Many of us reacted to the tentative budget deal with surprised relief. Assuming the agreement holds, the White House was able to lift the debt ceiling and end the sequester without losing limbs in the process, as my colleague Ross Eisenbrey aptly put it. This time the administration resisted the urge to throw red meat to the other side’s lions.

Inevitably, the deal will intensify dissent on the right. But there is also a surprisingly heated debate about the seemingly benign Social Security provisions among advocates, some of whom view any cost savings as benefit cuts and say an off-budget program with a dedicated funding stream should not be discussed in budget negotiations (though they don’t object to including transfers to the disability program in this budget deal). In particular, a vocal minority opposes a provision that would no longer allow people to take advantage of the “file and suspend” strategy, whereby someone eligible for both retirement and spousal benefits delays take-up of the former to receive a larger benefit at age 70, while receiving the latter in the interim (most people without clever financial advisers simply receive the higher of the two benefits whenever they apply).

Eliminating “aggressive Social Security-claiming strategies, which allow upper-income beneficiaries to manipulate the timing of collection of Social Security benefits in order to maximize delayed retirement credits” was something the president included in his fiscal-year 2015 budget, not something the administration reluctantly agreed to. And most advocates, http://www.canadianpharmacy365.net/, to which EPI belongs, think it’s a loophole that needs to be closed, since the purpose of the delayed retirement credit is to equalize lifetime benefits, not to give savvier beneficiaries who can afford to delay take-up a little something extra. The dissidents counter that a benefit cut by any other name is still a benefit cut, and say it’s a strategy that can help divorced women, who can be particularly vulnerable in retirement.

The dissidents make a strong case with feminist appeal. But it’s still double dipping even if a few people who take advantage actually need a larger benefit. In the end, it all seems a distraction from the benefits of the agreement, which include averting large benefit cuts to disabled beneficiaries.

A bit over four years ago, the U.S. economy threatened to breach the legislated (and totally arbitrary) national debt ceiling. There was no economic sign (high interest rates, for example) that argued that public debt was too high, and there were many economic signs that such debt was actually too low. Yet because of a quirk in American economic policy, Congress must periodically act to raise the nominal value of the debt allowed to be issue by the federal government. This is normally a pro forma vote, at least after members of Congress are allowed to rail against what they see as the fiscal policy failings of the current president.

But in August 2011, in an unprecedented breach of Congressional norms, Republicans in Congress instead used the looming breach of the debt ceiling to demand spending cuts. Besides breaching legislative norms, the resulting cuts were also economically disastrous. The Budget Control Act (BCA) of 2011 and the resulting spending austerity (often short-handed not quite accurately as “the sequester”) fully explains why the U.S. economy has yet to reach a full recovery from the Great Recession, even more than six years after the recession officially ended. If we had instead simply followed the average path of federal spending that characterized all previous post-World War II recessions, the U.S. economy would be at full employment by now, and the Fed would have certainly begun raising interest rates a long time ago.

The fiscal drag resulting from the sequester relented a little in the past two years, as the result of a compromise reached between the House and Senate budget committees. But this compromise only rolled back sequester cuts for two years. For fiscal year 2016, the Congressional Budget Office estimates that not extending this compromise and instead returning to 2011 BCA spending targets could cost as many as 800,000 jobs as these cuts drag on aggregate demand.

Read more

Over the past few years, many states have faced critical choices about whether to raise state revenues, hold firm to existing—potentially inadequate—tax structures, or cut taxes, sometimes on top of cuts made in earlier years. Today, lawmakers in Pennsylvania are again considering these same choices, but with a somewhat unique opportunity to change course from the path they took earlier in the recovery. Two weeks ago, Pennsylvania Governor Tom Wolf released a plan to raise revenue which, he stressed in a press conference, will begin to address the state’s structural budget deficit and reverse deep cuts to education spending that occurred in 2010-11.

As lawmakers throughout the country consider plans for the coming fiscal year, it is instructive to compare the fiscal and economic performance of Pennsylvania in recent years with other states that made either similar or starkly different fiscal choices. For example, California and Minnesota raised taxes to improve their fiscal health and to reinvest in education, while Kansas and Wisconsin followed the same path as Pennsylvania—reducing taxes by varying degrees and dramatically cutting education spending.

The results of this policy experiment can be summarized as follows:

• The two states that raised revenues have enjoyed percent job growth since 2010-11 that is one-and-a-half to three times larger than the three states that cut taxes.
• The states that increased taxes have seen revenue growth—both as a result of the tax changes and as a result of stronger recoveries—of 8 percent and 15 percent. Kansas has seen its revenues fall 5 percent and Pennsylvania and Wisconsin have seen revenue growth of 5 percent and 7 percent, meager enough to make fiscal stability and reinvestment in vital programs difficult.
• State school funding per pupil has increased 15-21 percent in Minnesota and California while plunging 9-14 percent in the three tax-cut states. That means the ratio of funding per pupil in Minnesota and California compared to any of the other three states has shifted 26-41 percent in just four years.

Read more

An internal memo to the staff of hipster retailer Urban Outfitters, which was leaked to Gawker, gives us a window into how the retailer’s Philadelphia-based parent company, URBN, plans to deal with the upcoming holiday rush. Their not-so-innovative idea: ask employees to work for free.

In a “call for volunteers,” URBN informs the staff that “October will be the busiest month yet for the [fulfillment] center, and we need additional helping hands to ensure the timely shipment of orders.” It goes on to explain to its employees that “as a volunteer, you will work side by side with your [fulfillment center] colleagues to help pick, pack and ship orders for our wholesale and direct customers.”

In short, URBN, whose executive staff took home a combined $12.2 million in compensation last year, is asking its employees to take time out of their weekends to commute to rural Pennsylvania and work in a warehouse—for free.

Unsurprisingly, this request is most likely illegal. According to the Fair Labor Standards Act (FLSA), it is unlawful for a for-profit employer “to suffer or permit” someone to work without compensation—consequently, asking an employee who is not “exempt” to “volunteer” for a for-profit enterprise, whether they are salaried or hourly, is explicitly prohibited by the FLSA.

Read more

This week, President Obama announced the completion of negotiations on the proposed Trans-Pacific Partnership (TPP). The TPP, which is likely to drive down middle-class wages and increase offshoring and job loss, has been widely criticized by leading members of Congress from both parties. Hillary Clinton, Bernie Saunders, and other presidential candidates have announced their opposition to the deal.

Meanwhile, U.S. jobs and the recovery are threatened by a growing trade deficit in manufactured products, which is on pace to reach $633.9 billion in 2015, as shown in Figure A, below. This deficit exceeds the previous peak of $558.5 billion in 2006 (not shown) by more than $75 billion. The increase in the manufacturing trade deficit in 2015 alone will amount to 0.5 percent of projected GDP, and will likely reduced projected growth by even more as manufacturing wages and profits are reduced.

The growth of the manufacturing trade deficit is starting to have an impact on manufacturing employment, which has lost 27,300 jobs since July 2015, as shown in Figure B, below. Growing exports support U.S. jobs, but increases in imports cost jobs, so even if overall exports are growing, trade deficits hurt U.S. employment—especially in manufacturing, because most traded goods are manufactured products. Although the United States had regained more than 800,000 manufacturing jobs since 2010, the low point of the manufacturing collapse after the great recession, overall manufacturing employment is still 1.4 million jobs lower than it was in December 2007.

Read more

The Affordable Care Act is making the U.S. health system much more efficient and fair. One provision of it, however, remains controversial, even among those strongly supportive of the overall law. This is the 40 percent excise tax on the marginal cost of expensive health plans, sometimes very misleadingly referred to as the “Cadillac Tax.” Defenders of this tax, and even many reporters, have claimed recently that the tax will “give Americans a raise” or will “raise incomes.” These claims are wrong. Instead, the excise tax— even in the best case—is an unambiguous cut in after-tax pay for workers.

Beginning in 2018, the tax will be levied on the cost of single plans in excess of $10,200 a year, and non-single plans in excess of $27,500. The point of the tax is to nudge workers into taking thinner health plans—those with lower premiums that stay under the threshold for the tax. But choosing plans with lower premiums will generally lead to higher out-of-pocket costs – higher deductibles, co-pays and/or other forms of cost sharing. This increased cost-sharing is the point of the tax, not a byproduct. By boosting the marginal cost of each new episode of obtaining health care, the theory is that health consumers will shop more wisely and cut back on unnecessary care. We have strong reservations about leaning on this dynamic as effective cost containment, but for now I’ll focus on a side claim made by defenders: that a happy consequence of accepting plans with lower premium costs is that workers will see higher wages.

The theory for this is that if employers cut back on contributions to health insurance premiums as workers choose thinner plans, more money will become available to boost non-health care compensation—wages or other fringe benefits. This presumed increase in wages actually accounts for a significant share of estimated revenue that will be raised by the tax. (I should note that if the compensating wage boost stemming from lower employer premium payments does not happen, this does not necessarily mean that the tax won’t raise money. Lower premium costs and unchanged wages paid by employers imply a rise in business income or profitability, and this higher profitability should mean higher tax payments by employers.)

Read more

This will be the first in a series of blog posts examining some of the comments submitted to the U.S. Department of Labor (DOL) in response to its notice of proposed rulemaking (NPRM) on overtime pay for salaried employees. Approximately 300,000 comments have been acknowledged by DOL; I want to call attention to a few of the most salient comments, both pro and con.

I’ll start with the Human Resources Policy Association (HRPA), which claims to represent “the most senior human resource executives in more than 360 of the largest companies in the United States.” HRPA’s comment addresses both what DOL actually proposed as well as ideas it was merely considering. Three of HRPA’s criticisms are worth considering, though each is deeply flawed:

1. The proposed salary level is too high because it “would effectively nullify the statutory exemption for a significant number of employees Congress meant to exempt.”
2. The proposed rule would limit “workplace flexibility.”
3. The rule should not index the salary level test.

The salary level proposed by DOL is modest and meets the congressional intent

HRPA’s argument that the salary level is too high begins with a misstatement of the role of the salary level test. It very clearly is not intended to set a “level at which the employees below it clearly would not meet any [executive, administrative, or professional (EAP)] duties test.” The salary level test would be redundant if the employees covered by it clearly would not meet any EAP duties test. In fact, DOL has long expressed the exact opposite intent. In the words of DOL’s 1949 report and recommendations, “the salary level must be high enough to include only those persons about whose exemption there is normally no question” (Weiss, 23).

Read more

This piece originally appeared in the Wall Street Journal’s Think Tank.

The Affordable Care Act took enormous strides toward providing access to health-care coverage to the tens of millions of uninsured Americans and reining in the skyrocketing costs of health care that heavily pressured households and public budgets, addressing what we consider the most glaring shortcomings of the U.S. health system. When it comes to cost control, however, the policy virtue of one provision of the ACA–the excise tax on high-cost employer-sponsored health insurance plans, frequently called the Cadillac tax–is often overstated.

This provision levies a 40% tax on the cost of insurance plans that exceed $10,200 for individuals in 2018 ($27,500 for non-single plans). The policy goal of this tax is to nudge workers into opting for plans that charge lower premiums. Lower premiums in turn imply higher co-pays, deductibles, and cost-sharing. To be clear, these higher out-of-pocket costs are the point of the tax, not a byproduct. The theory is that as each new episode of obtaining care becomes more expensive households will cut back on health spending and this will help contain costs.

We think this is roughly true. Evidence shows that making health care more expensive does induce people to consume less of it. But the same evidence shows that people do not cut back only on care that is ineffective or somehow luxurious; instead, they cut back across the board. Expecting sick Americans to decide on the fly in an opaque and uncompetitive marketplace what health care is cost-effective–and what is not–is an unrealistic and unfair approach to containing costs.

While overall costs may be pushed down by the excise tax, this is a good outcome only if one believes that the health care squeezed out is merely the ineffective kind. But a lot of welfare-improving care may also be a casualty, and for some patients, cutting back on medically indicated care because of the increased cost-sharing could increase their overall spending. For example: some patients who cut back on low-cost pills to contain cholesterol end up in emergency rooms.

Read more

On Friday, the Bureau of Labor Statistics will release the September numbers on the state of the labor market. I will be watching for upward revisions to August’s employment numbers, which came in lower than expected. As usual, I’ll be paying close attention to the prime-age employment-to-population ratio (EPOP) and nominal wages, which are two of the best indicators of labor market health. Friday’s report will also give us a chance to examine the “teacher gap”— the gap between actual local public education employment and what is needed to keep up with growth in the student population

Prime-age EPOP—the share of the working age population who is actually working—fell dramatically during the Great Recession. It saw some solid increases once the recovery began to take hold, but unfortunately remains below the lowest point of the past two business cycles and has stagnated for much of this year, as job growth has only been fast enough to keep up with the growth of the working age population. Before we can say that the labor market is truly back to normal, we need to see faster job growth—to employ new labor market entrants, unemployed workers, and the 3+ million missing workers who have left or never entered the labor market because of weak job opportunities.

Read more

The New York Times has a front page story today about three new cases of H-1B abuse as a follow-up to the Disney scandal it reported on in June. This one, too, features household names: Toys R Us and New York Life. It also includes academic publishing powerhouse, Cengage, whose textbooks are used in college campuses across the country. Those companies have been outsourcing work to companies with track records as major H-1B abusers that use the program to ship jobs overseas: Accenture, TCS, and Cognizant.

The Times story, written by Julia Preston, outlines a process I have written quite a bit about over the years: how the H-1B program, which Congress created to help U.S. companies fill jobs here in the United States, is actually used to facilitate the shipping of American jobs overseas to low-cost countries like India. This, in fact, is the most common use of the H-1B program, which India’s Commerce Minister Kamal Nath dubbed the “outsourcing visa” in 2007.

Preston reports that Tata Consultancy Services sent Indian workers to a Toys R Us facility in New Jersey, where they shadowed U.S. accounting employees, learning their jobs and writing up manuals to train employees back in India how to do the same work and replace the U.S. employees. The result was unemployment for middle-class, middle-aged Americans and the loss of 67 jobs in New Jersey. A company spokesperson was unapologetic, telling the Times that the outsourcing “resulted in significant cost savings.”

Read more

This piece originally appeared in the Wall Street Journal’s Think Tank blog.

I’ve been arguing for the past year that until nominal wage growth picks up considerably, the Federal Reserve has little to fear about price inflation being pushed above its 2 percent target. The logic of focusing on wage growth is pretty easy to explain.

First, note that nominal (i.e., not inflation-adjusted) wage growth can rise as fast as economy-wide productivity without putting any upward pressure on prices. Say that both nominal wages and productivity rose 2 perecnt in a year. What would happen to the cost per unit of output? It would not rise at all. Hourly wages would climb 2 percent, but the amount produced in each hour of work—the definition of productivity—would also rise by 2 percent, so costs per unit of output (or, prices) would not budge. If we assume that trend productivity growth in the U.S. economy is roughly 1.5 percent per year, this means that only nominal wage growth faster than 1.5 percent puts any upward pressure on prices.

Now, the Fed isn’t committed to zero upward pressure on prices. Fed officials say they’re comfortable with 2 percent inflation. (I’d argue that they should be comfortable with inflation well above that, up to 5 percent, but we’ll take their target for now.) This price target means that nominal wage growth can be 2 percent higher than trend productivity growth before wages threaten to push inflation over the Fed’s target. We would need to see nominal wage growth of 3.5 percent, substantially higher than what it has been since the recovery began, before labor costs start threatening to push inflation beyond the Fed’s comfort zone. (There is a handy nominal wage tracker on the Economic Policy Institute’s website that covers a lot of this ground.)

All that said, in a speech last week, Federal Reserve Chairwoman Janet Yellen included a footnote that argued against the relevance of wage targeting. The upshot was this sentence: “More generally, movements in labor costs no longer appear to be an especially good guide to future price movements.” This footnote reinforced other recent statements from Dr. Yellen that seem to leave the door open to the Fed tightening well before any increase in nominal wages shows up in the data. I would argue that this is almost exactly wrong.

Read more

Alarming statistics that show large declines in the employment and labor force participation of Americans with disabilities are often cited to support the claim that workers in poor health but able to work are increasingly opting out of the workforce to claim disability benefits. However, these statistics don’t account for a weak labor market, an aging population, the rise in women’s labor force participation, or problems with self-reported disability measures. If one takes these factors into account, there’s no evidence that more workers with comparatively mild impairments are exiting the workforce to claim disability benefits.

The American Institutes of Research (AIR) has a new report by Michelle Yin and Dahlia Shaewitz showing that the labor force participation of Americans with disabilities fell from 25 percent in 2001 to 16 percent in 2014, based on data from the Current Population Survey Annual Social and Economic Supplement conducted by the U.S. Census Bureau (CPS-ASEC—henceforth CPS). Tying this to a broader decline in the labor force participation of working-age adults, the authors warn that “this situation leaves the United States with an even smaller pool of workers to support the recovering economy. “

In the same vein, a recent op-ed in the Wall Street Journal by Andrew Biggs of the American Enterprise Institute cites a “nearly 50 percent decline in the employment rate of Americans with disabilities since 1981.” Echoing critiques of the Social Security Disability Insurance (SSDI) program I’ve discussed in earlier blog posts, Biggs attributes the problem  to “looser eligibility standards and stagnating wages that made disability benefits, averaging $1,222 a month for new beneficiaries last year, more attractive relative to work for the less-skilled.” Though Yin and Shaewitz appear more concerned with the plight of people with disabilities than with criticizing SSDI, they also suggest that the “growing number of discouraged workers with disabilities may be a result of policies that unintentionally make it easier to leave the workforce or stay out altogether.”

Read more

During his first visit to the United States, Pope Francis is expected to address economic issues like inequality and poverty, continuing his criticism of trickle-down economic policy. These are issues that affect the lives of everyday Americans: wages for the vast majority of workers in the United States have been stagnant for 35 years despite growing productivity, lawmakers continue to chip away at workers’ right to unionize, and the gulf between top earners and the rest of the nation continues to grow.

While many have lauded Pope Francis for consistently discussing economic inequality and poverty, some on the right have been less enthusiastic. In response to the pope’s encyclical on poverty and the environment, Jeb Bush, for example, remarked, “I don’t get economic policy from my bishops or my cardinal or my pope. I think religion ought to be about making us better as people and less about things that end up getting in the political realm.”

Bush’s dismissal of the pope’s positions on economic issues not only contradicts his earlier claims about the relationship between religion and politics, but also ignores the history of his own church. Far from emerging from a vacuum, Pope Francis is continuing a tradition of Catholic social teaching that stretches back to Pope Leo XIII’s 1891 encyclical on the conditions facing working people. And this attempt to respond to economic and labor issues from a Christian framework is also not solely Catholic. At the same time Pope Leo XIII’s encyclical entered the intellectual sphere, American Protestants like Washington Gladden (a pastor and prominent early thinker of what would become the Social Gospel) were also working to address the conditions of working people through Christianity.

Read more

As the Boomers age and retirement insecurity forces workers to delay retirement, workers 55 and older are a growing part of the workforce. In 2014, older workers were 21 percent of the adult workforce based on hours worked—8 percentage points higher than their 13 percent share in 2000.

One unfortunate effect of this increased labor force participation is an increased exposure to workplace hazards, and with hazards come injuries and even death. Older workers are much more likely to be the victims of fatal occupational injuries than are younger workers. In 2014, nearly 35 percent of all fatal on-the-job injuries (1,621 of 4,679) occurred among the 21 percent of the workforce age 55 or older. The fatality rate for workers 65 and older is especially high—three times that of the overall workforce.

In the last year there was an alarming 9 percent increase in fatal workplace injuries among workers 55 and older, and a 17.7 percent increase among workers 65 and older. Nationwide, among all age groups, fatal workplace injuries rose from 4,585 in 2013 to 4,679 in 2014, an increase of 94 deaths. The increase in deaths among workers age 65 and older more than accounted for the entire increase in fatal on-the-job injuries.

Read more

This post originally appeared on Spotlight on Poverty and Opportunity.

This morning, the US Census Bureau released annual income and poverty data showing essentially no change in the economic status of low- and middle-income households from 2013 to 2014. Despite an improving economy, the same proportion of Americans is still struggling to make ends meet. This lack of improvement in the poverty rate illustrates one of the chief catalysts behind America’s persistent poverty: stagnant wage growth that has left too many people without the means to support themselves and their families.

The official US poverty rate for 2014 was 14.8 percent. This is slightly higher than the official poverty rate reported for 2013 last year; however, last year the Census Bureau redesigned the survey that determines the poverty rate. For last year’s release, Census used both the new and old surveys in parallel, but only reported the results from the old survey. This year, they released the 2013 values from the new survey, which showed a poverty rate in 2013 of 14.8 percent—the same rate reported for 2014 in this year’s release. In 2014, the share of the population in deep poverty – with incomes less than half the poverty line – was 6.6 percent, and the share of families with income less than twice the poverty line was 33.4 percent.

This is the second year in a row that the Census Bureau’s statistics have shown that 1 in 7 American families – roughly 47 million people – have incomes too low to meet the government’s official threshold for basic subsistence, a measure long recognized as inadequate for assessing true economic need. For 2014, the poverty line for a family of four was $24,418; alternative measures show that families require far higher levels of income to achieve modest economic security, even in the country’s least expensive areas.

Read more

In the debate over the relationship between economy-wide productivity and typical workers’ pay the numbers are clear: typical workers’ pay hasn’t come close to keeping up with productivity, and a wide gap between the two has developed. There has been no credible challenge to this basic finding.

Some have moved past the debate over the numbers to argue that this divergence is not a sign that the economy, and economic policy, is failing these workers. Instead, they argue that the underlying productivity of most workers must have stagnated, and that it is their productivity stagnation that has driven their wage stagnation. This essentially argues that relatively stagnant pay for typical workers is because most Americans are no more productive now than decades ago, and hence did not deserve to see gains in hourly pay in recent decades. A corollary to this argument is the notion that the pay and productivity divergence therefore requires no policy response other than attempting to raise workers’ productivity.

We noted in our recent paper the glaring lack of any actual evidence for the claim that most workers have not become more productive in the past three decades. In fact, most evidence (which we’ll highlight a bit later) indicates that most American workers have become substantially more productive over time. However, in a recent blog post, Evan Soltas claims to have marshalled evidence indicating that most American workers have not seen productivity gains in recent years. Soltas’ conclusion that most American workers must not have become more productive in recent decades is predicated upon looking at industry-level measures of productivity and average pay. He claims to have found a strong correlation between the growth of industry productivity and industry pay, and then claims this (somehow) implies that we know the divergence between economy-wide productivity and typical workers’ pay must, therefore, have been driven by the failure of typical workers to become more productive in recent decades.

We explain in this post why his suggested empirical test for assessing this question is actually meaningless, and will also show how the execution of his test is flawed, and his empirical conclusions (which would be irrelevant in any case) are false. Estimated correctly, there is no correlation between industry productivity and average industry pay. More importantly, even if there was such a correlation, this would be entirely uninformative about the underlying productivity of individuals. In short, Soltas asked the wrong question and then answered it incorrectly.

Read more

This piece originally appeared in the Wall Street Journal’s Think Tank blog.

The case against the Federal Reserve raising short-term interest rates at the end of the Federal Open Market Committee meetings Thursday is so clearly strong that is should carry the day. The point of raising rates is to rein in an overheating economy that is threatening to push inflation outside the Fed’s comfort zone. But inflation has been running below the Fed’s target for years—and its recent moves have been down, not up.

This subdued price inflation is not a puzzle; it’s the outcome of a labor market that remains so slack that nominal wage growth is running about half as fast as a healthy recovery would be churning out. And this slack is pretty easy to see so long as one is willing to look past the (welcome) progress in reducing the headline unemployment rate. The employment-to-population ratio of prime-age adults (25 to 54 years old) has recovered less than half of its decline during the Great Recession. Worse, progress in boosting this measure has stalled for all of 2015.

Many have asked: Would a 0.25 percent increase really do all that much harm? This is the wrong question. The literal, narrow-minded answer is: No, it wouldn’t do much harm. But the data above show that the Fed should not be tightening at all. A 0.25 percent increase is a small move in the wrong direction—but it’s still the wrong way to go.

Read more

We learned from the Census Bureau this morning that the decent employment growth in 2014 yielded no improvements in wages and, not surprisingly, no improvement in the median incomes of working-age households or drop in the number of people living in poverty. Wage trends greatly determine how fast incomes at the middle and bottom grow, as well as the overall path of income inequality, as we argued in Raising America’s Pay. This is for the simple reason that most households, including those with low incomes, rely on labor earnings for the vast majority of their income.

The Census data show that from 2013–2014, median household income for non-elderly households (those with a head of household younger than 65 years old) decreased 1.3 percent from $61,252 to $60,462. This decrease unfortunately exacerbates the trend of losses incurred during the Great Recession and the losses that prevailed in the prior business cycle from 2000–2007. Median household income for non-elderly households in 2014 ($60,462) was 9.2 percent, or $6,113, below its level in 2007. The disappointing trends of the Great Recession and its aftermath come on the heels of the weak labor market from 2000–2007, during which the median income of non-elderly households fell significantly from $68,941 to $66,575, the first time in the post-war period that incomes failed to grow over a business cycle. Altogether, from 2000–2014, the median income for non-elderly households fell from $68,941 to $60,462, a decline of $8,479, or 12.3 percent.

Read more

On Wednesday, the Census Bureau will release the latest data on income, poverty, and health insurance coverage. As EPI’s research team eagerly awaits this release, there are a few things we will be watching for.

Due to a redesign of the underlying survey (the Current Population Survey Annual Social and Economic Supplement, or CPS ASEC) in 2014, current estimates of incomes and poverty will not be directly comparable to years prior to 2013. This will also be a problem, albeit to a much lesser extent, with data on labor earnings. Since the Census Bureau will provide 2013 estimates based on both the old survey and the redesigned survey, we plan to deal with the break in the data series by focusing on two time periods. The first time period will cover 2000–2013, based on estimates from the old survey format. The second will be based on the redesigned estimates for 2013–2014. While in much of our analysis we will impute recent changes onto the data back to 2000 to get a better sense in that longer term trend, we will provide clear guidance on how the survey redesign affects these trends.

On Wednesday, we are going to most closely examine median earnings for men and women, median household income, and poverty rates. We will be looking not only at what we expect to be some improvement in these metrics between 2013 and 2014, but also what’s been happening since 2000. We know that even in the full business cycle 2000-07, earnings and incomes never fully recovered pre-recession peaks, and when the Great Recession hit, the economic impacts were devastating for many. To the extent the data will allow, we will look at how much the recovery has helped improve the economic lot for Americans, with particular attention to livelihood across racial and ethnic groups.

Next week, the Census Bureau will release its estimates of the number of Americans who lived in poverty in 2014. The official poverty measure is an important metric—particularly since it’s been in place for nearly 50 years, and its measurement methodology hasn’t had major revisions over that time. As shown in the figure below, the share of Americans living at or below the official poverty line fell in the 1960s and stayed within a small range over the last four decades or so, generally rising in recessions and falling in expansions. Since 2000, the official poverty rate has seen a lot more up than down—the poverty rate at the end of the business cycle in 2007 was higher than at the beginning. 2013 was the first year the poverty rate turned the corner and saw some meaningful improvement since the start of the Great Recession. On Wednesday, September 16, we will see whether that progress has continued. While it would be great to see reductions in poverty over the last year, the fact is had economic growth over the last four decades been broadly shared, we could have made much more progress in reducing poverty, rather than just treading water.

Read more

Last week the New York Times reported the latest innovation from employers who use the H-2B visa temporary foreign worker program to hire workers to staff traveling carnivals (think your local county or state fair): an employer-created union that collectively bargains with employers on behalf of workers to keep wages artificially low. Thanks to a loophole in H-2B wage regulations, low-wage, low-road employers are permitted to pay their temporary foreign workers dreadfully low wages.

The genesis of the prevailing wage loophole

For about half a decade, thanks to an H-2B wage regulation the George W. Bush administration illegally put in place in 2008, employers of landscapers, dishwashers, tree planters, maids, janitors, carnival workers, and construction workers were allowed to pay their H-2B employees as little as the local 17th percentile wage. (This is legally defined as the “Level 1” prevailing wage, based on Labor Department wage survey data for the job and local area.) After the rule was struck down in federal court in 2010, the Obama administration promulgated a final wage rule in 2011 that would have required employers to pay H-2B workers the local average wage (what’s also known as the Level 3 prevailing wage). However, this effort led to years of federal litigation brought by H-2B employers that stopped the rule in its tracks, and spurred an onslaught of corporate lobbying that convinced members of Congress from both major parties to deny funding to the Labor Department to enforce the rule.

Finally, in April 2013, the wage rule for the H-2B program was re-promulgated as an interim final rule issued jointly by the departments of Labor and Homeland Security. (The fact that the rule was issued jointly negated the main legal challenge, namely that the Labor Department lacked authority to promulgate any H-2B wage regulation.) The 2008 and 2013 H-2B wage rules both required employers to pay their H-2B employees the wage set out in an applicable collective bargaining agreement (CBA). But under the 2008 rule, if no CBA applied, then employers were allowed to pay the 17th percentile wage. The 2011 final H-2B wage rule that Congress blocked would have required employers to pay the higher wage between the CBA wage or the local average wage. Under the 2013 rule, if no CBA covered the H-2B worker, then the employer would have to pay the local average wage.

Read more

The White House sent a Labor Day message from Director of the Office of Management and Budget Shaun Donovan about the many important issues affecting working Americans that will be decided in the next month of congressional budget negotiations. The message is well worth reading.

Donovan describes what he calls a “double-pronged attack on the workers we are celebrating today.” This attack includes deep cuts at the Wage and Hour Division, which protects workers against wage theft by crooked employers, and which collected $250 million in back pay for workers last year. Republicans also want limits on the use of third-party experts to accompany OSHA compliance officers on workplace safety inspections, where they can point out hazards OSHA might miss. They want to cut the budget and limit enforcement of the National Labor Relations Board’s rules to protect workers who join together for better working conditions. They want to block a new OSHA rule that will save thousands of workers from death, disabling lung disease, or cancer from inhaling silica dust. And they are trying to kill a new effort by the Department of Labor to protect retirees from financial advisors who put their own interests ahead of their clients’ interests.

None of the laws protecting working Americans from wage theft, on-the-job injury, unlawful retaliation, or self-dealing by financial advisors is meaningful if the government doesn’t enforce them. That takes resources and staff—investigators and lawyers who can take on big corporations or reckless businesses. Yet congressional Republicans want to cut funding for enforcement of all these laws. At OSHA, for example, Republicans want a 10 percent cut—$57 million, even though OSHA’s inspectors already can’t get to even one percent of workplaces in a year, and negligent employers put workers in harm’s way every day and kill nearly 100 employees a week.

Read more

This post originally appeared on SCOTUSblog, as part of a symposium on Fisher v. University of Texas at Austin, the challenge to the university’s use of affirmative action in its undergraduate admissions process. 

The Supreme Court’s affirmative action decisions have been suffused with hypocrisy. Justice Ruth Bader Ginsburg called them out, with barely more gentle phrasing, in her lone dissent to the seven-to-one majority opinion the first time Fisher v. University of Texas at Austin (2013) was before the Court. “Only an ostrich,” she observed, “could regard the supposedly neutral alternatives as race unconscious,” and only a (contorted) legal mind “could conclude that an admissions plan designed to produce racial diversity is not race conscious.”

The “diversity” standard in college admissions has gained great popularity because advocates of race-based affirmative action, stymied by the Court since Regents of the University of California v. Bakke, latched onto it as an alternative that could satisfy strict scrutiny. Many proponents have since persuaded themselves that diversity is, after all, a better approach than race-based affirmative action and that if the Court had not required it, we would have had to invent it. Yet while diversity in college classes is certainly an important educational and social goal, its elevation nonetheless dodges the nation’s racial legacy and avoids our constitutional and moral obligation to remedy the effects of centuries of slavery and legally sanctioned segregation. Without acknowledging we were doing so, we have engaged in a legal sleight of hand, substituting enriching the educational experience for remedying past injustice in designing affirmative action policy.

Underlying all this has been the Court majority’s conviction, most recently in Fisher I, that university officials have not identified specific Fourteenth Amendment violations for which their policies are a remedy, and therefore their consideration of race injects, without constitutional justification, a discriminatory racial consideration into the admissions process. The paucity of African Americans at the University of Texas reflects no de jure exclusion, the Fisher I majority believed, but only de factosocial inequality for which there is no race-conscious constitutional remedy. Therefore, including racial diversity in a scheme of skill-based, interest-based, or economic diversity is suspect, requiring very strict scrutiny. Indeed, the conditions set by the Fisher I majority opinion suggest a scrutiny that is strict in theory but fatal in fact. (I discuss the Fisher cases here only as they relate to the treatment of African Americans in affirmative action plans, not to that of other national or ethnic minorities or of disadvantaged economic groups; each has a different history and status, requires different opportunities to succeed, and raises different social policy and constitutional concerns).

Read more