Profits, wages, and inflation: What’s really going on

If you’re following debates over inflation, you’ve probably read contradictory things in recent weeks about the relationship between it and whether it is workers (labor) or their bosses (capital) who will be able to protect their incomes from rising prices.

For example, some well-known economists have mocked the idea that inflation is related to corporate profiteering. Yet some of the world’s most influential policymakers have expressed concern that inflation could spark an outbreak of excessive wage growth. One of these policymakers essentially pled with workers to moderate their wage demands in coming months in the name of slowing inflation. Finally, a Nobel Prize-winning economist claimed not only that inflation has nothing to do with the distributional conflict between labor and capital, but that even raising the specter of this will make it harder for policymakers to tamp inflation back down.

So what is the real story about profits, wages, and inflation? Simply put, while changes in the relative bargaining power of labor versus capital are not the root cause of the inflationary shock in 2021, this relative bargaining power will crucially determine whether or not inflation sustains momentum throughout 2022 and requires more sharply contractionary macroeconomic policy to slow.

In turn, policy efforts (like, for example, transformative reform to labor law or ramping up anti-trust enforcement) to change the relative bargaining position of labor vis-à-vis capital would be highly desirable for lots of reasons—but they wouldn’t take effect quickly enough to be relevant to the current inflationary episode. Jawboning from policymakers is unlikely to stop any incipient wage-price spiral—but jawboning only workers and not capital owners to stand down in the distributive conflict is particularly perverse.

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Project labor agreements on federal construction projects will benefit nearly 200,000 workers

President Biden recently signed an executive order (EO) requiring project labor agreements on federal construction projects over $35 million, a move that is expected to affect $262 billion in federal construction contracting and improve job quality for nearly 200,000 workers.

Project labor agreements (PLAs) are used primarily in the construction industry to establish the terms of employment for all workers on a project. Generally, PLAs specify workers’ wages and fringe benefits and may include provisions requiring contractors to hire workers through union hiring halls, otherwise establish a unionized workforce, or develop procedures for resolving employment disputes. PLAs often include language that prevents workers from striking during the project while also preventing employers from locking workers out.

PLAs are effective mechanisms for controlling construction costs, ensuring efficient completion of projects, and establishing fair wages and benefits for all workers. PLAs also help ensure worker health and safety protections while providing a unique opportunity for workforce development. These agreements can be written to engage local populations, provide jobs for underrepresented groups, and develop experience for apprentices.

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Inflation and the policy response in 2022

As the inflation debate continues, it’s worth reiterating some important points that policymakers should keep in mind in coming months as they ponder what to do about inflation that emerged last year.

  • The argument that too-generous fiscal relief and recovery efforts played a large role in the 2021 acceleration of inflation by overheating the economy is weak, even after accounting for rapid growth in the last quarter of 2021.
  • The COVID-19 pandemic is the primary factor driving excessive inflation through demand and supply-side distortions. Going forward, the economic distortions imposed by COVID-19 are highly likely to become less extreme in 2022, providing relief on inflation.
  • The worry that inflation “expectations” among workers, households, and businesses will become embedded and keep inflation high is misplaced. What matters more than “expectations” of higher inflation is the leverage workers and firms have to protect their incomes from inflation. For decades this leverage has been entirely one-sided, with workers having very little ability to protect wages against price pressures. This one-sided leverage will stem upward pressure on wages in coming months and this will dampen inflation.
  • Moderate interest rate hikes will not slow inflation by themselves. The benefit of these hikes in convincing households and businesses that inflation is taken seriously by policymakers needs to be weighed against their possible downsides in slowing growth.

Inflation in 2021 was not driven by generalized macroeconomic overheating

Dean Baker recently authored a strong post surveying the evidence about inflation and macroeconomic overheating. I’ll just add one or two points to his argument. In the last quarter of 2021, rapid growth in gross domestic product (GDP) pushed it 3.1% above the level it had reached in the last quarter of 2019 (the last quarter unaffected by COVID-19).

Should this level of GDP have put severe stress on the economy’s ability to produce it without inflation? Not really—inflation was low (and falling) in 2019. The economy’s supply side has been damaged since 2019, but it’s easy to overstate this damage. While employment was down 1.8% in the last quarter of 2021 relative to 2019, total hours worked in the economy is only down 0.7% (and Baker notes in his post that including growth in self-employed hours would reduce this to 0.4%). While some of this is due to people working longer hours than they did pre-pandemic, most of it is due to the fact that the jobs that have yet to return following the COVID-19 shock are much lower-hour jobs than average. Since labor is only about 60% of the inputs into production, the 0.4% decline in economy-side hours would only generate about a 0.2% decline in output, all else equal.

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The unequal toll of COVID-19 on workers

The surge of the Omicron variant in the United States sickened millions, hospitalized young people at record rates, killed Americans at a far higher rate relative to other high-income countries, and led to widespread work absences and societal disruptions.

Household Pulse Survey (HPS) data reveal stark inequities in COVID-19-related outcomes by income. Among working-aged Americans, those with 2019 household incomes less than $25,000 were 3.5 times as likely to report missing an entire week of work mainly due to their own or loved ones’ COVID-19 symptoms, relative to those earning $100,000 or more (Figure). The United States does not collect national COVID-19 surveillance data by income or occupation, so the HPS data are among the best sources for evaluating disparities, although the survey response rate is low.

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Strong job growth despite Omicron shows the strength of this recovery

Below, EPI economists offer their initial insights on the jobs report released this morning. The report showed an increase of 467,000 jobs in January—far exceeding expectations. 

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What to watch on jobs day: Omicron will weigh heavily on the labor market

While the official pandemic recession ended two months after it began, it is clear the pandemic is not behind us, as the Omicron variant has driven a huge uptick in COVID caseloads. On Friday, I’ll be looking for the fingerprints of Omicron on the jobs report, including top-line payroll jobs as well as labor force participation. I’ll also continue to track sector-level job shortfalls, notably the lack of public-sector job growth, and differences in the economic recovery by race and ethnicity. With the release of January data comes annual benchmarking procedures as well: the establishment survey is benchmarked to unemployment insurance tax records and the household survey incorporates new population controls.

The Centers for Disease Control and Prevention (CDC) COVID tracker shows that nearly seven times the number of cases were reported during the January reference week (January 9-15) compared with the December reference week. Average new caseloads exceeded 800,000 in the week ending January 15, the peak of Omicron in the United States. This is nearly five times the peak level during the Delta surge (164,000) and more than three times the peak last winter (250,000). The labor market experienced a slowdown in payroll employment growth during the Delta surge, and that is likely to happen again in January (or even a temporary decline).

The Census Bureau’s Household Pulse Survey also provides striking evidence of what to expect in the January jobs numbers. The number of people not working between the survey periods ending on December 13, 2021 and January 10, 2022 rose by 6.5 million. This dramatic rise is primarily due to a three-fold increase—5.8 million more people—reporting they did not work because they were caring for someone or sick themselves with coronavirus symptoms. Figure A illustrates the dramatic uptick in people not working because they were caring for themselves or someone else in the most recent survey.

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Job Openings and Labor Turnover Survey: Layoffs rate hits historic low while hires and quits declined

Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for December. Read the full Twitter thread here.

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The Biden administration’s Federal Reserve nominees are highly qualified and deserve a fair hearing

The Biden administration has forwarded five nominees for open slots on the Federal Reserve’s Board of Governors: Jerome Powell (nominated for another term as chair of the Board), Lael Brainard (vice chair), Sarah Bloom Raskin (vice chair for financial supervision), Philip Jefferson (governor), and Lisa Cook (governor). Notably, given the poor track record in picking Fed governors that represent the country’s diversity, Jefferson would be just the fourth Black man in the Fed’s 109-year history to serve on the Board and Cook would be the first Black woman. If this slate of candidates is confirmed, it will also be the first time that women hold the majority of seats on the Board of Governors.

This is an excellent slate of nominees, with each having better qualifications than dozens of past nominees and eventual Board governors. Despite this, political opponents of the Biden administration have started a campaign to figure out which of the nominees can be defeated by weakening their candidacy in the run-up to the confirmation process. The organized opposition has mostly settled into a focus on Cook and Raskin.

The opposition to Raskin concentrates on her policy record of regulating the powerful financial sector and seeking to make the Fed center climate change concerns in its policymaking. However, these aren’t weaknesses or flaws in her candidacy, they are strengths. The opposition to Cook is even uglier, deriding her qualifications for the nomination using barely disguised racial code words. The wellspring of much of this opposition also included attacks aimed at Jefferson, but this gross campaign against the Biden slate has clearly decided it’s more strategic to direct attacks about “qualifications” on Cook.

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Up to 390,000 federal contractors will get a raise starting next week

Next week, federal contractors will begin paying workers at least $15 an hour. Pay will rise for up to 390,000 federal contractors, about half of whom are Black or Hispanic (see Table 1). The new rule from the U.S. Department of Labor will also phase out the subminimum wage for tipped workers on federal contracts and continue to increase the federal contract minimum wage in line with inflation.

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Chicago and New York take action to protect domestic workers: A snapshot of state and local enforcement actions across the country

Series: The New Labor Law Enforcers

State attorneys general, district attorneys, and localities like cities are increasingly key players in protecting workers’ rights. This new series by Terri Gerstein provides snapshots of enforcement and other actions to protect workers’ rights by these new and emerging labor law enforcers at the state and local level. Gerstein is an EPI senior fellow and director of the state and local enforcement project at the Harvard Labor and Worklife Program, who has chronicled the growing influence of these new enforcers.  

 Recent cases brought by state and local enforcers address misclassification of workers as independent contractors and wage theft in Washington, D.C. and Illinois. They also enforced paid sick leave laws for domestic workers in New York and prevailing wage laws for construction workers in Massachusetts.

Here’s a snapshot of some enforcement actions at the close of 2021 and dawn of 2022.

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U.S. workers have already been disempowered in the name of fighting inflation: Policymakers should not make it even worse by raising interest rates too aggressively

Earlier this year, debate over the inflation spike in 2021 polarized around the question of whether it was “transitory” or “persistent.” But it turns out that this was the wrong distinction. Instead, what should decide if the Federal Reserve is pushed into raising interest rates to cool off growth and tamp down inflation is whether this inflationary shock will be amplified or dampened in the labor market.

If it’s amplified, this means that wage increases will quickly follow price increases, as workers are able to protect their real (inflation-adjusted) wages from higher prices. Higher wage costs will in turn lead to firms raising prices again to protect their profit margins. This tit-for-tat escalation of wages and prices is what led policymakers to intervene decisively to cut short the famous inflation of the 1970s—sparked by a rise in oil prices but then amplified by these types of labor market dynamics.

If it’s dampened, then wage increases will lag price growth and workers will largely not be able to protect their real wages from the inflationary wave. This will reduce their wages but will also stem pressure for subsequent inflationary waves. The recent shock of price increases will hence be steadily smothered in the labor market, even if these price increases are relatively persistent.  

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Tariff increases did not cause inflation, and their removal would undermine domestic supply chains

An earlier version of this blog appeared in The Hill.

The pronounced inflation uptick in 2021 has attracted enormous attention from both the media and policymakers. While it would be better for working families if inflation were lower, by far the biggest danger this episode poses is the prospect that policymakers will overreact, prescribing a cure that is worse than the disease. One obvious example of a policy overreaction would be a swing toward more-contractionary monetary and fiscal policy, most notably an increase in interest rates.

However, another potentially damaging overreaction to last year’s inflation would be a return to pre-2016 trade policy. Yes, it is true that the Trump administration’s trade policy amounted to little more than unfocused rhetoric. In particular, the Trump administration’s tariffs on steel, aluminum, and other specific products—as well as the general tariffs of up to 25% on more than half of all U.S. imports from China—were treated too often as an end goal rather than a strategic tool to pair with other efforts to restore American competitiveness.

But it is equally true that the pre-Trump status quo in trade policy for decades was deeply damaging to working families and domestic business. Many of those who inflicted this damaging status quo on U.S. workers have tried to leverage the current inflationary episode to roll back all tariffs introduced under the Trump administration in the name of containing inflation. This is a deeply dishonest linkage. Tariffs introduced over the past five years were not large enough, and the timing of them is completely inconsistent with them being a cause—or plausible significant solution—for today’s inflation.Read more

New U.S. Treasury final rule supports state and local spending for an equitable economic recovery

The U.S. Department of the Treasury last week released its final rule for the $350 billion in State and Local Fiscal Relief Funds (SLFRF) provided by the American Rescue Plan Act (ARPA). This rule provides clarity to states and localities, including tribal and territorial governments, on what they can do with the substantial federal resources made available to them through the ARPA. The rule also encourages state and local governments to spend the fiscal relief rapidly and directly, prioritizing economic recovery and equity.

This final rule replaces the interim final rule that has been in place since May 2021, and in this final guidance from Treasury, three new elements stand out. First, the rule expands governments’ ability to use the funds to hire and retain public-sector employees. Second, the rule provides new options to assist low-income workers and families dealing with the economic impact of COVID. Finally, the rule recognizes “the disproportionate impact of the pandemic on people of color,” and adds additional uses for ARPA funds to address inequities exacerbated by the pandemic.

The $350 billion, passed as part of the American Rescue Plan signed into law by President Biden in March 2021, is designed to help state and local governments mitigate the public health and economic impact of COVID. More than $200 billion has already been distributed, with the rest being disbursed starting in May of this year. Recipient governments can use the funds for many purposes, so long as they fall under one of these broad categories:

  • Fighting the pandemic
  • Addressing the economic impacts of the COVID pandemic
  • Replacing lost revenue for state and local governments
  • Providing premium pay for essential workers
  • Strengthening water, sewer, and broadband infrastructure

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The Freedom to Vote Act would boost voter participation and fulfill the goals of the March on Selma

In March 1965, Dr. Martin Luther King Jr., John Lewis, and several other civil rights activists and leaders led thousands of nonviolent demonstrators on a march from Selma to Montgomery, Alabama. This five-day, 54-mile march was conducted in an effort to register Black voters in the South safely and campaign for broader voting rights regardless of race and ethnicity. The Civil Rights Act of 1964—passed only a few months before—prohibited unequal application of voter registration requirements, racial segregation in schools and public accommodations, and employment discrimination. However, the law was inadequately enforced and had done very little to ensure and protect Black people’s right to vote.

The culmination of literacy tests, economic retaliation, and racial terrorism prevented many Black people from registering to vote and fully participating in our democracy, particularly in Southern states. The inexplicable link between brutality and voter suppression is deeply entrenched in American history and has shaped many of the historical events within the civil rights era.

The racial violence and tension that many Black people had experienced daily reached a boiling point during the first attempt at marching from Selma to Montgomery where demonstrators, led by John Lewis and others, were beaten and tear-gassed by state troopers and Ku Klux Klan members, leaving them unable to progress forward.

Infamously known as “Bloody Sunday,” the events of this gruesome demonstration shocked the nation. The fierce outrage led to a federal court order permitting the voting right marchers to finish their journey while under the protection of the National Guard. The events in Selma and the growing public support for the protestors later motivated Congress to pass the Voting Rights Act of 1965 prohibiting racial discrimination in voting and barring voter registration loopholes like poll taxes and literacy tests. Following the passage of the Voting Rights Act, voter registration increased significantly as seen in Figure A.

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December jobs report a tale of two surveys: Payroll survey falls below expectations, but household survey shows strong growth

Below, EPI economists offer their initial insights on the December jobs report released this morning.

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Twenty-one states raised their minimum wages on New Year’s Day: Federal action is still needed

On January 1, minimum wages went up in 21 states. The increases range from a $0.22 inflation adjustment in Michigan to a $1.50 per hour raise in Virginia, the equivalent of an annual increase ranging from $458 to $3,120 for a full-time, full-year minimum wage worker. The updates can be viewed in EPI’s interactive Minimum Wage Tracker and in Figure A and Table 1 below.

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State attorney general takes action to protect workers against COVID-19: A snapshot of state and local enforcement actions across the country 

Series: The New Labor Law Enforcers

State attorneys general, district attorneys, and localities like cities are increasingly key players in protecting workers’ rights. This new series by Terri Gerstein provides snapshots of enforcement and other actions to protect workers’ rights by these new and emerging labor law enforcers at the state and local level. Gerstein is an EPI senior fellow and director of the state and local enforcement project at the Harvard Labor and Worklife Program, who has chronicled the growing influence of these new enforcers.  

Recent cases brought by state and local enforcers address a host of violations: a lack of COVID-19 workplace safety at Amazon; failure to pay freelance workers on time or at all; terminating fast food workers without just cause (now illegal in New York City); misclassifying construction workers as independent contractors instead of as employees; and the consistent lack of justice for victims of wage theft.    

Here’s a snapshot of some enforcement actions across the country at the end of 2021: 

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What to watch on jobs day: A strong finish to 2021, but Omicron’s impact looms

In an unprecedented change, the Bureau of Labor Statistics (BLS) released the monthly Job Openings and Labor Turnover Survey (JOLTS) the same week as the monthly employment situation report. Given this new release schedule, I’m going to talk about what we learned from this week’s JOLTS report, which provides data for the full month of November (or the end of November, depending on the specific measure) as a preview for the jobs day release on Friday, because the reference week for Friday’s numbers is shortly after at December 5-11. This means that the rapid Omicron variant surge in the United States will not affect the trends released on Friday, as job growth is expected to approach 7 million for 2021 as a whole.

The JOLTS report for November continued to show high levels of churn in the labor market and strong net job growth. Job openings ticked down a bit, while hires ticked up and quits hit another series high. The media has focused on the high quits rate, but what’s often missing from that coverage is that workers who are quitting their jobs aren’t dropping out of the labor force, they are quitting to take other jobs. Hiring continues to outpace the number of quits, and the labor force continues to claw its way back after a huge drop in the spring of 2020. While the majority of job losses added to the ranks of the unemployed (+17.4 million), the labor force fell by nearly 8 million workers in March and April 2020 and has regained about 70% of those losses since then, including an increase of 1.8 million over the last nine months, when the quits rate has been so high.

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More worker power is the only sure path to safe work and pandemic recovery

Trapped at work during an intense storm that generated multiple tornadoes, six Amazon workers in Illinois and eight workers at a Kentucky candle factory died tragic, preventable deaths at the end of 2021. Their deaths brought brief visibility and attention to the reality that unless workers have a union, many lack the power to refuse unsafe work even in the face of extreme hazards.

As we enter year three of the COVID-19 pandemic, there likewise remains no refuge from the ever-present hazard of coronavirus exposure for millions of front-line workers whose jobs often require in-person work, long hours in unventilated spaces, frequent contact with co-workers or the public, and no guarantee of paid leave or health insurance.

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Job Openings and Labor Turnover Survey: Quits hit new high, but hiring was even higher in November

Below, EPI economists offer their initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for November. 

From EPI senior economist, Elise Gould (@eliselgould):

Read the full Twitter thread here.

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States are sitting on American Rescue Plan funds that could help against the Omicron variant

The Omicron variant of COVID is surging throughout the world, including in the United States, which is still being hit hard by the Delta variant, too. New cases in the United States are up more than 20% from two weeks prior.

There is strong evidence that financial challenges for low-wage workers are both reducing vaccination rates and hindering the success of COVID mitigation strategies. With soaring budget surpluses and plenty of unspent American Rescue Plan Act (ARPA) funding available, states should invest in paid sick and family leave, financial support to low-wage workers, and active vaccination efforts to protect lives and public health.

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An economic recovery for whom?: Black women’s employment gaps show important differences in recovery rates

Public discussions about the U.S. economic recovery fail to adequately portray the vastly uneven recovery that has been occurring since pandemic shutdowns began. Black women, who are pushed to the periphery of policymaking priorities, are among those whose experiences are most obscured by headline statistics.

The employment-to-population ratio (EPOP) of Black women in their prime working years (ages 25 to 54) in the past year is still 3.4 percentage points below their rate one year before the pandemic began, compared with 2.3 percentage points for all other women and 1.9 percentage points for white women. There are currently roughly 257,700 fewer employed prime-age Black women than a year before the pandemic. If Black women’s EPOP remained at their pre-pandemic level, there would over 312,500 more employed Black women due to population growth. Furthermore, the employment gap varies significantly across the country’s nine Census divisions. Black women in the Mountain, New England, and East North Central divisions suffer the biggest gaps in their employment ratios, ranging from an astonishing 10.7 percentage points in the Mountain division to 4.9 percentage points in the East North Central division.

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EPI’s top charts of 2021

The economic fallout from the COVID-19 pandemic exposed a range of stark inequalities in American society. Besides highlighting these inequalities, EPI’s research over the past year has identified the clear fingerprints of intentional policy decisions in driving the inequalities.

Building a better and fairer economy in the pandemic’s wake will require a fundamental reorientation of economic policy along many dimensions. While 2021 has seen a decent start in some of this reorientation, much more remains to be done. Here are the charts that we selected as our top ones of 2021.

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OSHA vaccine-or-test mandate is smart public policy

The Occupational Safety and Health Administration (OSHA) has proposed an emergency temporary standard (ETS) for employers to cope with the health dangers posed by COVID-19. The centerpiece of the ETS is a vaccine-or-test mandate for employees working at firms with over 100 employees to be vaccinated against COVID-19. The mandate is good public policy: it will reduce deaths and hospitalizations, and it will also increase economic growth and reduce the main inflationary pressures facing the U.S. economy.

The proposed ETS has spurred a large legal battle and its eventual fate is uncertain, even though exemptions for religious and health reasons are possible, and a version of these standards is already in effect for federal government employees, government contractors, and health care workers. In early November, the U.S. Court of Appeals for the Fifth Circuit stayed the ETS pending judicial review. However, over this past weekend, the stay was removed by the court with current jurisdiction over the case (the U.S. Court of Appeals for the Sixth Circuit).

The lifting of the ETS stay is welcome news. The vaccine-or-test mandate is a key plank in an effective public health response to the continuing havoc wreaked by COVID-19. For example, a recent paper examining the introduction of vaccine mandates at the provincial level in Canada, France, and Germany found “that the announcement of a mandate is associated with a rapid and significant surge in new vaccinations (more than 60% increase in weekly first doses)…” Higher vaccination rates will contribute meaningfully to reducing deaths and hospitalizations from COVID-19.

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Top five EPI blog posts of 2021

In 2021, many readers were looking to make sense of worries around potential labor shortages, despite little evidence that shortages in leisure and hospitality that popped up would spill over into the rest of the economy.

Aside from interest in labor shortages, what also got the attention of our readers was a post on how to fix the H-1B visa program, an important program that allows U.S. employers to hire college-educated migrant workers.

In addition, we saw a focus on the importance of state-level policy change amid federal inaction on a number of issues. Some states raised their own minimum wage above the federal level, included undocumented immigrants in critical pandemic aid, and extended unemployment benefits to school workers during the summer.

Here’s a countdown of the five most-read EPI blog posts in 2021. 

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Top EPI reports of 2021 focused on economic injustice and its remedies

As the nation pivoted to recovery, readers sought information on ways to remedy the economic injustices laid bare by the pandemic. Given the heavy burden borne by low-wage front-line workers, it is no surprise that raising wages, boosting worker power, and scrutinizing excessive compensation of people at the top were highest on the reading list. Here’s a countdown of EPI’s most-read reports in 2021.

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Wage inequality continued to increase in 2020: Top 1.0% of earners see wages up 179% since 1979 while share of wages for bottom 90% hits new low

Key numbers:

  • In 2020, annual wages rose fastest for the top 1.0% of earners (up 7.3%) and top 0.1% (up 9.9%) while those in the bottom 90% saw wages grow by just 1.7%.
  • The top 1.0% earned 13.8% of all wages in 2020, up from 7.3% in 1979.
  • The bottom 90% received just 60.2% of all wages in 2020, the lowest share since data began in 1937 and far lower than the 69.8% share in 1979.
  • Over the 1979–2020 period:
    • Wages for the top 1.0% and top 0.1% skyrocketed by 179.3% and 389.1%, respectively.
    • Wages for the bottom 90% grew just 28.2%.

Newly available wage data from the Social Security Administration allow us to analyze wage trends for the top 1.0% and other very high earners as well as for the bottom 90% during 2020. The upward distribution of wages from the bottom 90% to the top 1.0% that was evident over the period from 1979 to 2019 was especially strong in the 2020 pandemic year, yielding historically high wage levels and shares of all wages for the top 1.0% and 0.1%. Correspondingly, the share of wages earned by the bottom 95% fell in 2020.

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Job openings rose and quits fell in Job Openings and Labor Turnover Survey for October

Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for October. Read the full Twitter thread here.

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State attorney general addresses extreme underpayment of immigrant detainees: A snapshot of state and local enforcement actions to protect workers

Series: The New Labor Law Enforcers

State attorneys general, district attorneys, and localities like cities are increasingly key players in protecting workers’ rights. This new series by Terri Gerstein provides snapshots of enforcement and other actions to protect workers’ rights by these new and emerging labor law enforcers at the state and local level. Gerstein is an EPI senior fellow and director of the state and local enforcement project at the Harvard Labor and Worklife Program, who has chronicled the growing influence of these new enforcers.  

Recent cases brought by state and local enforcers address a host of violations. These include extreme underpayment of immigrant detainees; failure to pay overtime or provide paid sick leave to home health aides; unsafe working conditions at Amazon; failure to provide hotel workers with advance notice of a jobsite closure; and underpayment of construction workers on a public university building. State and local enforcers also weighed in on federal policy issues, sending a letter to the Department of Homeland Security (DHS) about how DHS enforcement could facilitate labor protections, and announcing the resolution of a lawsuit challenging a Trump-era rule weakening tipped workers’ rights. 

Here’s a snapshot of some enforcement actions across the country:

Protecting the labor rights of immigrant detainees in Washington: The Washington State Attorney General’s Office in late October obtained a unanimous federal jury verdict determining that GEO Group, a for-profit prison company, violated state minimum wage laws by paying immigrant detainees as little as $1/day. The company owes workers over $17 million in back wages, plus $5.9 million in unjust enrichment restitution, for a total exceeding $23 million.

Ensuring paid sick leave and overtime pay for 12,000 home health aides in New York: On November 16, the New York State Attorney General and the New York City Department of Consumer and Worker Protection jointly announced an agreement resulting in recovery of up to $18 million for 12,000 home health aides. The case involved two large home health agencies that underpaid workers and failed to provide required paid sick leave. The agencies were jointly owned and operated as a single enterprise but failed to combine all hours worked (for both agencies) for purposes of calculating overtime pay.

Ensuring that Amazon notifies workers and public health agencies of COVID-19 cases in California: The California State Attorney General on November 15 announced a stipulated judgment with Amazon, based on the AG’s complaint alleging that the company failed to notify warehouse workers and local health agencies of COVID-19 case numbers. The judgment requires Amazon to modify its notifications to workers and local health agencies, submit to monitoring about these practices, and pay $500,000.

Recovering restitution for New York hotel workers laid off without required warning: On October 27, the New York State Attorney General announced the recovery of $2.7 million for 250 Westchester hotel workers who were laid off without the notice required by the state’s Worker Adjustment and Retaining Act (WARN Act), which requires employers with 50 or more employees to give 90 days of notice to workers and to the state labor department before a mass layoff.

Criminally prosecuting wage theft in Maryland: On November 5, the Maryland Attorney General announced the guilty plea of a labor broker in the office’s first criminal labor case. Workers performed public construction on a state university building and the payroll records appeared to be compliant with prevailing wage laws. But in reality, workers were required to kick back money to the labor broker each week. (Prevailing wage laws require contractors on government construction projects to pay workers on those projects at a rate higher than minimum wage, specifically, the wage and benefits that are commonly paid in the region for a given type of work. These laws ensure that contractors cannot gain an unfair advantage in bidding for government contracts by paying sub-par wages.)        

Advocating for workers in federal policy: On November 15, a coalition of 11 attorneys general and eight local labor enforcement agencies and prosecutors sent a letter to the Department of Homeland Security (DHS) supporting the agency’s plan to change its approach to worksite enforcement to support labor rights, and recommending changes to DHS policies and practices to facilitate the ability of state and local labor officials to enforce workplace laws. The letter was in response to a recent DHS memorandum to Immigration and Customs Enforcement (ICE), Customs and Border Protection (CBP), and U.S. Citizenship and Immigration Services (USCIS) calling on them to adopt practices and policies to deliver more severe consequences to exploitative employers and increase workers’ willingness to report violations of worker protection laws.

Lastly, on November 16, the attorneys general of Pennsylvania and Illinois announced the stipulated dismissal of a lawsuit filed by a multi-state attorney general coalition against the U.S. Department of Labor challenging a Trump-era rule that would have allowed employers to pay workers a lower “tipped” minimum wage for significant time spent doing non-tipped work. A new Biden administration regulation adopts the 80/20 rule, under which workers can be paid the tipped minimum wage only for tasks that directly support tipped work and take up no more than 20% of a worker’s time. In other words, the new regulation allows payment of the lower tipped wage only when the vast majority of their work generates tips. The new regulation removes the need for the attorney general lawsuit challenging the prior rule.  

Jobs report tells two different stories of the November labor market

Below, EPI economists offer their initial insights on the November jobs report released this morning.

From EPI senior economist, Elise Gould (@eliselgould):

Read the full Twitter thread here.

 

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