Now is still a good time to raise the minimum wage
With minimum wages set to rise next week in Nevada, Oregon, Illinois, and the District of Columbia—as well as in Chicago, Minneapolis, Los Angeles, San Francisco, and 12 other smaller cities and counties—it’s not surprising that business groups that always oppose higher minimum wages are calling for states and cities to put scheduled increases on hold in light of the coronavirus pandemic. There is no question that the pandemic has created unprecedented challenges for state and local economies, but the case for raising wages for low-wage workers hasn’t changed. If anything, current conditions make it even more important for governments to strengthen pay standards, especially those that help low-income households.
The number one problem for businesses right now isn’t excessive labor costs, it’s a lack of demand. The federal government’s failure to quickly implement large-scale testing, contact tracing, and containment programs in the early days of the coronavirus’s spread forced most state and local governments to effectively put their economies into hibernation—limiting business activity to slow the spread of the virus. As cities and states reopen their economies, the central challenge for businesses and economic policymakers will be restoring consumer demand and making regular economic activity safe in the face of continued legitimate concern over the virus.
From a general macroeconomic perspective, raising the minimum wage in a period of depressed consumer demand is smart policy. Minimum wage hikes put extra dollars in the pockets of people who are highly likely to spend every additional cent they receive, often just to make ends meet. Workers who benefit from an increased minimum wage disproportionately come from low-income households that spend a larger share of their income than business owners, corporate shareholders, and higher-income households, who are likely to save at least some portion of the dollars that finance a minimum wage hike. As a result, raising the minimum wage boosts overall consumer demand, with research showing that past raises have spurred greater household buying, notably on dining out and automobiles. (Such findings are a good reminder that relatively small increases in a worker’s paycheck might be all that is needed for them to qualify for an auto loan or a mortgage.)
Because a higher minimum wage lifts up lower-income households—although some middle-income households benefit, too—it is likely to have a stronger effect than many—possibly even most—other recession response measures state and local policymakers might consider. Tax breaks or deferrals, rent subsidies, expanded lending programs, and other business-oriented relief measures all can help firms weather a downturn, but they’re not going to drive additional spending in the same way that a minimum wage hike does.
Trump’s ban on temporary work visas is an attempt to scapegoat immigrants during an economic collapse: Real reform would improve wages and working conditions
President Trump has issued a new proclamation, “Suspending Entry of Aliens Who Present a Risk to the U.S. Labor Market Following the Coronavirus Outbreak,” that will halt the issuance of certain major categories of nonimmigrant (i.e., temporary) work visas until the end of 2020, and calls for a number of rule changes with respect to work visas and work authorization. (A presidential proclamation is essentially the same as an executive order.) This follows his April proclamation that would suspend a third of immigrant visas from being issued (immigrant visas are also known as “green cards,” which confer foreign residents with lawful permanent resident status that can eventually lead to citizenship). The language in the April proclamation, which was initially valid for 60 days, also directed federal agencies to examine nonimmigrant work visas; this new proclamation appears to be the result of that effort. Trump’s new proclamation extends the duration of the April proclamation banning certain green cards until the end of 2020.
Trump’s June 2020 proclamation will suspend the issuance of new temporary work visas to migrants and their family members if they are applying from abroad, between now and December 31, 2020, but does not appear to suspend the issuance of visa statuses for those applying from within the United States. The impacted visa classifications are the H-1B for occupations requiring a college degree, H-2B for low-wage jobs outside of agriculture, L-1 for intracompany transferees and personnel with specialized knowledge, and some of the major programs that authorize employment in the J-1 Exchange Visitor Program, specifically the J-1 Intern, Trainee, Teacher, Camp Counselor, Au Pair, and Summer Work Travel programs.
While most of these visa classifications are issued to applicants at consulates abroad and are therefore suspended, the H-1B is an exception. In 2019, 60% of new H-1Bs were issued to migrants who were already present in the United States, often on a student visa. Therefore, the H-1B program will be less impacted in terms of a reduction in visas. (It may even result in a higher share of foreign graduates of U.S. universities being granted H-1B status, since they’ll be applying from within the country.)
Workers are striking during the coronavirus: Labor law must be reformed to strengthen this fundamental right
The coronavirus pandemic has revealed much about work in the United States: There have been countless examples of workers speaking out against unsafe work conditions and demanding personal protective equipment (PPE) to try and stay healthy and safe on the job. We also have seen that essential workers are often not paid commensurate with the critical nature of their work. Few U.S. workers have access to paid sick time or paid leave of any kind. And, when workers have advocated for health and safety protections or wage increase, they have often been retaliated against, and even fired for doing so. As a result, many workers have decided to strike in an effort to have their voices heard.
Even before the pandemic, data from the Bureau of Labor Statistics (BLS) showed an upsurge in major strike activity in 2018 and 2019, marking a 35-year high for the number of workers involved in a major work stoppage over a two-year period. Further, 2019 recorded the greatest number of work stoppages involving 20,000 or more workers since at least 1993, when the BLS started providing data that made it possible to track work stoppages by size. In fact, after decades of decline, strike activity surged in 2018, with 485,200 workers involved in major work stoppages—a nearly twenty-fold increase from 25,300 workers in 2017. The surge in strike activity continued in 2019, with 425,500 workers involved in major work stoppages. On average in 2018 and in 2019, 455,400 workers were involved in major work stoppages—the largest two-year average in 35 years.
DACA survives at SCOTUS: For now, ‘Dreamers’ will continue to be protected from deportation, but a permanent solution is urgently needed
Almost eight years to the day after President Obama announced his Deferred Action for Childhood Arrivals initiative, better known as DACA, the Supreme Court of the United States (SCOTUS) has issued a decision in Department of Homeland Security et al. v. Regents of the University of California et al.—the litigation concerning whether the Trump administration’s attempt to end DACA was carried out lawfully. In a stunning rebuke to the Trump administration’s ham-handed rescission of DACA, the highest court in the land—which has a majority of staunchly conservative justices—ruled 5–4 that the Trump administration failed to comply with the requirements of the Administrative Procedure Act (APA) when ending DACA. In doing so, SCOTUS upheld the findings of three lower courts that also determined the APA had not been complied with and that had allowed DACA to remain in effect via a nationwide injunction while the legal challenges continued. As a result, DACA will continue to exist, for now.
The immediate practical impact of the SCOTUS ruling on DACA cannot be overstated: It means 650,000 undocumented U.S. residents who were brought to the United States as children won’t lose their current protection from deportation. They can continue to attend school and work lawfully, and they can keep contributing to their communities and local economies.
The DACA initiative didn’t provide a permanent legal status, only a temporary reprieve from deportation that can be renewed every two years, along with the ability to obtain a Social Security Number and an employment authorization document. Nevertheless, this stopgap measure that DACA represents, which keeps immigrants from being deported to a country they can barely remember, has resulted in significant economic and educational achievements for DACA recipients. Being able to work lawfully and without the specter of deportation looming over them means DACA recipients are able to have basic labor rights, which in turn have translated into wage gains. How big are the wage gains? According to a study and survey conducted by Professor Tom Wong and United We Dream, the National Immigration Law Center, and the Center for American Progress, the hourly wages earned by DACA recipients increased 86% since they received DACA, from $10.46 per hour to $19.45 per hour. The wage gains were even higher for DACA recipients who are 25 and older—128%—from $10.64 per hour to $23.70. Wage gains of this magnitude can literally be the difference between being in poverty and entering the middle class.
A quarter of a year in, job losses remain at historic levels: More than one in five workers are either on unemployment benefits or are waiting to get on
Last week, 2.2 million workers applied for unemployment benefits. This is the 13th week in a row—a full three months—that initial unemployment claims are more than twice the worst week of the Great Recession.
Of the 2.2 million who applied for unemployment benefits last week, 1.4 million applied for regular state unemployment insurance (UI) on a not-seasonally-adjusted basis, and 0.8 million applied for Pandemic Unemployment Assistance (PUA). PUA is the federal program for workers who are out of work because of the virus but who are not eligible for regular UI (e.g., the self-employed). At this point, only 44 states, D.C., and Puerto Rico are reporting PUA claims.
How is it that we are still seeing large numbers of initial unemployment claims now, when the May jobs report shows we added jobs? The missing piece is hiring. If there are a large number of layoffs, there can still be job growth if there is also a lot of hiring (or rehiring). In today’s gradually reopening coronavirus economy, hires (or rehires) are now outpacing job losses, but we are still seeing a huge number of people losing jobs. This means labor market “churn” is vastly greater than in normal times.
Further, some recent unemployment claims may be from people who lost their job in March or April but didn’t apply right away (perhaps because they couldn’t get through the system).
Many commentators are still reporting the cumulative number of initial regular state UI claims over the last 13 weeks as a measure of how many people are out of work because of the virus. I believe we should abandon that approach because it ignores PUA but overstates things in other ways (for example, some who were laid off and applied for UI in March or April may now be going back to work). Instead, we can calculate the total number of workers who are either on unemployment benefits, or have applied and are waiting to see if they will get benefits, in the following way:
An open letter to economic institutions in the face of #BlackLivesMatter: Addressed to our allies in the economics community
This open letter from The Sadie Collective Community was published on Medium on June 11, 2020. The Sadie Collective is the first American nonprofit organization that aims to increase the representation of Black women in economics and related fields.
This letter is about whether you will choose to stand on the right side of history as your Black colleagues are hurting. Every day we do our best to show up for work, despite understanding that COVID-19 has disproportionately impacted our communities. Additionally, over the past weeks, the proliferation of news highlighting the plight of unjust police brutality plagues us. Many of us attempt to cope with the current reality and still show up for work, an all too familiar lifestyle of double consciousness, coping with the current reality of our broader lives while showing up, always at our “best,” in the workplace. This letter is not a plea for your sympathy, but rather a call to action for allies who understand the systemic violence that has led to dozens of protests across the United States. As demonstrations and the movement at large are being undermined by white supremacists, accelerationism and senior economists, it is necessary that the field take deliberate measures to address the exclusion of Black economists.
Within our nation, systemic racism is an age-old problem, demonstrated most recently by the police killings of Breonna Taylor and George Floyd. The systemic oppression of Black people enables this form of direct violence at the hands of the police, along with countless other varieties throughout society at large. We need a vocal and action-oriented approach which shows you care that your Black colleagues do not walk through the world living in fear of how their lives are disregarded in America. We are reaching out because we are concerned with your immediate acknowledgment, coupled with meaningful action to address this issue.
Here are examples of institutions who have demonstrated a commitment to making or upholding change:
- University of Minnesota: The institution will be scaling back ties with the Minnesota Police Department who is responsible for the death of George Floyd.
- YouTube: Released a statement of concern and donated $1M in support of efforts to address issues of social injustice.
- Glossier: The platform released a statement of concern and will be donating $500K in grants to Black-owned beauty supply companies and donating $500K across organizations that are committed to combating racial injustice.
- Top Tech Companies: The linked companies have issued a statement and are being tracked. Note that the data on Black employees are not disaggregated, so for companies with a high number of Black employees, there is still much work to be done. We do recognize that acknowledgment is a step in the right direction
- National Economic Association: The organization released a statement which condemned the disproportionate use of lethal force on Black people in a way that was not just filled with platitudes but with a denunciation of injustice, maltreatment, and racism is not only policing but in the economic and social structures of the U.S. as a whole.
Updated state unemployment numbers: In 10 states, more than one in six workers are receiving or have filed for regular unemployment
The U.S. Department of Labor (DOL) released the most recent unemployment insurance (UI) claims data yesterday, showing that another 1.5 million people filed for regular UI benefits last week (not seasonally adjusted) and 0.7 million for Pandemic Unemployment Assistance (PUA), the new program for workers who aren’t eligible for regular UI, such as gig workers. As we look at the aggregate measures of economic harm, it is important to remember that this recession is deepening racial inequalities. Black communities are suffering more from this pandemic—both physically and economically—as a result of, and in addition to, systemic racism and violence.
As of last week, more than one in five people in the workforce are either receiving or have recently applied for unemployment benefits—regular or PUA. These benefits are a critical lifeline that help workers make ends meet while practicing the necessary social distancing to stop the spread of coronavirus. In fact, the $600 increase in weekly UI benefits was perhaps the most effective measure in the CARES Act for insulating workers from economic harm and jump-starting an eventual economic rebound, and it should be extended past July.
Figure A and Table 1 show the total number of workers who either made it through at least the first round of regular state UI processing as of May 30 (these are known as “continued” claims) or filed initial regular UI claims during the weeks of May 30 or June 6. Figure A and Table 2 show the total number of workers who either made it through at least the first round of PUA processing by May 23 or filed initial PUA claims during the weeks of May 23, May 30, or June 6. We do not sum the two totals together because some states have misreported PUA claims in their initial claims data, leading to potential double counting.1
New and cumulative jobless claims by state: Unemployment insurance (UI) claims filed and numbers and shares of workers either receiving unemployment benefits or waiting for approval during the week ending June 6
| State | Initial regular UI claims filed in most recent week | Total currently receiving or applied for regular UI | Regular UI as a share of labor force | Total currently receiving or applied for PUA |
|---|---|---|---|---|
| Alabama | 19,347 | 211,071 | 9.4% | 57,855 |
| Alaska | 7,427 | 61,448 | 17.8% | 19,391 |
| Arizona | 22,879 | 247,046 | 6.8% | 894,313 |
| Arkansas | 9,151 | 128,906 | 9.4% | 0 |
| California | 258,060 | 3,341,467 | 17.1% | 1,300,660 |
| Colorado | 13,128 | 289,379 | 9.1% | 128,813 |
| Connecticut | 15,279 | 300,197 | 15.6% | 54,199 |
| Delaware | 2,921 | 62,098 | 12.7% | 0 |
| Washington D.C. | 3,291 | 77,133 | 18.6% | 0 |
| Florida | 110,520 | 1,254,775 | 12.0% | 0 |
| Georgia | 134,711 | 977,160 | 19.0% | 0 |
| Hawaii | 6,694 | 133,425 | 19.9% | 120,250 |
| Idaho | 3,665 | 53,704 | 6.0% | 2,365 |
| Illinois | 44,814 | 834,372 | 13.0% | 109,502 |
| Indiana | 23,604 | 273,829 | 8.1% | 256,794 |
| Iowa | 10,112 | 176,527 | 10.1% | 21,156 |
| Kansas | 8,824 | 124,021 | 8.3% | 48,615 |
| Kentucky | 40,536 | 280,346 | 13.5% | 0 |
| Louisiana | 22,002 | 341,096 | 16.2% | 201,381 |
| Maine | 3,031 | 90,444 | 13.0% | 93,193 |
| Maryland | 41,104 | 310,969 | 9.5% | 234,866 |
| Massachusetts | 44,732 | 639,945 | 16.7% | 1,105,114 |
| Michigan | 28,504 | 910,062 | 18.4% | 1,767,907 |
| Minnesota | 29,209 | 461,435 | 14.8% | 73,040 |
| Mississippi | 21,021 | 196,782 | 15.4% | 74,600 |
| Missouri | 18,587 | 269,277 | 8.7% | 84,860 |
| Montana | 2,892 | 50,875 | 9.5% | 70,751 |
| Nebraska | 4,729 | 68,801 | 6.6% | 21,238 |
| Nevada | 13,200 | 350,953 | 22.5% | 477,579 |
| New Hampshire | 6,055 | 114,212 | 14.7% | 0 |
| New Jersey | 22,621 | 606,794 | 13.3% | 546,712 |
| New Mexico | 5,913 | 119,986 | 12.5% | 51,355 |
| New York | 94,348 | 1,881,352 | 19.7% | 1,303,899 |
| North Carolina | 33,148 | 600,561 | 11.7% | 186,650 |
| North Dakota | 2,527 | 39,418 | 9.7% | 9,014 |
| Ohio | 35,474 | 581,932 | 10.0% | 554,102 |
| Oklahoma | 50,397 | 260,857 | 14.1% | 4,275 |
| Oregon | 23,445 | 501,756 | 23.8% | 0 |
| Pennsylvania | 50,088 | 953,018 | 14.5% | 1,272,259 |
| Rhode Island | 3,485 | 83,510 | 15.0% | 49,364 |
| South Carolina | 22,734 | 251,486 | 10.5% | 121,961 |
| South Dakota | 817 | 22,827 | 4.9% | 5,313 |
| Tennessee | 21,417 | 347,419 | 10.3% | 99,535 |
| Texas | 89,736 | 1,437,877 | 10.1% | 337,388 |
| Utah | 5,452 | 88,494 | 5.4% | 16,385 |
| Vermont | 1,560 | 47,844 | 14.1% | 12,457 |
| Virginia | 30,164 | 457,579 | 10.3% | 219,996 |
| Washington | 33,502 | 534,974 | 13.5% | 220,742 |
| West Virginia | 4,216 | 99,883 | 12.4% | 0 |
| Wisconsin | 25,731 | 306,455 | 9.9% | 16,560 |
| Wyoming | 1,610 | 20,886 | 7.1% | 3,833 |
Notes: Initial claims for the week ending June 6 reflect advance state claims, not seasonally adjusted. For comparisons to the size of the labor force, we use February 2020 levels. Totals reflect the number of workers whose have made it through at least the first round of processing or are waiting for their claim to be processed.
Unless otherwise noted, the numbers in this blog post are the ones reported by the U.S. Department of Labor, which they receive from the state agencies that administer UI. While the DOL is asking states to report regular UI claims and PUA claims separately, many states appear to also be including some or all PUA claimants in their reported regular UI claims. As state agencies work to get these new programs up and running, there will likely continue to be some misreporting. Since the number of UI claims is one of the most up-to-date measures we have of labor market weakness and access to benefits, we will still be analyzing it each week as reported by DOL, but ask that you keep these caveats in mind when interpreting the data.
Source: U.S. Employment and Training Administration, Initial Claims [ICSA], retrieved from Department of Labor (DOL), https://www.dol.gov/ui/data.pdf and https://oui.doleta.gov/unemploy/claims.asp, June 11, 2020.
Three months in, the economic pain of the coronavirus pandemic continues: More than one in five workers are either on unemployment benefits or are waiting to get on
Last week, 2.2 million workers applied for unemployment benefits. This is the twelfth week in a row that initial unemployment claims are have been more than twice the worst week of the Great Recession.
Of the 2.2 million who applied for unemployment benefits last week, 1.5 million applied for regular state unemployment insurance (UI), and 0.7 million applied for Pandemic Unemployment Assistance (PUA). PUA is the federal program for workers who are out of work because of the virus but who are not eligible for regular UI (e.g., the self-employed). At this point, only 42 states and Puerto Rico are reporting PUA claims. This means PUA claims are still being undercounted.
How is it that we are seeing large numbers of initial unemployment claims now, when the jobs report from last Friday shows we added jobs in May? One key thing is the fact that the unemployment benefits numbers don’t account for changes in hiring. If there are a large number of layoffs, there can still be job growth if there is also a lot of hiring (or rehiring). Further, some unemployment claims since April may be from people who actually lost their job in March or April but didn’t apply right away (perhaps because they couldn’t get through the system).
Many commentators are still reporting the cumulative number of initial regular state UI claims over the last 12 weeks as a measure of how many people are out of work because of the virus. I believe we should abandon that approach because it ignores PUA—and is thus an understatement on that front—but overstates things in other ways (for example, some who were laid off and applied for UI in March or April may now be going back to work). Instead, we can calculate the total number of workers who are either on unemployment benefits, or have applied and are waiting to see if they will get benefits, in the following way:
Without federal aid to state and local governments, 5.3 million workers will likely lose their jobs by the end of 2021: See estimated job losses by state
Last week, EPI hosted a bipartisan panel of economists who called upon policymakers to pass significant federal aid for state and local governments in coming months. This panel’s judgement was unanimous that federal aid for subnational governments is crucial for helping the economy mount a rapid recovery from the current crisis. In this post, we highlight that:
- If policymakers do nothing at the federal level to address these shortfalls, the United States could end 2021 with 5.3 million fewer jobs, with losses in every state.
- Further, if Congress passes some level of aid that is insufficient—less than $1 trillion—they will needlessly guarantee a significant job gap by the end of 2021.
- If they pass $500 billion of aid over that time, the jobs gap will likely be roughly 2.6 million. If they pass $300 billion of aid, the jobs gap will likely be roughly 3.7 million.
- While empirical estimates of the shortfall should guide policymakers’ thinking, they can (and actually should) avoid putting a firm sticker price on state and local aid by tying this aid to economic conditions. If the economy recovers faster than the forecasts driving the $1 trillion estimated shortfall indicate will happen, then less aid would be needed. If instead recovery lagged, more would be needed.
- Finally, filling in the estimated shortfalls would merely return state and local governments to their pre-crisis fiscal status quo. But the unique features of the current economic shock will put greater demands on public services than existed before the crisis. To go beyond macroeconomic stabilization and promote the general welfare, even more federal aid to these governments is likely needed.
Because a weakening economy undercuts state and local tax revenues, and because states operate under balanced budget constraints, the coming months will see intense downward pressure on state and local spending. Reductions in this spending will in turn significantly slow recovery from the current economic crisis. This is not an abstract concern—the historically slow recovery in state and local spending following the Great Recession by itself delayed a recovery in unemployment to pre-crisis levels by four full years.
The U.S. economy remains in an enormous jobs deficit: The labor market was down 15.9 million jobs at the end of April (JOLTS data), and down 19.6 million at the middle of May (jobs data)
Quick reminders about the Job Openings and Labor Turnover Survey (JOLTS):
- JOLTS data provide information on all pieces that go into the net change in the number of jobs. These components include: hires, layoffs, voluntary quits, and other job separations (which includes retirements and worker deaths). Putting those components together reveals the overall (or net) change.
- JOLTS data provide information about the end of one month to the end of the next, whereas the monthly employment numbers provide information from the middle of one month to the middle of the next.
This morning, the Bureau of Labor Statistics (BLS) released Job Openings and Labor Turnover Survey (JOLTS) data for April, showing the second-highest number of job separations on record (March was the highest) and the lowest level of hires on record. One important thing to understand about JOLTS data is the timing. JOLTS data provide information from the end of one month to the end of the next, whereas the monthly employment numbers provide information from the middle of one month to the middle of the next. The JOLTS data showed that 6.4 million jobs were lost from the end of March to the end of April. The monthly employment numbers straddle these numbers, showing that 20.7 million jobs were lost from mid-March to mid-April, and 2.5 million jobs were gained from mid-April to mid-May. Together, the JOLTS data and the monthly employment numbers paint a picture of the peak of job loss in this recession being in late March or early April, and people beginning to go back to work by the beginning of May. But no matter how you measure it, the U.S. economy remains in an enormous jobs deficit—we were down a total of 15.9 million jobs at the end of April (according to the JOLTS data), and down a total of 19.6 million at the middle of May (according to the monthly employment data).