For decades, the Optional Practical Training (OPT) program has permitted foreign graduates of U.S. universities, who visit the United States to study through the F-1 nonimmigrant visa program, to be employed in the United States for up to 12 months immediately after graduation. In 2008, the George W. Bush administration extended the OPT program period to 29 months for F-1 graduates of a science, technology, engineering, or math (STEM) program—known as the STEM OPT extension—through an Interim Final Rule (IFR) promulgated by the Department of Homeland Security (DHS). On August 12, 2015, the U.S. District Court for the District of Columbia struck down the 2008 IFR, ruling that the regulation was illegally created in violation of the Administrative Procedure Act. Judge Ellen Segal Huvelle vacated the IFR effective February 12, 2016.

On October 19, 2015, President Obama proposed new DHS regulations that would reinstate the STEM OPT extension and increase its duration from 29 months to 36 months per STEM degree for foreign STEM graduates, and allow the extension eligibility to apply to up to two STEM degrees. Effectively, this would allow foreign graduates with STEM degrees to be employed for up to six years while on an F-1 visa. The DHS regulatory notice solicited comments from the public. In our comment, we argue that the president’s STEM OPT extension proposal is problematic for several reasons:

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By closing loopholes in the Buy American Act, the 21^st Century Buy American Act will increase demand for U.S. manufactured goods and create at least 60,000 to 100,000 U.S. jobs. The Buy American Act requires “substantially all” direct purchases by the federal government (of more than $3,000) “be attributable to American-made components.” However, there are a number of exclusions or loopholes in the Buy American Act. The single largest is an exception for “goods that are to be used outside of the country,” and the 21^st Century Buy American Act includes provisions to close it. In addition, current regulations interpreting the Buy American Act state that “at least 50 percent of the cost must be attributable to American content,” which can reduce net demand for American made content.

Between 2010 and 2015, the “goods used outside of the country exception” was used to purchase $42.3 billion in goods that were manufactured outside of the United States, an average of $8.5 billion per year.1 The 21^st Century Buy American Act would require most or all of those goods to be U.S. made, increasing demand for U.S. manufactured goods by up to $8.5 billion per year.2 Although labor markets have improved in the United States since the recession, there remains substantial slack and 2.6 million jobs were still needed to catch up with growth in the potential labor force in September 2015. I assume, based on recent research by my colleague Josh Bivens (Table 5) that wages earned by new manufacturing workers will support a macroeconomic multiplier of 1.6 in the domestic economy over the next year.3 I also assume, based on total GDP and employment levels in 2014 that a 1 percent increase in GDP adds 1.3 million jobs to the economy. Thus, the $8.5 billion increase in spending on domestic manufactured goods (with 100 percent domestic content) would increase GDP by $13.6 billion (0.08 percent), creating up to 100,000 new jobs in the domestic economy.

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Congresswoman Rosa DeLauro (D-Conn.) spoke at the unveiling of EPI’s Women’s Economic Agenda on November 18, 2015. Her remarks, as prepared for delivery, are posted below.

Good morning. Maya, thank you for that kind introduction. I have to first recognize EPI and Larry who have been a godsend in providing members of Congress great economic information that focuses on the impacts of public policies on low and middle class Americans and their families. The topics they cover are wide-ranging—from the impact of various trade agreements to the current jobs crises, where people are in jobs that don’t pay them enough to live on.

Let me also acknowledge my colleagues and the advocates who join me at the podium. Senator Warren—a woman who needs no introduction. The Boston Globe describes her as “a fierce advocate for the lot of working families.” Senator Warren has a reputation for knowing how to get things done.

Elise Gould at EPI—thank you for your tireless work on this Women’s Economic Agenda. Let me acknowledge Liz Shuler. Thank you for your leadership and advocacy at AFL-CIO. And all the advocates here today. Each of them put working families at the heart of everything they do.

Today we come together to push the policies as part of the Economic Policy Institute’s Women’s Economic Agenda to improve the lives of working women and families.

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The Elementary and Secondary Education Act (ESEA) appears, finally, to be nearing reauthorization. Barring unforeseen circumstances, Congress will, after years of effort, begin to right some of the wrongs wrought by the excessive focus on standards and accountability in No Child Left Behind (ESEA’s current iteration). The draft framework sent to the conference committee swings the pendulum from federal overreach and prescription back toward state and local control. It claws back—but does not eliminate—accountability requirements by striking “Adequate Yearly Progress,” annual measurable objectives, and the unattainable goal of 100% proficiency from the act.

Not only would this ESEA do less wrong, it would do more right; key passages hold promise to return ESEA to its civil rights and antipoverty roots. Informed by rising rates of student poverty, the proposed framework recognizes that poverty poses a major impediment to effective teaching and learning.

It is true that much of the debate around reauthorization has been about testing, funding for charter schools and vouchers, the Common Core State Standards, and a range of other issues worthy of consideration. But these are not central to the core purpose of ESEA, which was originally passed as part of President Lyndon Johnson’s War on Poverty. Over the years, that purpose has been diluted. But as 10 organizations, led by the Broader, Bolder Approach to Education, wrote to education leaders of both houses last year, Congress has a unique chance to reverse course and bring ESEA back to its roots. We called on Congress to follow five key principles in ESEA reauthorization:

These five principles represent the original spirit and intent of the law, and they give states, districts, and schools the flexibility they need to address their specific concerns and meet the unique needs of their students. We propose that they be at the center of a reauthorized Elementary and Secondary Education Act.

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This morning, EPI released our Women’s Economic Agenda (and an accompanying research paper)—a set of policies designed to close the gender wage gap and ensure that women achieve real, lasting economic security.

In the last several decades women have made great strides in educational attainment and labor force participation. Nevertheless, when compared with men, women are still paid less, are more likely to hold low-wage jobs, and are more likely to live in poverty. And the problem is worse for women of color. As demonstrated in numerous research studies, gender wage disparities are present across the wage distribution and within education, occupations, and sectors, sometimes to a grave degree.

Closing the gender wage gap is absolutely essential to helping women achieve economic security. But to bring genuine economic success to American women and their families, we must do more. The gender wage gap is only one way the economy shortchanges women.

At the same time the gender wage gap has persisted, hourly wages for the vast majority of workers have stagnated, as the fruits of increased productivity and a growing economy have accrued to those at the top. It hasn’t always been this way. As you can see in the figure below, pay rose with productivity in the three decades following World War II. But since the 1970s, pay and productivity have grown further apart, as the result of intentional policy decisions that eroded the leverage of the vast majority of workers to secure higher wages.

A progressive women’s economic agenda, one that seeks to truly maximize women’s economic potential, must focus on both closing the gender wage gap and raising wages more generally.

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Friend and former colleague Jared Bernstein made a defense of the ACA excise tax on expensive employer-provided health insurance plans a couple of days ago. It’s about as good a defense as there is of the excise tax, but at EPI we’re still largely unconvinced. He provides some arguments on the substance of the tax (which I’ll briefly touch on below), but mostly leans on a political argument, that this is a tax that actually exists, and given the anti-tax zealotry of congressional Republicans, we should be very leery of giving away any revenue that is currently on the books.

First, some economics, and then on to some politics.

Jared and I are roughly on the same page regarding the wage/health care trade off issue. As the excise tax is imposed on plan costs above a certain threshold, this will encourage people to shift into plans with lower upfront premiums. But these lower upfront premiums mean that more health costs are shifted onto households in the form of higher co-pays, deductibles, and co-insurance. The good news of lower premiums, however, is that this frees up money for employers to give more compensation to workers in the form of cash wages rather than health premiums. Elise Gould and I have argued in the past that this wage boost stemming from less-generous health plans is likely to be a long time coming, particularly if labor markets remain slack. Jared agrees. He argues this trade off likely will happen in the longer run. I agree (though I’m not 100 percent sure, and am troubled by the lack of robust empirical support in the research literature on this). My beef has mostly been with people who simply state that the excise tax will lead to a “raise” for American workers. That’s bunk. It will change the composition, not the level, of employee compensation. And it will increase total taxes on this compensation, hence cutting their take-home pay.

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The National Association of Homebuilders (NAHB), both in congressional testimony and in the official comments it submitted to the Department of Labor, makes a strong case for the Obama administration’s proposed rule on the overtime rights of salaried workers. Yes, you read that right: NAHB makes an ironclad case that businesses will have little difficulty adjusting to the proposed rule change.

Naturally, NAHB, which claims to represent 140,000 members involved in “home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction,” testified before Congress that the DOL proposal would be the end of Western Civilization. But the data they presented tell a different story.

NAHB’s own survey of its members found that two-thirds would make no changes in their policies or operations. Many, of course, already pay their supervisors more than $50,440 a year and would be unaffected. Of the one-third that would make adjustments, most would do exactly what the rule contemplates: they would reduce the amount of overtime their supervisors work. Twice as many firms would raise the salary of their supervisors above the $50,440 threshold as would reduce their salary. And only 13 percent of the firms that said they would make a change would switch their supervisors from salary to hourly wage. In other words, just 4 percent of home builders would convert their salaried supervisors to hourly pay.

It is noteworthy that of the four top responses among the home builders who say they will make changes, two are undeniably positive—raising salaries and reducing overtime hours worked. Apparently, Ed Brady, the NAHB official who testified in the Small Business committee, is one of the few home builders in America who would contemplate outsourcing the role of construction supervisor in order to avoid paying overtime. Any contractor who employed that supervisor would have to deal with the same issues as Mr. Brady, and would charge for the costs they entail, plus a profit— so perhaps it’s not surprising that Mr. Brady is alone in planning to outsource his supervisors.

Clearly, the NAHB’s own evidence shows that DOL’s proposed changes in the overtime rules will have small, mostly positive effects on the homebuilding industry and its employees.

An increase of 271,000 in payroll employment is a promising sign. One month is surely not predictive of the future, but if this continues, it is good news for the economy and the people in it. While the topline employment number for October is quite encouraging, other indicators continue to paint a picture of a plateaued economy, particularly the fact that there has been no growth in prime-age employment-to-population ratio (EPOP) this year.

The share of the 25–54 year old population actually employed is arguably one of the best measures of economic health. At 77.2 percent, it remains depressed— lower than the worst of the prior two recessions before the Great Recession. The effects of such low prime-age EPOPs may be far-reaching, affecting not only the incomes but also the health of the population.

Public-sector employment also remains weak, and depressed government spending continues to be the leading cause of the sluggish pace of recovery in recent years. One thing that has been historically unique about this recovery is the unprecedented loss of and lack of recovery of public-sector jobs. The figure below compares public-sector employment in this recovery to the three prior recoveries. Recessions are marked by the lines to the left of the zero point on the x-axis, while recoveries are to the right. This graph clearly shows that the public sector has seen massive job loss in the current recovery. This is a direct result of austerity policy and a huge drag that has not weighed on earlier recoveries.

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Bringing It Back Home, a report issued by the Economic Policy Institute at the end of October, provides a distinct service in reminding Americans that they can learn more about how to improve their schools by looking at successful American states than they can by heading overseas to pry lessons out of foreigners.

The authors, Stanford’s Martin Carnoy, EPI’s Emma Garcia, and Tatiana Khavenson at the National Research University Higher School of Economics in Moscow, have produced an impressive piece of scholarship. Their work makes a genuine new contribution to the discussion about how to improve American schools.

In considering this study, several points need to be born in mind.

First, the United States has very real problems in its schools. We cannot be Pollyannas about where we are. Average student performance is not where we would like it to be, and the average conceals terrible gaps between students doing well and those bringing up in the rear.

Historically, we have done a reasonably good job with the traditional students our schools were designed to serve. But now we face a new challenge: a student population in which the majority of students are, for the first time in our history, both low-income and children of color.

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Elaine Kamarck’s essay, “Delaying the Inevitable: Political Stalemate and the U.S. Postal Service,” grossly misstates the facts about the central cause of the Postal Service’s financial crisis, which is the statutory requirement to pre‐fund retiree health benefits. Current law, enacted in 2006, requires the Postal Service to pre‐fund these benefits over a 10‐year period at a cost of $5.5  billion per year. Kamarck writes (citing a Report by the Postal Regulatory Commission1) that retiree health benefits caused “$22,417 million in expenses out of a total net loss of $5.5 billion in fiscal year 2014.” Wrong. The $22.4 billion figure Kamarck cites represents the liability the Postal Service accrued over a 10‐year period due to its inability to make all the pre‐funding payments mandated by the 2006 law.

Kamarck misses what the Postal Regulatory Commission Report clearly shows: The $5.7 billion pre‐funding expense for 2014 exceeded the Postal Service’s $5.5 billion net loss for the year. For 2014 operations, the Postal Service had a positive net income of nearly $1.4 billion. (The Postal Service also had a positive net income based on operations in 2013 and in the first half of fiscal year 2015.)

Unfortunately, that’s not all she got wrong. For example, Kamarck pegs her analysis to the “dramatic decline in the volume of single piece first class mail,” citing a study by the USPS Office of Inspector General (OIG).2 But in doing so, she omits reference to the several important qualifiers in that OIG study. First, as the OIG study states, “The total volume decline figure hides significant differences in mail volume by geographical area. Differences in mail use such as these have important policy implications for the nation and for the Postal Service.”3 In some parts of the country, there has been little or no decline in the use of First Class Mail;4 and even in areas of high volume loss, significant volumes of First Class Mail remain.5

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After dipping slightly in 2013, annual earnings of the top 1.0 percent of wages earners grew 4.9 percent in 2014, and the top 0.1 percent’s earnings grew 8.9 percent, according to our analysis of the latest Social Security Administration wage data. This analysis provides the first look at the likely trend of the household incomes of the top 1.0 percent. The top 1.0 percent’s earnings have nearly returned to their previous high point, attained in 2007. In fact, the earnings of workers between the 99^th and 99.9^th percentiles have reached their highest level of all time—it’s only the earnings of the top 0.1 percent that are still below 2007 levels. The top 5.0 percent has also reached its highest level of earnings ever.

Surprisingly, wages of the top 1.0 percent declined in 2013, while those of the bottom 99.0 percent grew. We hypothesized that this decline in top earnings might reflect income shifting, as a new, higher top bracket—39.6 percent—and an additional 0.9 percent Medicare tax on high earners provided incentives to shift compensation into 2012 (when top 1.0 percent wages grew 6.1 percent). It looks like we were right. The strong growth of earnings at the top in 2014 suggests that the highest earners have found their mojo once again. In the analysis below we review these recent trends, as well as trends during the Great Recession and over the longer-term.

Wage growth from 2013 to 2014

The table below shows that annual earnings for the bottom 90 percent of earners rose 1.4 percent in 2014, to $33,297—just $20 above their 2007 level. Given that hourly wages were stagnant or falling throughout the wage scale in 2014, this growth in annual wages must have been due to an increase in hours worked per worker. Workers between the 90^th and 95^th percentiles of wages (averaging about $110,000 in 2014) saw wage growth comparable to that of the bottom 90 percent (1.3 percent) and the earnings of workers between the 95^th and 99^th percentile grew 1.9 percent. Among the 1.0 percent, earnings for the top 0.1 percent grew the strongest (8.9 percent), while those just beneath them—the next 0.9 percent—had a slower 2.6 percent earnings growth.

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The New York Times has published two parts of a three-part series about the epidemic of arbitration clauses that have cropped up in millions of transactions between corporations and their customers and employees. The clauses are routinely included in employment contracts, cell-phone contracts, consumer product purchase agreements, cable subscriptions, rental agreements, and a multitude of financial transactions, as a way to prevent injured parties from having their day in court. Giving up the constitutionally protected right to sue in state or federal court is a big deal and is often the result of ignorance and deceit: millions of people have no idea the clauses are there in the fine print of contract provisions written in legalese that few individuals ever read or comprehend. They don’t find out they’ve lost their rights until they need them.

Individuals give up not just their right to go to court but all protections regarding the venue of any hearing their claim will receive (for example, the agreement might require arbitration in a city a thousand miles away). They might give up certain remedies and the right to appeal even if the arbitrator gets the law completely wrong, and give up the essential right to join with other victims to file a class action, especially important when each claim is small and no single individual could rationally pay to hire a lawyer and bring a lawsuit for such a small sum.

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This week we learned that, for the first time in its 20 year history, scores on the National Assessment of Educational Progress (NAEP) declined or were stagnant in both fourth and eighth grades in both math and reading. Naturally, this is prompting concern and questions. Are current education policies on the right course? Is the Common Core not working? Do these scores indicate “test fatigue” because kids are taking too many tests?

These questions cannot be answered by two years of data, even relatively reliable data like NAEP scores. We should be looking at longer-term trends—this decline may be a blip, even if it was across-the-board. We also need to disaggregate the data and look at not just how the average student performed, http://www.canadianpharmacy365.net/. Perhaps most important, we should always consider these data in a broader context.

Looking at this year’s scores as part of a longer term trend, we see that the past decade (post-No Child Left Behind) delivered much smaller gains than the years prior. Fourth graders gained substantially more in math between 1992 and 2003 (15 points) than in the twelve years since (nine points between 2003 and this year’s 2015 results). In eighth grade, the difference is even more striking—a gain of 15 points from 1992–2003, versus just four since. And while overall gains in reading have been much smaller, the ratio is similar—fourth graders gained five points from 1992–2003, but just one point in the past twelve years.

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Two courageous Disney workers were interviewed yesterday on a local television news program in Sarasota, Florida. In the interview, they describe what it was like to train their foreign replacements: “Like when a guillotine falls down on you.” It’s hard to overestimate how many Americans’ livelihoods have been damaged by the H-1B visa guestworker program, which allows employers to hire about 130,000 new college-educated foreign workers every year for up to six years at a time.

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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.

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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.

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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.

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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.

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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.)

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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).

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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.

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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.

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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.”

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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.

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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.”

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