Signing trade deals is a terrible jobs strategy

As part of his proposals to spur job growth, President Obama promised in last night’s State of the Union address to complete negotiations on the proposed Trans Pacific Partnership (a proposed free trade agreement (FTA) with at least eight other countries in Asia and Latin America), and announced new talks on a comprehensive FTA with the European Union. This is a shame, because chronically high unemployment is a real crisis, while trade agreements are a fake solution.

The issue is simple: it is trade balances – the net of exports and imports – that can affect jobs. Unless trade agreements promise to reduce our too-high trade deficit, they will have no positive effect on jobs. Even worse, past trade agreements have actually been associated with larger trade deficits in their aftermath.

This is not some proprietary EPI stance on trade – the economics textbook teaches that, as Paul Krugman has summarized, “Trade Does Not Equal Jobs.”Read more

Immigration reform and the minimum wage

The most surprising part of the president’s State of the Union address last night was his forthright endorsement of the principle that no one in the United States of America should work full-time and yet still find himself in poverty. That is a statement I often heard from Sen. Edward Kennedy, but I can’t remember any other president—not JFK, not LBJ, not Jimmy Carter, and not Bill Clinton—announcing it so clearly and forcefully.

The president called on Congress to raise the minimum wage to $9.00 an hour, which translates into a full-year income of $18,720, almost enough to meet the federal poverty guideline for a family or household of three people ($19,090), and more than enough to satisfy the guideline for a family of two ($15,130).

Raising the minimum wage is a perfect complement to immigration reform and its promise of legalizing millions of undocumented workers. Many of them are working at wages below even the current $7.25 per hour minimum wage and cannot have amassed much in the way of savings. If they are to pay the penalties and back taxes the immigration bill will require, and pay for English lessons to meet the bill’s other requirement, they will need to be paid fairly for their work.

I hope that Congress sees fit to include a higher minimum wage in any immigration reform bill it enacts.

President Obama throws his support behind increasing the minimum wage

Last night’s State of the Union address laid the foundation for important policy initiatives, from investing in infrastructure and early care and education to prioritizing the creation of more manufacturing jobs.  But according to a post-SOTU briefing hosted by the White House, the “most-tweeted” element of the President’s address was his proposal to increase the minimum wage to $9.00.

“We gather here knowing that there are millions of Americans whose hard work and dedication have not yet been rewarded… for more than a decade, wages and incomes have barely budged… We know our economy is stronger when we reward an honest day’s work with honest wages.  But today, a full-time worker making the minimum wage earns $14,500 a year… Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00.”

This proposal lays the foundation for an important conversation about increasing the minimum wage, a conversation that has already been joined by many, including our former EPI colleague, Jared Bernstein, our colleagues at the National Employment Law Project, and even Bloomberg News, which posted an article online that recognizes the positive impact such a change would have on the economy.

The erosion of low wages is not news, both in the sense that it’s not a new phenomenon, and it certainly hasn’t been the focus of much media attention.Read more

What we read today

The president can end currency manipulation with the stroke of a pen, halving the U.S. trade deficit and creating millions of jobs

Five years after the start of the great recession nearly nine million jobs are still needed to return to full employment.  And as the Administration lays the groundwork for its second term, job creation should be goal number one.  Under existing authority, the President can execute one simple policy that would create 2.2 to 4.7 million jobs over the next three years:  End currency manipulation by a handful of countries, especially China.  This policy would boost GDP, reduce unemployment and, in budgetary terms cost nothing. It would, in fact, substantially reduce the federal deficit.  No other policy could achieve this jobs trifecta.

Over the past fifteen years rising trade deficits have devastated U.S. manufacturing employment. Since April 1998, the United States has lost 5.7 million manufacturing jobs, nearly a third of manufacturing employment and most of those job losses were due to the growing U.S. trade deficit.  Although half a million manufacturing jobs have been added since 2009, a full manufacturing recovery requires greatly increasing exports relative to imports.  While exports support domestic job creation, imports (and growing trade deficits) eliminate domestic jobs.  Although the overall U.S. trade deficit declined slightly last year, the trade deficit in manufactured products increased by $44.7 billion in 2012.  This growing manufacturing trade deficit is a threat to manufacturing employment and the overall recovery.

Currency manipulation, which distorts trade flows by artificially lowering the cost of imports to the U.S. and raising the cost of U.S. exports, is the single most important cause of these growing trade deficits. Halting global currency manipulation by making it illegal for China and other currency manipulators to purchase U.S. Treasury bills and other government assets is the best way to reduce the U.S. trade deficit, create jobs, and rebuild the economy.Read more

What we read today

CBO report shows two vastly different baselines moving closer together

Yesterday, the Congressional Budget Office (CBO) released their updated budget baseline in the February 2013 Budget and Economic Outlook report.  One interesting takeaway is that projected deficits for the new ten-year budget window are $7 trillion, whereas last August the agency projected $2.3 trillion in total deficits over 2013-22.1 Why such a large change in projected deficits?

First of all, the August baseline assumed the expiration of a variety of tax provisions, including the Bush tax cuts, the Alternative Minimum Tax patch, a variety of business tax extenders, indefinite war spending, a massive cut to Medicare doctors’ payment rates, and sequestration. Though CBO always calculates these baseline projections with respect to current laws, it was clear that this was not a realistic baseline and that the current policy baseline was a more accurate depiction of likely ten-year budget projections.

Secondly, each time the CBO updates their baseline budget projections, they take into account legislative, economic, and technical changes that have occurred since the previous update—changes that impact the size of projected surpluses or deficits. In this instance, passage of the American Taxpayer Relief Act of 2012 (ATRA) caused enormous changes that pretty much explain the entire increase in projected deficits (excluding debt-service costs, ATRA boosted projected deficits by $4 trillion). ATRA impacted future revenue levels by:

  • Permanently extending the Bush income tax rates for all income under $400,000 ($450,000  for joint filers); a provision that, though helpful for lower-and middle-income earners while the economy remains depressed, is already proving to be very costly down the road.Read more

The Progressive Caucus’s sensible approach to sequestration: Prioritizing jobs and growth

Congressional Progressive Caucus (CPC) Co-Chairs Rep. Keith Ellison (D-MN) and Rep. Raúl Grijalva (D-AZ) have introduced the Balancing Act of 2013 (H.R. 505) which presents an evidence-based approach to two imminent challenges actually facing policymakers: preventing what is intentionally terrible budget policy from taking effect, and preventing budget policy from exacerbating the jobs crisis and counterproductively delaying a return to full employment.

Broadly speaking, their bill would replace the entirety of the pending automatic “sequestration cuts”—now legislated to commence March 1—with $948 billion in progressive revenue (much of which was proposed in the CPC’s budget fiscal 2013 alternative, the Budget for All) coupled with $276 billion in near-term economic stimulus, paid for with $278 billion in cuts to spending by the Department of Defense. Replacing the sequester with revenue would bring net spending cuts and revenue increases roughly to a 1:1 ratio, and the DOD spending reductions would bring nondefense and defense discretionary spending cuts to a 1:1 ratio (measuring deficit reduction since the start of the 112th Congress, notably $1.5 trillion in discretionary spending cuts and $633 billion in policy savings from the lame duck budget deal). And most critically, the bill would balance deficit reduction with near-term measures boosting growth and employment, while making the composition of deficit reduction less economically damaging than scheduled.Read more

The UK is showing us why austerity is dangerous, but are we paying attention?

With the recent news that both the United Kingdom’s and United States’ economies contracted last quarter—the U.K. by a large 1.2 percent annualized rate and the U.S. by a much smaller 0.1 percent—it’s a good time to revisit the contrasting economic situations in the U.K. and the U.S. to show just how dangerous austerity is to economic growth. First off, both countries fell into recession by experiencing a similar housing market shock, and the central banks of both countries engaged in responses of similar magnitude. And between the second quarter of 2009 (the trough for both countries) and the third quarter of 2010, both countries grew at similar rates: 2.2 percent annualized real growth for the U.K., and 2.5 percent annualized for the U.S. (according to OECD data).

But in the summer of 2010, the newly-elected conservative-led coalition government of the U.K. passed and implemented an aggressive austerity budget. This budget was heavily weighted toward spending cuts—nearly 80 percent of the total fiscal consolidation—and included a 25 percent cut to non-health domestic departmental spending by 2014-15. Tax increases accounted for the remaining 20 percent, including increases in the value-added tax (essentially a sales tax). In total, this fiscal consolidation represented 2.2 percent of U.K. GDP by 2014-2015. Combined with the previous government’s planned austerity, the overall fiscal consolidation implemented totaled 6.3 percent of GDP.

Screen Shot 2013-02-04 at 2.39.43 PMRead more

Immigration reform should invest in labor standards enforcement and electronic employment verification—not more border security

The Pew Hispanic Center estimates that 45 percent of unauthorized immigrants crossed the border legally, but overstayed their temporary work or tourist visas, which means that almost half of unauthorized migration won’t be impacted at all by more Border Patrol agents, surveillance drones, or additional miles of border fencing. That’s why the additional funding proposed for border enforcement in the immigration proposals put forth by President Obama and the “Gang of Eight” Senators is misguided. Instead, some of those funds would be better spent by first, legalizing and fully integrating unauthorized immigrants into the fabric of American society, and then by investing in the creation of a functioning electronic employment verification mechanism. New funds should be devoted to increasing the level of labor standards enforcement by the agencies of the U.S. Labor Department. This is the only way to prevent future unauthorized migration.

It is encouraging that both immigration proposals offer a pathway to citizenship for unauthorized immigrants. Legalization will ensure that five percent of the labor force is no longer exploitable and that unauthorized workers do not degrade the wages and working conditions of U.S. workers. But the proposals ignore the reality that according to almost every conceivable metric, the southern border is more secure than it has ever been, and cities near the southern border are some of the safest in the country. Last year, $18 billion in taxpayer dollars was spent on securing the border—perhaps it was worth it, based on these results—but we might have reached the point of diminishing returns.

Compare this to the $1.6 billion that was spent in 2012 on enforcing labor laws and regulations, to protect 135 million workers, despite rampant wage theft of low-wage workers and alarmingly high levels of work-related injuries, illness, and deaths. Employer subcontracting to avoid accountability and employees being misclassified as independent contractors are also widespread problems in the workplace; they are tactics businesses use to exploit workers and escape liability when they circumvent labor and immigration laws, and to avoid paying payroll taxes and worker’s compensation insurance premiums. If a new comprehensive immigration law does not invest heavily in enforcing labor standards and tackling these problems, they are likely to continue. Read more

Immigration system should meet labor market needs and reform guest worker programs

President Obama and a group of eight Senators (also known as the “Gang of Eight”) have each released sets of principles for reforming our immigration system. Their courage and hard work to fix our long-broken immigration system should be applauded. Both plans rightly focus on granting a path to citizenship for the unauthorized immigrant population—which will allow more than 5 percent of the U.S. labor force to come out of the shadows and the underground economy. This will level the playing field for all workers (as well as the firms that employ them) and end the exploitation of foreign workers who labor without the protections offered by most labor and employment laws.

MORE: Key EPI research on immigration

What has not been discussed to a large extent—and which the president and the Gang of Eight’s frameworks do not yet address in detail—is how we manage future flows of immigrant workers, and how we fix the poorly functioning programs employers use to hire workers from abroad. Any acceptable and successful comprehensive solution to our immigration system will hinge upon this.Read more

Debt stabilization does not require $1.4 trillion, $1.5 trillion, or any other single number

There is a rapidly-forming consensus that policymakers should commit to specific levels of deficit reduction over the next 10 years. At a press conference earlier this month, President Obama endorsed a specific 10-year savings target of $1.5 trillion, arguing that two years ago there was a consensus that “we need[ed] about $4 trillion to stabilize our debt and our deficit, which means we need about $1.5 trillion more.” This is consistent with the Center on Budget and Policy Priorities’ recommendation that  $1.4 trillion in deficit reduction (including interest savings) over the next 10 years be targeted to stabilize the debt ratio (federal debt as a share of total gross domestic product).

Various commentators such as Martin Wolf of the Financial Times and Paul Krugman of the New York Times have noted that this amount of deficit reduction is modest, and consequently suggest that policymakers instead focus on the more pressing priority of job creation and rapidly lowering unemployment. But the case for turning to job creation is even stronger than perhaps they realize: this analysis shows that the debt ratio can be stabilized with less than $1.4 trillion. And more importantly, there actually isn’t a single minimum target necessary; if coupled with near-term stimulus, the debt ratio could be stabilized without any deficit reduction whatsoever. Read more

What we read today

Here are a few links that EPI’s research team clicked through today:

How raising Maryland’s minimum wage will benefit workers and boost the state’s economy

Amid signs that the Maryland economy is slowly improving, lower-income earners continue to struggle. Maryland has now gained back more than four of every five jobs lost during the recession, yet population growth since December 2007 means that the state needs to create more than 180,000 jobs just to get back to the unemployment rate preceding the recession.1 Raising Maryland’s minimum wage would put much-needed money in the pockets of Maryland’s low-income workers, particularly important in a state where low wages (i.e., wages at the 20th percentile) declined by a nation-leading $1.20 between 2009 and 2011.2  Senator Robert J. Gargiola and Delegate Aisha Braveboy have introduced legislation this year to raise Maryland’s minimum wage from the current $7.25 per hour to $10.00 in 2015, increasing the tipped minimum wage from 50 percent to 70 percent of the full minimum wage, and indexing both wage rates to rise automatically with the cost of living. The data show that this proposal would improve the well-being of working families in Maryland, while injecting almost half a billion dollars into the economy.

small-pdf-logoDownload the PDF version of this analysis

This paper provides an overview of the economic impact and demographic details of the workers who would benefit from the proposed increase in the minimum wage, examining their gender, age, race and ethnicity, educational attainment, work hours, family composition, and other characteristics.  It also details the estimated economic activity and job-creation impacts that would result from an increase in the Maryland minimum wage to $10.00.

Key findings include:

– Increasing the Maryland minimum wage to $10.00 by July 2015 would result in raised wages for over half a million (536,000) Maryland workers—roughly one in five workers in the state. These workers would receive $778 million in additional wages over the phase-in period. Read more

Guestworker expansions don’t belong in comprehensive immigration reform

In a CNN opinion piece published Jan. 28, Tamar Jacoby, the president and CEO of ImmigrationWorks USA, shows amazing disdain for the one-third of Americans working low-wage jobs. She claims that they shouldn’t want the jobs they have because they can find more productive and better paying work. Jacoby thinks a job as a home health aide is beneath the aspirations of native-born Americans. So much for the dignity of work!

Dr. Martin Luther King Jr. criticized Jacoby’s way of thinking about “low productivity” work in a famous speech to striking sanitation workers just before he was assassinated:

If you will judge anything here in this struggle, you’re commanding that this city will respect the dignity of labor. So often we overlook the worth and significance of those who are not in professional jobs, or those who are not in the so-called big jobs. But let me say to you tonight, that whenever you are engaged in work that serves humanity, and is for the building of humanity, it has dignity, and it has worth. One day our society must come to see this. One day our society will come to respect the sanitation worker if it is to survive. For the person who picks up our garbage, in the final analysis, is as significant as the physician. All labor has worth.

The fact is that 40 million Americans work in extremely low wage jobs and are either grateful to have them or unable to find anything better. It’s shocking Read more

Today’s teachable GDP moment: Slower government spending => slower GDP growth

Today’s GDP report was unexpectedly disappointing, but the economy is likely not entering recession. The downward drag on GDP growth that pushed into negative territory was mostly exerted by changes in private inventories (which are volatile and unlikely to provide a consistent drag on GDP going forward) and a large reduction in defense spending that is also unlikely to be repeated.

The large drag imposed by this defense cutback, however, illustrated the valuable point that fiscal contraction is contractionary: When government spending drops, the economy suffers.  The rest of the economy is simply not growing strong enough to make up for losses in demand due to government spending cuts. And while the defense drag this quarter was extraordinarily large, the trend has been steadily declining public support to the economy for some time now.

The downward trend in government spending can be illustrated by taking a look at current government expenditures, relative to potential gross domestic product. We look at expenditures as a percent of potential GDP because it does not allow a decline in actual GDP (or a slowdown in its growth) to make this ratio look bigger. What we’re looking for is a policy-induced rise (or failure to rise) in the importance of public spending, and expressing this spending as a share of potential GDP better isolates this policy effect. Read more

What we read today

Here are a few of the links that EPI’s research team clicked through during the last couple of days:

Louisiana retirement plan ruled unconstitutional

The cash balance retirement plan Louisiana Gov. Bobby Jindal recently signed into law for state workers was declared unconstitutional by a state district judge because it did not pass the Louisiana House of Representatives with a two-thirds majority. The cash balance plan would shift considerable risk onto workers without addressing the issue of unfunded liabilities caused by elected officials’ failure to keep up with required contributions.

Jindal has announced that he will appeal the decision. But this isn’t the only legal challenge the plan faces. The IRS is also considering whether the plan fails the Social Security equivalency test, which exempts some public-sector workers from participating in Social Security as long as government employers provide a retirement benefit at least equivalent to Social Security benefits. As Michelle Chen wrote in an In These Times blog post, Republicans around the country are using “pension panic” to push through policies that are both half-baked and anti-worker.

When and what kind of deficit reduction matters most: The danger of aggressive 10-year deficit targets in the current budget debate

In the aftermath of the American Taxpayer Relief Act of 2012 (i.e., the lame-duck budget deal, ATRA for short), many in Washington have urged 10-year deficit reduction targets that are trillions more than the $600 billion reduction already locked in by ATRA. While many of these calls for increased deficit reductions have been inchoate (as noted here), others have been more reasonably grounded. Yet, we think that nearly all demands for specific, ambitious 10-year deficit reduction targets are likely to be terribly counterproductive in the current debate

The primary reason for this is simple: Without a sharp focus on when and what kind of deficit reduction should happen, these calls can easily lead policymakers to embrace measures that will surely hamper economic recovery. And this recovery should be the primary focus of these policymakers. The output gap in 2012—essentially the difference between actual economic output and output that would have been produced had all productive resources in the economy been put to work—will likely register just shy of $1 trillion, or 5.6 percent of the economy. This is $1 trillion in national income that the country is forfeiting each year simply due to the continued weakness in aggregate demand—weakness that would likely be exacerbated by any aggressive deficit reduction in the next few years. This depressed state of the economy makes the timing and composition of any proposed deficit reduction crucial. And yet these crucial details are generally not a primary focus in 10-year deficit reduction targets that are dominating the debate.

In regards to timing, deficit reduction that imposes a drag on growth really should not begin at all until the economy moves much closer to full employment. Read more

The importance of revenue revisited: Minimizing the drag of austerity

Via Ezra Klein comes a must-read leaked memo from Senate Budget Committee Chairwoman Patty Murray (D-Wash.) to Senate Democrats ahead of fashioning a Senate Budget Resolution. It’s an excellent chronology of the deficit reduction enacted in the 112th Congress—a hefty $2.4 trillion expected to take effect and $3.6 trillion if sequestration goes into effect—and the looming phases of the Beltway budget fights following the American Taxpayer Relief Act (i.e., the lame-duck budget fight, or ATRA for short).1

Klein hones in on tables depicting the fundamentally unbalanced nature of deficit reduction in the 112th Congress: Ignoring sequestration, 70 percent of policy deficit reduction measures (i.e., excluding additional debt service savings) enacted came from spending cuts as opposed to revenue, and if sequestration takes effect as scheduled, the share of spending cuts ratchets up to 80 percent. Murray’s memo contrasts these ratios with a 51 percent revenue share proposed by the Simpson-Bowles Co-Chairs’ report and 52 percent in the Senate’s bipartisan “Gang of Six” proposal. Hence Murray’s conclusion:

Revenue Must be Included in Any Deal. Tackling our budget challenges requires both responsible spending cuts and additional revenue from those who can afford it most.”

She’s absolutely right, but the memo hits only on the budgetary half of why compositional balance is important. Accepting on face value that the 113th Congress will pursue more deficit reduction measures (more forthcoming from us on this premise)—at the very least replacing sequestration in chunks or entirety—including progressive revenue is critical for minimizing the economic drag of austerity. Read more

Huge disparity in funding for immigration enforcement vs. labor standards

In a new, well-documented report, Immigration Enforcement in the United States: The Rise of a Formidable Machinery, the Migration Policy Institute (MPI) calculated that the government’s price tag for immigration enforcement in 2012 was $18 billion. The report made headlines by highlighting the fact that this figure amounts to 24 percent more than it costs to fund the five main U.S. law enforcement agencies combined. But MPI offered another important juxtaposition in the report that has failed to receive much attention: the abysmally low level of funds the government commits to enforcing labor standards and protecting the rights of workers in the United States.

MPI reviewed the budgets of the National Labor Relations Board (NLRB) and the Labor Department’s Wage and Hour Division (WHD) and Occupational Safety and Health Administration (OSHA), concluding that in 2010, the “combined budgets for [the] three main federal labor standards regulatory agencies was $1.1 billion … compared to the $17.2 billion budgets for DHS’s two immigration enforcement agencies.” Analyzing the most recent federal budget data available, EPI has found that even when including additional federal agencies whose primary purpose is to enforce labor standards (the Mine Safety and Health Administration (MSHA), the Office of Federal Contract Compliance Programs (OFCCP), and the National Mediation Board (NMB)), in 2012, the total amount Congress appropriated to enforce labor laws and regulations amounted to only $1.6 billion—about 9 percent of what was spent enforcing immigration laws last year.

The labor enforcement agencies are staffed at only a fraction of the levels required to adequately fulfill their missions.Read more

The congressional GOP has smothered a more rapid economic recovery

PBS’ Frontline has an interesting piece on the GOP response to President Obama’s election in 2008, reporting that, “After three hours of strategizing, they decided they needed to fight Obama on everything.”

Part of this “everything” was the efforts of the new administration to end the Great Recession and restore the economy back to full health. From the start, the GOP sought to block measures that a wide swath of economists agreed would provide help to boost the economy and bring down unemployment. This obstructionism has been a constant theme throughout the past four years, and it continues today.

Congressional Republicans have made it clear that they intend to use every bit of leverage they can to force cuts to domestic spending in the coming year. This leverage includes threats to not raise the statutory debt ceiling and/or force a federal government shutdown after March 27, when the standing appropriations continuing resolution (CR) expires. This, of course, would represent the long-promised repeat of the spring and summer of 2011, when congressional Republicans secured over $500 billion in domestic spending cuts in CR fights and another $2.1 trillion in spending cuts in exchange for incrementally raising the debt ceiling by an equivalent amount—better known as the Budget Control Act (BCA) of 2011.

The BCA cuts have already done damage, and will all-but-surely slow growth in the rest of 2013 as well. The various components of the BCA accounted for about one-third of the total fiscal drag exerted by the major components of the “fiscal cliff” that was facing Congress ahead of the lame duck budget deal. And the components of the BCA account for 48 percent of the remaining fiscal drag unaddressed by the deal—a drag that is poised to shave 1.0 percentage point from real GDP growth in 2013. House Republicans have voted to replace the Defense cuts contained within the sequester—again rapidly approaching, following its postponement to March—in it with deeper domestic spending cuts, leaving a drag of 0.8 percentage points from the BCA for 2013, all while threatening to use the debt ceiling and CR as leverage to get their way.

If this ideologically driven objective of deeply cutting spending is met, this will represent just one more way that the GOP Congress has managed to delay full recovery from the Great Recession. The evidence continues to pile up Read more

Are the job polarization data robust?

This post is the fourth in a short series that assesses the role of technological change and job polarization in wage inequality trends.

In an earlier post, John Schmitt showed that “job polarization”—the expansion of low- and high-wage occupations at the expense of occupations in the middle—did not occur in the 2000s, (and therefore could not be responsible for rising wage inequality in the 2000s). In this post, I examine how well the key figures at the heart of the “job polarization” analysis really fit the underlying data. I begin with a closer look at the data for the 1990s, the decade that appears to conform most closely to the patterns implied by the job polarization explanation for wage inequality.

In a recent piece critical of research myself, John, and Larry Mishel are doing on technology and wages, Dylan Matthews makes a lot of our interpretation of the following chart for the 1990s. The chart, which we prepared for a paper presented at a conference earlier this month, shows the change between 1989 and 2000 in the share of total employment in 100 different occupation groups arrayed by their average wage level (labeled “skill percentile”):

The two lines are statistically smoothed versions of the individual data points, which appear as blue diamonds. Both lines show a rough U-shape that is consistent with the standard story of job polarization: employment increases were largest at the top and bottom of the skill distribution and smallest in the broad middle. Read more

What we read today

Here’s some of the thought-provoking content that EPI’s research team enjoyed reading today:

Apple’s own data reveal 120,000 supply-chain employees worked excessive hours in November

To its credit, Apple is now posting monthly information tracking the extent to which employees in its supply chain are working less than its standard of 60 hours per week. The introductory language to this information states: “Ending the industry practice of excessive overtime is a top priority for Apple in 2012.” The accompanying graph itself, however, contains data from Jan. 2012 through Nov. 2012 and suggests otherwise. Not only has Apple failed to end this practice, but progress has significantly reversed in recent months.

Apple’s code of supplier conduct sets a maximum work week of 60 hours, with an exception clause, discussed below. Eyeballing Apple’s graph indicates (Apple only provides a specific number for November, so visual approximation is necessary):

  • In Jan. 2012, about 16 percent of the workers in Apple’s supply chain worked more hours than Apple’s maximum standard. This proportion diminished through August, when approximately 3 percent of these workers had work weeks that exceeded this standard.
  • But the proportion of workers meeting the standard dropped precipitously since then, presumably reflecting the increased intensity of work to produce and meet iPhone 5 demand.
  • In November, 12 percent of the workers in Apple’s supply chain that are being tracked worked more than the 60-hour standard. This was the worst monthly compliance rate of the year, with the exception of January. More than one million workers are being tracked by Apple, so the 12 percent translates to more than 120,000 workers in their supply chain working excessive hours. Read more

AARP comes out against COLA cut

AARP unveiled new research from its Middle Class Security Project yesterday, with related papers focusing on topics ranging from rising health care costs to credit card debt. At the release, AARP CEO Barry Rand gave a rousing speech, coming out strongly against a proposed cut in the Social Security cost-of-living adjustment (COLA), echoing a similar stance by the New York Times this Sunday. Rand focused on the need for both solvency and adequacy, emphasizing that Americans don’t want Social Security reform to be part of deficit reduction talks and were willing to contribute more to strengthen the program.

Policy director Debra Whitman, an economist and Social Security advocate Rand hired to replace the too-quick-to-compromise John Rother, said most Americans were surprised at how low Social Security benefits were—less than $14,000 per year on average. In the report, Whitman and her co-authors highlight the fact that benefits would be cut further for future retirees with a scheduled increase in the normal retirement age to 67, equivalent to an across-the-board benefit cut. As a result of this and other negative trends, the report estimates that three out of 10 middle-income workers will become low-income retirees.

This might seem like an obvious place to call for shoring up Social Security benefits for the middle class—or at least halting their decline. But though Whitman and many of her colleagues may prefer to close Social Security’s projected shortfall with revenue increases, AARP continues to avoid ruling out additional benefit cuts or endorsing specific revenue proposals, such as lifting the cap on taxable earnings. This might seem like a wise PR move, given the flak AARP gets for drawing a line in the sand (even when it actually hasn’t). But, like President Obama’s administration, AARP will be attacked as intransigent by some critics no matter how conciliatory they are, so they might as well stake out a clear position, backed up by the facts in this report.Read more

Occupation employment trends and wage inequality: What the long view tells us

This post is the third in a short series that assesses the role of technological change and job polarization in wage inequality trends.

The discussion of job polarization—the expansion of high and low-wage occupations while middle-wage occupations decline—and its role in driving wage inequality would benefit from a longer examination of occupational change and technology’s impact.

“Occupational upgrading” has been going on for 60 years or more. By occupational upgrading, we mean the erosion of employment in blue-collar and, more recently, pink-collar (administrative/clerical) occupations and the corresponding employment expansion of high wage, professional and managerial white-collar occupations. The share of employment in low-wage, service occupations (food preparation, janitorial/cleaning services, personal care and services) has actually been relatively stable for many decades and remained a small—roughly 15 percent—share of total employment.

The bottom line for the discussion of the role that technologically-driven occupation trends have played in generating wage inequality is that occupational upgrading has been occurring for decades, through periods of both rising and falling wage inequality and through both rising and falling median real wage growth. In our view, this makes occupational employment shifts a poor candidate for explaining the rise in wage inequality since 1979. Read more

International tests show achievement gaps in all countries, with big gains for U.S. disadvantaged students

Corrections were made to this post on Jan. 30. For explanations of the corrections, see the full report summarized in this posting.

In a new EPI report, What do international tests really show about U.S. student performance?, we disaggregate international student test scores by social class and show that the commonplace condemnation of U.S. student performance on such tests is misleading, exaggerated, and in many cases, based on misinterpretation of the facts. Ours is the first study of which we are aware to compare the performance of socioeconomically similar students across nations.

Some critics, disturbed by the unsophisticated way in which policymakers and pundits use international tests to condemn American student performance, have commented that American students in relatively affluent states, like Massachusetts or Minnesota, or students in schools where few students are from low-income families, perform as well or better than average students in the highest scoring countries. But while such comparisons are well-intended, they can’t tell us much because a proper comparison would be between affluent states in the U.S., and affluent provinces or prefectures in other countries, or between schools with little poverty in the U.S. and schools with little poverty in other countries. Critics have not previously had data by which such comparisons can properly be made.

MORE: Authors’ response to OECD/PISA reaction to their report (PDF)
AUDIO: Authors speak with the press about their report (MP3)

Yet both of the major international tests—the Trends in International Mathematics and Science Study (TIMSS) and the Program on International Student Assessment (PISA)—eventually publish not only average national scores but a rich database from which analysts can disaggregate scores by students’ socioeconomic characteristics, school composition, and other informative criteria. Examining these can lead to more nuanced conclusions than those suggested from average national scores alone. Read more

What we read today

Here’s some interesting content that EPI’s research team recommends today:

Missing in action: Growth and shared prosperity

Two articles in the Sunday New York Times, appearing side-by-side, together told the fundamental truth that our current discussion of economic policy ignores:  Generating greater economic growth and ensuring that middle-class wages grow with productivity are essential for restoring shared prosperity and achieving our budget goals.

Steven Greenhouse’s piece, “Our Economic Pickle,” states:

“Federal income tax rates will rise for the wealthiest Americans, and certain tax loopholes might get closed this year. But these developments, and whatever else happens in Washington in the coming debt-ceiling debate, are unlikely to do much to alter one major factor contributing to income inequality: stagnant wages.”

The article notes, “Wages have fallen to a record low as a share of America’s gross domestic product” and quotes Harvard’s Larry Katz appropriately summarizing the situation: “What we’re seeing now is very disquieting.”

This is not totally new, as shown by the data from The State of Working America that Greenhouse cites: “From 1973 to 2011Read more