Year one of the Trump administration: Normalizing itself by working for the top 1 percent

Tomorrow, President Trump is set to deliver his first State of the Union speech, in which he will likely provide a triumphalist account of the economic policy changes made during the first year of his presidency. But despite big talk on the campaign trail about how he would stand up for the forgotten working man (for Trump, it was always men who were left behind), the first year of the Trump presidency has been no triumph for typical American workers. Instead the big winners over the past year have been the already rich.

This really shouldn’t come as a surprise. Trump’s was crystal clear in his inaugural address about who he considers the cause of American workers’ disempowerment: foreigners. This diagnosis is stunning not just in how wrong and bigoted it is, but how cynically it attempts to distract from the privileged group that really was reaping gains that should have been broadly shared—the top 1 percent and their enablers. His agenda of continuing the upward redistribution of income to this top 1 percent while scapegoating immigrants and allegedly nefarious foreign governments is essentially the orthodoxy among the Republican Congressional majority, and it will do nothing to help America’s workers.

The cynicism is clearest when considering the signature piece of legislation signed by Trump, the Tax Cuts and Jobs Act (TCJA). The TCJA provides a number of temporary tax cuts to households, most of which will accrue to those at the top of the income distribution. But it saves its permanent tax cuts for the nation’s corporations, whose profits eventually flow overwhelmingly to the richest households in America. By 2027, when the household tax cuts have expired but the corporate tax cuts remain, the top 1 percent will see 83 percent of the gains from the TCJA. Corporations have been so giddy about the windfall they’ve reaped from the TCJA that they’ve mounted an absurdly transparent public relations campaign on its behalf, claiming that every bonus and wage increase they have bestowed since its passage was somehow the result of it—even those that occurred before the TCJA actually took effect. This is, needless to say, not how economics argues that tax cuts can potentially boost wages. It’s also important to note that in any given year about half of all workers see raises, and nearly 40 percent receive bonuses. In short, it is extremely likely that not a single worker who wasn’t a high-placed CEO or corporate manager has seen a raise because of the TCJA. And if they got a bonus this year because of the TCJA, it was a likely a one-time attempt by their employer to sneak in a deductible expense before the tax cuts made these deductions less profitable, and no future TCJA-linked bonuses will be seen again.

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White House framework calls for a vast increase in immigration enforcement on the backs of DREAMers, while only legalizing 16 percent of the undocumented population

Yesterday the White House one-page framework for a legislative deal to provide a permanent immigration status to DACA recipients was made public, which is in addition to the four-page memo released on January 9 that included the Department of Homeland Security’s priorities for an “immigration deal.” The new one-page memo includes a long list of far-reaching demands to “reform” the immigration system, in exchange for remedying the crisis that President Trump himself imposed on the nearly 700,000 immigrants who were brought to the United States as children by their parents, and who voluntarily availed themselves to the U.S. government after they were promised that they would be protected and not deported by the Obama administration.

President Trump’s latest demands for major changes to the U.S. immigration system include additional legal authority to deport unauthorized immigrants, $25 billion in new funding for more border security and immigration enforcement agents, an end to the diversity visa program, and cuts to permanent immigrant visas for family reunification, among other things. All of this would be in exchange for putting up to 1.8 million DACA recipients and DREAM Act-eligible immigrants on a path to citizenship.

It is notable that the Trump administration is willing to extend the possibility of legalization and citizenship beyond just the current 700,000 DACA recipients, but doing so would still only legalize 16 percent of the total unauthorized immigrant population (1.8 million out of 11.3 million). DACA recipients and potential DREAMers themselves have made it clear that they reject a path to citizenship if it means that their parents and the millions of unauthorized immigrants left behind will be terrorized through a vastly expanded national deportation apparatus and additional border militarization, plus sharp cuts to future immigration levels.

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Lessons from today’s GDP report: Long-expected rebound in productivity finally seems to be happening, and no reason for Fed to raise rates in their next meeting

The Bureau of Economic Analysis (BEA) reported this morning that gross domestic product (GDP—the widest measure of economic activity) grew at a 2.6 percent annualized rate in the last quarter of 2017. This was down slightly from the 3.2 percent growth rate of the third quarter of 2017.

Today’s data also lets us examine how the economy grew over the year that ended in December 2017. Between the end of 2016 and the end of 2017, the economy grew by 2.5 percent. This is a faster rate of growth than what prevailed in either 2015 (2.0 percent) or 2016 (1.8 percent), but it is far from unprecedented. Growth was faster in both 2013 and 2014, for example (2.7 percent growth in both of those years).

Importantly, the recent pickup in GDP growth is largely the result of faster productivity growth. Employment growth actually slowed in 2017 while output growth rose, which implies a pickup in productivity (the amount of economic output generated in an average hour of work). As I wrote almost a year ago, this pickup in productivity growth should not come as a surprise—productivity growth has been extraordinarily slow in recent years but it generally reverts to long-run averages. Further, the source of recent productivity growth weakness was clear—it was a continuing casualty of the enormous shortfall of demand caused by the Great Recession and its subsequent slow recovery. As the economy worked off this demand shortfall, it was always quite likely that a rebound in productivity growth would follow.

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Davos is Trump’s kind of town

The global punditry is all a twitter this week with the prospect of Donald Trump going to Davos—the chic winter gathering place of the world’s rich and powerful.

The media narrative is that this will be a titanic clash of opposites. Populist, “America First” Trump confronting the high-minded capitalist builders of the global economy.

It’s going to be a hell of a show,” a Vox writer assures us. “Fox in the Globalist Henhouse?” headlines the New York Times. The internationalist intellectual Niall Ferguson explains that: “Trump is as loathed by the elites of Western Europe as he is by the elites of Manhattan.”

No doubt many of Manhattan’s rich and powerful would agree with Trump’s Secretary of State (the former CEO of Exxon) that the president is a moron. But so what? Rather than drain the Washington swamp he pumped it even more full of Wall Street financiers, international business interests and lobbyists from virtually every sleazebag business interest in the country.

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The TCJA, combined with a cynical PR campaign from the GOP and the corporate world, could hit American families hard in the 2019 tax season

Republican congressional leaders and President Trump have made loud claims about how great the recently passed Tax Cuts and Jobs Act (TCJA) will be for typical American families. When will these families be able to conclusively judge the truth of these claims? Not for a long while. The changes from the new tax law took effect on January 1. Companies now have to figure out how much to change workers’ tax withholdings to comply with the new law. To do that, they need guidance from the Internal Revenue Service (IRS).

But this is the same IRS that has seen its budget cut by 18 percent and its workforce cut by 14 percent since 2010. And it’s the same IRS that would send home over half of its workforce if the government shuts down again. While a deal was reached to end the current shutdown, that deal only funds the government through February 8th. All as the 2018 tax filing system ramps up and 2017 tax returns flood into the agency.

Typically, this shouldn’t be much of an issue. A shutdown would usually only push back the timing of withholding changes. The IRS would understandably take more time to issue guidance, and companies would simply implement the new withholdings later in the year.

But the Trump administration has already been pressuring the IRS to aim for speed over accuracy in new withholdings. Further, they would love companies to err on the side of withholding too little and boosting workers’ take-home pay, even if this meant that these workers have to make large payments back to the government in 2019. After all, the salience of the TCJA is as high as it’s going to be, and this administration is not shy at all about putting political expedience over smart policy. And telling workers that the tax cut is already working for them is awfully expedient in a mid-term election year. If the administration continues to focus on speed, then what was already a risk of under-withholding would be augmented by a government shutdown.

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Overall union membership rises in 2017, union density holds steady

Newly released Bureau of Labor Statistics data on union membership trends show that union membership as a share of overall employment held steady at 10.7 percent in 2017, with essentially stable membership rates in both the private (6.4 or 6.5 percent) and public (34.4 percent) sectors.

Union membership gains among men offset continued losses among women last year. But, it is important to view these different trends by gender within historical context: union membership in 2017 was roughly equivalent among men (11.4 percent) as women (10.0 percent), compared to 1979 when men were more than twice as likely as women to be union members and comprised 69 percent of union members.

It is difficult to use one year changes in union membership trends to assess underlying dynamics. For one, the small samples involved for particular subgroups produce year-to-year volatility that should not be mistaken for a trend. Second, any change in union density can result from many different factors including the pattern of overall employment growth (whether sectors or occupations that are more heavily union grow faster or slower than average), the success or failure of union organizing drives, the scale of union organizing, changes in workers’ desire for union membership (i.e., demand for collective bargaining), and other factors. An understanding of the dynamics of union membership and representation requires a long-term analysis of detailed trends.

Nevertheless, it is worth squeezing out what is plausibly interesting in the most recent data:

  • Union membership (according to the BLS release) rose by 262,000 in 2017, more than the 173,000 additional workers covered by a collective bargaining agreement (hereafter referred to as “coverage”). See Table 1 (which relies on tabulations of the underlying survey data because BLS does not provide gender breakdowns within sectors). The greater growth in union membership than coverage was driven by developments in the private sector where membership growth was triple (164,000) that of the growth of coverage (53,000), centered in professional and service occupations.
Table 1

Union membership and collective bargaining coverage: By sector, for men and women, annual 2016-17

 Employment Rates
Sector  All  Union membership  Collective bargaining coverage Union membership Collective bargaining coverage
Change, 2016 to 2017
All industries 1,781,023 261,891 171,556 0.1% 0.0%
Men 870,382 282,105 230,065 0.3% 0.2%
Women 910,642 (20,214) (58,509) -0.2% -0.2%
Private sector all 1,499,242 164,069 52,852 0.1% 0.0%
Men 670,042 214,632 120,916 0.3% 0.1%
Women 829,199 (50,563) (68,063) -0.2% -0.2%
Public sector zll 281,782 97,822 118,704 0.0% 0.1%
Men 200,339 67,473 109,150 0.0% 0.4%
Women 81,443 30,349 9,554 0.0% -0.2%

Note: Changes in rates are percentage point changes.

Source: Economic Policy Institute, Analysis of Current Population Survey data.

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  • Union membership became more common among men: some 32 percent of the net increase in male employment in 2017 went to men who were union members, leading union membership to rise from 11.2 to 11.4 percent of all male employment. Growth of union membership for men was strong in both the public and private sectors and for Hispanic and for non-Hispanic white men.
  • Correspondingly, union membership dipped slightly among women because women’s union membership did not rise in the private sector although employment overall did rise—private sector employment growth for women was concentrated in nonunion sectors. Union membership growth, however, was strong among Hispanic women.
Table 2

Change in union membership and union coverage rates by gender, 2014-2017

Rates
2014 2015 2016 2017
All
Union membership 11.1 11.1 10.7 10.7
Bargaining coverage 12.3 12.3 12.0 11.9
Men
Union membership 11.7 11.5 11.2 11.4
Bargaining coverage 12.8 12.6 12.3 12.5
Women
Union membership 10.5 10.6 10.2 10.0
Bargaining coverage 11.7 11.9 11.6 11.3

Source: Economic Policy Institute analysis of Bureau of Labor Statistics

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  • Union membership grew in manufacturing despite an overall decline in manufacturing employment. Union membership was also strong in the wholesale and retail sectors, in the public sector and in information sector (where union membership density rose 1.9 percentage points).
  • Union membership density was stable or grew in a number of Southern states: Arkansas, Florida, Georgia, Louisiana, and Virginia with especially strong growth in Texas.

Unrigging the economy to grow the middle class: Pennsylvania takes the lead on overtime

Yesterday, Pennsylvania Governor Tom Wolf became the first state executive to take action to provide workers overtime protections that help guarantee fair pay for hard work, since a 2016 federal rule to do this at the national level was blocked in the courts by corporate interests. As part of his “Jobs That Pay” initiative, Wolf proposed a state rule change that will modernize the state’s overtime policies, providing new or strengthened overtime protections to 460,000 more middle-income workers by 2023 and ultimately putting close to $53 million more each year into Pennsylvanians’ paychecks.

The Keystone Research Center (KRC), a member of the Economic Analysis and Research Network (EARN), advocated for the Wolf administration to take this action. Stephen Herzenberg, KRC economist and executive director, applauded Wolf’s leadership.

On overtime pay, the governor has authority to act without the state legislature. On another vital measure to improve the lives of working families, raising the minimum wage, legislative action is required—and Pennsylvania still lags its neighboring states. Unlike these six contiguous states, the Pennsylvania legislature has failed to increase the minimum wage above the federal level of $7.25.

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State and local policymakers should beware preemption clauses

On January 12, 2018, the Maryland legislature successfully overrode Governor Hogan’s veto of a bill granting Maryland workers access to paid sick days across the state. This is great news—it means that nearly 700,000 workers who previously lacked access to paid sick days will no longer have to choose between their health and their paycheck, or even their job. The Maryland legislature’s victory comes after other states, such as Oregon and Rhode Island passed statewide paid sick days laws in in 2015 and 2017.

There is no federal law that provides workers with the right to earn paid leave for sick days or to take time off to care for an ill family member—the federal Family Medical Leave Act simply allows workers to take up to 12 weeks of unpaid leave. In the absence of federal action, with Maryland, nine states have passed paid sick days laws, and five states (and the District of Columbia) have passed paid family leave laws. Local governments, however, have taken up the cause of providing workers with this fundamental need: at least 30 cities and two counties have enacted their own paid leave ordinances in various forms.

But state governments have begun blocking local government efforts to give workers the opportunity to earn paid time off for paid sick days and/or paid family leave through the use of “preemption laws.” “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. The figure below shows that at least 20 states have passed paid leave preemption laws.

Figure A

Paid leave preemption is on the rise: States passing laws preempting local paid leave laws, January 2004–July 2017

Paid leave preemption is on the rise: States passing laws preempting local paid leave laws, January 2004–July 2017

Note: In each column, blue boxes represent paid leave preemption laws passed in the given year. Gray boxes represent paid leave preemption laws in effect (passed in previous years).

Source: EPI analysis of preemption laws in all 50 states

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Maryland grants access to paid sick days to 700,000 workers and their families

Today, the Maryland legislature successfully overrode Governor Hogan’s veto of a bill granting Maryland workers access to paid sick days at long last. Coalition group Working Matters estimates that nearly 700,000 workers who previously lacked access to paid sick days will no longer have to choose between their health and their job.

While inaction on paid sick days at the national level continues to erode families’ economic security, a group of cities and states are stepping up for working people and serving as models for jurisdictions throughout the country. Maryland is the latest example and the ninth state to guarantee a minimum amount of paid time for eligible workers to care for themselves or their family when they are sick or need medical care.

Roughly 32 percent of the private sector workforce in the United States has no ability to earn paid sick time. Furthermore, access to paid sick days has historically been far more common among high-wage workers, leaving low-wage workers and their families with little protection when they get sick or need to visit the doctor. This important legislation not only protects workers from lost pay or potential job loss when they or their family members get sick, it also protects the public by keeping sick workers, who feel economically compelled to work, from spreading illness to co-workers and customers.

In a paper released last year, we highlighted some of the costs to workers and their families when they are not given the opportunity to earn paid sick time. By examining estimated spending on essential items for families who lack paid sick days today, we quantified how this lack threatens the economic security of low- and moderate-income families.

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Fighting for public sector union rights 50 years after MLK’s assassination

The night before his assassination in April 1968, Dr. Martin Luther King spoke before a group of striking sanitation workers in Memphis, Tennessee as they prepared for a march for civil rights, union recognition, and economic justice. The movement behind the strike started earlier that year, when two Memphis garbage collectors, Echol Cole and Robert Walker, were sucked in by a malfunctioning compactor mechanism on a garbage truck and crushed to death. On the same day, when a heavy rainstorm hit, the city sent 22 black sewer workers home without pay while their white supervisors were retained with a full-day’s pay. 12 days later, more than 1,100 black men from the Memphis Department of Public Works went on strike, demanding recognition of their union, better safety standards, and a decent wage. The sanitation workers were led by garbage-collector-turned-union-organizer, T. O. Jones, and supported by the American Federation of State, County, and Municipal Employees (AFSCME).

Memphis Mayor Henry Loeb fought to break the workers’ strike, and “refused to take dilapidated trucks out of service or pay overtime when men were forced to work late-night shifts. Sanitation workers earned wages so low that many were on welfare and hundreds relied on food stamps to feed their families.” As Michael K. Honey writes in Going Down Jericho Road: The Memphis Strike, Martin Luther King’s Last Campaign, one of the things Loeb was most fervent about opposing was the dues-checkoff provisions that the sanitation workers wanted in their union contract. The workers on strike in Memphis knew that a dues checkoff—whereby union members voluntarily authorize the employer to make regular deductions from an employee’s wages to pay their union dues—was crucial to the union’s survival, especially given that Tennessee had passed a so-called “right-to-work” law, which allowed nonunion members to refuse to pay their fair share of dues but still collect the same benefits as union members. Loeb surely knew that the powers conferred to workers in the union contract—including an increase in black sanitation workers’ wages, protections for black workers from race-based employment discrimination, and a procedure for the black sanitation workers to file grievances against their white supervisors—would become wholly ineffective if the union could not collect dues to support its basic operations. More than once, the city had offered to settle the strike on the condition that dues checkoff be prohibited from their contract—but workers persisted, knowing that the “dues checkoff remained crucial, for without it, the union would not survive.” One of the cofounders of the Community on the Move for Equality, Reverend Malcom Blackburn, even embodied dues checkoff in his call to action.

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Our analysis of January 1 state minimum wage changes understated the total increase in wages for workers throughout the country

In December, we published a “snapshot” estimating that 4.5 million workers throughout the country were likely to receive a raise at the beginning of the year as a result of higher state minimum wages going into effect. We estimated that these increases would raise the annual income of affected workers by roughly $5 billion. Subsequently, Mark Perry at the American Enterprise Institute published a blog post critiquing those estimates. He claimed our research methods were flawed and opaque, and that the wage increases for workers impacted by state minimum wage increases in 2018 will be much smaller than our original $5 billion. All of these claims are wrong.

In regards to our research methods, we do make one modeling decision that may strike some as overly optimistic: we assume that new minimum wage levels will largely be enforced. But in regards to the size of minimum-wage-driven raises in 2018 our methods contain one hugely conservative choice. We didn’t fully account for minimum wage changes in New York, and subsequently left out significant wage increases going to workers in New York City and its surrounding counties. We’ll say some more on both of these issues below.

It’s worth noting first that while EPI does not typically publish methodological statements for snapshots—they’re short pieces with a single, informative graphic with minimal accompanying text—the methodology employed in our December snapshot is the same methodology we have used for years in modeling the impact of higher state and federal minimum wages. We’ve published this methodology multiple times, the most recent being this past April in appendix B of our analysis of the proposal to raise the federal minimum wage to $15 by 2024.

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The search for the next president of the New York Federal Reserve is a big deal

Those hoping to chart a new course in economic policy that delivers real gains, not just cynical rhetoric, to American workers have been closely following electoral politics throughout the country. But elections aren’t the only way change can happen. A case in point is the search currently underway to replace William Dudley as the President of the Federal Reserve Bank of New York.

We have written plenty before about the importance of the Federal Reserve in determining whether or not American workers will have a chance to see serious wage growth in coming years. Put simply, the Federal Reserve controls the economy’s brakes. If they decide the pace of economic growth is fast enough to risk overheating, leading to an outbreak of accelerating inflation, they step on the brake. No other policy has a hope at creating jobs and delivering broad-based wage growth if the Fed uses this brake prematurely. Recent decades have seen exactly this premature use of brakes, and the result has been unemployment kept too high to give typical workers the economic leverage and bargaining power they need to achieve substantial wage gains.

Why has Fed often ridden the economy’s brakes too hard in recent decades? Mostly because they have a loud backseat driver that is terrified of any unexpected inflation: the nation’s financial sector. Unexpected inflation decreases the value of financial assets and transfers resources from creditors to debtors. Wealthy households and creditors—the prime clients of finance—want to avoid this kind of inflation-induced transfer at all costs. And the costs of avoiding it are high indeed. Excess unemployment, justified in the name of putting relentless downward pressure on inflation, is a key reason why inflation-adjusted wages for typical workers have nearly stagnated over most recent decades.

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Renegotiating NAFTA is an opportunity to get trade policy right

The United States, Canada, and Mexico are currently in talks over changes to the North American Free Trade Agreement (NAFTA). Renegotiating NAFTA offers an opportunity to create a new labor template based on long overdue and urgently needed labor standards that are consistently enforced and upheld. In order to accomplish this, we need to update and strengthen current language (based on the May 10, 2007 template). Among other things, there should be fewer limitations on the kinds of labor violations that are covered, and each signatory must be in compliance with the standards set forth prior to joining the agreement. The following recommendations constitute some of the steps needed to achieve these essential improvements to the labor chapter:

  1. Incorporate explicit references to labor standards reflecting the conventions of the International Labour Organization (ILO), including those concerning the freedom of association, collective bargaining, discrimination, forced labor, child labor, and workplace safety and health.
  2. Remove the footnote explicitly limiting the terms of the chapter to the ILO Declaration on Fundamental Principles and Rights at Work.
  3. Eliminate the requirement that labor violations under the agreement must be in a manner affecting trade or investment between the parties.
  4. Eliminate the requirement that labor violations must be sustained or recurring.
  5. Verify that labor standards in the agreement are being honored and enforced by the signatories prior to the agreement going into effect.

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The economy has made great strides since the recession, but weakness remains

With today’s jobs report we can look at the entirety of 2017—putting the year as a whole in perspective and comparing 2017 with 2007, the last business cycle peak before the Great Recession began. Yesterday, I provided a fairly broad overview of the year with context since the last business cycle peak before the Great Recession (2007) and the last time the U.S. economy was at full employment (2000).

As the recovery has strengthened we’ve seen improvements in all measures of employment, unemployment, and wage growth. These measures tell a consistent story—an economy on its way to full employment, but not there yet. Taking a data-driven approach to policymaking would mean continuing to push, keeping interest rates low and letting the economy recover for Americans across genders, races, ethnicities, and levels of educational attainment.

Payroll employment growth in December was 148,000, bringing average job growth in 2017 to 171,000. The figure below shows average employment growth over the last several years. While more than enough to keep up with population growth and pull in workers from the sidelines, job growth in 2017 was noticeably slower than in recent years.

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What to Watch on Jobs Day: Taking stock of the labor market, 10 years since the start of the Great Recession

The last jobs report of 2017 comes out on Friday, giving us a chance to step back and look at the entire year. Tomorrow’s jobs report also marks the 10th anniversary of the start of the Great Recession. My expectation is that the December data will confirm that, while by some measures the economy has almost recovered its immediate pre-Great Recession health, by other measures it is still notably weaker than in 2007, the last year before the Great Recession hit. Further, as I have often noted, 2007 should not be considered a benchmark for a fully healthy economy for America’s workers. Almost all labor market measures were notably weaker in 2007 than they were at the previous business cycle peak in 2000. There was very little reason to think that the U.S. economy in 2007 was at full employment. If one looks at the stronger business cycle peak of 2000 as a more appropriate benchmark, the economy in 2017 looks even weaker, and the case for continued policy support for faster growth is strengthened. Many working people are still not seeing the recovery reflected in their paychecks—and the economy will not be at genuine full employment until employers start offering workers higher wages.

In this post—and tomorrow when the December numbers come out—I’m going to look at average payroll employment growth over the last several years. Because there is always a bit of volatility in the monthly data—especially in the household series—taking a year-long approach allows us to smooth out the bumps and take stock of all the key measures: payroll employment growth, the unemployment rate, the employment-to-population ratio, and nominal wage growth.

The figure below shows average nonfarm employment growth for 2007–2016 and for the first 11 months of 2017. With an average of 174,000 new jobs being added each month, job growth in the first 11 months of 2017 was slower than in any year since 2011. But even at this slower pace of growth we are not only absorbing population growth, but also chipping away at the slack remaining in the labor market—namely workers who continue to be sidelined and who I expect will enter or re-enter the labor market as opportunities for jobs and better paying jobs expand. If December’s numbers are in line with payroll employment growth over the last several months, it will be more proof that the economy is continuing its slow but steady march towards full employment.

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The courts are getting it wrong when it comes to unpaid interns

For the past six years, a group of brave young (and some not so young) former interns have been fighting for workplace protections, including the right to be paid. Not just to be paid properly—to be paid at all. I have had the privilege of representing many of them in their lawsuits. It has been quite a journey that, at this point, is going in the wrong direction.

At the beginning, the court of public opinion was decidedly against us. Anderson Cooper mocked our lawsuit against Fox Searchlight Pictures, which used unpaid interns on its Black Swan film production, placing it on his “RidicuList.”

But slowly the tide turned our way as more interns spoke up about the long hours they toiled for no pay and receiving little or no benefit in return. The New York Times reported that former interns were pushing back against exploitative internships.  A social media campaign urging companies to #payyourinterns exploded.

The interns’ lawsuits raised a straightforward point: interns who do real work for private companies, whether menial or not, are protected by our nation’s labor laws and, therefore, should be paid at least minimum wage for the hours they work. The fact that many interns are students or work for relatively short durations should be irrelevant. Seasonal and temporary workers must be paid the minimum wage, so why should there be an exception for interns? The fact that some schools grant credit to some interns should not change the calculation either. Course credit is no substitute for pay and, for many interns, paying for the school credit is another out of pocket expense that they can ill afford. In fact, everyone seems to benefit from the transaction more than the interns—schools benefit by reaping tuition dollars without providing instruction and corporations benefit by substituting parts of their paid workforces with unpaid hours.

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By overturning Specialty Healthcare, the NLRB has made it harder for workers to organize

On Friday, the Trump administration’s appointees to the National Labor Relations Board (NLRB) once again made it more difficult for workers to join together and form a union, by overturning the Board’s standard for determining an appropriate bargaining unit, as established in 2011’s Specialty Healthcare case.

Under the National Labor Relations Act, private-sector workers who wish to be represented by a union can petition the NRLB to hold a union election. Federal labor law gives the Board wide discretion to determine the appropriate “bargaining unit,” the term for the group of workers that will vote in the election and will be represented by the union. In Specialty Healthcare, the Board established that once an appropriate unit of employees is identified based on the employees’ “community of interest,” an employer can only petition to add more employees to the unit if the employer can show the additional employees share an “overwhelming community of interest” with the workers who are already in the bargaining unit. This standard is important to prevent employers from attempting to manipulate or gerrymander the bargaining units in order to thwart their employees’ union elections. The NLRB’s standard for determining an appropriate bargaining unit in Specialty Healthcare has been unanimously upheld in all seven U.S. Courts of Appeals in which it has been challenged.

Since the NLRB issued its decision in Specialty Healthcare corporate special interests have assailed it as inviting the proliferation of “micro” units that will allow unions to form small pockets of unionized employees among an employer’s workforces. However, data on the median size of bargaining units disproves the argument that the standard would lead to the proliferation of so-called “micro-units”—the median size of bargaining units has hardly changed since the Board issued its Specialty Healthcare decision in 2011.

Why then were the Chamber of Commerce and other corporate interest groups committed to doing away with the Specialty Healthcare standard? They simply want to make it easier for employers defeat an organizing campaign, by manipulating who is in a bargaining unit. By overturning this rule, the Trump administration has once again shown that it wants to make it harder for workers to organize and join unions.

The arguments supporting corporate tax cuts are wrong, and territorial taxation will make things worse

Congressional Republicans are set to release the final version of their tax bill this evening. Pending more details, the final bill coming out of the conference committee looks increasingly like the Senate version of the bill, which makes Republican tax priorities clear. Most of the individual provisions in the bill are temporary, and the exceptions to this actually raise taxes on households—by tying tax brackets to a new, lower inflation rate and reducing the number of people receiving help buying health insurance through the Affordable Care Act. The end result for the Senate bill was that on average, households making under $75,000 would see a tax increase by 2027 according to the Joint Committee on Taxation.

On the other hand, the changes for corporations, such as lowering the corporate tax rate and shifting to a “territorial” tax system, are permanent. Since changes benefiting corporations are the only policies deemed worth keeping by Republicans (besides those that raise taxes on most families), it bears repeating that these cuts will not trickle down to typical workers, and arguments to the contrary are not credible.

The typical first argument peddled is that U.S. corporations are taxed at disproportionately high rates and this hurts U.S. workers through some vague notion of “competitiveness.” As we’ve detailed, “competitiveness” is a meaningless term and the evidence doesn’t support the idea that cutting corporate tax rates will help typical American workers. There is no international evidence that corporate tax cuts boost investment (which could potentially lead to higher wages), nor is there any evidence on the state-level that corporate tax cuts boost wages.

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NLRB reverses Browning-Ferris, makes it harder for workers to bargain with their employers

Yesterday, the National Labor Relations Board (NLRB) made it more difficult for millions of workers to join together and form a union, by overturning its joint-employer standard established in 2015’s Browning-Ferris Industries case.

It is hard in today’s economy to bargain for higher wages or better working conditions, especially if your direct employer doesn’t really make those decisions. Under President Obama, the NLRB tried to make it easier for employees by holding each employer responsible when they co-determine what a worker’s wages, hours, and working conditions will be. In yesterday’s decision, the Trump NLRB decided to make it harder than ever.

The NLRB’s latest decision is bad law resulting from a bad process. Ordinarily, before overturning major precedent, the Board invites the public to comment by filing amicus briefs. However, this time, they did not, and instead announced this reversal with no warning or notice. President Trump’s appointees to the Board were so keen to respond to the demands of the franchising industry, which wants a rule that franchisors like McDonald’s aren’t responsible unless they exercise direct control over a franchisee’s labor relations, that they reversed the joint-employer standard in a case where the standard wasn’t even an issue, and where the public had no opportunity to weigh in.

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The economy is on the right track, but key indicators show we’re not at full employment yet

The Bureau of Labor Statistic’s released its employment situation report for November this morning, which had the economy adding 228,000 jobs and the unemployment rate holding steady at 4.1 percent. Labor force participation among prime-age workers, those 25-54 years old, increased slightly, while the prime-age employment-to-population (EPOP) ratio hit its highest point in this recovery. Meanwhile, year-over-year nominal wage growth is stalled at 2.5 percent, below where it should be and with no sign of inflationary pressures to weigh on the Federal Reserve’s decision whether to raise rates later this month.

Given the weather-related volatility this fall, it’s useful to provide some context on the topline employment growth figure. Over the last three months, average job growth was 170,000, while over the last six months, job growth averaged 178,000. An increase of about 90,000 is enough to keep up with population growth—so by any measure, smoothed or not, the economy is pulling more people off the sidelines and into the labor force. Even if the unemployment rate simply holds steady, absorbing more and more would-be workers at this point of the recovery is a sign of a healthy economy well on its way to full employment. There is no reason to think that much of the remaining slack, particularly among prime-age workers, won’t continue to be soaked up in a steadily improving economy.

The prime-age EPOP hit a high water mark this month, rising 0.2 percentage points, to 79.0 percent. The overall EPOP—including those above age 55 and below age 25—fell ever so slightly (0.1 percentage points). Unfortunately, this drop is due to losses among young workers, rather than older workers voluntarily retiring. While these differences are certainly important to note, I’d argue that the prime-age EPOP is a better measure of overall labor market health. In a stronger economy, we would expect a larger share of this population to be gainfully employed. As you can see in the figure below, the prime-age EPOP has now comfortably passed the low water mark of the last two business cycles, but still has a way to go before hitting full employment levels.

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If corporate rate cuts don’t trickle down, the House tax plan will raise taxes on moderate-income households too

The headline distributional numbers for the Senate tax plan from the Joint Committee on Taxation (JCT) attracted much attention because they showed that households making under $75,000 would actually see a tax increase on average in 2027. Many have noted that the House bill is not as bad on this score, with the JCT analysis showing that “only” households earning between $20,000 and $30,000 will face a tax increase on average in 2027.

But behind the ostensibly better House distribution score is a major catch—low- and moderate-income households will face tax increases unless corporate tax cuts trickle down to them in the form of higher wages, which historically has not happened when corporations receive large tax cuts. The individual income taxes low- and moderate- income households pay through withholding on their paychecks and on tax forms each year will certainly increase by 2027.

The central mechanism of both versions of the Tax Cut and Jobs Act (TCJA) is easier to see in the Senate bill: permanent tax cuts for corporations, coupled with eventual individual income tax increases for low- and moderate-income households. By 2021, households making less than $30,000 will see individual income tax increases under the Senate tax bill. And the only individual income tax changes that are permanent are the repeal of the individual mandate from the Affordable Care Act (ACA) and indexing tax brackets to a slower growing measure of inflation, thereby pushing people into higher tax brackets more quickly. This means that on average every income category is paying more individual income taxes in 2027 under the Senate tax bill. These tax increases are used to pay for permanent tax cuts for big corporations.

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What to Watch on Jobs Day: Labor market should continue to improve, with or without pending tax cuts

Tomorrow, the BLS will release the latest numbers on job creation and the labor market. Today, I’m going to take step back and provide some context for what we’ve seen so far this year, as we approach the 10th anniversary of the beginning of the Great Recession. I’m also going to provide some perspective on the tax bill wending its way through Congress, in light of steady progress in the labor market over the last several years. The bottom line is that (1) contrary to recent economic commentary surrounding the proposed tax cuts in Congress, it is not clear that we have reached genuine full employment yet and significant slack may still remain in the labor market , but (2) if we continue to see solid payroll employment growth in the months to come, we should expect to see continued strong progress in labor force participation, particularly among prime-age workers, and in wage growth—even in the absence of any fiscal stimulus from tax cuts. Any claims that these tax cuts, if they pass, will lead to significant improvement in the labor market or in wages need to be viewed in the context of an already steadily improving economy.

In January 2017, we released our autopilot economy tracker, as a way to set down key benchmarks for the U.S. economy. Think of it as providing a gauge of whether changes to policy are leaving any discernible mark on the economy’s trajectory. We look at where several economic indicators were headed before the year started, and where they would be if those trends simply continued. Take, for example, the prime-age employment to population ratio (EPOP). In the figure below, you can see clearly the progress that has been made over the last several years, and the continuation of that trend through this year with no discernible uptick in the pace of recovery. Steady improvements in the prime-age EPOP since January have tracked our predictions of an economy on auto-pilot fairly well, and we should expect this trend to continue into next year.

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The distribution of TCJA cuts, as well as the burden of financing them, by income group and race

The House and Senate both passed versions of the Tax Cuts and Jobs Act (TCJA) in recent weeks. Both versions of the bill, which must now be reconciled and voted on again, are made up mostly of large, hugely regressive tax cuts that give disproportionate benefits to big corporations and the wealthiest Americans. While the regressivity of these bills by income class has been well-documented by now, we’ve been asked by a number of people about the likely distribution of tax cuts called for by the TCJA across racial groups. A fully fleshed-out and precise estimate of this racial distribution would take lots of time and effort to calculate, but a decent rough estimate can be made pretty quickly if we’re willing to use some plausible proxy data.

However, it is also crucially important to note that congressional Republicans have not just passed versions of the TCJA in recent weeks, they have also passed a budget resolution calling for steep cuts to key programs, in large part because they want this money to finance their tax cuts. Assessing the impact of tax cuts while ignoring likely spending cuts would lead to a radical underestimate of the effect of coming fiscal policy changes on typical Americans’ livelihoods. Given this, we also examine the likely distribution of the burden of financing the TCJA with spending cuts by income class and race.

The Urban-Brookings Tax Policy Center (TPC) has provided estimates of what share of the tax cuts would go to different income groups. The Survey of Consumer Finances (SCF) provides data on the share of households in each of various income groupings that are headed by white, African American, or Hispanic householders. The SCF is uniquely useful here because it has clear income percentile rankings all the way up to the top 1 percent. Merging the TPC and SCF data in this way is not a pure apples-to-apples comparison. The TPC data is arranged by “tax units” while the SCF data is arranged by households (while the SCF calls their unit of analysis “families”, it is much closer to the “household” definition used by surveys like the Census). A tax unit can contain more than one household. But, all this said, there still should be substantial overlap between the two data measures, and the TPC data on tax units should provide a useful overview of the distribution of tax cuts across households.

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United States fails to participate in key global conversations on migration

On December 2, the State Department announced—and multiple news outlets reported—the decision of the Trump administration to end U.S. participation in the Global Compact for Migration (GCM), a non-binding international agreement that is in the process of being negotiated by 193 member states of the United Nations. The GCM is an attempt to improve coordination and governance on migration, seek new solutions to challenges posed by increased migrant flows, and strengthen the contributions of migrants to sustainable development. Numerous groups working to advance migrants’ rights have condemned the U.S. withdrawal from the GCM process.

The State Department’s statement came on the eve of an important intergovernmental meeting in Puerto Vallarta, Mexico, to prepare the world’s governments for the negotiations during most of 2018. The Trump administration’s statement pointed to the New York Declaration of 2016, which kicked off the process for UN Member States to negotiate a Global Compact, as containing “numerous provisions that are inconsistent with U.S. immigration and refugee policies and the Trump Administration’s immigration principles.” UN Ambassador Nikki Haley further noted that “decisions on immigration policies must always be made by Americans and Americans alone.”

The GCM is a historic opportunity to improve the governance of migration. The compact is likely to address issues such as deportations, the rights of child migrants, and labor migration—but no one knows what will be in the final compact because there is no initial first or “zero” draft. In addition, the United States could decide not to support the final text if it fails to improve the status quo, and the GCM will be a non-binding agreement, meaning the United States is not required to comply with it under international law. As a result, Ambassador Haley’s statement that “the global approach in the New York Declaration is simply not compatible with U.S. sovereignty” is misleading.

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Republican tax plan will reduce American competitiveness

Supporters of the Republican tax plan claim that business tax cuts, including cutting corporate tax rates and immediate expensing of non-structure investments will increase U.S. business investment and economic growth.  However, this one-sided analysis ignores the impacts of financing the tax cut package by adding $1.5 trillion to federal budget deficits over the next decade.  Past experience has shown deficit-financed tax cuts are associated with higher interest rates, an overvalued U.S. dollar and growing trade deficits.

A recent report from the Council of Economic Advisors claims that tax cuts and the immediate expensing of equipment (non-structural) investments will reduce the user cost of capital (UCC), “increasing firms’ investment, desired capital stock, and potential output.”  In addition, they claim that lowering the UCC will lead “multinational corporations and foreign capital…to invest in the U.S. economy.”  These arguments could have some merit if the plan were revenue neutral, and financed by closing loopholes and through other tax reforms.  However, domestic and foreign businesses are unlikely to invest in the United States if there is inadequate demand for domestically produced goods.  U.S. manufacturing and other traded goods industries (including agricultural products and other traded commodities) will be hard hit by the Republican tax plan, because it is financed through a large increase in the government budget deficit.  Further, real-world evidence indicates that the UCC facing American corporations is already incredibly low yet business investment remains quite sluggish. In short, the UCC is not a current constraint on American investment, so efforts to reduce it further will miss the point in aiming to boost this investment.

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Teacher pensions—the most important tool for keeping and retaining good teachers

Chad Aldeman at Bellwether Education Partners tweeted that my recent report on teacher pensions was “frighteningly bad.” Here’s what’s really frightening: a zombie lie about teacher pensions that won’t die.

Attacks on teacher pensions may not rank with global warming or mass shootings on the list of things keeping us awake at night, but they deserve way more attention than they get. Teacher pensions are the single most important tool for recruiting and retaining good teachers, and good teachers are the key to our future in a knowledge economy. Yet Aldeman is trying to mislead people into supporting Kentucky Governor Matt Bevin and others around the country who want to switch teachers to 401(k)-style plans.

Aldeman claims that “most teachers get a bad deal from teacher pensions.” Though my research, and earlier research from UC Berkeley, showed that the vast majority of teachers are well-served by their pensions, this recycled claim appears impervious to counter-evidence. As long as a billionaire with an agenda keeps funding the research, we’ll continue see elaborate variations on the same theme, all of which rely on the same statistical sleight-of-hand.

The average person understands “most teachers” to mean “most teachers teaching today” or at any given point in time. This is a commonsense interpretation, and the one used in my research. Aldeman’s methodology instead counts new teachers as they enter the system, giving them equal weight whether they teach for just one year or for a whole career. As I showed in my paper, even if slightly over half of new teachers leave before becoming eligible for employer-provided benefits, these short-term teachers, some of whom go on to earn pension benefits in different systems, represent only a tiny fraction of the teaching workforce.

Aldeman accuses me of callously ignoring the “lived experiences” of individual teachers to focus on a “snapshot” that ignores “anyone who was once a teacher and is no longer (a teacher).” This is nonsense. Aldeman is no more focused on individual teachers’ lived experiences than I am. He and I rely on the same experience studies based on the same pension participants—including teachers who leave. The only difference is how we weight participants. He gives equal weight to all new teachers who enter the system in a given period, and I give equal weight to all teachers active at any given point in time.Read more

The biggest turkey this Thanksgiving is the Republican Tax Plan

In recent years we’ve used the tradition of arguing with cranky relatives over the holidays to arm people with evidence to bat back silly economic arguments that are made all year long. This year, most dinner table arguments will likely be about Roy Moore, Al Franken, and maybe Russia, and on those, well, you’re on your own.

But if debates do stray to economics, the topic is likely to be the tax bill being pushed by Republicans in Congress and the White House. If this bill becomes law, it would be a terrible shame. But until it does, the debate surrounding it is actually useful. It is by far the clearest sign that the Trump administration, while chaotic and unprecedented in many ways, is utterly conventional when it comes to making economic policy. The highest priority of Republicans in Congress in recent decades has been slashing taxes for rich households and corporations, and the Trump administration has thrown in completely with this effort.

The centerpieces of the bills passed by the House and voted out of the Senate Finance committee last week are large tax cuts for businesses, both corporate and non-corporate. The corporate rate cuts are by far the largest parts of both bills, and the corporate changes are the only parts of the Senate bill that remain permanent—almost all of the changes to the individual code phase out in 2025. Non-corporate businesses—or “pass-throughs”—receive very large cuts in both bills, but because pass-through income is taxed on individual tax returns rather than at the business level, these changes expire in the Senate bill in 2025, along with most other individual changes.

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Millions fewer would get overtime protections if the overtime threshold were only $31,000

Federal law requires that people working more than 40 hours a week be paid 1.5 times their rate of pay for the extra hours, but exempts salaried workers who make above a certain salary threshold and are deemed to have “executive, administrative, or professional” duties. The salary threshold is meant to help protect salaried workers with little bargaining power—for example, low- or modestly-compensated front-line supervisors at fast food restaurants—from being forced to work unpaid overtime. But, at $455 per week (the equivalent of $23,660 per year), the overtime threshold has been so eroded by inflation that it is now less than the poverty rate for a family of four. If the rule had simply been adjusted for inflation since 1975, today it would be well over $50,000.

In 2016, the Department of Labor published a highly vetted, economically sound rule that would have increased the threshold to $913 per week ($47,476 per year). However, a district court judge in Texas ruled that the new overtime threshold is invalid. While the Trump DOL plans to appeal the judge’s flawed ruling, they will not defend the $47,476 threshold. Instead, they intend to propose a new threshold, and have asked the court to stay the appeal while they engage in new rulemaking.

DOL officials have repeatedly indicated that they would prefer a salary threshold far below $47,476—rolling back protections for millions of workers. It is likely that they are considering proposing a new threshold of around $31,000.

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Supreme Court will decide if women can join together to fight sexual harassment at work

After the news that Hollywood producer Harvey Weinstein had been sexually harassing and assaulting women in the movie industry for decades, millions of women shared their stories with the hashtag #metoo. The social media campaign shined a light on a fact that to many women: sexual harassment is a daily fact of life in the workplace. Many American corporations foster—or at least tolerate—widespread, egregious sexual harassment of their workers, even all these years after U.S. law first recognized sexual harassment as a form of sex discrimination. As the Supreme Court considers the first case of its term, National Labor Relations Board v. Murphy Oil, we hope they have read the stories about Weinstein, Bill O’Reilly and other men, as well as the millions of people who spoke up online.

Just last week, a poll conducted by NBC News and the Wall Street Journal found that 48 percent of currently employed women in this country say that they have personally experienced an unwelcome sexual advance or verbal or physical harassment at work. And, while many corporations have announced zero-tolerance policies for harassment, employers are increasingly preventing workers who experience sexual harassment to join together to seek justice

Today, 24.7 million American workers have been forced to sign contracts that, as a condition of employment, require them to waive their rights to joining a class action lawsuit to address sexual harassment and other workplace disputes—instead these workers must act alone to resolve what is often systemic violations of employment protections. The National Labor Relations Board has determined that these arbitration agreements violate workers’ right under the National Labor Relations Act to join together for “mutual aid and protection.” Business interests—and the Trump administration—disagree. In Murphy Oil, the Supreme Court will decide whether workers have the right to come together to protect themselves from workplace issues like sexual harassment. The case could not be more relevant, or present the Justices with two more starkly divergent options.

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New paper on pay-productivity link does not overturn EPI findings

Economists Anna Stansbury and Larry Summers released a new paper today, “Productivity and Pay: Is the Link Broken?” which explores the relationship between economic productivity and compensation.

We welcome further inquiry into the relationship between productivity growth, inequality, and the ability of typical workers to benefit from a growing economy—and what policies are needed to do that. The Stansbury/Summers analysis adds some light but also some confusion and, ultimately, makes oversized claims about the role of productivity, especially since minor changes in specification of one of the three variables—unemployment—both substantially weakens some of their results, and also highlights just what is being missed in this investigation.

What are the issues?

The iconic chart (data here) that Stansbury and Summers are investigating is one showing a typical workers’ hourly compensation (measured as the compensation for production/nonsupervisory workers, roughly 80 percent of payroll employment) grew in tandem with productivity in the 1948-73 period but diverged thereafter. We have presented decompositions of the wedges between productivity and compensation for a typical worker that identifies the contribution to the divergence of: 1) changes of labor’s share of income (gap between average productivity and average compensation); 2) changes in wage/compensation inequality (gap between typical worker’s compensation and average compensation); and 3) differences in price deflators used for productivity and compensation. We find in the most recent period, 2000-2014, that rising inequality—both compensation inequality and reductions in labor’s income share—explains eighty percent of the gap between productivity and a typical workers compensation.

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