Teddy Wayne’s Sunday New York Times article about the exploitation of 20-somethings in the workplace (“The No-Limits Job”) should wake up a lot of young workers and their parents. There is something seriously wrong with a corporate culture that uses extremely low-paid or even unpaid labor and then treats the workers like they own them.

The low point in the article is probably the story of Dalkey Archive Press, of Champaign, Illinois, which not only employs unpaid interns but threatens them with “immediate dismissal” if they come in late or leave early without permission, are “unavailable at night or on the weekends,” or “fail to respond to e-mails in a timely way.” But as Wayne makes clear, round-the-clock, 24-7 internships can be exploitative even when paid.

One of my personal heroes, Ross Perlin, the author of Intern Nation, is interviewed by Wayne and warns about a sinister change in our culture that has made it acceptable to young people to give up their personal time and devote themselves to an employer, totally blurring the line between personal life and work while receiving almost no financial reward. This problem is worst in what Perlin calls the “rock-star professions”—film, TV, publishing, and media—and in creative industries like fashion, but the trend is spreading to other fields as well. Even un-hip businesses like manufacturers and law firms have begun to advertise for and employ unpaid labor, and failure to pay for overtime is endemic in white-collar work.

The Fair Labor Standards Act, which requires payment to employees of at least the minimum wage, is conveniently ignored by employers who rationalize their exploitation and illegality by arguing that the jobs are for the benefit of the interns, who usually do learn something and can put the experience on their resume. However, as Perlin explained in his book and Wayne’s article corroborates, a new phenomenon, the serial intern, is developing.Read more

What we read today:

• Automatic Reductions in Government Spending — aka Sequestration (Congressional Budget Office)
  
• Minimum Wage/Maximum Growth (The Innovation Files)
• How Much Does Race Still Matter? (New York Times)
• What’s So Bold about $9.00 an Hour? Benchmarking the Minimum Wage (Dissent)

Supporters of the Immigration Innovation Act, dubbed the “I-Squared Act,” claim that legislation to dramatically increase the annual quota for H-1B guest worker visas is urgently needed to keep and create jobs in America. But the I-Squared Act will do just the opposite.

The headline in the leading news daily in India – the Times of India – had this assessment: “Proposed H-1B legislation to help Indian IT [companies]…”

CLSA, a leading financial advisory firm that analyzes the offshore outsourcing industry for investment clients, believes I-Squared will spur the sector’s growth. The firm finds the proposed legislation is “encouraging for Indian IT companies,” most of which are outsourcing companies with a business model that sends high tech American jobs overseas. The report says that passage of such a bill will make it much easier for the outsourcing industry to use the H-1B visa to bring in foreign guest workers from abroad, thus reducing the need for “hiring of locals in [the] US” at higher wages. In other words, if the bill passes, firms could more easily bypass and replace qualified American workers with hundreds of thousands of cheaper H-1B guest workers.

Given the policy proposals by some senators, CLSA has advised clients to “overweight” the Indian IT outsourcing sector in their portfolios. This is a reversal of fortune mostly based on the prospect that the U.S. government will make it possible for the outsourcers to get access to three to four times more guest workers per year.Read more

As a follow-up to my earlier blog post on the responsibility for and consequences of sequestration, I want to underscore that the entirety of the Budget Control Act (the resolution to the 2011 debt ceiling crisis, which created the sequester) was about shrinking government, not fiscal responsibility. As I previously noted, sequestration will harm the economy, and perversely increase the debt-to-GDP ratio to 76.3 percent by the end of fiscal 2013, from 76.1 percent without sequestration. And by defunding public investment (a key driver of long-run economic growth) and delaying economic recovery, thereby incurring more long-run economic scarring, sequestration will leave a poorer country to service larger relative debts.

But even ignoring the macroeconomic damage wrought by sequestration, this across-the-board meat cleaver approach to cutting spending is often fiscally imprudent even on a programmatic level.

For instance, the Office of Management and Budget estimated that the Internal Revenue Service tax enforcement department would see $436 million dollars of budget authority sequestered in fiscal 2013. (This estimate predates the lame duck deal’s two-month delay, although the fiscal 2014 cut would be larger.) But by all estimates, marginal increases in funding for tax enforcement pay for themselves multiple times over. In fiscal 2012, IRS enforcement raised $50.2 billion in revenue, or $2.3 million per enforcement agent. Former George W. Bush administration IRS Commissioner Mark Everson estimated that every additional dollar spent would return $4 in revenue, for $3 in deficit reduction (Sawickey et. al 2005). That would imply that the full fiscal 2013 cut could add $1.3 billion to the budget deficit.Read more

As “sequestration” spending cuts seem increasingly likely to take effect tomorrow, and the blame game escalates over responsibility for the fallout, some incorrect revisionist history as well as (silly) pox-on-both-houses punditry merit comment.

If sequestration takes effect, it will be because congressional Republicans put draconian spending cuts in play, and have subsequently refused to replace those cuts with more sensible deficit reduction. And should sequestration take effect, this would not be an isolated case of economic policy malpractice: Congressional Republicans have consistently hamstrung efforts that economists overwhelmingly agree would have meaningfully helped lower the unemployment rate and instead advanced policies projected to decelerate near-term growth.

My colleague Josh Bivens and I recently chronicled at length the numerous, varying ways Congressional Republicans have deliberately obstructed a stronger economic recovery over the past four years. 1 This economic and budgetary obstructionism, in turn, has been a considerable factor explaining why U.S. economic growth has decelerated since mid-2010 and is currently far too slow to push the economy back to full health in the next few years, already more than five years after the start of the Great Recession.

What follows is a not-so-quick history of how we got to this week’s deadline.Read more

Here are some articles we read today, yesterday, and over the weekend:

• Unemployment Stories, Vol. 28: ‘I’m Inclined to Simply Disappear Into Silence’ (Gawker)
• Fix the Economy, Not the Deficit (The American Prospect)
• We’re 60 Percent of the Way to Simpson-Bowles! (Mother Jones)
• Study ties black-white wealth gap to stubborn disparities in real estate (Washington Post)
• What if the Outrage over Excessive Welfare Extended to the Tax Code? (Tax Policy Center)
• Fight Over Spending Cuts a Prelude to Budget Battles Ahead (New York Times)

The Hong Kong based group SACOM released a report today of a new investigation of working conditions at three Apple factories in China. The investigation uncovered extensive labor rights abuses, including extremely long work hours, employees forced to work off the clock for no pay, continuing hazards to worker safety, and verbal abuse and humiliation of workers by supervisors. The report, issued on the eve of Apple’s annual shareholder meeting, calls into question the accuracy of Apple’s claims of labor rights progress in its supply chain.

SACOM interviewed 130 workers employed at Foxlink, Pegatron and Wintek, three key suppliers of parts used in the assembly of iPhones, iPods and Macs.

Of note, the report found that poor conditions have led to turnover rates so high that the factories are resorting to the use of contracted labor on a massive scale, hiring so-called “dispatch” agencies to provide workers who are employed by the agencies, not the factories. This arrangement makes workers especially vulnerable because they enjoy few protections under Chinese labor law. SACOM found that dispatch workers comprise as much as 80% of the workforce at these factories.

The findings in the SACOM report include:

Excessively long work hours remain common. During peak production periods, workers can work up to 14 hours per day and receive only one or two days off over a period of nearly three months. Working 70-100 hours per week is common during peak periods, far in excess of what is permitted by Chinese law (49 hours) and even above the maximum allowed under Apple’s own code of conduct (60 hours).Read more

Happy Friday! Here’s what we were reading today:

• The Ph.D Bust: America’s Awful Market for Young Scientists—in 7 Charts (The Atlantic)
• Academic raises doubts about hedge fund returns (Financial Times)
• Want to Tackle Income Inequality? You Need to Go After Capital Gains (Mother Jones)
• Why our brightest female graduates are still at a disadvantage (Washington Post)

If you want to understand the high tech labor market in the United States, a good place to start might be one of these stories about a lawsuit in the U.S. District Court in California.

These stories trace the progress of legal actions against some of America’s best-known tech companies over their attempts to suppress their employees’ wages through anti-competitive “no-poaching” agreements.  The Department of Justice found evidence that Intel, Adobe Systems, Google, Apple, Pixar, and Intuit made  secret agreements not to call each others’ employees with job offers, thereby reducing job opportunities and salaries in the industry. DOJ induced the six companies to settle an anti-trust suit in 2010 with a promise not to engage in similar restraints on trade in the future. The companies paid no damages and admitted no violations of anti-trust law, but the employees who had been hurt by the practices were not satisfied.

Employees filed suit against the six companies and Lucasfilm in federal court alleging an illegal conspiracy to restrain wages and salaries and seeking damages.  When the companies tried to have the suit dismissed, the district court judge sided with the plaintiffs, and in January, according to Phys.org, Judge Lucy Koh ruled that the case should proceed to trial and that Apple CEO Tim Cook, Google Chairman Eric Schmidt and Intel chief Paul Ottelini may be questioned by plaintiffs’ attorneys about their roles in the alleged conspiracy. The trial, reportedly, will take place in November.

I recommend keeping this case in mind when it comes time to evaluate the companies’ claims that their interest in bringing skilled guestworkers to the U.S. has nothing to do with getting cheaper labor. Never mind that the H-1B visa, which ties employees to a single employer for 6 years or more, is a bigger restraint on employee mobility than a no-poaching agreement.

When President Obama and Japanese Prime Minister Abe meet on Friday, currency manipulation and Japan’s unfair trade policies must be addressed. The Yen has declined 13% in the past three months, in part because Mr. Abe has pledged to weaken monetary policy to spur growth. A weaker Yen lowers the cost of Japanese imports in the U.S. and raises the cost of U.S. exports in Japan and other countries where our products compete. While a more expansionary domestic monetary policy is an appropriate tool for a country stuck far below economic potential because of demand shortfalls, Japan has also displayed a historic pattern of intentionally lowering the value of their own currency vis-à-vis the U.S. dollar by buying U.S. denominated assets. Because the first-order effect of this direct currency manipulation is to create demand for Japan at the expense of the U.S., which is also currently starved of demand, this is not responsible policy for a country as large and important in global trade markets as Japan.

Currency manipulation is the single most important cause of growing U.S. trade deficits and Japan has a well established reputation as a currency manipulator. Japan has expressed a desire to join the proposed Trans-Pacific Partnership (TPP), a regional free-trade agreement with 10 other countries.  The TPP should include language to end currency manipulation by Japan and other trading partners.  Elimination of currency manipulation by China, Japan and other countries could create 2.2 to 4.7 million jobs, expand U.S. GDP and reduce the federal deficit, according to a recent EPI report.

The U.S. trade deficit with Japan increased from $66.4 billion in 2011 to $79.9 billion in 2012, an increase of $13.4 billion (20.2 percent).1 Growing trade deficits lead to job losses and growing unemployment or weaker growth in the United States.Read more