Tomorrow the Senate Banking Committee will vote on the first Trump administration nominee to the Federal Reserve Board of Governors, Randal Quarles. As we’ve noted again and again in recent years, members of the Federal Open Market Committee (FOMC), which include Fed governors, have extraordinary power over American economic policy. A primary job for the FOMC is balancing the two prongs of the Fed’s “dual mandate”—the pursuit of maximum employment consistent with stability of prices (or at least stability of inflation). For too many years over recent decades the Fed has privileged avoiding any outbreak of above-target inflation over the need to pursue maximum employment and keep labor markets tight. This failure to target and achieve genuine full employment has been a key driver in the rise of income inequality and the failure of wages for the vast majority to meaningfully outpace inflation. Currently, this debate over full employment and the dual mandate centers over concerns that the Fed may have begun raising short-term interest rates too early and too rapidly, threatening to drag on the pace of economic recovery and progress in reducing unemployment.
Quarles has made it clear that he does not think that recent interest rate increases have proceeded too rapidly. In fact, he has made a conventionally conservative mistake in declaring that low interest rates are a “threat to financial stability.” This outlook should not come as a huge surprise. A key reason why the Fed in recent decades has privileged extreme inflation control over tight labor markets has been because the financial sector and wealth holders are extremely averse to inflation surprises. The financial sector dominates governance of the regional Federal Reserve banks, which supply 5/12ths of the votes of the FOMC. Quarles’ arguments against efforts to aggressively pursue genuine full employment are fully consistent with his background as a self-described “Wall Street lawyer.”
The saying goes that even a stopped clock tells the correct time twice a day. This is a pretty good description of the Trump administration’s approach to trade policy: their analysis and motivations are almost never right, yet they occasionally hit on a decent idea. But then they move quickly off of it. This is illustrated perfectly in their recent moves regarding the Korea-U.S. Free Trade Agreement (KORUS).
News reports suggest that the Trump administration is preparing to withdraw from KORUS. The motivation for this seems more driven by Trump pique that the South Korean government is not rubber-stamping his preferred policy stance on the current tensions in the Korean peninsula, rather than on any coherent economic analysis.
Yet, it’s true that on pure economics, KORUS should be seen as a failure. The KORUS deal, approved in 2011, was supposed to result in rising U.S. exports. However, U.S. exports to Korea actually fell $1.2 billion between 2011 and 2016, while imports from South Korea soared—increasing the bilateral trade deficit by $14.4 billion and eliminating more than 95,000 jobs in the first three years alone.
The glaring omission in KORUS was failure to include enforceable provisions on currency policy. Korea is a well-known currency manipulator, and it also has the fourth largest current account trade surplus (the broadest measure of trade in goods, services, and income) in the world. Ending Korean currency manipulation and revaluing the won is the surest way to increase U.S. exports and stop the surge in Korean imports in the United States, demonstrating the value of this strategy for rebalance overall U.S. trade and helping to rebuild U.S. manufacturing. Recent estimates suggest that rebalancing U.S. trade will require Korea to revalue the won by at least 32.7 percent.
This morning Attorney General Jeff Sessions announced that the Trump administration will “wind down,” and in six months, end Deferred Action for Childhood Arrivals (DACA), a Department of Homeland Security initiative put in place in 2012 that temporarily deferred the deportation of approximately 800,000 young immigrants who were brought to the United States as children. DACA has been an unqualified success and has benefited not only the DACA recipients themselves, but also the country and the economy.
The young immigrants who met the requirements and passed the necessary background checks for DACA were promised by the federal government that they would not be removed from the United States for two years at a time, as long as they kept applying to renew, kept a clean criminal record, and were either enrolled in school or graduated, or serving in the military or honorably discharged. Because of these requirements, we know that nearly all of the recipients are deeply integrated into their local American communities and labor markets.
Along with protection from removal, DACA recipients are entitled to receive an employment authorization document (EAD), allowing them to be employed in the United States legally, along with certain other benefits. More than 100 legal experts and 20 state attorneys general have recently argued that DACA is a lawful use of the executive branch’s prosecutorial discretion, and as I have written before, the granting of an EAD to deferred action recipients is clearly authorized by statute. Together this means that eliminating DACA is entirely a political decision and not a legal one. The impact of this political decision is significant: 800,000 young immigrants—many of whom have never known another country except when they were small children—will become instantly deportable and lose the ability to work legally and contribute to the United States, and will be effectively left without labor rights and employment law protections in the workplace.
Trump administration and congressional GOP will return to a packed schedule, but maintain attack on working people
Congress returns from a month-long recess next week to a packed agenda. Lawmakers must pass a government spending bill by September 30 in order to avert a federal government shutdown. They must also increase the debt ceiling or risk defaulting on the national debt. In spite of Republican control in both chambers of Congress, action on these critical measures is complicated by divisions within the party over whether to tie the debt limit vote to spending cuts. Funding for President Trump’s border wall and the need to consider disaster relief funding for those areas impacted by Hurricane Harvey loom over any government spending measure. One thing is clear—September is likely to be filled with congressional chaos. In the midst of that chaos, the Trump administration and congressional Republicans will continue to advance the anti-worker agenda they have been working to carry-out since taking office. While those actions may not get attention proportional to their impact, EPI will continue to monitor and report on these important issues. Here are some critical actions to look out for this month:
Trump continues to attack workers’ retirement, costing them billions in retirement savings
Just this week, the Department of Labor (DOL) published a proposal to delay full implementation of the fiduciary rule (the rule that requires financial advisers to act in the best interest of their clients) for another 18 months. This delay would cost retirement-savers 10.9 billion over the next 30 years. Public comments on the proposal are due September 15. It is expected that DOL will quickly finalize this delay. Workers should be able to invest for retirement without worrying about their financial advisers steering them toward investments that pay a lower rate of return for the saver, but offer a higher commission to the adviser. The only people who will benefit from the Trump administration’s DOL actions here are unscrupulous financial advisers and financial services companies.
Trump continues efforts to take away the rights of millions of workers to get paid for working overtime Read more
Labor Day is a celebration of the labor movement and the contributions working people make to the economy and the country. Today’s unions give workers across the economy the power to improve their jobs; through collective bargaining, working people gain a voice at work and the power to shape their working lives. As we illustrated in a recent research report, unions are associated with higher wages and benefits for workers of all genders, races, and ethnicities, better health and safety practices in a variety of sectors, and lower levels of economic inequality across the economy. Unfortunately, aggressive anti-collective bargaining campaigns and lobbying have eroded union membership, thwarting the ability for workers to organize.
Without stronger collective bargaining—and stronger labor standards in general—it is only in the tightest of labor markets that the vast majority of workers see their wages grow and their working conditions improve. Without strong unions, one of the only ways workers have leverage in the labor market is when workers have good “outside options,” i.e. when business have to woo workers rather than workers having to compete for scarce job openings. And unfortunately, that has not been the case for many years.
Repeal of pay transparency rule will make it easier to discriminate against women and people of color
On Tuesday, the Trump administration announced a “review and immediate stay” of the EEO-1 pay data collection rule, which was an Obama-era rule issued by the Equal Employment Opportunity Commission (EEOC). The rule would have required large companies (with 100 or more employees) to confidentially report to the EEOC information about what they pay their employees by job category, sex, race, and ethnicity. Pay transparency is key in leveling the playing field in order to eliminate employer discrimination.
This move is just another example of how the Trump administration’s campaign rhetoric on supporting working people has been followed by actions that hurt them at every turn. Further, this decision runs counter to what the research shows—inequities have gotten worse, not better. Even among workers with the same level of education and work experience, black-white wage gaps are larger today than nearly 40 years ago and gender pay disparities have remained essentially unchanged for at least 15 years. In both cases, discrimination has been shown to be a major factor in the persistence of those gaps.
As my colleague Marni von Wilpert notes, by staying the equal pay data rule, the Trump administration is making it harder for employers and federal agencies to identify pay disparities and root out employment discrimination—and it will make it more difficult for working people to know when they are being discriminated against. When this rule was first announced, former EEOC Chair Jenny R. Yang stated, “Collecting pay data is a significant step forward in addressing discriminatory pay practices. This information will assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of our federal anti-discrimination laws.” By staying this rule, the Trump administration has shown that it does not value equal pay for equal work.
This post originally appeared on the NAACP Legal Defense Fund’s Medium page.
This week, New York Magazine and ProPublica published a scathing article by Alec MacGillis titled, “Is anyone home at HUD?”. Multiple sources — current and former, career, and political staff — described a U.S. Department of Housing and Urban Development in disarray, with severe lack of direction from a Secretary who has said he believes poverty is a mindset. Here, Richard Rothstein digs into the socio-economic conditions that lead to poverty for many low-income children, which policymakers like Secretary Carson would do well to consider.
Ben Carson, Secretary of Housing and Urban Development, told an interviewer recently that poverty results from “the wrong mindset:” low-income persons with strong motivation can escape poverty while those with negative attitudes remain poor.
His own life story seems to illustrate this. Poor children with ambition and self-discipline can occasionally climb the socioeconomic ladder. Luck figures, too, but a child must be on the lookout for it to benefit. Children expecting defeat may never seize opportunities within reach.
Yet as a scientist, Dr. Carson should realize that it’s always dangerous to jump from anecdotes about exceptional cases to generalizations about entire groups. Every human condition has variability. Only some children in Flint got lead poisoning, although all drank the same poisoned water. Even native intelligence is distributed: in any demographic group, some have above average I.Q.s, some are below it, and most are average, around 100.
During a town hall on Monday, House Speaker Paul Ryan trotted out a standard and misleading talking point, claiming that the international competitiveness of U.S. corporations is damaged by an allegedly too-high corporate income tax rate.
“I was just meeting with a father/son business in—I was doing office hours in Janesville today. I met with a father/son business in—down in south central Wisconsin. I don’t want to tell their names because I don’t want to, you know, get them grief. But down in Genoa City, they have an electricity business. They make electrical parts for Snap-on and other companies.
Their biggest competitor is Canada, a company in Canada. Their tax rate—they’re a corporation, small business, 35 percent. You know what the Canadian tax rate is? Fifteen percent. Eight out of 10 businesses in America file their taxes as people, as individuals. We call them, like, Subchapter S corporations, LLCs. Their top effective tax rate is 44.6 percent. Canadians are at 15 percent. The Irish at 12.5 percent. China, 25 percent.”
As I noted a couple weeks ago, the most common version of this talking point just compares the statutory U.S. corporate tax rate to the statutory corporate rate in other countries. This is already awfully misleading because what corporations actually pay (their effective rate) is far less than the 35 percent statutory rate, thanks to a corporate tax code riddled with loopholes. It’s hard to come up with an exact number, but studies have found effective federal corporate tax rates ranging between 12.5 and 19.4 percent—a far cry from 35 percent.
The first round of the Trump administration’s NAFTA renegotiations began in Washington wrapped up on Saturday. The negotiators will meet again in September in Mexico City and then again in October in Canada. The United States has not yet proposed any specific measures on important issues such as labor rights, currency manipulation, or rules of origin. By all accounts, these negotiations are more likely to hurt than help most working Americans, who would be better served by efforts to target countries with large, global trade surpluses such as China, the European Union (EU) and Japan. Rather than tinkering around the edges of NAFTA, the United States should begin a campaign to realign the U.S. dollar and rebalance global trade.
Over its first 20 years, growing trade deficits with Mexico and Canada from the North American Free Trade Agreement (NAFTA) eliminated 850,000 U.S. jobs, most of them in manufacturing. (American workers suffered far more after China entered the World Trade Organization in 2001, including 3.4 million jobs lost through 2015 alone, due to growing trade deficits with that country.) And trade deficits and job losses are just the tip of the iceberg of the devastation wreaked by bad trade deals, which have also driven down the wages of all 100 million American workers without a college degree, who have suffered losses of just under $2,000 per year for each median wage, full-time worker. Roughly $200 billion per year is being taken from the pockets of working people and middle class families, because the super-rich and huge corporations have been able to game the system at their expense.
NAFTA has created the economic equivalent of a 14-lane freeway to Mexico, paving the way for the outsourcing of jobs and factories to Mexico. In the past twenty years, the U.S. has lost more than 87,000 factories (manufacturing establishments), wiping out nearly one-third of U.S. manufacturing production capacity. Tweaking NAFTA around the edges is not going to change those dynamics. As EPI founder Jeff Faux recently explained, NAFTA created “radical new rules for trade…that shifted the benefits of expanding trade to investors and the costs to workers.” The system that created this deal to benefit rich executives and multinational companies is still in place and, if anything, tilts even further in their interest in an administration led by former Goldman Sachs executives Gary Cohn (Trump’s chief economic advisor) and Treasury Secretary Steve Mnuchin.
Yesterday, the National Labor Relations Board (NLRB) filed its brief in NLRB v. Murphy Oil, which will be argued in the Supreme Court in October. The case will determine whether mandatory arbitration agreements with individual workers that prevent them from pursuing work-related claims collectively are prohibited by the National Labor Relations Act (NLRA). The brief makes clear what is at stake for workers if the Supreme Court were to rule against the NLRB in this matter.
The NLRA guarantees workers the right to stand together for “mutual aid and protection” when seeking to improve their wages and working conditions. Employer interference with this right is prohibited. However, increasingly, employers are requiring workers to sign arbitration agreements that force them to waive their rights to collective actions, and handle workplace disputes as individuals. In practice, that means that even if many workers faced the same type of dispute at work, each individual employee must hire their own lawyer, and must resolve their disputes out of court, behind closed doors, with only their employer and a private arbitrator. The NLRB has found these forced arbitration agreements interfere with workers’ right to engage in concerted activity for their mutual aid and protection, in violation of the NLRA.
U.S. corporations pay a far lower effective tax rate than the statutory rate would indicate—and a recent CBO study doesn’t actually contradict this
The conventional wisdom on corporate taxes holds that while the U.S. statutory rate of 35 percent is among the highest of our peer countries, widespread loopholes in the corporate tax system mean that the rate actually paid by U.S. corporations is far lower, and actually firmly in line with these international peers. And this is one of the times where the conventional wisdom is actually correct. Because of a lack of data, it’s hard to put an exact number on it, but it’s clear that the actual rate faced by U.S. corporations is far lower than the headline 35 percent rate.
But recently, some have been trying to refute this conventional wisdom by brandishing a recent Congressional Budget Office (CBO) report. Summary Table 1 in the report has led some to believe that even the effective rates that U.S. corporations actually face are high among peer countries. But as we describe in our recent paper, once you dig into the details of the measures that CBO is reporting, this isn’t actually the case. And in fact, their findings simply bolster conventional wisdom. See EPI’s analysis of the CBO report:
Does a recent CBO report contradict our findings about U.S. effective rates? No—and here’s why.
CBO recently released an updated report comparing corporate income taxes across G-20 countries (CBO 2017). Uncareful readers might be led into thinking that the CBO report overturns the empirical evidence cited above that indicates that corporate taxes actually paid by American companies are not notably high relative to international peers. But a careful read shows that the CBO report does not contradict this other evidence.
The headline findings of the CBO study claim that the United States has the highest statutory corporate tax rate, the third-highest average corporate tax rate, and the fourth-highest effective marginal corporate tax rate. However, when we dig into the study, we are able to show that the latter two claims are simply not true. We’ll take each of the CBO estimates in turn and show why they do not contradict the evidence presented in Figure C.
The statutory tax rate. As we have already noted, it is absolutely true that the United States has one of the highest statutory rates, but widespread loopholes make this rate irrelevant to the broader question of what corporations are actually paying in corporate income taxes.Read more
What to watch on jobs day: Hoping for stronger nominal wage growth as the economy continues to inch toward full employment
This week, I wrote two blog posts about wages in the first half (FH) of 2017. First, I analyzed up-to-date real (inflation-adjusted) hourly wage series from the Current Population Survey (CPS) across the wage distribution and compared it to FH2016, FH2007, and FH2000. Preliminary findings from 2017 suggest more broadly based wage growth—with significant gains at the 10th percentile—associated with an economy approaching full employment as well as state-level increases in the minimum wage. However, that good news is tempered by the fact that the vast majority of workers are, in reality, only beginning to make up for lost ground, rather than getting ahead, and wage inequality is still far greater today than in 2007 or 2000.
Second, I analyzed wages in FH2017 by education level. I found that wages for workers with less than a high school degree or just a high school degree rose faster over the last year than any other group at 1.9 percent and 1.7 percent, respectively. This phenomenon is likely related to the disproportionate increases among lower wage workers, due to some states raising their minimum wage. Somewhat surprisingly, given their unemployment rate of 2.9 percent over the last year, I also found that college wages actually fell slightly between FH2016 and FH2017. This is evidence against the claim that the U.S. economy is experiencing a work shortage, particularly among credentialed workers. If employers had to work harder to attract or retain workers with a college degree, we would surely see it in the wage data.
In January, Montgomery County, Maryland County Executive Isiah Leggett vetoed an ordinance passed by the county council that would match the minimum wage in the District of Columbia, raising the county minimum to $15 by 2020. Leggett then commissioned the consulting firm PFM to analyze the likely economic effects. The firm just released their study and their findings are so implausible that they border on the absurd. The study essentially concludes that raising the minimum wage in Montgomery County—even a small amount—would be the most devastating economic shock the county has experienced in a generation, more damaging than the Great Recession. To say that the study has methodological problems would be a gross understatement. No county official, business owner, worker, or resident in Montgomery County—and certainly not editorial boards of local newspapers—should give any credence to this report.
The report posits that the proposed $3.50 minimum wage hike over 5 years will lead to massive losses in jobs, income, and county revenues. Ostensibly wanting to present both the costs and benefits, the authors do also note that “increased wages are associated with improved mental health, reduced hunger, and decreased stress for workers and their families.” Admittedly, I have only skimmed the full 145 page report, but one only needs to read the initial section on job impacts to see how flawed this “study” is. The alleged large negative outcomes for incomes and county revenues all stem from the jobs findings, so there really isn’t need to read much further.
The report’s methodology for how they calculate expected impacts on employment is completely divorced from any actual research. First, the authors go through a long discussion of other localities that have enacted higher minimum wages—such as the District of Columbia, Los Angeles, and San Jose, among others— which they refer to as “comparison jurisdictions,” implying that the impacts of minimum wage hikes in these locations might provide guidance for how a higher minimum wages might affect Montgomery County. Ironically, they note that in virtually all these “comparison jurisdictions,” studies that analyzed the resulting or likely employment effects of the local minimum wage showed that any impact on jobs was negligible. Nevertheless, the authors assert that Montgomery County is not a “twin” of any of these places, thus none of these chosen comparisons should serve as a guide.
Yesterday, I took an in-depth look at the latest wage data for select percentiles. Today, I’m going to provide a brief look at the latest wage data by educational group for the first half (FH) of 2017 compared to FH2016 and FH2007, before the Great Recession began. While FH data are, by definition, more volatile than full year data, data for this year so far indicate a mild reversal of trend from what I found in The State of American Wages 2016.
The table below shows real average hourly wages in FH2017 dollars for the five main educational groupings and annualized changes over the last year and since FH2007. It is particularly striking that the wages for workers with less than a high school degree or just a high school degree rose faster over the last year than any other group at 1.9 percent and 1.7 percent, respectively. This phenomenon is likely related to the disproportionate increases among lower wage workers. I pointed out earlier this week the likely relationship between strong wage growth at the 10th percentile and the significant number of state-level minimum wage increases that took effect at the beginning of the year.
Average hourly wages by education, FH2007–FH2017 (FH2017 dollars)
|Less than high school||High school||Some college||College||Advanced degree|
|Annualized percent change|
Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata
From the latest wage data, we also see that average wages for workers with some college or a bachelor’s degree fell over the last year. Because of the opposing trends in high school and college wages, the gap between those two groups fell, mildly offsetting the increases we saw between 2015 and 2016. The slight decline in average wages for college graduates is particularly striking as the unemployment rate for that group averaged 2.9 percent over the last year. While not definitive, this is a sign that there is no shortage of credentialed workers in the economy today. If there were, employers would have to offer higher wages to attract and retain the workers they want. It remains to be seen whether this trend will continue through the remainder of the year.
Agriculture has long been the poster child for an industry dependent on low-wage migrant workers. Today, about two-thirds of the hired workers employed on crop farms were born in Mexico, and most of these Mexican-born workers are not authorized to be employed in the United States. The total number of unauthorized migrants has fallen, while the number of unauthorized migrants who are employed in the U.S. labor market has been stable at about eight million, and the share of Mexican-born farm workers has also been stable. The lack of unauthorized newcomers makes agriculture a bellwether of how industries that rely on newcomers from abroad are adjusting to the slowdown in unauthorized migration. In agriculture, employers are responding in a number of ways. One of their main strategies has been to increase the use of the H-2A guestworker program to hire farm workers from abroad for seasonal jobs; this poses key challenges that have yet to be fully explored.
How farmers are adjusting to fewer new unauthorized migrant workers: 4-S strategies
Farmers are adjusting to the lack of new unauthorized migrant workers and higher labor costs with some or all of what are called “4-S” strategies: satisfy, stretch, substitute, and supplement. First, by satisfying current workers with new incentives, employers may be able to retain them longer. The second strategy is to stretch the current workforce with mechanical aids that increase worker productivity, which can include using conveyor belts that reduce the need to carry harvested produce as far, making them more productive and harvesting jobs more appealing to older workers and women. The third strategy is substitution or replacing workers with machines. Five of the most important field crops covered by government support programs—corn, soybeans, wheat, cotton, and rice—have largely been mechanized. Fresh fruits and vegetables, on the other hand, have defied mechanization because many are fragile and require gentler human hands, and machines that shake apples or pears from trees damage a higher share of the fruit than hand harvesters.
Approximately 4,000 workers at a Nissan manufacturing plant in Mississippi will be voting on August 3 and 4 whether to join the United Autoworkers (UAW). The Nissan plant in Canton is located in a suburb of Jackson, the Mississippi state capital. For decades, the working poor in and around Jackson have faced significant problems stemming from systematic, persistent poverty. Over 30 percent of the people living in Jackson, and 26 percent of the people living in Canton, are living in poverty. But the struggles that many Mississippians face are not insurmountable, unchangeable problems. Rather, they are the result of deliberate policy choices made just down the road from the Nissan plant at the state’s capitol, on issues such as health, education, and jobs.
When it comes to health, Mississippi has the highest death rates in the country from preventable causes such as heart disease, diabetes, and stroke, but has one of the lowest rates in the country of residents who receive health insurance through their jobs. There is an immense need for better access to health care in Mississippi, and the Medicaid expansion available to Mississippi under the Affordable Care Act would give an additional 300,000 people coverage. But Governor Phil Bryant (R) deliberately chose not to expand Medicaid access for his citizens.
When it comes to education, many workers at the Nissan plant send their children to the Jackson and Canton public school districts, which were both graded as failing by the state’s Department of Education. To address underperforming schools, the state legislature established the Mississippi Adequate Education Program (MAEP), which requires the state to determine the amount of funding necessary to ensure schools districts have the basic funds needed to equip students to perform at least a “C” level. But each year, the state legislature has deliberately chosen to underfund the MAEP, totaling over $1.7 billion in education underfunding since 2008.
And when it comes to jobs, Governor Bryant is making another deliberate policy choice that will harm working people in Mississippi: he opposes the Nissan workers’ drive to form a union. The governor has taken this position even though unions have consistently been shown to raise wages and benefits for workers, which would be a much-needed boost for communities with high poverty rates like Jackson and Canton.
Earlier this year, I wrote about the state of American wages through 2016. Now, we have a chance to see what’s been happening to wages in 2017 by examining wages in the first half (FH) of the year. In the table below, I present EPI’s most up-to-date real (inflation-adjusted) hourly wage series from the Current Population Survey (CPS) across the wage distribution. I compare the most recent six months of wage data with FH2016, FH2007, and FH2000. My conclusions about FH2017 data are fairly consistent with what I found when I analyzed the 2016 data compared to previous years. Preliminary findings from 2017 suggest more broadly based wage growth—with significant gains at the 10th percentile—associated with an economy approaching full employment as well as state-level increases in the minimum wage. That good news is tempered by the fact that the vast majority of workers are, in reality, only beginning to make up for lost ground, rather than getting ahead, and wage inequality is still far greater today than in 2007 or 2000.
Hourly wages by wage percentile, FH2000–FH2017 (FH2017 dollars)
|Wage by percentile|
Note: The xth-percentile wage is the wage at which x% of wage earners earn less and (100-x)% earn more.
Source: EPI analysis of Current Population Survey microdata
Real wage growth over the last year is broadly based and stronger than the wage growth we’ve seen for much of the economic recovery from the Great Recession. This type of growth is expected as we continue to inch towards full employment. When the unemployment rate falls even as more workers are drawn into the labor market, available workers of all types become scarcer and employers have to increase wages to attract and retain the workers they want. Lowered unemployment has, in the past, benefited low-wage workers more than middle-wage workers and middle-wage more than higher-wage workers. Though we’ve seen slow but steady improvement over the last several years, today’s labor market still exhibits a fair amount of slack with a weaker prime-age employment-to-population ratio that we’ve seen at other times of similar unemployment rates and nominal wage growth slower than target levels.
Monday, July 24 marked eight years since the federal minimum wage was raised from $6.55 to $7.25. While the anniversary passed with little fanfare, the Trump administration chose Monday to issue a Request for Information (RFI) in an effort to weaken or kill the Department of Labor’s (DOL) 2016 update to the overtime rule. On Wednesday, the Trump Department of Justice (DOJ) filed a brief arguing that Title VII does not protect employees from discrimination based on sexual orientation. On Thursday, Members of Congress introduced a bill to weaken the joint employer standard under both the Fair Labor Standards Act and the National Labor Relations Act. And throughout the week, Senate Republicans continued their never-ending attempt to repeal the Affordable Care Act, with the effort ultimately failing early this morning.
Minimum wage anniversary
It has now been more than eight years since the federal minimum wage was last raised. Over this time, the purchasing power of the federal minimum wage has fallen by over 12 percent. Had the minimum wage kept pace with productivity since the late 1960s, it would be over $19 per hour today. With action on the federal level stalled, many states and municipalities have raised their minimum wages, but there are still 21 states where the minimum wage is stuck at $7.25. If policymakers raised the federal minimum wage to $15 by 2024, 41 million American workers would benefit.
Trump Department of Labor begins the process of weakening the overtime rule
In 1975, DOL set the salary level at which workers could be exempt from overtime to the equivalent of around $58,000 in today’s dollars. At that level, more than 50 percent of full-time salaried workers were covered. However, the salary threshold was not raised enough to keep up with wage growth or inflation, leaving millions of workers without protections by 2016.
The Obama administration issued a rule to raise the salary threshold, setting it at $47,476—high enough to cover about 34 percent of full-time salaried workers. The Trump administration has refused to fully implement and enforce the updated rule, first by deciding not to defend against a lawsuit attacking the rule and now by opening up a wasteful RFI. The RFI asks for input on a number of factors, such as whether there should be multiple standards based on geography or job duties. National wage standards ensure decent basic standards for all workers, and the updated rule had already set a salary threshold linked to the lowest-wage Census region. Workers’ wages should not be undercut even further by weakening the salary threshold.
July 31st is Black Women’s Equal Pay Day, the day that marks how long into 2017 an African American woman would have to work in order to be paid the same wages as her white male counterpart was paid last year. Black women are uniquely positioned to be subjected to both a racial pay gap and a gender pay gap. In fact, on average, black women workers are paid only 67 cents on the dollar relative to white non-Hispanic men, even after controlling for education, years of experience, and location.
Why does this wage gap exist for black women?
Pay inequity directly touches the lives of black women in at least three distinct ways. Since few black women are among the top 5 percent of earners in this country, they have experienced the relatively slow wage growth that characterizes growing class inequality along with the vast majority of other Americans. But in addition to this class inequality, they also experience lower pay due to gender and race bias.
In the last 37 years, gender wage gaps have unquestionably narrowed—due in part to men’s wages decreasing—while racial wage gaps have gotten worse. Despite the large gender disadvantage faced by all women, black women were near parity with white women in 1979. However in 2016, white women’s wages grew to 76 percent of white men’s, compared to 67 percent for black women relative to white men—a racial difference of 9 percentage points. The trend is going the wrong way—progress is slowing for black women.
Myth #1: If black women worked harder, they’d get the pay they deserve.
The truth: Black women work more hours than white women. They have increased work hours 18.4 percent since 1979, yet the wage gap relative to white men has grown.
Over the last several decades, both black and white workers have increased their number of annual hours in response to slow wage growth. While men typically work more hours than women, the data reveal that growth in work hours, for both whites and blacks, was heavily driven by the growth of work hours among women. The increase in annual hours is particularly striking for workers in the bottom 40 percent of the wage distribution, where it has been driven almost entirely by women.
President Trump’s spring regulatory agenda throws out hard-fought protections for workers
The administration released its spring regulatory agenda this week. Its proposals to rescind regulations that protect workers’ safety, paychecks, and retirement savings reflect an ambitious agenda that consistently puts corporate interests first. The administration’s proposals to reopen rules protecting workers from exposure to beryllium, making it easier for OSHA to track injury and illness on the job, as well as the overtime and conflict of interest (fiduciary) rules, put workers’ pay, retirement security, and safety at the bottom of their list of priorities.
The administration’s proposal also includes changes to the current regulations on “tip pooling. The National Restaurant Association, who praised this move, has lobbied for years to loosen these restrictions and give employers more control over workers’ tips. While there are few details in this proposal at the moment, it’s worth noting that the restaurant industry, where tipping is prevalent, is rife with labor violations. In a recent EPI study on wage theft, more than 14 percent of food and drink service workers reported being paid less than the minimum wage, while 6 percent of other leisure and hospitality workers reported the same. And nearly half of workers reporting wage theft in the ten most populous states worked in service occupations. Under these circumstances, a policy action that could hand even more authority over a worker’s tips to their bosses would not be a step in the right direction.
Over the last several years, the economy has moved steadily (if more slowly than we would have wanted) towards full employment. Payroll employment growth in excess of working-age population growth is a positive sign of a growing economy, but unrecovered labor force participation and below-target wage growth are clear signs of remaining economic slack—signaling that we haven’t yet reached genuine full employment.
Last week, Valerie Wilson and I put the black unemployment rate in perspective. Today, I want to talk about the plight of young workers in our economy. The overall unemployment rate between July 2016 and June 2017 (we look at data over a full calendar year to allow large enough sample sizes to compare subgroups within the labor force) was 4.7 percent. But this rate masks important differences within the population. Young workers, ages 16-24 years old, had an unemployment rate more than twice as high as prime-age (25-54 year old) workers (9.8 percent versus 4.0 percent) and nearly three times as high as older (55-64 year old) workers (3.3 percent). While young workers typically have much higher unemployment rates, tight labor markets could induce employers to turn to younger workers and push their unemployment rate down disproportionately in coming years. And like all workers, young workers need tighter overall labor markets to see their wages grow.
The Global Compact on Migration (GCM) is an agreement that is being negotiated through the United Nations (UN) by its Member States to establish a new regime for cooperation on international migration. One of the major goals of the GCM is to expand labor migration and labor mobility channels for migrants seeking work in countries other than their own. But what could that look like in practice?
Migrant workers and international labor migration
There are approximately 244 million international migrants around the globe, accounting for approximately 3 percent of the world’s population. The UN’s International Labour Organization (ILO) estimated that 150 million or two-thirds of all international migrants were in the labor forces of the countries to which they moved in 2013, suggesting that many, if not most, migrants cross national borders for economic reasons.
Congress returned from the July 4th recess this week, and Senate Republicans debuted yet another proposal in the ongoing attempt to repeal and replace the Affordable Care Act. The latest proposal still includes the severe cuts to Medicaid found in earlier drafts, so millions of Americans will lose health care coverage if this week’s version of the Republican plan becomes law. Meanwhile, the House Appropriations Committee released a fiscal year 2018 Labor, Health and Human Services, Education (LHHS) funding bill that would cut funding for the Department of Labor (DOL) by $1.3 billion. This measure also includes several non-funding-related requirements (often called “riders”) that would block or weaken labor protections. The House Committee on Education and the Workforce held a hearing attacking the concept of joint employer liability under various worker protection laws. And, the Senate Committee on Health, Education, Labor and Pensions (HELP) held a consolidated hearing on President Trump’s nominees to the National Labor Relations Board (NLRB) and to DOL.
Draining worker protection and training resources from the FY18 DOL and NLRB budgets
The LHHS funding bill from Appropriations Subcommittee Republicans would further reduce funding for agencies that are already stretched thin. Occupational Safety and Health Administration funding would be nearly $12 million less than even President Trump’s draconian budget request earlier this year (and about 4 percent less than the current budget). The Wage and Hour Division would face a roughly 6 percent cut. In other areas, the bill takes a hatchet to job training programs and other services, particularly the Workforce Innovation and Opportunity Act programs at the Employment and Training Administration. There’s also a whopping 9 percent cut ($25 million) to the National Labor Relations Board. The Bureau of Labor Statistics, crucial for providing much-needed data on the workforce, would suffer a 5 percent cut.
Minimum wage workers in St. Louis just had a taste of what life might be like with a raise, only to have it taken back by the Missouri state legislature. St. Louis is part of a growing number of cities across the country seeking to raise their own minimum wage by city ordinance.
In 2015, the City of St. Louis passed an ordinance establishing a minimum wage for the city that was higher than Missouri’s minimum wage. In the bill’s preamble, the City’s leaders explained the need for a wage increase for the its poorest workers:
WHEREAS, the defining issues of our time include the increase in income inequality, the growing gap between rich and poor, and the obstacles preventing people from rising into the middle class; and . . .
WHEREAS, low-wage workers in the St. Louis region struggle to meet their most basic needs and to provide their children a stable foundation, a safe dwelling, and an opportunity to obtain a high-quality education; and . . .
WHEREAS, minimum wage laws promote the general welfare, health, and prosperity of the City of St. Louis by ensuring that workers can better support and care for their families and fully participate in the community[.]
In 2015, Missouri’s state minimum wage was pegged at $7.65 per hour, and by passing its local ordinance, St. Louis raised it to $8.25 for employees working within the city limits. Because of that ordinance, St. Louis’ minimum wage rose to $9.00 in 2016, and $10.00 on January 1, 2017. Meanwhile, the state’s minimum wage barely budged to $7.70 during that same time period.
Last week, Missouri’s governor announced that he will let a preemption law take effect, prohibiting cities from requiring a minimum wage higher than the state’s—nullifying the city of St. Louis’s minimum wage ordinance and effectively lowering the city’s minimum wage from $10 down to $7.70. With this law, lawmakers have potentially undone raises for roughly 31,000 workers in St. Louis who received a raise when the city’s ordinance took effect in May, and likely stopped scheduled raises for those same 31,000 workers plus another 7,000 workers, for a total of 38,000 workers who would have gotten a pay increase when the city’s minimum wage was scheduled to rise to $11 an hour in January. (Minimum wage increases typically also lead to raises for workers slightly above the new minimum wage. The estimates here do not include these “spillover” effects.)
In 2015, the St. Louis city council and mayor approved a minimum wage ordinance, which would have gradually raise the city’s minimum wage to $11 per hour by January 2018. A protracted legal dispute delayed implementation of the ordinance until this past spring, but on May 5th, the ordinance finally took effect, raising the city minimum wage to $10 per hour. Now the city’s minimum wage will lose effect on August 28th, and the wage floor for workers in the city will fall back to the state minimum wage of $7.70.
It is impossible to know how many of the 31,000 St. Louis workers who were directly affected when the city’s minimum wage rose from to $10.00 will now see their pay cut, but some may. Workers can only hope that their employers will not roll back their raises. For some, that raise may have been the key difference in affording a new apartment rental, car payment, or similar long-term financial commitment. In any case, anyone starting out in the St. Louis workforce, or any low-wage worker considering changing jobs, is likely to find that most opportunities pay less than they would have had the ordinance remained in effect.
Healthcare’s biggest losers, part two: How the Senate’s TrumpCare bill can increase your state taxes
This blog post references the version of the Better Care Reconciliation Act introduced in June 2017. EPI will update the analysis if newer versions of the bill are significantly different.
In anticipation of cuts in federal spending, we often fail to consider the extent to which state governments will be obliged to pick up the slack when the cuts include grants-in-aid to the states. This concern applies with particular intensity to the largest item in most state government budgets: the Medicaid program. The Republican Senate initiative to “repeal-and-replace ObamaCare” with the so-called “Better Care Reconciliation Act (BCRA)” makes significant reductions in federal grants to state governments for Medicaid.
The Congressional Budget Office estimates that by 2036, these cuts will rise to 35 percent of spending under current law. It should be noted that current-law spending levels in the future accommodate expected increases in health care costs. Under the BCRA, future Medicaid spending might be higher than current-year spending, but it would still fall well-short of what would be necessary to absorb those future increases in health care costs. That is why the BCRA is said to cut “current services” spending, a concept that reflects projected increases in health care costs and Medicaid beneficiaries.
People who became eligible for Medicaid after 2010 under President Obama’s stimulus bill and the Affordable Care Act (ACA)—over ten million people—will lose health insurance coverage, except insofar as state governments replace the lost funds with their own tax revenue, or with cuts to other programs. (A likely victim in the latter respect is the other large item in state government budgets: K-12 education, in the form of grants to local governments and school districts.)
An important analysis by Allison Valentine, Robin Rudowitz, Don Boyd, and Lucy Dadayan provides insight into the impact of the effort by Republicans in the House of Representatives’ effort to abolish ObamaCare.
When you hear politicians singing the virtues of deregulation, remember the Grenfell Tower fire. Last month, 80 people, including young mothers and children, died in an inferno that destroyed the 24-story Grenfell Tower apartment building in London. The undisputed cause of this completely avoidable tragedy can teach us important lessons about government regulation and deregulation.
The blaze that devastated the building occurred when a faulty refrigerator near a window ignited the apartment tower’s exterior cladding, a sheath of aluminum and flammable insulation that was recently added. The cladding panels used on Grenfell Tower, which sandwich a layer of polyethylene between two aluminum sheets, are combustible. In most countries, the company that manufactures the panels recommends that they not be used on buildings taller than about 33 feet, or two stories, the reach of a firetruck’s ladder.
In most countries, including the United States, combustible panels like those installed at Grenfell Towers would be illegal. U.S. fire codes require fire testing of the cladding, and as the New York Times reports, “no aluminum cladding made with pure polyethylene – the type used at Grenfell Tower—has ever passed the test.”
In response to the large movements of refugees and migrants around the world, including the dramatic movement of over one million Syrians, Afghans, and Africans from various countries to Europe in 2015, world leaders at a UN Summit for Refugees and Migrants in September 2016 proposed two “global compacts” to improve the governance of international migration: a Global Compact for Safe, Orderly, and Regular Migration and a Global Compact on Refugees. The Global Compact on Refugees already has a normative framework, the 1951 Geneva Convention, which has been ratified by almost every nation, and a lead UN agency in the UNHCR that can assist Member States to improve protections and more equitably share the burden of hosting refugees.
While the Global Compact on Refugees is expected to offer support to countries that host large numbers of refugees by developing a Comprehensive Refugee Response Framework and to develop a plan of action to address refugee issues, the Global Compact on Safe, Regular, and Orderly Migration (also referred to as the Global Compact on Migration or GCM) has a broader challenge. The GCM must offer a framework for protecting the human rights of migrants and integrating them in the places to which they move—often for the purposes of finding employment—while also helping combat xenophobia, racism, and discrimination toward migrants.
Tomorrow, the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) is set to consider President Trump’s nominees to the National Labor Relations Board (NLRB), as well as Trump’s pick for Deputy Secretary of Labor. Both the NLRB and the Department of Labor are critically important agencies for this nation’s workers. Senate Republicans were so concerned about President Obama’s nominees to the NLRB that they refused to allow a vote, leading to a showdown that culminated in then-Senate Majority Leader Reid threatening to use the “nuclear option” to change the Senate rules for confirmations. What a difference a president makes. Now, Senate Republicans have decided to rush the confirmation hearings by consolidating consideration of the NLRB nominees with a nominee to a senior post at the Department of Labor.
As an independent agency, the NLRB members do not report to the president, but rather, serve as neutral arbiters of our nation’s labor law (“umpires rather than advocates,” as Senator Lamar Alexander, the chair of the committee, likes to say). DOL, meanwhile, is a cabinet-level agency—and its leaders report directly to the president. The Deputy Secretary of Labor is a political position whose main role is not neutral interpretation of the law but rather to advance the administration’s policies. Considering these nominees alongside each other, given the incongruous nature of the positions and agencies they will serve, is an abdication of the committee’s responsibility to thoroughly review these nominations.
Rushing this process and consolidating what should be separate hearings on important nominations deprives senators of the opportunity to examine these nominations. Most importantly, it shortchanges U.S. workers who depend on these agencies and the officials who lead them to enforce their rights and protect their freedoms. We deserve a process that enables our representatives to meaningfully consider the nominations. At the very least, the HELP Committee should hold separate hearings on nominees who, if confirmed, would serve vastly different roles in vastly different agencies.
Steel and aluminum trade restraints are good first steps, but not nearly enough to rebuild manufacturing
The Trump administration is poised to impose broad tariffs and/or quotas on imports of steel and aluminum products. As the issues are being pondered, battles are raging between metal-producing and consuming industries, and between the United States and its trading partners. Trade restriction in these sectors could relieve near-term pressure on thousands of jobs and, if done well, could buy valuable time that could lead to global solutions to chronic dumping and overcapacity problems centered in China and a few other countries. But tariffs and quotas in a few industries will never be sufficient to structurally rebalance U.S. trade or rebuild U.S. manufacturing, goals that have been clearly identified by the president and other members of his administration. In order to achieve these goals, the United States needs to realign the dollar to reverse the effects of more than two decades of unfair trade and currency manipulation on world trade and the global economy.
The conclusions in this post are based on the following key observations:
- U.S. steel and aluminum industries have been heavily injured by massive growth of excess capacity and overproduction in China and other countries. More than 13,000 U.S. jobs have been lost in aluminum since 2000—and 14,000 steel jobs disappeared in last two years alone.
- Surging imports of steel and aluminum and diminished domestic production capacity in these industries are a threat to national security because access to reliable sources of these metals is critical to supply of military equipment and critical infrastructure. If current trends persist, in time of war or other national emergency, the United States would find itself dependent on unstable import sources.
- Tariffs and quotas will save jobs in these industries from near-term threats and help domestic producers recover from unfair trade. In the best of cases, tariffs can be used to encourage other importers to develop common policy to address overcapacity and overproduction by China and other major exporters. But trade remedies can have negative consequences too. Increasing costs of steel and aluminum may reduce the competiveness of other domestic producers (both downstream producers of steel and aluminum products, as well as other users such as automakers and aircraft manufacturers), hurting consumers and reducing exports. Imposing trade restraints can also lead to retaliation by other countries, further reducing U.S. exports.