates working in jobs that do not require a college degree, underscores that today’s unemployment crisis did not arise because workers lack the right education or skills. Rather, it stems from weak demand for goods and services, which makes it unnecessary for employers to significantly ramp up hiring.
The figure below, from this report on the labor market prospects of the Class of 2013, gives unemployment and underemployment rates for college graduates under age 25 who are not enrolled in further schooling. The unemployment rate of this group over the last year averaged 8.8 percent, but the underemployment rate was more than twice that, at 18.3 percent. In other words, in addition to the substantial share who are officially unemployed, a large swath of these young, highly educated workers either have a job but cannot attain the hours they need, or want a job but have given up looking for work.
Unemployment and underemployment rates of young college graduates, 1994–2013*
| Underemployment | Unemployment | |
|---|---|---|
| 1994 | 10.7% | 5.5% |
| 1995 | 11.5% | 6.1% |
| 1996 | 10.2% | 5.8% |
| 1997 | 8.0% | 4.0% |
| 1998 | 7.8% | 4.5% |
| 1999 | 7.8% | 5.1% |
| 2000 | 7.1% | 4.4% |
| 2001 | 9.7% | 6.1% |
| 2002 | 9.5% | 5.9% |
| 2003 | 11.9% | 6.7% |
| 2004 | 11.2% | 6.2% |
| 2005 | 10.5% | 5.7% |
| 2006 | 9.2% | 5.2% |
| 2007 | 9.9% | 5.7% |
| 2008 | 11.2% | 6.2% |
| 2009 | 18.7% | 9.8% |
| 2010 | 19.8% | 10.4% |
| 2011 | 19.5% | 10.1% |
| 2012 | 18.4% | 8.7% |
| 2013 | 18.3% | 8.8% |
* Latest 12-month average: March 2012–February 2013
Note: Underemployment data are only available beginning in 1994. Data are for college graduates age 21–24 who do not have an advanced degree and are not enrolled in further schooling. Shaded areas denote recessions.
Source: Authors' analysis of basic monthly Current Population Survey microdata
Apple’s advice on corporate tax reform: more tax breaks, please!
Yesterday it was revealed that Apple has shifted roughly $74 billion in profits out of the reach of the IRS in the last three years, mostly by holding this cash offshore. Amazingly, Tim Cook’s response to the congressional investigation that documented this is to call for corporate tax “reform” that will provide further benefits to both his firm and corporations in general. In his testimony (pdf) in front of the Senate Permanent Subcommittee on Investigations today, Cook bulleted his preferred corporate tax reform:
“….comprehensive [corporate tax] reform should:
- Be revenue neutral;
- Eliminate all corporate tax expenditures;
- Lower corporate income tax rates; and
- Implement a reasonable tax on foreign earnings that allows free movement of capital back to the US.”
So, the first and third prongs of this reform agenda are to raise no additional revenue and to lower corporate tax rates. The second prong (eliminate corporate tax expenditures) has some merit, for sure.
What we read today
An oped from Wilma Liebman, former chairwoman of the NLRB, tops our list of what we read today:
- Clearing NLRB nominees is a clear step forward (Politico)
- The 1 Percent Are Only Half the Problem (New York Times)
- Do Extended Unemployment Benefits Lengthen Unemployment Spells? (pdf, Federal Reserve Bank of San Francisco)
Nostalgic for the Gatsby era? (Surprise! You’re living in it.)
It’s fitting that director Baz Luhrmann chose contemporary artists like Jay-Z to provide the soundtrack in his new take on The Great Gatsby, because in many ways, the Gatsby story could easily be set in current times. (No, we don’t mean hipsters bringing back vests or flapper hairstyles.) Unfortunately, today’s economy shares many of the same sad qualities of the 1920s highlighted in the Gatsby story: increasing financialization, low socioeconomic mobility, and gross wealth and income inequality such that a privileged few live astonishingly well while a large portion of Americans are struggling just to get by.
EPI has been describing these trends for years. In fact, you might consider our flagship publication, The State of Working America, as a sort of modern-day Gatsby, in charts. The prose may not be as artful as Fitzgerald’s, but the economic descriptions are equally alarming.
The Great Gatsby’s protagonist, Nick Carroway, is drawn to New York by the promise of riches to be made on Wall Street. Indeed, the premium to working in the financial sector at that time was better than ever… until recently. As Figure A shows, at the beginning of the Great Depression, earnings per worker in the financial industry peaked at nearly 1.8 times the earnings per worker of all other private sector workers. After the Depression and the regulation that followed, earnings per worker in finance fell back roughly into line with the rest of the private sector. Beginning in the late 1970s, however, earnings per worker in finance again began to take off. By the onset of the Great Recession, they exceeded 1.8 times the earnings per worker of all other private sector workers. With such striking disparities in compensation, who wouldn’t be attracted to the green light of finance?
What we read today
Happy Friday! Here are a few stories our experts read today:
- How the Case for Austerity Has Crumbled (New York Review of Books)
- My Two (Per)cents: How Are American Workers Dealing with the Payroll Tax Hike? (Liberty Street Economics)
- Poverty as a Childhood Disease (New York Times)
Sequestration, detailed
Though it didn’t get much attention, Democrats on the House Committee on Appropriations recently released a report on the effects of sequestration (pdf) and efforts to mitigate its impact. The report is a comprehensive look at sequestration cuts specific to the following areas: public safety, health, education and science, national security, judiciary and legal representation, commerce, housing, seniors, and foreign assistance. Some highlights in the report on the impacts of sequestration:
- NIH funding for research is cut by more than $1.5 billion, which the report estimates eliminates more than 20,000 jobs at universities, labs, and other research institutions.
- Funding for the Center for Disease Control and Prevention is cut by $285 million due to sequestration, inhibiting the CDC’s ability to—among other things—facilitate immunization, combat disease outbreaks, and manage and prevent both chronic and infectious diseases.
- The National Science Foundation loses $365 million due to sequestration, resulting in approximately 1,000 fewer research grants.