Minnesota and Wisconsin had similar job growth trajectories leading up to the Great Recession, but not after it
Earlier this week, EPI released an analysis of economic performance in Wisconsin and Minnesota since 2010, which showed that by virtually every available measure, Minnesota has outperformed Wisconsin. This is notable because lawmakers in the two states adopted vastly different policy agendas coming out of the recession. Wisconsin adopted a highly conservative agenda of cutting taxes, shrinking government, and weakening unions. Minnesota, in contrast, enacted many key progressive priorities: raising the minimum wage, strengthening safety net programs and labor standards, and boosting public investment in infrastructure and education, financed by raising taxes, primarily on the wealthy.
Skeptical readers might argue that as much as the two states are similar, they are sufficiently different such that the diverging economic outcomes observed in our report are the result of fundamental differences in the two states’ economies and that state policy decisions were largely irrelevant. I think there’s ample evidence to indicate that such readers are wrong. In the paper, I discuss some of the policy decisions—such as those around Medicaid expansion, investment in infrastructure, and worker organizing—where one can draw a fairly straight line from the policy decision to the observed economic result. I also note that wage growth was actually stronger in Wisconsin than Minnesota in the seven years prior to Great Recession.
It’s also instructive to compare job growth in the two states in the economic expansion prior to the Great Recession. The data suggest that whatever their differences, prior to the recession, Wisconsin and Minnesota followed a very similar trajectory for employment growth.
Minnesota and Wisconsin had similar job growth trends leading up to the Great Recession, but not after it: Employment levels relative to the start of Governor Walker and Governor Dayton’s terms (Jan 2011)
Source: EPI analysis of Current Employment Statistics data from the Bureau of Labor Statistics
Figure A shows the number of jobs in Wisconsin, Minnesota, and the United States from November 2001 to December 2017, relative to the number of jobs in each geography in January 2011, the month that Governors Walker and Dayton took office. As you can see from the figure, changes in the level of jobs throughout the business cycle leading up to the Great Recession were remarkably similar between the two states. Both Minnesota and Wisconsin had modest job losses in the beginning of the period in the wake of the early 2000s recession, followed by modest job growth that tracked the U.S. average for a while and then flattened out for roughly the last two years prior to the onset of the Great Recession. In that earlier business cycle from November 2001 to December 2007, cumulative job growth was 3.7 percent in Minnesota and 3.3 percent in Wisconsin. Subsequently, the two states suffered losses in the recession that were similar, albeit slightly more severe in Wisconsin—with losses of 4.3 percent and 4.9 percent in Minnesota and Wisconsin, respectively, from December 2007 to December 2010.
The period from January 2011 to December 2017, after Governors Walker and Dayton assumed office, shows a starkly different picture. From early on in the recovery, Minnesota’s job growth accelerated noticeably more quickly than Wisconsin’s and the gap between the two states has increased fairly steadily ever since.
Last Friday’s jobs report showed that the unemployment rate fell to 3.9 percent, the first time is has dipped below 4.0 percent since 2000. While many factors contribute to the overall unemployment rate—including labor force participation rates—policymakers should take note that a tightening labor market is not resulting in higher wages for working people. Nominal wage growth continues to fall short, rising only 2.6 percent over the year. One significant reason workers have been unable to insist on an increase in their paychecks is the uniquely low bargaining clout of U.S. workers.
While 60 percent of adults have a favorable view of labor unions, the most recent data available on union membership shows that, as of 2017, only 10.7 percent of wage and salary workers were union members. This disconnect is the result of decades of fierce opposition to unions and collective bargaining. These efforts have led to the enactment of state laws weakening—and even repealing—collective bargaining rights. At the federal level, corporate lobbyists have blocked attempts to reform outdated labor laws, enabling employers to exploit loopholes in the law and defeat workers’ organizing efforts. It is now standard practice for private employers to hire union avoidance consultants to quash workers’ efforts to unionize. Nearly ten years ago, a study found that roughly one-third of private sector employers fire workers during an organizing effort and over half of employers threaten to close the worksite if workers unionize. It is likely that employer opposition has intensified over the last decade, leaving more workers vulnerable to unlawful retaliation for exercising rights promised them over 80 years ago.
The Workplace Democracy Act, introduced today by Senator Bernie Sanders and several Democratic cosponsors, would begin to restore workers’ right to join together to improve their wages and working conditions. The legislation includes many critical reforms including closing loopholes in the law that enable employers to misclassify workers, denying them the right to organize. The bill also ensures that employers cannot subcontract their way out collective bargaining. And, the legislation ensures that working people have meaningful leverage in the workplace. These reforms would give U.S. workers more bargaining clout which is necessary to ensure a just economy.
The Supreme Court will soon decide whether employers can lawfully require workers to sign mandatory arbitration agreements that include class and collective action waivers. A ruling in NLRB v. Murphy Oil USA, Inc., Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris will have significant impacts on working people. If the Court sides with employers and the Trump administration, it is likely that the majority of workers in this country will be required, as a condition of employment, to sign away their right to pursue workplace disputes on a collective or class basis. In fact, available data suggest that it may take only six years for more than 80 percent of workplaces to adopt mandatory arbitration with class and collective action waivers.
Last year, EPI commissioned a survey that found that 53.9 percent of nonunion private-sector employers already have mandatory arbitration procedures. Prior to that study, the one major governmental effort to investigate the extent of mandatory arbitration was a 1995 GAO survey. That survey, conducted between April 1994 and April 1995, found that just 7.6 percent of employers had mandatory arbitration agreements. In other words, the use of mandatory arbitration agreements grew by more than 600 percent between 1994 and 2017. Using the growth rates between the two surveys to forecast future expansion suggests that by 2024, more than 80 percent of private sector, non-union establishments will adopt mandatory arbitration with class and collective action waiver of employment disputes, if the Court finds that such agreements are lawful.1 That will leave more than 85 million workers subject to mandatory arbitration agreements with class and collective action waivers. This means that the vast majority of workers will be forced to sign away their right to act with their colleagues to resolve workplace disputes—as well as their right to go to court for these matters. As a result, even if many workers face the same type of issue at work, each individual worker will be forced to hire their own lawyer, and resolve their dispute out of court, behind closed doors, with only their employer and a private arbitrator.
While payroll employment growth was particularly weak in March, over the longer-term employment growth has been more than enough to keep up with growth in the working age population and even pull additional people off the sidelines and into the labor market. Labor force participation still has a way to go to reach full employment levels, but the trend continues to move in the right direction. And, make no mistake, we’ve never thought these displaced workers would be sitting on the sidelines forever. In fact, we’ve been expecting the workers to return to the labor force for years.
As those sidelined workers start dwindling in numbers, we should expect stronger and stronger wage growth. Continued slow wage growth tells us that employers still hold most of the cards, and don’t have to offer higher wages to attract workers. In other words, workers have very little leverage to bid up their wages. Therefore, wage growth remains one of the most important indicators to watch in Friday’s jobs report. The fact that nominal wage growth is still below target levels is a clear sign that the economy has yet to clearly reach full employment.
Alas, nominal wage growth for private-sector workers and even nominal wage growth for production/nonsupervisory workers offers only a limited view on wage growth in the economy today. One of the major benefits of a full employment economy is that wage growth isn’t simply strong for workers at the top of the wage distribution or for workers with more educational attainment. Younger workers, black workers, workers with lower levels of educational attainment, and workers at the middle and bottom of the wage distribution are disproportionately boosted in a stronger economy just as they are disproportionately harmed in a weaker one. Research has shown that for each percentage point decline in the unemployment rate, there is stronger wage growth in the lower part of the wage distribution than in the higher part (in particular, see Figure F here). Similarly, black workers saw disproportionately stronger opportunities for employment and wage growth in the latter part of the 1990s recovery than white workers did. Workers whose prospects fall farther in recessions see these prospects grow faster when times are good.
April 28 is Workers’ Memorial Day, an international remembrance day set aside to “mourn for the dead, and fight like hell for the living,” in the words of the immortal labor organizer Mother Jones.
In 2016, nearly 5,200 workers were killed on the job in the United States—14 workers every day—the highest number of workplace deaths in years. But that is only a part of the deadly toll: each year, more than 50,000 workers die from work-related disease. With this awful trend, any rational government would be proposing a significant increase in the budgets of our worker protection agencies and a rapid expansion of regulatory protections for workers.
Unless you’re just waking up from a 15-month nap, you know that workers’ rights—and especially worker safety and health—are under attack by the Trump administration like never before. And not only are workers under attack in their workplaces, but thanks to actions by the Environmental Protection Agency (EPA), the Interior Department, the Department of Agriculture and others, they’re also under attack where they live, where they eat, and where they vacation.
But these attacks didn’t originate in the fevered dreams of Donald Trump. What we’re seeing is the attempted wholesale implementation of the long-standing wish list of the conservative anti-worker Republicans, the Chamber of Commerce, and its anti-worker corporate allies.
And the attacks are not just aimed at the Occupational Safety and Health Administration (OSHA), but at a variety of other agencies— and even the scientific process underlying the ability of government agencies to legally protect workers from getting injured, killed, or sickened in the workplace.
It would take a long time to detail every attack on worker safety and the safety of the communities they live in, but I’ll list just a few here:
One of Donald Trump’s first actions as president was to issue an executive order requiring agencies to repeal two protections for every new one issued.
Late last month, the Office of the United States Trade Representative (USTR) issued its “Findings on the Investigation Into China’s Acts, Policies, and Practices Related to Technology Transfers, Intellectual Property, and Innovation Under Section 301 of the Trade Act of 1974”. The report re-confirmed previous findings concerning China’s reliance on forced transfer of technology and production from U.S. aerospace companies in return for market access. Just this week, USTR released its list of proposed tariffs on Chinese products.
While the findings of the report and the proposed tariff list represent steps forward in addressing this critical matter, findings and proposed lists alone won’t stop China from engaging in this unfair trade practice. The Trump administration should move quickly to implement a comprehensive strategy which includes:
- Placing tariffs on Chinese aerospace parts, components, and subassemblies that cost U.S. jobs;
- Filing a complaint (preferably joined by the European Union) at the World Trade Organization (WTO) against China’s unfair trade practices regarding forced transfers and subsidies to its aerospace industry; and,
- Making the elimination of forced transfers of technology and production a priority in bilateral and multilateral dialogues, including discussions over the U.S.-EU Transatlantic Trade and Investment Partnership (T-TIP).
Transfers of production and technology from U.S. aerospace and related companies are a serious matter. Among other things, they cost U.S. aerospace jobs and lead to a further decline in our aerospace industrial base in at least four different but related ways: First, jobs that may be associated with the transfer of technology and production are lost; second, the skills that accompany the transfers are lost leading to a further decline in our industrial base; third, future jobs are lost as China (and other countries) utilizes the transfer from the United States to create and strengthen their own aerospace companies that compete directly with U.S. companies; and fourth, the technology and production that would have led to more U.S. jobs through the development of innovative products is lost.
While China continues to utilize every tool available to establish a strong aerospace industry, up until now, the United States has done little to stop China from forcing the transfer of technology and manufacturing to develop its own industry. Far from implementing any strategic policy to stem this transfer, the U.S. government has largely left it up to U.S. aerospace companies to either comply with China’s forced transfer demands, or be shut out of China’s market. While the precise details of these transactions are not public, numerous reports shed light on how China plays the world’s two large commercial aircraft producers, Boeing and Airbus, against one another.
In 2005, President George W. Bush attempted to partially privatize Social Security. He centered his argument for this change on the claim that people would fare better investing in asset markets than contributing to Social Security. The privatization push proved highly unpopular, as research from EPI and others highlighted the high transition costs and investment risks.
Nevertheless, the belief that Social Security amounts to a low-risk but low-return investment persists, hampering proposals to expand the popular program. This is unfortunate, as Social Security looks better than ever in comparison to low-performing 401(k)s and IRAs.
As shown below, a young worker today with average career earnings will receive Social Security retirement benefits equivalent to total employer and employee retirement contributions plus a 5.7 percent annual rate of return. This “internal rate of return” is not much lower than the 7.0 percent net return for 401(k)-style defined contribution plans between 1990 and 2012, and it’s higher than more recent returns for these plans and IRAs (3.1 percent and 2.2 percent, respectively, over the 2000–2012 period).
Social Security internal rate of return, medium earner aged 21 in 2018 with average life expectancy at retirement (retirement benefits only)
|Based on Current Contribution Rate||5.7%|
|Based on Contribution Rate after Eliminating Shortfall||5.0%|
|Based on Full Cost Rate||4.5%|
Source: Author's calculations based on inflation, average wage, and cohort life expectancy projections in single-year tables underlying the 2017 Social Security Trustees Report; and the "medium earner" in Michael Clingman and Kyle Burkhalter, "Scaled Factors for Hypothetical Earnings Examples Under the 2017 Trustees Report Assumptions," Social Security Administration Actuarial Note, July 2017. Assumes retirement at normal retirement age (67).
This calculation doesn’t take Social Security’s projected long-term shortfall into account. But even if we closed the shortfall by raising the contribution rate from 10.0 percent to 12.6 percent (excluding contributions going toward disability benefits), the internal rate of return for a medium earner would be 5.0 percent.
Though Social Security is primarily funded through worker contributions, a small share of the cost is paid for by taxes on the benefits of better-off retirees that revert to the program. If these taxes on high earners were eliminated so that the entire cost of retirement benefits were funded by worker contributions, the internal rate of return for a medium earner would be a healthy 4.5 percent, still an excellent return for such a low-risk investment.
Rates of return on 401(k)-style plans vary widely and are subject to market downturns. To reduce the risk of worse outcomes, most investors, especially retirement savers, would choose a secure 5 percent return over a volatile return averaging 7 percent, since, contrary to popular belief, investment risk doesn’t disappear over long time horizons.
The SEC’s “Regulation Best Interest” is in the best interest of Wall Street, not retirement savers and other investors
On Wednesday, the Securities and Exchange Commission (SEC) issued over 1,000 pages of proposed regulations relating to the conduct of financial professionals. Among other things, the proposals specify that brokers must act in the best interest of clients, limit the use of terms like “financial adviser,” and require financial professionals to provide clients with short descriptions of their legal obligations to the client and of their compensation structure.
At first blush, these appear to be positive, albeit incremental, steps. In fact, their purpose is not to protect investors, but to present an alternative to the much stronger protections in a Department of Labor (DOL) rule that requires financial professional offering investment advice to retirement savers to adhere to a fiduciary standard. While the DOL rule remains in place for the time being, the Trump administration has delayed its full implementation and enforcement, and it has been challenged in court by financial industry players. EPI has estimated that these delays will cost investors $18.5 billion in higher fees and lower net returns over the next 30 years.
The SEC’s proposed “best interest” standard, which to unsuspecting investors may sound similar to the DOL’s fiduciary standard, is in fact much weaker. Though it would prohibit brokers and other financial professionals from steering clients toward clearly unsuitable investments, financial professionals are already prohibited from doing so under current rules. While these rules prevent brokers from—say—recommending highly risky investments to risk-averse clients, they don’t prevent them from promoting higher-cost but “suitable” investments when similar lower-cost investments are available.
The SEC proposals, unlike the DOL rule, do not prohibit commissions and other forms of compensation that create conflicts of interest between financial professionals offering advice and their clients. Though some egregious practices may be curbed, the practical impact of the SEC proposals is unclear because the Commission does not define “best interest.” If anything, dissenting Commissioner Kara Stein says the proposed regulations appear designed to provide financial professionals with guidelines on how to adhere to the letter of the law with written disclosures, policies, and procedures—but no meaningful changes to actual practices. Moreover, enforcement is likely to be weak, because investors would not be able to sue brokers for violating the “best interest” standard, but would only have recourse to private arbitration under the auspices of the Financial Industry Regulatory Authority (FINRA), an industry-funded body. As Commissioner Stein put it, a better name for these proposals is “Regulation Status Quo.”
A recent academic paper by economists Michael Lovenheim and Alexander Willén argues that men who lived as school-age children in states where teachers were allowed to bargain collectively are less likely to work as adults and, when they do work, they earn significantly less than men who grew up in states where teachers were not allowed to bargain collectively.
There are at least three reasons to be deeply skeptical of their findings.
First, the chain of causal links is extremely circuitous. The reasoning runs from a student’s initial potential “exposure” to teachers’ right to collective bargaining all the way through to the conclusion that this “exposure” significantly worsened labor market outcomes decades later as an adult. In most of their analysis, the authors rely on data that let them know the state where a person was born and the employment situation of that same person in a single year between the ages of 35 and 49. The researchers use this information to construct a simulated educational history for each adult, where they assume that the person attended K-12 school in the state where they were born. The researchers, however, don’t actually know that an individual lived in the state of birth while at school age, or whether the school the individual attended was unionized, or even whether the individual attended a public or private school. Instead, the paper’s conclusions hinge on the idea that students born in states with collective bargaining for teachers were more likely to be “treated” by collective bargaining than students in “control” states where teacher collective bargaining was not permitted. This is possible, of course, but the methodology leaves substantial room for other factors that might explain the observed differences in labor market outcomes of adults who were born in different states. The states that denied teachers the right to bargain collectively, for example, include 11 southern states, which have many long-term trends in common other than collective bargaining rights, including industry and age structure, income distribution, climate, and rapid population growth.
The Trump administration doubles down in the Wall Street Journal on why trickle-down really does work
Kevin Hassett, the chair of the Trump administration’s Council of Economic Advisers (CEA), wrote an op-ed in the Wall Street Journal this week mounting a defense of the Tax Cuts and Jobs Act (TCJA)—the tax cut passed by congressional Republicans and signed into law by the president at the end of last year. It starts out badly, railing against “leftists from Marx to Piketty (?!)” and doesn’t get much better from there.
It is an objective fact that the cut’s direct benefits are extraordinarily regressive, with 83 percent of these benefits going to the top 1 percent of households when it’s fully phased-in. Most of this regressivity is due to the very large cut in corporate taxes enacted as part of the TCJA. Ownership of corporations, and capital assets generally, is extremely concentrated in richer households, so, the direct effect of cutting taxes on capital is to funnel money to the top.
But Hasset insists indirect effects will trickle down to benefit the rest of us. His operating theory is almost quaint in how antiquated it is: “…workers do well when their employers do.” This leads him to claim that “when profits go up, capital investment goes up, and wages follow.”
On Tax Day, Republicans in Congress will surely be trying to tout the benefits from the Tax Cuts and Jobs Act (TCJA) that they passed in December. It’s still far too early to make big claims about what the data shows about the effect of the TCJA, but it’s worth remembering why we should be very doubtful that any benefits at all will accrue to typical American families from the largest— and only permanent—feature of the TCJA, the cuts in corporate income tax rates.
The TCJA’s likely effect on the economy depends on whether the economy remains demand-constrained or not. Below, we’ll lay out why the TCJA is bad policy regardless of whether or not today’s economy remains demand-constrained.
When the economy is demand-constrained, there is not enough overall spending in the economy—or “aggregate demand”—to pin the economy at full employment. If the economy still suffers from a lack of aggregate demand, as we believe is likely the case, then tax cuts can boost demand—and thereby employment—by increasing the post-tax income of households and businesses.
The TCJA is generally not defended on the grounds that it will boost demand. The reason why is clear: the tax cuts that make up the bulk of the TCJA—tax cuts for the rich and big corporations—are by far the weakest fiscal stimulus to aggregate demand. High-income households are more likely to save the money they receive from a tax cut than low- and moderate-income households. This means that much of the TCJA will end up as savings in the pockets of rich households rather than a boost to aggregate demand. Corporate tax cuts don’t rate any better on this core, for the same reasons. In the short run, the benefits of corporate tax cuts flow to shareholders. The top 1 percent owns 40 percent of total stocks. In short, corporate rate cuts are simply tax cuts for the rich by another name. Tax cuts for low- and middle-income households would have provided about three times as much bang for the buck as the TCJAs tax cuts for the rich and big corporations, as would have increases to income support programs or infrastructure spending.
All of this is why defense of the TCJA (and tax cuts for rich people generally) assume the economy is not demand-constrained and is already at full employment. In this case, the claim is that cuts to the corporate rate give companies higher after-tax profits with which they can pay dividends to shareholders. This increases corporations’ incentive to undertake investment in new plant and equipment. And because the increase in the post-tax return to capital owners’ savings induces households to save more (or attracts more savings from abroad), these desired new investments can be financed without being choked off by rising interest rates. The resulting increase in capital investment gives workers more and better tools to work with, which boosts labor productivity and eventually wages.
A discussion broke out on Twitter last week about a recent paper I wrote on what role the government can and should play in creating jobs. The discussion centered on how this paper overlaps with and is different from a job guarantee proposal detailed in a series of papers by William Darity and Darrick Hamilton (often co-authored with Mark Paul, with others, particularly Pavlina Tcherneva, contributing analyses of job guarantees in recent years). Twitter is a tough place to have a substantive discussion, particularly one in which you’re disagreeing with people you have a lot of respect for, so I’ve decided to spend more than 280 characters on this. Because the contrast on Twitter was between our recommendations and the Darity and Hamilton proposals, I’ll focus on their framework in what follows.
Areas of overlap between our job creation recommendations and a job guarantee
Darity, Hamilton, and Paul’s latest job guarantee proposal was released last month by the Center on Budget and Policy Priorities. The best summary statement of it comes from their own paper: “The federal job guarantee would provide a job, at non-poverty wages, for all citizens above the age of 18 that sought one.” While job creation is the key goal of their proposal, their plan also hinges on these jobs producing goods and services that private markets are not producing—especially public investments. They identify two key benefits of the job guarantee as:
Macroeconomic stabilization. The job guarantee would function as a robust automatic stabilizer in the economy, maintaining levels of employment during economic downturns through direct hiring, and freely allowing workers to flow from the jobs program to the private sector during economic boom times.
The provision of socially useful goods and services. During the Great Depression, the Works Progress Administration (WPA) and Civilian Conservation Corps (CCC) were public employment programs designed to put Americans back to work…. These programs, implemented under the Roosevelt administration, provided goods and services that benefited all Americans by facilitating the logistics and technological expansion of our public infrastructure…..Under a job guarantee, even those who do not receive employment via the NIEC will likely benefit through the increased provision of public goods and socially desirable goods and services.
The House is set to take up a balanced budget amendment this week, which would limit federal spending in each fiscal year to federal receipts in that year. Putting aside for a moment the chutzpah of House Republicans trying to pass a balanced budget amendment (BBA) just a few months removed from their passage of a $1.5 trillion tax cut that went largely to the richest households and big corporations, the simple fact is that the economic consequences of a balanced budget amendment range from extremely bad to catastrophic. The reason for this is that a BBA would amplify any negative economic shock to the economy and would thereby turn run-of-the-mill recessions into disasters.
When the economy enters a recession, government deficits increase as tax revenues decline and government spending on programs such as unemployment insurance increase. These “automatic stabilizers” are incredibly important as they cushion the blow to the economy from a recession. For example, researchers at Goldman Sachs found that the shock to private sector spending from the bursting of the housing bubble was larger than the shock that led to the Great Depression of the 1930s. Given this larger initial shock, why didn’t we have another Great Depression, with unemployment rates approaching 20 percent and beyond, in 2009–10? The simple reason is that the mechanical increase in the deficit from tax reductions and increased transfer payments absorbed a lot (not enough, but a lot) of this shock, and automatic stabilizers were either non-existent or a lot smaller in the 1930s. Having these programs in place to absorb recessionary shocks is one of the great economic advances of the past 80 years—and getting rid of them by imposing a BBA makes as much sense as outlawing computers or antibiotics. To comply with a BBA as a recession approached, Congress would have to offset any mechanical increase in the deficit by raising taxes or cutting spending. The increased taxes or spending cuts would further drag on the economy, raising the deficit again and requiring still further tax increases or spending cuts. This vicious cycle would amplify the damage to the economy. Essentially this vicious cycle would lead to a large increase in the fiscal multiplier, with each dollar in spending cuts leading to output losses of about $2.50.
The Federal Reserve could try to counteract this drag on the economy by cutting interest rates. But the extent to which they would be able to mitigate the damage may be extremely limited, for a couple of reasons. First, while the Fed can certainly restrain growth by raising interest rates, spurring growth by cutting rates is often ineffective; a dynamic often referred to as rate cuts akin to “pushing on a string.” Further, with current chronic downward pressure on aggregate demand, so-called “secular stagnation,” characterizing the U.S. economy in recent decades, it is likely that the Federal Reserve would be constrained by the zero-lower bound (ZLB) on interest rates—as it was during the Great Recession. Since interest rates cannot be moved (for too long or too far) below zero, when the Federal Reserve hits the ZLB they will be unable to offset any further drag on the economy through conventional monetary policy.
New UN data on international migrants highlights special responsibility for destination countries in the Global Compact for Migration
Large movements of refugees and migrants around the world since 2015, many in response to humanitarian crises, have led to a global negotiation at the United Nations (UN) to create a new Global Compact for Migration (GCM). The GCM will be a non-binding international agreement to establish a new regime for cooperation on international migration that can maximize the benefits of migration and better protect migrants in vulnerable situations. While governments—minus the United States—continue to negotiate the GCM, it’s important to step back and reflect on the lives at stake. The latest UN report and data on migration from the UN Population Division helps by providing a snapshot of migrants around the world. These data can assist policymakers who are currently negotiating the GCM’s substantive provisions, who should remember to take into account their special responsibilities to protect the human rights of all migrants who live and work within their borders.
The UN Population Division reported that there were 258 million international migrants worldwide in 2017, meaning that 3.4 percent of people had been living outside of their country-of-birth for at least one year. The number of international migrants rose by 10 million from 248 million in 2015, but was unchanged as a share of the global population. The number of migrants in 2017 is an increase of 50 percent from 173 million in 2000, rising 0.6 percent from 2.8 percent of the global share of the population in 2000. Almost 75 percent of international migrants are of prime working age, meaning between the ages of 20-64. Men were 52 percent of international migrants in 2017 and women 48 percent.
By continent, Asia hosted 80 million international migrants, Europe 78 million, North America 58 million, Africa 25 million, Latin America 9.5 million, and Oceania 8.4 million. Europe’s population would have declined between 2000 and 2015 had it not been for the arrival of international migrants.
I’ve written a lot about wages in recent months. In March, I detailed trends in wages through 2017 in a report, with specific emphasis on growing inequality both across the wage distribution and between black and white workers. My “What to Watch on Jobs Day” blog post last month, as well as my statement on jobs day, tried to put wage growth in perspective by comparing multiple measures of wage growth and showing how many of them fell short of levels that would be needed to confidently declare the economy at full employment. On Friday’s Jobs Day, I will look at wage growth once again, as well as other measures of labor market slack which indicate that the economy has yet to unambiguously reach full employment.
Wage growth is a really important measure of labor market strength, and while slow wage growth is not just an indication that the economy remains below full employment, by definition slow wage growth means there continues to be some slack in the labor market. Slow wage growth tells us that employers continue to hold the cards, and don’t have to offer higher wages to attract workers. In other words, workers have very little leverage to bid up their wages. Slow wage growth is evidence that employers and workers both know there are still workers waiting in the wings ready to take a job, even if they aren’t actively looking for one. But, you say, the unemployment rate is 4.1 percent. Where are these workers waiting in the wings? The focus of this blog post and what I’ll be looking at on Friday (along with wages) are the other measures that similarly indicate there remains a non-trivial amount of slack in the labor market. I’ll argue that we can actually see this “waiting in the wings” in the data in other measurable ways, aside from weak wage growth.
Last week, my colleague Josh Bivens highlighted one underappreciated measure of labor market flows: the share of the newly employed that come from out of the labor force. One might be tempted to believe that the labor force represents a rather static and cleanly-defined group of people: those who have a job or those who don’t but want one and are actively looking for one. If that were the case, then the total labor force wouldn’t fluctuate so much and only the unemployment rate would move up and down at different points in the business cycle. But, the labor force itself ebbs and flows, even relative to the working-age population.
Last month, we did an analysis that examined the impact of a provision of the Affordable Care Act limiting the amount of CEO pay that could be deducted from profits to $500,000.
In the years after it took effect, this provision raised the cost of CEO pay to employers (i.e., shareholders) by more than 50 percent. Prior to 2013, shareholders of health insurance companies effectively paid just 65 cents on every dollar of CEO compensation, since their taxes would fall by 35 cents for every dollar they paid out. After 2013, they would be paying 100 cents of every dollar.
If CEO pay bears a close relationship to their value to the company, this change in the tax code should have led to some reduction in their pay. Using a wide variety of specifications, controlling for growth in profits, revenue, stock price, and other relevant factors, we found no evidence that the pay of health insurance CEOs fell at all in response to the limit on deductibility.
While this finding does support the view that CEO pay is not closely related to their value to shareholders, it is worth asking how much this provision mattered to insurers’ bottom line. In other words, how much more did they effectively end up paying to their CEOs, measured as a share of profits, as a result of the change in the tax code?
Some recent media reports on a new academic study by political scientist Agustina S. Paglayan give the impression that the paper’s findings reflect badly on teachers unions. This is a misreading, however, of the study and of its implications. A key issue lost in the press accounts is that the study is, first and foremost, an historical analysis, examining the effects of the expansion of state collective bargaining rights for teachers between 1959 and 1990. Given the historical focus, the study excludes the experience of the last three decades, where the evidence clearly suggests that collective bargaining raises teachers pay.
But, even with respect to just the historical period studied, the paper’s conclusions are much more nuanced than the press reports suggest. A central conclusion, which has been overlooked in media accounts, is the author’s view that the reason that teachers unions might not have been effective in raising expenditures on education (including teachers’ pay) in the early days of expanding collective bargaining rights is because the laws that allowed collective bargaining often simultaneously restricted the ability of public-sector unions to strike. What the law gave with one hand, it often took back with the other. To illustrate the point, the paper shows that in states where public-sector workers had both the right to collective bargaining and the right to strike, collective bargaining did appear to increase expenditures on education.
More recent evidence on the effect of unions on teacher pay
Any analysis of unionized public-sector teachers’ pay needs to separate out two points of comparison: one is a comparison of teachers’ pay with what similar workers earn in the private sector; the other is a comparison between what unionized and non-unionized teachers earn in the public sector.
Last December, the U.S. Department of Labor (DOL) issued a proposal to allow employers to collect their workers’ tips, ostensibly to distribute them more evenly through tip pools. However, the rule was written in such a way that it would have made it legal for employers to simply pocket tips. This would have been a major windfall to restaurant owners and other employers of tipped workers, out of the pockets of people who work for tips. We estimated that if that rule were finalized, workers would lose $5.8 billion a year in tips, with $4.6 billion of that coming from the pockets of women working in tipped jobs.
Because of the overwhelming outcry from workers and allies in response to the proposal, along with excellent investigative journalism that uncovered the administration’s cover-up of its analysis showing the rule would be terrible for workers, DOL came to the table to hammer out a compromise. As a result, last week’s spending bill included a provision that makes it clear that employers may not keep any tips received by their employees, and ramps up the punishment for violations. Those things are huge wins for workers.
The clear next steps for protecting workers in tipped occupations are eliminating the tip credit for minimum wage employers, enforcing one minimum wage for all workers regardless of whether they receive tips, and substantially increasing the federal minimum wage. The rest of this post explains why these next steps are so crucial.
It is not uncommon for servers in restaurants to voluntarily share a portion of their tips with kitchen staff. A provision in the spending bill passed last week allows employers to operate tip pools between tipped workers and “back-of-the-house” or other non-tipped workers. Under the new rules, employers can operate these pools if they pay their tipped workers a base wage of at least the federal minimum wage, which is currently $7.25—i.e. employers cannot operate a tip pool between tipped and non-tipped workers if they use a tip credit to cover any wages up to $7.25 an hour. Non-tipped workers in tip pools must still be paid a base wage of the full minimum wage in their city or state. And, as always, the total pay of tipped workers (base wage plus tips) must be at least the full minimum wage in their city or state.
The Federal Reserve Bank of New York’s search for a new president was a flawed process that should go back to the drawing board
It is now widely recognized that the president of the Federal Reserve Bank of New York is a uniquely powerful economic policymaking position. More crucially, it’s likely the most important such position that is not chosen by President Trump. Given the poor choices Trump has already made in choosing the leadership of the Fed, it is more important than ever to make a great choice for the NY Fed presidency.
The process so far has not been encouraging. Several on a list of highly qualified and diverse candidates were not contacted by the NY Fed. Worse, the leading candidate in today’s news reports wasn’t even being mentioned a week ago. This is not how a transparent and publicly accountable process should work, and it’s why the Fed needs fundamental reform.
This leading candidate is John Williams, the current president of the San Francisco Fed. Hiring the current leader of another regional Fed bank hardly constitutes out-of-the-box thinking for the NY Fed. Further, while Williams has done valuable economic research, his tenure as a policymaker at the Fed is frankly disappointing. He has consistently underestimated how much lower the unemployment rate could sustainably go. In 2012, he even thought that 6.5 percent might be the lower limit on the unemployment rate. Since then, he has modified his estimates, but he has seemingly not been chastened about making firm before-the-fact predictions about how low unemployment could go before sparking accelerating inflation.
The Federal Open Market Committee (FOMC) has lost some of its leading proponents for testing the lower limits of unemployment, and has gained some members who have been deeply wrong in arguing that unemployment should not be allowed to fall as far and fast as it has in recent years. Shifting John Williams from the San Francisco Fed to the NY Fed does nothing to push back on this drift of the FOMC away from valuing genuine full employment.Read more
Congress is trying to use appropriations expand the H-2B temporary worker program—where migrants are exploitable and have few rights—by 73 percent
The GOP-led Congress is aiming to pass an omnibus appropriations bill to fund the federal government before the current temporary spending bill expires on March 23, 2018. Part of the negotiations include a major effort by legislators in both parties—who are being bombarded by corporate lobbyists in the hospitality, seafood, landscaping, and construction industries—to expand the H-2B temporary migrant worker program. We estimate the proposal would increase the number of H-2B workers that employers can hire in lesser-skilled occupations by at least 73 percent, from 66,000 per year to 114,000.
The H-2B program—like other temporary migrant worker programs—is not a work program that brings immigrants to the United States with equal rights and the option to stay permanently. Instead, it is used by employers carve out a lawless zone in the labor market where migrant workers have few workplace rights in practice, because they arrive indebted to labor recruiters and indentured to U.S. employers.
Nevertheless, rather than focusing on the most urgent immigration issues at hand, including a path to citizenship for immigrants who are in danger of becoming undocumented, like DACA recipients, and those who have Temporary Protected Status, Congress is instead focusing on making changes to temporary worker programs via the appropriations process. Congress has done this a number of times in recent years, something that Republican Senate Judiciary Chairman Sen. Chuck Grassley and Democratic Ranking Member Sen. Diane Feinstein came together last year to criticize for usurping the committee’s jurisdiction over immigration legislation. Other Senators have done the same, including Dick Durbin and Bernie Sanders. The New York Times editorial page and migrant worker advocates alike have also criticized this end-around the normal legislative process.
Using the H-2A guestworker program for year-round agricultural jobs would lower wages for farmworkers
The H-2A guestworker program provides an unlimited number of temporary work visas to agricultural employers to hire farmworkers from abroad to fill temporary or seasonal jobs lasting for less than one year. Last year, over 200,000 H-2A jobs were certified by the U.S. Department of Labor (DOL)—the most ever—despite the many abuses and exploitation that continues to occur at the hands of employers and labor recruiters. Members of Congress are currently negotiating and debating the fiscal 2018 omnibus appropriations bill to fund the federal government, and hope to pass it before the current temporary spending bill expires on March 23, 2018. On the table is a proposal to allow employers to use the H-2A program to fill year-round, permanent jobs in agriculture with H-2A workers who have few rights and no path to permanence and citizenship. It was first proposed in July 2017 by Rep. Dan Newhouse (R-WA) but never became law.
We have already explained why making H-2A year-round via appropriations is a bad idea, but one other major consequence that Congress should consider is that it will result in allowing agricultural employers to pay much lower wages to H-2A workers in year-round jobs than they pay to the Americans and immigrants who are currently employed in those jobs.
Making H-2A year-round would expand the scope of H-2A by allowing employers offering year-round employment on dairy, livestock, and poultry and egg farms, as well as in nurseries and greenhouses and other non-seasonal agricultural occupations, to hire H-2A workers—bringing H-2A workers into sectors that offer approximately 260,000 year-round full-time equivalent (FTE) jobs. Table 1 lists some of the main year-round agricultural industries in major agricultural states, accounting for 123,000 of the 260,000 full-time equivalent jobs, and shows how much farmworkers earned annually, on average in 2016 in those occupations (according to the Quarterly Census on Employment and Wages, from DOL).
On Valentine’s Day, a 19 year-old with a legally purchased AR-15 assault rifle stormed into Marjory Stoneman Douglas High School in Parkland, Florida and murdered 14 students, and 3 educators. In Florida, an AR-15 military-style assault rifle is easier to buy than a handgun. Understandably, many of the students who survived the mass shooting and the families of the 17 victims have called for a change in the law, arguing that it shouldn’t be so easy to legally purchase weapons that powerful. I write here not to weigh in on the merits of any given gun law, but to comment on the process of advocating for legislative change, and the challenges at the local level with the preemption laws on the books.
In terms of advocating for a change in federal law, Congress’s ban on AR-15s and other semiautomatic assault weapons expired in 2004, and federal lawmakers have not been able to pass a similar ban since.
In terms of advocating for change in state law, dozens of Florida high school students recently loaded onto buses and drove to the Florida state capital to lobby for a bill banning assault rifles, which was voted down by the state’s House of Representatives.
In terms of advocating for a change in gun laws at the city and county level, the students, families of the victims, or anyone else won’t even have a chance because of Florida’s preemption law. “Preemption” in this context refers to a situation in which a state law is enacted to block a local ordinance from taking effect—or dismantle an existing ordinance.
While payroll employment growth has continued to be more than fast enough to absorb working age population growth as well as workers idled by slack demand in previous years and the unemployment rate is holding at 4.1 percent, other economic indicators such as the labor force participation rate, the prime-age employment-to-population ratio, and wage growth resemble an economy with a fair amount of remaining slack. My attention this jobs day and in the discussion below is wage growth.
Last week, I released a paper on the State of American Wages in 2017, with comparisons to earlier periods as well as analysis by gender, race, and educational attainment. Key findings include a pickup in wages for the lowest wage workers over the last couple of years due in part to more workers finally feeling the effects of the growing economy in their wages plus state-level minimum wage increases occurring in states where about half of all workers reside. On the downsides, much of the 2000s and 2010s have been characterized by growing wage inequality and slow or stagnant wages for many. Black-white wage gaps have worsened over the 17-year period and the bottom 50 percent of college degreed workers have lower wages today than in 2000.
Tomorrow, the latest wage growth numbers from the Current Employment Statistics (CES) will come out. The paper I just referenced primarily examined the wage data found in the Current Population Survey Outgoing Rotation Group (CPS-ORG), which allows wage comparisons across the wage distribution and by demographic characteristics. For a read on the labor market and an assessment about whether wage growth reflects an economy at full employment, it’s important to look at nominal wage growth. What’s clear from both surveys, using different metrics (median versus average and total private versus production/non-supervisory) is that nominal wage growth is still below levels consistent with the Federal Reserve’s inflation target and with estimates of potential productivity growth—a sign that the economy still has considerable slack.
The past year has provided countless examples of the ways in which our nation’s labor and employment laws fail workers. From the #MeToo social media campaign that helped expose that for many women sexual harassment is a daily fact of life in the workplace to a recent report revealing that the vast majority (74 percent) of Uber and Lyft drivers earn less than the minimum wage in their state, it is clear that American workers need policymakers to act to reform the current system of worker protections. That is why stories like the one in Vox today that some congressional lawmakers require unpaid interns to sign broad nondisclosure agreements that may discourage them from speaking out if they experience harassment or encounter other workplace issues are so troubling. How can we expect our elected representatives to legislate effective worker protection measures when they themselves adopt exploitative employment practices?
Congress has a long history of exempting itself from workplace protection measures. When the Fair Labor Standards Act was passed, Congress exempted itself from coverage. When the Civil Rights Act, including Title VII which protected workers from employment discrimination on the basis of race, color, religion, sex, or national origin, was signed into law, Congress again exempted itself from these protections. It was not until 1995 that Congress passed the Congressional Accountability Act, finally extending workplace protections to congressional staff. However, recent reports of congressional settlements surrounding harassment claims have shown that Congress is not holding itself accountable for workplace protections.
In 1967, young black men rioted in over 150 cities, often spurred by overly aggressive policing, not unlike the provocations of recent disturbances. The worst in 1967 were in Newark, after police beat a taxi driver for having a revoked permit, and Detroit, after 82 party-goers were arrested at a peaceful celebration for returning Vietnam War veterans, held at an unlicensed social club.
President Lyndon Johnson appointed a commission to investigate. Chaired by Illinois Governor Otto Kerner (New York City’s mayor John Lindsay was vice-chair), it issued its report 50 years ago today. Publicly available, it was a best-seller, indicting racial discrimination in housing, employment, health care, policing, education, and social services, and attributing the riots to pent-up frustration in low-income black neighborhoods. Residents’ lack of Fambition or effort did not cause these conditions: rather, “[w]hite institutions created [the ghetto], white institutions maintain it, and white society condones it… [and is] essentially responsible for the explosive mixture which has been accumulating in our cities since the end of World War II.”
The report warned that continued racial segregation and discrimination would engender “two societies, one black, one white—separate and unequal.” So little has changed since 1968 that the report remains worth reading as a near-contemporary description of racial inequality.
Of course, not everything about race relations is unchanged. Perhaps most dramatic has been growth of the black middle class, integrated into mainstream corporate leadership, politics, universities, and professions. We’re still far from equality—affirmative action remains a necessity—but such progress was unimaginable in 1968. Today, 23 percent of young adult African Americans have bachelor’s degrees, still considerably below whites’ 42 percent but more than double the black rate 50 years ago.
In the mid-1960s, I assisted in a study of Chicago’s power elite. We identified some 4,000 policymaking positions in the non-financial corporate sector. Not one was held by an African American. The only black executives were at banks and insurance companies serving black neighborhoods. Today, any large corporation would face condemnation, perhaps litigation, if no African American had achieved executive responsibility.
New Federal Reserve Chair Jerome Powell testified before Congress this week, roughly a month after replacing Janet Yellen. The key question many have is whether or not a change in personnel will mark a break with past policy. If it does, and if the Fed starts crediting arguments for raising interest rates that they correctly rejected before, then today’s low unemployment rate might be unfortunately short-lived.
Under Yellen’s leadership, the Fed was notably “dovish” in that it strove to keep monetary policy expansionary with the goal of pushing unemployment down, rather than contractionary in the service of guarding against an outbreak of inflation. Her replacement, Jerome Powell, served on the Fed’s Board of Governors with Yellen between 2012 and early 2018. Powell was by most accounts supportive of the policy path blazed by Yellen, so in that sense a radical change in the Fed’s stance would be surprising. But Yellen wasn’t just a dovish vote on the Fed, she was an intellectual leader in the defense of expansionary monetary policy over the past decade. As a highly respected academic macroeconomist and policymaker, Yellen had the ability and confidence to push back hard on weak arguments about why the Fed should reverse course and begin worrying about containing inflation rather than pushing down unemployment.
One of these weak arguments is that the Fed needs to raise rates faster and sooner so that when the next recession hits, there will be enough “room” to lower them. Proponents of this argument point out that in previous recessions the Fed lowered the short-term “policy” interest rates that it controls by 3–5 percentage points in an effort to restart growth. Today these rates are at 1.5 percent, and, they really can’t go much below zero for any extended period of time. This “zero lower bound” (ZLB) on interest rates is driven by the fact that once these rates hit zero, wealth-holders will just stop demanding bonds and will be happy to hold cash instead. This means that further Fed purchases of bonds to lower rates will have no effect. What hitting the ZLB means for policy is that we could enter the next recession without the ability of the Fed to lower policy rates as far as they have in the past.
While the constraints put on monetary policymaking by the ZLB are real, raising rates now to clear out room for cutting them later remains a silly idea. First, raising rates sooner and further doesn’t just give the Fed more interest rate “room” to fight the next recession, it also makes the next recession more likely. Post-war recessions have largely occurred because of asset market bubbles popping or the Fed raising rates too far and too fast.
An analogy might help point out the absurdity of this. Say that your house is a cool 50 degrees and you hike the thermostat to your desired temperature of 70 degrees. After the heat has been running for a while, the house has warmed to 60 degrees, and your roommate argues you should turn the thermostat off because if the room gets really cold again, you’ll want “room” to warm it by cranking the thermostat up again.
Does this make sense? Of course not. So long as one believes that the economy has not warmed up to its optimal setting, then one should not be using policy tools to cool it back down. Is there a convenient summary measure that can guide us as to whether or not the economy is running hot enough? There are lots, actually, but let’s use the Fed’s own announced measure: 2 percent price inflation. The economy has been running beneath this 2 percent inflation target for years now, and there is little evidence of any acceleration. Further, if one excludes rental prices, then inflation has been even lower. Fighting rent inflation (which occurs due to low supply of housing units relative to demand) by raising interest rates which will curtail home-building would be perverse.
So, the economy is by the Fed’s own definition not running hot enough, yet they’ve already begun raising rates to cool it off, backed in part by arguments that this is necessary because one day they might want to try to heat it back up. This is a terrible way to prepare for the next recession.
There is no starker metric for our unequal age than the stagnation of American wages over the last generation. Since 1973, productivity has grown about 75 percent, while the compensation of the typical worker has grown only about 12 percent. Since 1979, the hourly median wage has grown less than 10 percent in real dollars, or an average annual raise of barely 4 cents. While wages grew for many workers in 2017, wage growth is still far slower—and more unequal—than where it needs to be.
The interactive graphic below shows the change in real (inflation-adjusted) wages by wage decile, with drop-down filters for gender, race, educational attainment, and time period. This affords comparison of the wage gains (or losses) experienced by particular workers, and comparison across the full 1979–2017 span, or its constituent business cycles. The choice of “African-American” and “1979–1989,” for example, charts how black workers fared during the dismal 1980s; the choice of “BA or higher” and “2009–2017” charts how well-educated workers fared during the long recovery from the Great Recession.
There are a lot of moving pieces here—including shifting economic opportunities, changes in educational attainment, policy drifts and shifts, and five recessions that swallow up almost 6 of the 39 years since 1979. But here are four key takeaways:
Ron Blackwell, a friend to EPI since its early days, died on February 25.
Ron had a long career in the labor movement, starting with the Amalgamated Clothing and Textile Workers Union in New York, moving to the AFL-CIO in Washington, D.C. until he retired in 2012.
Raised in Alabama, he was a steadfast defender of the rights of working people and a life-long enemy of economic injustice in its many forms.
He pioneered in the design and management of campaigns to use the financial and pension assets of labor unions as a tool of organizing and collective bargaining.
Having studied economics and political economy at the New School, he understood how elite decisions hidden from the public can destroy efforts by ordinary people to better their lives. His was a relentless voice urging the labor movement to demand a seat at the table of economic policy. He also played an important role in efforts to create international labor solidarity in a world of globalizing capital.
Above all, Ron Blackwell was the rare man of principle who actually had the courage of his convictions. As a young man, he chose to go to prison rather than submit to those who were waging the unjust and terrible war in Vietnam. In his years as a labor advocate, he was quick to spot hypocrisy among political leaders, who—as the late mineworkers’ leader John L. Lewis once put it—“supped at labor’s table and sheltered in labor’s house” but then, “cursed with equal impartiality both labor and its adversaries.”
Ron told it like it was.
EPI, the labor movement, and the country have lost a valiant warrior in the struggle for justice.
Anniversaries of major events are nearly irresistible opportunities to reflect on the past, often with the hope that there has been some progress. So it is this year, 50 years after the Kerner Commission Report on Civil Disorders found systemic inequality and racial discrimination to be at the root of riots across America.
In a new report, Janelle Jones, John Schmitt and I present statistics showing what life was like for African Americans in this country 50 years ago compared to now. That document is a straightforward, unfiltered presentation of the facts, covering a wide range of economic, social, and health outcomes. In the spirit of reflection, I want to use this blog post to focus on racial economic inequality in the labor market, which directly affects approximately 20 million African Americans who get up every day and either go to work or go to find work.
The bottom line is simple. Despite decades of policies, programs, protests and outstanding achievements by African American men and women in many aspects of American life, race far too often remains a deciding factor in the economic status of African Americans relative to whites.
Great strides have been made toward raising educational attainment among African Americans and closing the education gap relative to whites, especially with regard to completing high school. In 1968, just over half (54.4 percent) of African American adults age 25-29 were high school graduates, compared to nearly three-quarters (75.0 percent) of whites. In 2016, 92.3 percent of African American adults age 25-29 were high school graduates with 22.8 percent having gone on to complete a bachelor’s degree or higher (up from 9.1 percent in 1968). Among whites, 95.6 percent are high school graduates and 42.1 percent have a bachelor’s degree or higher (up from 16.2 percent in 1968).
Sen. Hatch’s H-1B bill and other guestworker proposals should be kept out of Senate immigration debate
In the context of this week’s immigration debate in the Senate, Republican Senators will push for the reforms in the Secure and Succeed Act of 2018, which reflect the White House’s policy priorities for immigration. It’s likely, however, that one or more Senators will try to attach legislation to increase the number of temporary migrant workers who lack adequate wage and worker protections onto any bill that emerges. The thrust of any guestworker proposals that may arise will be to widen the essentially lawless zone in the labor market that has been carved out by the proliferation of temporary work visa programs, which put American and permanent immigrant workers into competition with temporary migrants who are denied all opportunity to bargain meaningfully for higher wages. This week’s debate in the Senate should prioritize providing a path to citizenship for DREAMers, not opportunistically expanding the share of workers in America who are not protected by labor standards.
As the Los Angeles Times recently suggested, there may be an attempt to include a bill from Sen. Orrin Hatch (R-Utah) that would triple the number of college-educated temporary migrant workers who are employed in the H-1B visa program—a flawed guestworker program used mainly to outsource jobs in information technology and send high-tech jobs offshore. Hatch’s bill is known as I-Squared, and although Hatch is trying to sell it as an increase in “merit-based” immigration, it is primarily an attempt to increase the number of temporary migrant workers the tech industry can hire at low wages.
There is no question in anyone’s mind that the United States will always need to attract the best and brightest workers from abroad, and many employers claim the H-1B visas is a tool to achieve that. But any migrant workers who enter the U.S. labor market must do so with equal rights, fair pay, and a quick path to permanent residence and citizenship that the worker controls—not the employer. Unfortunately, the H-1B guestworker program fails to meet any of those requirements. Hatch’s I-Squared bill would exacerbate the problems the H-1B program creates by vastly increasing the number of H-1B workers while failing to fix the three main problems with the H-1B program: first, employers are allowed to legally underpay H-1B workers compared to similarly situated U.S. workers; second, employers do not have to recruit U.S. workers before hiring H-1B workers, allowing them to ignore the U.S. workforce altogether; and third, the H-1B program allows employers to replace U.S. workers with much lower-paid H-1B workers—a deplorable practice that has occurred far too many times—and the laid-off workers are often forced to train their own H-1B replacements as a condition of their severance pay.