A record share of earnings was not subject to Social Security taxes in 2021: Inequality’s undermining of Social Security has accelerated
Social Security payroll taxes are not collected on earnings over a set cap. In 2021, this cap was $142,800, so workers making more than this enjoyed the benefit of zero Social Security taxes on all earnings in excess of this cap.
However, rising income inequality is skewing this tax structure even further to the benefit of top earners and diminishing funding for the crucial retirement program so many Americans rely on.
Social Security’s payroll tax—of which employees pay 6.2% and employers 6.2% each—has a cap that rises with growth in the national average wage index compiled by the Social Security Administration (SSA). In 2023, for example, the cap is set at $160,200. But since wage growth for top earners continues to outpace average wage growth, a growing share of total earnings is spilling over the cap and escaping taxation, eroding Social Security revenues.
Significant reforms to Social Security made in 1983 set the cap at a level so that 90% of all earnings would be subject to taxes. Over time, rising inequality meant that this share shrank as more earnings for higher-wage workers spilled over the cap. In 2020 and 2021, the share of earnings subject to Social Security taxes hit the lowest levels since before the 1983 reform. In fact, by 2021, the share of earnings subject to Social Security taxes was at the lowest level in nearly 50 years (since 1972).
The Department of Homeland Security took a positive step by clarifying and streamlining the process to protect migrant workers in labor disputes
Today, the U.S. Department of Homeland Security (DHS) announced a streamlined process that provides clarity on how migrant workers who are victims of, and witnesses to, labor and employment violations can come forward to request temporary protections, including protection from deportation through deferred action and employment authorization. This is a positive step that will protect the rights of workers to be treated and paid fairly and to organize and join unions, and allow them to assist labor standards enforcement agencies with their investigations.
EPI has joined hundreds of other immigrant and worker rights organizations to call on DHS to clarify the process for how migrant workers engaged in labor disputes can request status protections. This will help workers and whistleblowers overcome their very rational fears about coming forward to report labor and workplace violations. EPI has also called for DHS to grant deferred action and parole to migrant workers in labor disputes with more frequency and regularity across a broad range of disputes, and in response to a broad swath of labor and workplace violations. This action by DHS deserves praise, and I look forward to its swift implementation.
Workers are 46% more likely to make below $15 an hour in states paying only the federal minimum wage
The crisis of low pay is widespread throughout the United States and will remain so until federal and state policymakers prioritize the economic hardships of low-wage workers. Even after the rapid inflation of the past 18 months and the recent unprecedented wage growth for lower-wage workers, 21 million workers are still paid less than $15 per hour.
State and local governments should use ARPA pandemic funds in 2023 to rebuild the public sector and support working families and children
The American Rescue Plan Act (ARPA) of 2021 created a $350 billion state and local fund to help fight the pandemic and support an economic recovery. Sadly, more than $150 billion remains unspent and is sorely needed to bolster public-sector employment and the care economy.
The ARPA dollars earmarked as part of the State and Local Fiscal Recovery Fund (SLFRF) have fueled transformative investments across the country, but there’s more to be done now.
As 2023 begins, state and local governments should prioritize spending relief funds on three critical areas that are incredibly important for the welfare of children and families:
- rebuilding the public sector
- expanding access to paid leave
- bolstering our systems of care through increasing access to quality child care and elder care, and supporting the workers who perform that work.
Job growth strong in December as wage growth slows
Below, EPI economists offer their initial insights on the jobs report released this morning, which showed 223,000 jobs added in December and wage growth slowing.
Proposed FTC rule would ban noncompete agreements and empower workers
Today, the U.S. Federal Trade Commission (FTC) released a proposed rule that, if finalized, would ban noncompete agreements. EPI research has found that at least 36 million workers—27.8% of the private-sector workforce—are required to enter noncompete agreements, which are employment provisions that ban workers at one company from working for, or starting, a competing business within a certain period of time after leaving a job.
In response, EPI president Heidi Shierholz shared a Twitter thread applauding the proposed rule.
From EPI president, Heidi Shierholz (@hshierholz):
This morning the @FTC released a proposed rule that, if finalized, will ban noncompete agreements. It is REALLY good. 1/ https://t.co/KlnlFHzIjS
— Heidi Shierholz (@hshierholz) January 5, 2023
The research on this is clear. Noncompetes are ubiquitous, they reduce wages, keep workers from finding better opportunities, and reduce the formation of new firms. 3/ https://t.co/NsnAmuwkkY
— Heidi Shierholz (@hshierholz) January 5, 2023
In other words, noncompetes are about reducing competition, fullstop. That’s bad for workers and bad for consumers. This rule would be an important step in creating an economy that works for everyone. 5/ https://t.co/HT8Mjc3NsY
— Heidi Shierholz (@hshierholz) January 5, 2023
Job openings remain significantly lower than 2022 peak
Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for November. Read the full Twitter thread here.
While not much changed in the JOLTS report for November, when we benchmark against latest peaks and troughs, we can see how much these labor market metrics have moderated over the last two years. Job openings and hires are down about 12% from their peaks earlier in 2022. pic.twitter.com/V5ueoVLHFl
— Elise Gould (@eliselgould) January 4, 2023
More than 8 million workers will get a raise on New Year’s Day: 23 states and D.C. will see minimum wage hikes ranging from $0.23 to $1.50 an hour
On January 1, 23 states and Washington, D.C. will increase their minimum wages, raising pay for an estimated 8.4 million workers across the country.1 In total, workers’ wages will increase by more than $5 billion, with average annual raises for affected full-time workers ranging from $150 in Michigan to $937 in Delaware. In addition, 27 cities and counties will increase their minimum wages on January 1, adding to the number of workers likely to see increased earnings.
The state with the stingiest increase is Michigan with a 23-cent raise bringing the total to $10.10 an hour, while the biggest hike of $1.50 an hour is in Nebraska, raising the rate to $10.50 an hour.2 Washington, D.C. will not increase its regular minimum wage, but will increase its tipped minimum wage by 65 cents to $6.00 an hour as a result of a ballot measure to eliminate the tipped minimum wage by 2027. When the New Year’s celebrations die down, Washington will be the state with the highest minimum wage of $15.74 an hour.
Proposed New York state minimum wage legislation would boost wages for nearly 2.9 million workers: Minimum wages would range by region from $20 to $21.25 per hour by 2026
Key takeaways:
- Proposed Raise Up New York legislation, sponsored by State Senator Jessica Ramos and Assembly Member Latoya Joyner, would raise the minimum wage to $21.25 an hour in New York City and suburban Nassau, Westchester, and Suffolk counties by 2026. It would also raise upstate New York’s minimum wage to $20 an hour by 2026.
- Starting in 2027, upstate New York would catch up to the statewide wage, and both would be adjusted each year to keep up with rising consumer prices and worker productivity.
- We find that nearly 2.9 million workers—32% of the state’s workforce—would receive raises averaging $3,307 a year.
- These minimum wage increases would be a vital support for low-wage workers in one of the most expensive states in the nation and arrive at a time when the purchasing power of workers’ wages has been eroded rapidly by recent price increases.
Updated minimum wage legislation in the New York State Senate and Assembly (S3062D/A7503C) would secure much-needed wage increases for almost 2.9 million workers throughout the state. The proposed Raise Up New York legislation—which would index annual statewide increases to inflation and labor productivity—would help protect workers’ economic security as prices rise, and prevent inequality from widening as the economy grows.
A fair way of calculating the minimum wage
Currently, New York has distinct minimum wage schedules for three different regions in the state: New York City, the suburban counties of Nassau, Westchester, and Suffolk, and the remainder of upstate New York. As shown in Table 1, New York City’s minimum wage is $15 per hour, where it has stood since 2018. Nassau, Westchester, and Suffolk counties’ minimum wage reached $15 per hour at the end of 2021, while the minimum wage for the rest of the state is currently $13.20 with scheduled annual increases that will track nominal labor productivity (real productivity plus inflation) until it eventually reaches $15.00 per hour.
The proposed Raise Up New York legislation would increase the minimum wage for New York City and Nassau, Westchester, and Suffolk counties to $21.25 through 2026, and then increase the minimum wage annually by nominal labor productivity. The tipped minimum wage would also increase while remaining two-thirds of the regular minimum wage as stipulated in New York law.1 The minimum wage for the rest of the state would reach $20.00 an hour in 2026 before catching up to NYC and the suburban counties in 2027.2 The inflation and labor productivity adjustments would follow the same formula that New York has already been using for state minimum wage increases in recent years.
Beyond the numbers: What teaching shortages look like in practice
In a recent report, we reviewed the size and scope of the national teacher shortage using data from a wide range of public and private sources, including the Bureau of Labor Statistics, the National Center for Education Statistics, the RAND Corporation, and others. The available data consistently point to a large and growing problem of teacher vacancies that looks unlikely to be filled without substantial efforts to increase job quality for teachers.
But in pulling together our report, we realized that the statistics we presented don’t fully capture what shortages actually look like—in practice—for school districts, teachers, and students. To convey at least a part of that missing texture, we’ve pulled together some recent journalistic and more granular accounts of how state and local school education officials have responded to the long-term rise in teacher vacancies. Unfortunately, almost all of these have proved to be less than ideal for teachers and students.