7-Eleven‘s Modern Day Plantation System

Who in America is willing to work 100 hours a week without getting paid for those brutally long hours (not to mention without the time-and-a-half pay required for overtime)? The answer should be, “no one.” But for undocumented immigrants, who don’t have the right to take above-board, normal jobs, almost any job, no matter how abusive or how low the pay, is better than nothing—especially if they owe debts to criminal smugglers who know where their families live.

According to the New York Times, fourteen 7-Eleven franchises have been charged with raking in $180 million since 2000 in illegal profits from underpaying employees, and another 40 franchises are under investigation. Employees who should have been paid as much as $1000 a week were paid only $300-$500 while being forced to live in unregulated, substandard boardinghouses operated by the stores’ owners.

It took 13 years for an employee to finally complain about wage theft and call in the authorities to break up the illegal operation. That’s a good measure of the fear and intimidation that keeps the undocumented in the shadows and lets greedy employers get away with paying sweatshop wages.

Clearly, legalization of the undocumented will improve the labor market in the United States by bringing abused workers out of the shadows and starting the process of lifting wages. However, this will work better and faster if Congress also provides the right enforcement resources, including the Labor Department wage and hour inspectors and attorneys needed to investigate and prosecute cheating businesses and the criminals who run them. The U.S. spends $18 billion a year on border security and immigration enforcement, and will spend even more if the Senate’s proposed comprehensive immigration law, S.744, is enacted. It seems clear to me that some of those funds should be redirected to the Labor Department and its never-ending battle against wage theft and exploitation.

Senator Merkley Takes on H-2B Guestworker Abuses

The abuse of temporary foreign workers in the United States has been well documented, from the Bracero program of the 1960s to the recent cases of seafood workers in Maryland (PDF) and Louisiana, fast-food workers in Pennsylvania, and forestry workers in Georgia. The wrongs to workers are sometimes nothing short of criminal: wage theft, violence and threats of violence, even peonage.

But harm is done to U.S. workers, too, before temporary “guest” workers are ever brought to the U.S.  The businesses that could and should be recruiting and hiring workers here in the U.S. at decent wages are shunning them to hire more exploitable, more desperate foreigners. The law and regulations that govern guestworker programs, most notably the H-2B non-immigrant visa program, are ignored or circumvented, leaving U.S. workers jobless while people from thousands of miles away do jobs the local workers are able and willing to do.

The law and regulations forbid the admission of any H-2B guestworker to the U.S. unless the employer attests that U.S workers capable of performing the job are not available and that the employment of foreign workers will not adversely affect the wages and working conditions of similarly employed U.S. workers. The Department of Labor and the various State Workforce Agencies are charged with verifying that the jobs of U.S. workers are protected, but they have failed to do so.

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What We Read Today

More Empty Rhetoric on Public Investment and Discretionary Spending: Fred Hiatt Edition

Fred Hiatt trots out the standard centrist argument for cutting the already-stingy system of American social insurance (Social Security, Medicare, Medicaid): we need to cut this spending to preserve the “good” spending that he likes—non-defense discretionary (NDD in budget jargon) spending.

I agree with him that lots of NDD spending is good—it includes the general business of running the non-defense portions of the government as well as programs like Head Start, and it also includes a substantial chunk of public investment financed by the federal government. So yes, let’s preserve this.

But this claimed tension between spending on Social Security and Medicare versus NDD spending is plain false. We recently looked at various competing budget proposals to see what their implications were for NDD spending and public investment at the end of the budget window. Paul Ryan’s budget, which takes a chainsaw to the social insurance programs also saw the biggest squeeze on NDD spending and public investment. President Obama’s budget, which included damaging cuts to Social Security and was couched in the language of protecting public investment, still saw NDD and public investment spending reach historic lows by the end of the budget window. The Congressional Progressive Caucus Back to Work budget had no cuts to social insurance and yet had substantially higher NDD spending and public investment than all other plans. Read more

Ongoing State Jobs Deficits—Keeping State Employment Gains in Perspective

Friday’s infographic from Stateline at the Pew Charitable Trusts shows year-over-year job creation at the state level. We track state-level job trends at the Economic Policy Institute also, paying particular attention to trends in job creation and state unemployment rates.

These trends are important—they provide point-in-time information and benchmark states’ progress getting back on track since the start of the Great Recession in 2007. Our monthly analyses track trends over the previous three months, six months and year. Many of our EARN state partners produce reports that drill down deeper in their respective state labor markets.

It’s important, though, to step back and look at these recent trends in the context of job loss during the Great Recession and population growth since the beginning of the recession.

This lens on state economies tells a very different, though equally important, story about what is happening in the labor market at the state level. We see, for instance, that despite the fact that Texas has led job creation, with 326,000 jobs gained between April 2012 and April 2013, it continues to have a jobs deficit of nearly 600,000 jobs. In other words, in order for Texas to return to pre-recession employment rates, the state would need to create another 594,100 jobs.

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Rise in college completion welcome – but not driven by rising college wage premium or ‘sheltering’

Catherine Rampell had a good piece in the Times yesterday on the rise in college completion among 25-29 year olds. She surveys lots of interesting data and comes away with the generally encouraging conclusion that college completion is on the rise.

But two influences she identifies as probable suspects in driving this increase don’t really fit the data: a rising college wage premium and the decision of young people to “shelter” in college while the recession-damaged labor market remains weak. We’ve examined both of these in the past, and, the college wage premium has actually been flat for over a decade and there didn’t really seem to be much sheltering during or after the Great Recession.

Given this, the real reasons for increased college completion seem like open, and important, questions.


How much can tax policy curb income inequality growth? Maybe a lot

Since the late 1970s, the United States has experienced a sharp divergence in the distribution and growth of market-based income, with gains overwhelmingly skewed toward the very top of the income distribution and away from the bottom. This era of widening income inequality represents a sharp break from the first three decades following World War II, when the gains from growth were shared fairly equally across the income distribution, even tilted somewhat favorably towards lower-income over upper-income workers. The increasingly lopsided concentration of income growth at the top of the distribution comes at the expense of stagnant or falling living standards for working families.

Policymakers have lately taken more of an interest in curbing income inequality growth, and to that end, it is critical to understand the impact and scope of tax policy. Changes in tax and transfer policies are one of the more easily quantifiable contributors to income inequality, say compared with policies (or lack thereof) related to labor protections, collective bargaining, minimum wage erosion and trade.

While both tax and transfer policies can influence inequality growth, tax policy is particularly policy relevant. Tax policy can more easily be fitted to the upwardly skewed income distribution than transfer policy, and there is vastly more market-based income than transfer income at the top of the scale, so doing so would further advance Congress’s prioritization of deficit reduction. Additionally, changes in tax policy can be implemented faster than changes in many transfer benefits, as politicians are reluctant to change retirement benefits for those approaching retirement.

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J-1 exchange visitors deserve labor rights and human trafficking protections

The Senate’s proposed comprehensive immigration reform legislation could bring 11 million unauthorized migrants out of the shadows and grant them equal protection under the law. That in turn would even the playing field in the labor market, improving not just the wages and working conditions of exploitable unauthorized workers, but also those of less-educated U.S. workers employed in similar occupations. Employers engaged in a race to the bottom to find the most vulnerable and exploitable workforce will find it much more difficult to get away with violations of immigration and labor laws. However, the Senate bill fails to grant adequate employment and labor law protections to the hundreds of thousands of temporary foreign workers—also known as guestworkers—who enter the U.S. workforce every year.

Jennifer Rosenbaum of the National Guestworker Alliance in New Orleans has a great op-ed in Roll Call that explains:

“The current Senate bill would provide one small category of guestworkers — those on the proposed W visa — whistle-blower protections and the ability to change employers without losing legal status. But the bill risks leaving hundreds of thousands of guestworkers subject to captive labor. And lobbyists are pushing to make sure that there are as many of those guestworkers as possible.”

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A step forward for the rights of interns

A federal district court judge ruled yesterday that Fox Searchlight violated the minimum wage law when it failed to pay its interns for their work on the movie Black Swan. This is excellent news—unpaid internships hurt mobility, exploit young workers, and are frequently illegal.

The judge, following a ruling made 15 years ago by then district court judge Sonia Sotomayor1, upheld and applied the Department of Labor’s six-part test for determining whether an internship is employment covered by the Fair Labor Standards Act or is, instead, training or education that can illegally go unpaid.

Congratulations are due to Eric Glatt, the lead plaintiff, who has become a leading activist in the fight against the deregulation of wages and the spread of unpaid labor. And congratulations, too, to the law firm of Outten and Golden, which represents Eric Glatt and plaintiffs in several cases that challenge the new sense of entitlement employers have to ignore the law and treat employees like serfs. Increasingly, trial lawyers are on the front lines of the fight to protect the dignity of work and the rights of labor. As state and federal agency budgets are cut the role of trial lawyers is growing in importance.

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Employers: Pay your interns. Labor Department: Bust them if they don’t!

The summer has begun and greedy employers across the country are searching for people who will work for them for free. Meanwhile, in a few weeks the nation will celebrate the 75th anniversary of the Fair Labor Standards Act, which makes it illegal for most employers to take advantage of their fellow Americans’ work without paying at least the minimum wage for it.

At a time when the real value of the minimum wage is well below the levels of the 1960’s (making entry-level workers quite affordable), when the weak labor market is forcing college graduates in record numbers to take jobs that don’t require a college degree and entry level wages for college grads are already substantially below the levels of 10 years ago, the exploitation involved in not paying employees anything at all is shameful and economically dangerous.

It’s dangerous because the main obstacle to a healthy recovery from the Great Recession is weak consumer demand, and unpaid internships hurt consumer demand in two ways. First, they leave interns without any wage income, reducing their ability to purchase the products and services supplied by businesses. Second, they lower expectations and reduce wage demands by employees who do have paying jobs.

Nevertheless, employers from coast to coast think that simply by calling a job an internship, they can take advantage of young people desperate to start their careers and get the benefit of their talents and work, but not pay them even a measly $7.25 an hour.

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Equal Pay Act turns 50: What are the forces holding back the wages of both women and men?

Yesterday was the 50th anniversary of the Equal Pay Act, which President John F. Kennedy signed into law in 1963 to help combat wage discrimination based on gender. Since that time, the gender gap in wages has indeed improved significantly, particularly since the late 1970s. In 1979, the median hourly wage for women was 62.7 percent of the median hourly wage for men; by 2012, it was 82.8 percent.

One thing to note is that a big chunk of the improvement in the gender wage gap since the 1970s—more than a quarter of it—was happening because of men’s wage losses, rather than women’s wage gains. With the exception of a period of labor market strength in the late 1990s, the median male wage has decreased over essentially the entire period since the late 1970s. That has made the gender wage gap smaller, but it certainly isn’t the kind of improvement anyone wants to see.

It is important to note that the forces that were holding back male wage growth over this period were also acting on women’s wages, but the gains made by women over this period in educational attainment, labor force attachment, and occupational upgrading more than overcame these adverse forces (at least until the last decade, when women’s wages have also dropped).

What are the forces holding back the wages of both women and men? Essentially, economic policy has not supported good jobs over the last 35 years. Rather, the focus has been on policies that were advertised as making everyone better off as consumers: deregulation of industries, the Federal Reserve Board prioritizing low inflation over full employment, the weakening of labor standards including the minimum wage, a “stronger” dollar, and the move toward fewer and weaker unions. In fact, these policies have served only to make the already-affluent better off.  They have eroded the individual and/or collective bargaining power of most workers, widened wage inequality among both women and men, and depleted access to good jobs.

There have been a lot of great articles recently (for example, here) about the large remaining gender gap in wages, and the work that needs to be done to get more women access to good jobs.

What we read today

CAP’s rethinking of the grand bargain path is good. Now CAP should rethink their role in putting us on that path.

The Center for American Progress (CAP) has issued an important new report saying that “new realities” dictate that we “reset button on the entire fiscal debate,” end the pursuit of a fiscal “grand bargain” with Republicans in Congress on deficit reduction, and replace the sequester (through 2016). One can only hope this signals a change in direction for the administration and others on the center-left who embarked on the grand bargain deficit reduction journey in late 2009 and early 2010 when their focus should have remained on job creation. That turn of events was one of the most consequential economic policymaking decisions in decades, because it derailed job creation (i.e., further stimulus) efforts thus ensuring that recovery from the Great Recession would be agonizingly slow. That, of course, has had a hugely adverse impact on the wages, benefits and employment of the vast majority of Americans, but has also had tremendous political fallout (i.e. 2010) and weakened the public’s faith in government’s ability to spur job growth. It was a clear unforced error by CAP and the administration to suggest the need for a grand bargain on deficit reduction, embodied in the appointment of the Simpson-Bowles commission. For these reasons it’s worth examining the argument CAP has made and compare it to the situation in late 2009 and early 2010 when CAP pushed for a grand bargain, praised the Simpson-Bowles effort and recommended a deficit plan that, if adopted, would have started to cut spending in October 2010 (when, it turns out, unemployment was still 9.5 percent). This is not an across-the-board indictment of CAP—they do lots of excellent work, including Michael Linden’s budget analyses. But it is important to highlight that there were two paths available to liberal and center-left policymakers over the course of this crisis, and many of today’s difficulties are with us because the wrong path was chosen. EPI, I am proud to say, was and remains resolutely focused on the ongoing jobs crisis.

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Why Our Schools Are Segregated

In the May issue of Educational Leadership, I attempt to show how our misunderstanding of the origins of racial segregation stands in the way of efforts to narrow the black-white academic achievement gap.

Socially and economically disadvantaged children perform, on average, at lower levels of achievement than advantaged children. The achievement gap primarily results from disadvantaged children coming to school unprepared to take advantage of what schools have to offer, not primarily from inadequate teachers or schools. Children who come to school from households with poor literacy levels, who are in poor health, whose housing is unstable, whose parents are suffering the stress of unemployment, and who are themselves stressed as well in neighborhoods with high levels of crime and violence, cannot be expected to achieve, on average, as well as middle class children, even if all have high quality instruction.

Disadvantaged children’s obstacles to achievement are exacerbated when these children are concentrated in racially and economically homogeneous and isolated schools. Meaningful narrowing of the achievement gap will not be possible without breaking down these barriers and integrating black children into middle-class schools.

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I see the future

On May 1st, I wrote a blog post pointing out that at a rate of 175,000 jobs per month we won’t get back to the December 2007 unemployment rate until 2020.  Apparently, I was looking into a depressing but very accurate crystal ball, since 175,000 jobs is exactly how many jobs we ended up getting in May.

It’s still true that at 175,000 jobs per month, we won’t close the jobs gap before the end of this decade.  To close the jobs gap by 2016, the year of the next presidential election, we have to add more than 300,000 jobs every month.

Recent impacts on grant funding to state-level programs

As we’ve discussed, the sequestration enacted March 1 cut federal spending by $85.3 billion for fiscal year 2013.  The sequester not only cut money allocated to federal programs, but also meant reductions for federal spending at the state and local level.  States and local governments depend on federal grants and loans to fund essential services and programs, helping them maintain infrastructure, provide education, administer health and social services and ensure public safety.  In 2011, federal grants to states and localities totaled $607 billion and accounted for approximately 25 percent of state and local government spending.

A report released by EPI last week finds that the sequestration decreased federal funding for state grants by $5.1 billion in the 2013 fiscal year.  Although the March 1 sequester reduced federal grant spending to all states (relative to the continuing resolution federal grant spending already in place),   some states were impacted more than others, ranging from a 0.68 percent cut in Tennessee, to a 3.36 percent cut in Wyoming (see Table 1 in the paper).

Following sequestration, the current continuing resolution was signed into law on March 26—less than a month after the budget sequestration began—setting funding levels for the remainder of the fiscal year, and thus impacting grant funding to programs at the state level.  The map below illustrates the changes in each state’s fiscal 2013 federal grant funding, compared to fiscal 2012 federal grant spending, as a result of sequestration and funding levels in the current continuing resolution.  Differences in how grant funding is distributed are dependent both on how programs function as well as which states participate in programs funded by federal grant money. After accounting for both sequestration and the current continuing resolution, grant funding for 26 states is estimated to increase, while grant funding for the remaining 25 states (including the District of Columbia) is estimated to decrease.

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More thoughts on the value of cutting corporate tax rates

My colleague Tom Hungerford has laid out why he’s not part of the alleged consensus cited by Dylan Matthews that cutting corporate tax rates would boost GDP growth, based on a skeptical look at the research and data. I’d just add a couple of extra points:

First, this is all kind of tangential to the live debate currently going on about corporate tax reform. This debate is sadly all about revenue-neutral reform. So, all research that has used effective average corporate tax rates as explanatory variables in growth regressions is irrelevant to this kind of debate. And the upshot of such reform is even unclear as to what it will do to effective marginal rates—some firms will see their taxes go down, while others will see them go up. So, even if one believed in a huge growth bonanza from significantly cutting corporate taxes—that’s not what the debate in DC is about.

Second, even if one believed the modest growth-spurring impacts of cutting corporate tax rates cited in much of the research that Dylan and Tom discuss, I still don’t think that  I’d fall all over myself trying to accomplish this as a high-priority policy goal.


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I’d be a damn fool to jump off a cliff

When I was a child, there were times when I wanted to go someplace with a group of friends and my mother would say no. I would then argue that I should be allowed to go “because all my friends are going.” As would be expected, my mother would respond with “suppose all your friends jumped off a cliff, would you?” I would always answer no, of course, but I gather that a number of people would answer “I’d be a damned fool not to.” In his Wonkblog post, Washington Post’s Dylan Matthews appears to be the latest to respond this way when he joins the “consensus around the idea that increases in the corporate tax rate hurt growth.” Before getting into why I am not part of the so-called consensus, I need to first correct a glaring error in Matthews’s blog.

The Error

He cites a Tax Notes article (and CRS report) I wrote with Jane Gravelle in 2008. He notes that we concluded: “The traditional concerns about the corporate tax appear valid. While many economists believe that the tax is still needed as a backstop to individual tax collections, it does result in economic distortions.” This conclusion, he claims, contradicts my new analysis of the corporate tax rate. There are two problems with his claim. First, he omitted the next sentence: “These economic distortions, however, have declined substantially over time as corporate rates and shares of output have fallen.”

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Still Polishing Apple: Second FLA report misleads on labor rights progress

Read in isolation, the second verification assessment by the Fair Labor Association (FLA) of remediation steps at three Foxconn factories making Apple products might lead one to think that essentially all labor rights violations have been addressed.  The FLA’s report, for instance, features the claim that Foxconn has already completed “98.3 percent” of the necessary steps to correct the problems at its factories.  But while some of the steps taken – such as reducing work weeks to below 60 hours and certain safety and health improvements – do represent progress, the overall score given by the FLA as well as the accompanying rosy language about reforms are fundamentally deceptive.  Consider:

The FLA ignores crucial reforms promised by Apple and Foxconn, including increasing wages enough to offset reductions in work hours and providing back pay for uncompensated work time.  On March 29, 2012, the FLA described the basic remedial actions to be undertaken by Foxconn and Apple by July 2013.  Paragraph five of this announcement contained the promise that Foxconn would increase compensation enough to offset any reduction in overtime hours.  Paragraph six contained the promise that Foxconn and Apple would provide retroactive pay for the many circumstances in which workers had not been compensated for all their overtime hours.  Paragraph seven of the March 2012 announcement said a study would be undertaken to determine the amount of compensation necessary to provide for basic needs; according to the FLA’s own survey, 64 percent of workers said their compensation did not provide them enough to meet their basic needs.

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Sheesh, Everyone’s a Chart Critic

Matt Yglesias doesn’t think that Figure B in Tom Hungerford’s new paper on corporate tax rates and economic growth “proves” a non-relationship between the two. He’s right, of course, but then goes on to argue that including this chart specifically, and including charts in blogs generally, is a borderline shady practice. This I don’t really get.

So, I shall make the case for the use of charts with a chart, below.

But, first, a quick thought on another point in Matt’s post. He notes that we at EPI aren’t keen on seeing corporate tax rates cut reformed anytime soon because we like revenue and we “feel that the corporate income tax raises it in a distributionally progressive way.” We do like revenue, but our thoughts on the incidence of corporate tax rates are not “feelings”—they’re pretty evidence-based. The CBO, for example, used to assume that 100% of the corporate income tax fell on owners of capital (a very well-off bunch relative to the rest of the population). Now they assume that 3/4ths does. So our view that most of the incidence of the corporate income tax falls on capital is not some wild-eyed heterodox view.

We’d probably quibble even with the change to put some of the incidence on wages (though I’m not a huge expert in this one), and we know of the growing effort by some economists to claim that the incidence of the corporate income tax is actually borne by workers, but we’re convinced by the counter-evidence (see here (PDF) and here (PDF) for some of this evidence). A side-note—it’s always fun to see people who claim in one venue that corporate tax rates should be cut reformed because the incidence is actually borne by workers claim in another that the corporate income tax is bad because it “double-taxes” capital income. Really, you can’t have both claims.

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What we read today

Social Security’s challenges continue to be modest and manageable

Every year since 1941, the Social Security Trustees have issued a report on the long-term financial outlook of Social Security. The 2013 report is out today, along with the Medicare trustees report. The Social Security trust fund reserves increased by $54.4 billion in 2012, and this year’s surplus is projected to be $28 billion. Social Security will continue to run a surplus through the end of the decade, with the trust fund growing from $2.76 trillion in 2013 to a peak of $2.92 trillion in 2020.

Beginning in 2021, Social Security will begin drawing down the trust fund to provide a cushion to help pay for the Baby Boom retirement. This was anticipated. The trust fund was never meant to grow indefinitely and its drawdown should not be cause for concern, though the recession and weak recovery have accelerated the process.

If no policy changes are made to Social Security, the trust fund will reach exhaustion in 2033, unchanged from last year’s report. (See this interesting blog from CBPP looking at how trust fund exhaustion dates have fluctuated since 2000 due to demographic and economic uncertainties; note that the exhaustion date was the same in 2000 as it was during the recession in 2009.) Even in the unlikely event that nothing is done to prevent automatic benefit cuts when the trust fund runs out, Social Security would still be able to pay out 77 percent of promised benefits to recipients. Modest increases in revenue, however, could keep Social Security paying out full benefits for the foreseeable future. Even without any changes, Social Security will be able to keep paying full benefits for another two decades. So there is absolutely no reason why any action or “grand bargain” including Social Security reform must happen now, especially with a dysfunctional Congress.

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Economic expansion versus economic recovery

Piggybacking on my colleague Josh Bivens’ recent post refuting claims that the economy is “holding up surprisingly well,” it seems some in the press corps could benefit from a primer on economic expansion versus economic recovery. Rebounds in certain economic indicators, particularly stock indices and housing prices—very incomplete metrics of overall health being buoyed by the Federal Reserve’s quantitative easing asset purchases—are too often being conflated with or contributing to a “recovery” that presupposes the economy is recovering.

Part of this confusion likely reflects misidentification of the affliction at hand. The U.S. faces a sharp aggregate demand shortfall stemming from the housing bubble’s implosion and a jobs crisis that resulted from this pullback in spending by households, businesses and government. On these fronts, the U.S. is mostly oscillating between recovery and backwards progress, and “treading water” tends to be a better characterization than recovery since the end of 2010, after the Recovery Act’s boost faded and the federal government joined state and local governments on the austerity bandwagon.

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Previewing the Social Security Trustees Report

The number of disabled worker beneficiaries grew by 187 percent between 1980 and 2010, much faster than the 39 percent growth in the workforce. Much of this can be explained by the aging of the Baby Boomers, who were 45-64 in 2010 (peak years for disability), and the rise in the number of insured women, according to recent testimony by Social Security Chief Actuary Stephen Goss (pdf). (An additional factor was the increase in Social Security’s normal retirement age (pdf) from 65 to 66, which delayed when beneficiaries are shifted from disability to retirement benefits.)

However, age-adjusted incidence rates also increased from 3.1 percent in 1980 to 4.4 percent in 2010.1 This and the fact that the Disability Insurance (DI) trust fund is projected to run out in 2016 has brought a flurry of negative attention to the program. Advocates are bracing for more when the Social Security Trustees Report is released tomorrow.

Much of the media coverage focuses on workers with seemingly minor impairments who apply after losing their jobs, giving the impression that DI is luring people out of the workforce and causing a drain on public resources. In a particularly misleading story, National Public Radio dubbed the disability program a “hidden, increasingly expensive safety net.” But as a new report from the Center for American Progress (pdf) points out, DI benefits are a modest lifeline for disabled workers, and the difficult and lengthy application process makes it highly unlikely that workers with real options will choose this route. Even among the more than half of applicants who are rejected, relatively few find jobs later (pdf), though the fact that some applicants who nearly qualify manage to engage in “substantial gainful activity” suggests that DI does have a modest dis-employment effect.

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Economic policy is largely being driven by obstructionism, not economic advisers

President Obama is reportedly planning to nominate economist Jason Furman to replace Alan Krueger as the head of the Council of Economic Advisers. Like Krueger and, for that matter, Austan Goolsbee and Christina Romer who previously served this administration in the same capacity, Furman boasts an impressive resume, with a Harvard economics doctorate as well as stints at the Brooking Institution, the Center on Budget and Policy Priorities (CBPP), and the CEA under President Clinton, among others. If you’re still of the incorrect belief that tax cuts largely pay for themselves (looking at you, Senate Minority Leader Mitch McConnell), do yourself a favor and read his CBPP report explaining the mechanics and empirics of “dynamic scoring” (pdf) and why invoking it as a talisman doesn’t mean one can claim anything one finds politically expedient.

The Beltway coverage of this news is overly focused on the inside baseball politics between the CEA and the National Economic Council, where Furman has been serving as Deputy Director since January 2009. But it’s important to step back and remember that economic policy in recent years has been principally driven not by well-qualified economists with the CEA, NEC, or elsewhere in the executive branch, but instead by conservative congressional obstructionism. Jason Furman’s appointment to the CEA will not alter the troubling reality that the United States is on an autopilot course of premature, excessive austerity and intentionally poorly designed sequestration spending cuts. But even if the ghost of conservative saint Milton Friedman rose up and warned the GOP against such austerity, today’s conservatives in Congress would declare him an apostate and continue their destructive course.

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Ongoing joblessness: A national catastrophe for African American and Latino workers

As my colleague Heidi Shierholz has noted, the recent “hold steady” jobs report represents an ongoing disaster for all workers. But historically, and since the Great Recession, unemployment has inflicted significantly more pain on black and Hispanic workers. EPI recently released five reports on unemployment through the recession that reveal the depth of suffering among black and Hispanic workers in states with large minority populations, focusing particularly on black and Hispanic unemployment in Michigan, Mississippi, New Mexico, North Carolina, and Texas. Coupled with historic barriers to employment for people of color, the economic collapse of the recession and painfully slow recovery have taken a much greater toll on African Americans and Hispanics than whites.

The figure below shows the significant disparities in black-white and Hispanic-white unemployment in the U.S. over the last 34 years. African American unemployment rates have almost always been at least twice—and sometimes more than two and a half times—that of whites since 1979. Even at the depths of the Great Recession, when white unemployment was much higher, the black unemployment rate was 1.88 times that of whites. At this disparity’s peak in 1989, the black unemployment rate was 2.71 times the white unemployment rate. Likewise, Hispanic unemployment rates have been at least one and a half times (and, throughout the 90s, more than twice) that of whites since 1979. The Hispanic-white unemployment gap peaked in 1998 when the Hispanic unemployment rate was 2.12 times that of whites. At the end of 2012, the black unemployment rate was more than twice (2.11) that of whites, and the Hispanic unemployment rate stood at more than one and a half times (1.56) that of whites.

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No cause for relief—austerity will indeed drag hard on the economy in 2013 and 2014

The normally excellent Neil Irwin and Ylan Q. Mui at Wonkblog are mostly wrong, I think, in arguing that the economy is “holding up surprisingly well” in a year of austerity. The data they cite to make this judgment are rising prices in both the stock market and home prices and falling gasoline prices.

But rising stock prices are actually pretty irrelevant to most American families, and today they mostly reflect the stunningly high profit margins of American corporations. These profit-margins in turn are boosted by extremely weak wage-growth, as inflation-adjusted wages for the vast majority of American workers have fallen in each of the last three years. In short, one could easily make the case that today’s high stock prices are actually mostly a sign of bad news for American workers.


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Why we should tax overseas corporate income

This week, we learned that Apple is sitting on over $100 billion in untaxed overseas cash, and this cash will remain untaxed until and unless Apple repatriates this income (that is, brings the cash home to the United States).

In a blog post, Jared Bernstein asked about how we can stop this sort of international tax avoidance. The simplest and most direct way of taxing offshore income would be to simply end deferral entirely. Taxing the overseas income of U.S. multinationals would raise revenue, helping ease current budget pressures, and eliminate incentives for complicated tax avoidance schemes.

Not only do millionaires have low tax rates, so do many corporations, with some large corporations paying less in taxes than the typical middle-class American taxpayer. So how do large multinational corporations avoid paying taxes? The full answer is as complicated as the tax code; the short answer involves profit-shifting and deferral.

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Differences between House Republicans’ and Senate Democrats’ proposed funding allocations reveal their priorities

Although the House and Senate have yet to reconcile their respective budget resolutions, the House Appropriations Committee forged ahead and recently approved a GOP spending plan for fiscal year 2014, capping base discretionary funding at $967 billion—the level set by the sequestration. The committee also defeated a Democratic proposal that would have set the top-line discretionary funding allocation at $1.058 trillion—the same level of spending called for in both President Obama’s budget request and the Senate budget resolution.

We know that the two chambers of Congress will not likely reach agreement on spending levels for FY2014. But where exactly do they differ? The chart below indicates that there are very minor differences between the House and Senate on Defense, Homeland Security, and Military Construction-Veterans Affairs appropriation levels. (The latter two allocations are the only without disagreement between the two chambers.) The biggest relative differences occur in funding levels for the Financial Services and General Government, Labor-Health and Human Services-Education, and State and Foreign Operations subcommittee allocations. The biggest dollar difference in proposed appropriations between the two chambers is for the Labor-HHS-Education subcommittee allocation, which the House GOP recommends funding $44 billion below both the Senate and the administration’s budget requests for FY2014.

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In one chart: we have a demand problem, not a skills problem

The large increase since 2007 in the unemployment and underemployment rate of young college grads, along with the large increase in the share of employed young college graduates working in jobs that do not require a college degree, underscores that today’s unemployment crisis did not arise because workers lack the right education or skills. Rather, it stems from weak demand for goods and services, which makes it unnecessary for employers to significantly ramp up hiring.

The figure below, from this report on the labor market prospects of the Class of 2013, gives unemployment and underemployment rates for college graduates under age 25 who are not enrolled in further schooling. The unemployment rate of this group over the last year averaged 8.8 percent, but the underemployment rate was more than twice that, at 18.3 percent. In other words, in addition to the substantial share who are officially unemployed, a large swath of these young, highly educated workers either have a job but cannot attain the hours they need, or want a job but have given up looking for work.


Figure A

Unemployment and underemployment rates of young college graduates, 1994–2013*

Underemployment Unemployment
1994 10.7% 5.5%
1995 11.5% 6.1%
1996 10.2% 5.8%
1997 8.0% 4.0%
1998 7.8% 4.5%
1999 7.8% 5.1%
2000 7.1% 4.4%
2001 9.7% 6.1%
2002 9.5% 5.9%
2003 11.9% 6.7%
2004 11.2% 6.2%
2005 10.5% 5.7%
2006 9.2% 5.2%
2007 9.9% 5.7%
2008 11.2% 6.2%
2009 18.7% 9.8%
2010 19.8% 10.4%
2011 19.5% 10.1%
2012 18.4% 8.7%
2013 18.3% 8.8%
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The data below can be saved or copied directly into Excel.

* Latest 12-month average: March 2012–February 2013
Note: Underemployment data are only available beginning in 1994. Data are for college graduates age 21–24 who do not have an advanced degree and are not enrolled in further schooling. Shaded areas denote recessions.

Source: Authors' analysis of basic monthly Current Population Survey microdata

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