EPI stands astride history and shouts, ‘Why not?’ to economists who say, ‘No.’

It says, ‘Where’s your data?’

– Jared Bernstein, Chair of President Biden’s Council of Economic Advisers

For the past four decades, one small and scrappy think tank has played a key role in reviving and reinventing U.S. liberalism, and returning its concerns to the well-being of U.S. workers. By providing the analysis and the hard numbers that demonstrated the failure of the neoliberal policies that Democrats as well as Republicans had turned to after the 1970s, the Economic Policy Institute has helped create an updated version of New Deal economics, while also addressing the concerns of race and gender that the New Deal had largely overlooked. 

Since its founding in the late 1980s, EPI has practiced an empirically rooted institutional economics that documented how unchecked corporate power and its accompanying agenda—the destruction of unions, the offshoring of industry, the suppression of wages, the discrimination against women and minorities—led to the squeezing of America’s middle class, the marginalization of its working class, and the rise in its deaths of despair. 

It’s only recently that EPI’s long-embraced advocacy for policies to rebuild America’s once broadly shared prosperity have begun to be adopted. EPI’s founders—economists Lester Thurow and Barry Bluestone, economic policy writers Robert Reich and Robert Kuttner, former Labor Secretary Ray Marshall and EPI’s founding president Jeff Faux—called for the kind of industrial policy that only now has come into being. For a long time, EPI was the only economic institution to both predict and then document the calamitous effects that corporate trade agreements would have over U.S. industry and workers—a stance that was once almost universally denounced by economists and elite media, and for which it is now not-quite-universally but very widely respected. 

Over the subsequent decades, EPI economists and leaders like Larry Mishel, who revealed the widening gap between rising productivity and stagnating wages, and Josh Bivens, who led the advocates for the massive stimulus that enabled the nation to dodge a recession at the outset of the Biden presidency and lift millions of adults and children out of poverty, have had a profound influence in the fight to create a fairer and more vibrant economy. In recent decades, EPI has also been at the hub of a network of state and regional organizations fighting for more equitable economic policies at the state and local level.

In recent years, EPI has continued to enter many of the nation’s most contentious arguments—providing critically important work that documented the rising corporate profit margins that fueled the nation’s inflation, and revealed the economic impact that draconian abortion restrictions have had on women, their families, and their communities. EPI was also one of the first of the nation’s think tanks to devote major resources to documenting and analyzing the ongoing economic effects of systemic racism and sexism, providing a roadmap for other institutions seeking to undertake their own complementary studies. 

Throughout the years, EPI has also incubated and advanced the careers of many of the nation’s leading economic policymakers, including prominent Biden administration officials and congressional staffers.

Today, EPI is helmed by two powerful women leaders, one a passionate economic scholar and the other a longtime crusader for worker rights. President Heidi Shierholz and Executive Vice President Naomi Walker lead a growing team of economists and researchers focused on bolstering race and gender equity and pushing federal, state, and local governments to lift up workers. In this era of misinformation, EPI continues to provide national and local policymakers and grassroots activists with the numbers and analyses that enable them to push for a more equitable and prosperous America.

How did this organization, which began as a handful of economists who contested virtually every neoliberal tenet in the midst of the Reagan eighties, and revealed the fallacious assumptions that propped up all the received “truths” of the economic establishment, become the most trusted go-to source for the economic policy of the new progressive mainstream? Herein hangs the tale.

We needed data

The origins of EPI

In the 1970s, a new American Right began to take shape. Its seeds were sown in a 1971 paper written for the U.S. Chamber of Commerce, the “Powell memo,” which called on big business to devote much more funding to lobbying, to political campaigns, and to a new infrastructure of policy-oriented think tanks.

Business answered Powell’s call—promoting institutions and policies well to the right of the modest conservatism of the Eisenhower and Nixon administrations. In 1973, direct mail pioneer Paul Weyrich and beer baron Joseph Coors founded the Heritage Foundation. In 1977, oilman Charles Koch provided the funding for a start-up libertarian think tank, the Cato Institute. Emboldened by the decade’s run of stagflation, which conservatives attributed to the failures of Keynesian economics and too much liberal spending, Milton Friedman promoted an anti-government libertarianism, and Ronald Reagan won the White House proclaiming that government was the problem.

A softer version of these doctrines seeped into the Democratic party as well. A new generation of Democrats, representing more affluent, historically Republican suburban districts that went Democratic in the wake of Watergate, fashioned themselves as post-New Deal pragmatists—liberal on social issues, not very liberal on bread-and-butter economics. For its part, the Carter administration deregulated a host of industries in the belief that empowered markets would cure whatever ailed the economy. The cult of the market grew so pervasive that Ray Marshall, Carter’s Secretary of Labor (and one of the few liberals in his administration) recalls that “even our economists at the Labor Department were caught up in free market fundamentalism.”

In the eighties, the movement toward deregulated markets became a stampede. (The government did intervene in the market on behalf of corporations and the wealthy, however, through measures like extending copyrights and patents). Freed from government’s guardrails, Wall Street preached the gospel of profits über alles, and corporate America responded by doing everything in its power to maximize its profits by minimizing its labor costs. Emboldened by Reagan’s mass firing of striking air traffic controllers, CEOs tore up the New Deal’s social contract between capital and labor and began mass firings of their own workers when they opted to strike, as well as routinely disrupting and defeating organizing campaigns through tactics that violated the National Labor Relations Act but went effectively unpunished. They offshored work to low-wage nations; they sent work out to low-wage sub-contractors; they employed low-wage temps—and they wielded these strategies as ways to compel their remaining U.S. employees to work for less, for diminished or no benefits, for crazy hours. 

The Democrats’ drift rightward continued apace. The Brookings Institution, Washington’s most venerable think tank, shifted during this period from espousing a mildly center-left economic perspective to one that was more center-right. Market-oriented “Atari Democrats” championed the rise of the deregulated tech industry; the Democratic Leadership Council promoted Democrats—most notably, Bill Clinton—who combined a faith in markets with more centrist stances on social issues. Behind this move rightward was a shift in the party’s funding base. As Thomas Edsall documented in his 1984 book The New Politics of Inequality, the financial contributions to all 1982 Republican congressional candidates came from right-wing institutions and organizations (corporate and conservative PACs) over left-wing institutions and organizations (union and liberal PACs) by a ratio of 33-to-1. The right-to-left ratio of contributions to the Democrats in 1982, Edsall found, was 1-to-1. 

This was the terrain on which—and against which—the Economic Policy Institute was founded. 

“By the mid-eighties, there was a lot of discussion among liberals about the lack of an intellectual infrastructure, of institutions on the left that would provide progressives with the kind of information and analysis that the right had developed by that time,” Robert Reich recalls. “There was literally nothing, a spectacular lack of thinking outside the neoliberal box.”

Reich was one of several progressive economists, public intellectuals and activists who began discussing filling that void with a think tank that would provide them with the kind of information and analysis they could wield in the battle of ideas—above all, hard data on the consequences that deregulating U.S. capitalism had on the U.S. people. He was soon to join such notable dissidents from the zeitgeist as economists Barry Bluestone and Lester Thurow, economics writer Robert Kuttner, former Carter administration Labor Secretary Marshall, and progressive policy proponent Jeff Faux in discussions on how to establish a Washington-based think tank. They agreed that Faux was the person with the time, energy, smarts, and track record to build it and lead it. 

Faux brought to the task a combination of Washington experience, having run a grassroots economic development organizing division of Lyndon Johnson’s War on Poverty in the Sixties, and economic policy development, having worked alongside Gar Alperovitz on such projects in the Seventies. In the early eighties, he’d collaborated with longtime progressive activist Roger Hickey in an effort to set up an institution that would promote industrial policy – a common concern of EPI’s eventual founders as plant closings ballooned in the early years of Ronald Reagan’s presidency. Faux’s efforts proved to be about 40 years too early (it’s only in the past couple of years, as trans-oceanic supply chains broke under the weight of a global pandemic, that official Washington came to realize the necessity of industrial policy). Sufficient funding for that Faux-Hickey venture was not forthcoming, but as the Reagan administration began dismantling as much of the New Deal order as it could get away with, the need for a progressive economic think tank grew even more urgent.

At the same time, the unions bearing the brunt of offshoring and heightened corporate and governmental opposition to their very existence saw declines in membership, which meant declines in their budgets. At their height, unions like the United Auto Workers had what nearly had amounted to economic think tanks of their own, but those days were either going or gone. “They were cutting research departments and policy staffs,” Faux recalls. “They weren’t hiring policy economists as they had in the past; what remained was focused more on collective bargaining.” 

Ray Marshall, the one Carter administration alumnus who understood the importance of unions, had been “prevailed upon,” he recalls, “by some foundations to form a think tank of some kind, which became the National Policy Center. But the work was too broad; we needed to narrow the focus to economic policy. Around that time, Jeff was thinking of forming EPI. I thought it would be a good idea to discontinue the National Policy Center. It had done good work, but what Jeff was planning was better.”

Faux had known Marshall when he’d worked in the War on Poverty. “I went to Ray,” Faux says, “even before meeting with Bob [Kuttner] and Barry [Bluestone]. He was a great asset. He was critical in expanding our network beyond our group of liberal economists.” 

Marshall proved particularly critical in lining up EPI’s seed money, which came from labor. The first union to back Faux’s proposal was AFSCME, whose policy director, Rob McGarrah, brought it to the attention of Gerry McEntee, who’d just been elected AFSCME’s president. McEntee immediately understood the importance of the project and agreed to help organize other union leaders. Marshall and Bluestone then accompanied Faux to a meeting with Lane Kirkland, president of the AFL-CIO, and helped persuade Kirkland to sign off on the project. 

With that, McEntee invited a group of union presidents—the UAW’s Owen Bieber, the Steelworkers’ Lynn Williams, the Clothing and Textile Workers’ Jack Sheinkman, the Machinists’ William Winpisinger, SEIU’s John Sweeney, and the Communication Workers’ Morty Bahr—to a dinner where Faux presented the proposal. (Rich Trumka, then President of the Mineworkers, couldn’t attend the meeting, but was enthusiastic about EPI from the beginning and quickly joined the group. He later became Chair of the EPI Board when he succeeded Sweeney as president of the AFL-CIO.) 

“You guys are getting killed,” Faux told the presidents. “The Heritage Foundation had an 800-page plan for Reagan. We had nothing for the Democrats.” (Indeed, the main economic policy advanced by the Democrats’ 1984 presidential nominee, Walter Mondale—raising taxes to reduce the growing budget deficit—was the brainchild of Goldman Sachs executive Robert Rubin.)

Each of the union presidents then made a three-year pledge of support for an economic think tank that would center its research and analysis on workers and their families.

From the beginning, the labor movement accepted that EPI had to be independent. There were a few times when one union or another was unhappy with EPI’s analysis. But with only minor exceptions, they understood and accepted that EPI would never establish or retain its credibility if it couldn’t present its research even when it didn’t show what its funders wished. Despite the caricature of unions as narrowly self-interested institutions, they understood not just the importance of EPI’s mission but of its independence as well. Moreover, they continued to support EPI financially even as their memberships and dues declined and times grew harder for them. 

It was 1986, the middle of the dismal eighties. Faux came up with a “vanilla name” for the outfit while Hickey found an office. The founders knew what they wanted and needed from the fledgling outfit. “We were all writing about structural changes to the economy,” says Reich, “but we needed data; we needed more and better analysis.” 

All of the Institute’s founders were “institutionalists” in their approach to economics, following in the tradition of John Kenneth Galbraith, Robert Heilbroner, Adolph Berle, John R. Commons, and Thorsten Veblen. They focused on the structures of power behind the veil of free-market fundamentalist theory that was then dominating economics.

That required them to look at specific sectors and industries. Conventional economics, by contrast, focused on only two perspectives—the individual alone in the market or the entire macro economy. Mainstream economists wouldn’t or couldn’t see anything in between; that would be altogether too messy for economics as they conceived and practiced it, too full of class interests, social bias and politics that were beyond the scope of supply and demand curves. Asked whether the government should consider having a policy that bolstered key industries, Michael Boskin, who then chaired George H.W. Bush’s Council of Economic Advisers, made clear just how far beyond the pale of proper economics and proper economic policy such considerations were. “Potato chips, computer chips,” he said, “what’s the difference?”

The neoliberal policy wonks wouldn’t admit it, but their “data-based” science began with the conclusion that free markets worked best, which their number then “proved.” EPI, by contrast, would plunge into the workings of the actual economy, where power, class, race, and gender shaped actual outcomes. It would look at the economy through the updated versions of the institutionalist lenses that its great institutionalist predecessors had used to describe the actual economies of their own times. It would do so by uncovering and analyzing economic data that conventional economics ignored and dismissed.

Challenging the stranglehold neoliberalism had on economic policymaking seemed impossibly ambitious. “You’ll never make it,” a sympathetic, seasoned Washington economist told Faux. “The establishment has too much money and power for you to overcome.” Moreover, it would require building an institution that could incubate and influence succeeding generations of activist economic analysts. EPI could never count on the corporate and foundation deep pockets that were available to support the conservative agenda of the “Powell memo.”

To have a chance against these odds, EPI had to first establish its credibility by showing that the economics professions own quantitative methodology supported the EPI criticism.

 “Numbers are the currency of economic and political debate in this town,” says Faux. I knew the only way we were going to break through was to be good with the numbers.” 

“That’s when I hired Larry Mishel.”

Good with numbers

EPI defines itself

In 1987, when Faux hired him as EPI’s initial research director and chief economist, Larry Mishel had already worked for the UAW—the gold standard for union economic policy shops—and then the AFL-CIO’s Industrial Union Division. “Larry was young, quantitative; he liked playing with numbers and understood what we were about,” Faux says. 

What Mishel was about, particularly in EPI’s early years, was providing the numbers that challenged the conventional economic wisdom. “The Commerce Department kept insisting there was no decline in U.S. manufacturing,” Faux recalls, “but that ran counter to everything we were hearing and seeing. Larry dived into those numbers and concluded after a month that they were mismeasuring manufacturing output and ignoring a rise of imported inputs. At first, Commerce denied that they were miscalculating, but then a former BLS [the Bureau of Labor Statistics] productivity expert said that Larry was right.”

“We had to overcome the ‘stigma’ of being a labor-supported think tank,” says Mishel, “so I wanted to do that by paying the closest attention to the data. When my first report, ‘Manufacturing Numbers’ was published in April 1988, the conventional wisdom was that the U.S. had not deindustrialized. I argued that the BEA [the Commerce Department’s Bureau of Economic Analysis] was wrong. And by October, BEA had suspended its data series and committed to revising it.” This also began to dispel a huge misunderstanding of the U.S. economy. 

 “In the world of economic statisticians,” says Faux, “this was a big deal. It showed we were serious about the numbers.”

With its credibility as an organization that could decipher, document and analyze the real economy steadily growing, EPI became a big deal not just for statisticians but for its union backers (the Steelworkers’ Lynn Williams called the union’s EPI contribution “the best investment I’ve ever made”), for foundations (Ford became an early supporter) and liberals more generally. In 1988, each of the Democrats seeking the presidency cited EPI’s numbers in their presentations of where—and how, and why—the economy had gone astray. 

Also in 1988, on Labor Day, EPI published its initial State of Working America (SWA). “It established our mode of working for many years: It did not have anything about policy; we just wanted to overwhelm readers with the data, with 90 tables, that showed the condition of the middle and working classes,” Mishel says. “It became EPI’s brand; it made clear our focus on getting the data right and highlighting what was happening to jobs, wages, job quality and inequality.” 

“For some people on the left, the State of Working America became a bible; it was the icing on our statistical cake,” says Faux. “The press relied on it, congressional staffers used it; when I walked into congressional offices, it would be sitting on the shelf.”

On the subsequent editions of SWA (which EPI continued to publish through 2012), Mishel had a stellar array of EPI co-authors. In the institute’s formative years, he hired a number of young economists and policy advocates—among them, Jared Bernstein, Thea Lee, Heather Boushey, Dean Baker, and John Schmitt—who were to become some of the nation’s most influential policy analysts and formulators. 

Mishel hired Bernstein as a research assistant in 1992. Bernstein could program microdata, and EPI purchased the computer equipment that Bernstein could use to view and analyze BLS survey data.

“It was life-changing for EPI,” Mishel says. “We could get and analyze data” that no one else was looking at. “Bill Clinton was running for president saying, “What you earn depends on what you learn”—that education was the answer for a struggling workforce. But our data was the basis of a front-page New York Times story with the headline ‘Wages for College Grads Not Doing Well.’”

In a sense, the Times story conveyed EPI’s first public salvo against the then-prevailing notion that the nation’s rising inequality was the result of a “skills gap” among U.S. workers. Much of EPI’s work over the past 35 years has centered on demonstrating the real causes of that inequality: slack economies, deunionization, structural racism, and trade accords that undermined domestic living standards—public policies that had been enacted and could therefore be reversed. 

“Larry’s big investment was to buy computer equipment that filled up a whole chunk of a room,” says Bernstein. “I was crunching these big magnetic tapes. We realized that a distributional analysis of hourly wages did not exist. BLS didn’t produce it. So we crunched hourly wage data by income percentile and level of education. At the time, Democrats and the center-left said the remedy for wage stagnation was education. But we crunched, and found that people with four year of college had stagnant wages, too.”

“We were contesting a very individualistic view of what was driving economic inequality,” Bernstein continues, “that the blame belonged to people who weren’t smart enough. That ignored all the macro forces that were shaping the economy, like workers’ institutional bargaining power.” 

“Some of what we were doing was the result of new technology that enabled us to work with microdata from the Current Population Surveys,” says Dean Baker. “It was hard to work with, but Larry made a commitment that we’d do this. No one else was doing this in a timely fashion. Harvard and MIT had the resources to do this—and they didn’t.” 

The 1994 edition of the SWA contained the chart that Mishel says will be engraved on his tombstone. It contains two lines, one representing the rise in productivity since the late 1940s, the other representing the rise in median hourly pay over the same time period. Through the 1970s, the lines showed that productivity and the pay of the typical worker grew in tandem. Beginning in the eighties, however, they showed productivity continuing to rise (albeit more slowly than before), while wage growth tanked.

Productivity-Pay Gap

Conventional, and at the time, all but consensual, economic theory said that wage increases track increases in productivity; and if wages stagnate, that’s because productivity is ebbing, too. Those whose wages were not faring well, in this view, had skills inadequate for the information age. This is what Charles Schultze, a Brookings Institution fellow who had chaired President Carter’s Council of Economic Advisers, and others at Brookings were arguing: Lowering deficits, increasing savings, and reversing the productivity slowdown were what workers needed.

In a sense, Schultze was merely restating President John F. Kennedy’s famous assertion that “a rising tide lifts all boats.” The EPI chart, however, suggested that the tide’s boat-lifting mechanisms had been a consequence of institutional economic factors that loomed large during the years of Kennedy’s early sixties presidency, such as the bargaining power of a substantially unionized workforce in a not yet globalized economy. That power that had waned as union membership accelerated its decline in the eighties, and in the face of competition from low-wage nations. In the absence of those mid-century factors, the emphasis on growth that characterized both the Clinton administration and Brookings did not necessarily translate to economic gains for the median worker. Worse yet, the economic orthodoxy at Brookings and the White House held that expansive fiscal and monetary policies to engender full employment were impermissible because they ran the risk of inflation. That meant not only that the tide wouldn’t lift all boats but also that the tide itself wouldn’t amount to much. EPI countered that the actual numbers showed that fears of inflation were excessive, reflecting instead the anxieties of Wall Street bondholders.

EPI built the chart around a key distinction that lies at the center of much of its work. The focal point was not on the experience of the “average” worker, but instead the experience of what statisticians would call the “median” worker and what EPI usually refers to as the “typical” worker. The median worker’s wage is the wage of the worker right in the middle, the one earning more than the bottom half of workers but less than the top half of workers. In an economy with U.S. levels of inequality, the wage earned by this median worker is a much better description of the economic circumstances facing the typical than the much more commonly cited “average” wage, which is pulled up by the wages of a relatively few, very high earners.

The fact that the chart tracked median hourly wages rather than, say, median annual incomes or average wages (which include all earners from CEOs to janitors) is further testimony to EPI’s focus on profiling the lived experience of working people. Workers may be able to augment their income by working overtime or taking a second (or third) job (or, today, a gig), but they do so at the expense of other aspects of their lives, like spending time with their children and being engaged with their communities.

That’s why the hourly wages of a typical or median worker offer the most revelatory and telling measure of the state of worker well-being.

According to Baker, “no one else was even looking at the people who made the median wage, and so didn’t understand how much they were hurting. When Alicia Munnell [then assistant secretary for economic policy in Bill Clinton’s Treasury Department] met with Jared, she’d only been looking at average wages, not median wages. So, she was surprised.” 

By rooting economic policy in improving the lot of median-wage Americans, EPI was also rooting economic argument in empirical data rather than in the aggregate approach (which focused on the GDP) that almost completely dominated macroeconomics and economic reporting at the time. In that sense, EPI prefigured by more than 20 years the revival of empiricism in the practice of academic economics sparked by the work of Thomas Piketty and Emmanuel Saez. In going first, EPI was challenging what was then the otherwise unchallenged economic mainstream, its fundamental methodology and its shibboleths. 

“Any time someone wants to do something progressive, a bunch of economists say why you can’t,” says Bernstein. “EPI would always get into that argument and ask, ‘Are you sure? Where’s your data? If we raise the minimum wage by five cents, there will be job loss? That’s a testable hypothesis.’” 

“That’s the thematic behind everything we did.” 

That thematic informed the work of EPI economist Dean Baker, and later, of EPI economist Josh Bivens, both of whom charted the rising share of the nation’s income going to capital and the declining share going to labor. It also informed EPI’s revelations about the nation’s wealthiest residents, including CEOs—something that most other economists considered impolite (or at least impolitic) to focus on. In the mid-nineties, EPI began developing the data and the chart that displayed median CEO pay and median worker pay as far back as the early 1960s. Since 2012, EPI has issued annual reports showing the ratio between the two. As this chart shows, U.S. CEOs went from making 21 times that of the typical worker in 1965 to 344 times that in 2022. 

CEO Pay 2023

By the early ‘90s, EPI had begun to resemble a small, bustling, out-of-the-mainstream but relentlessly accurate economics department. Faux and Mishel’s early hires included Bernstein, Baker, Thea Lee, Bill Spriggs, John Schmitt, Eileen Appelbaum, and Heather Boushey, all of whom were to play major roles in eventually convincing center-left and liberal policymakers and advocates to adopt more egalitarian and social democratic economic perspectives. This recruitment of young, obscure economists who were then to play key roles in reshaping both public and elite understanding of the economy continued when Mishel succeeded Faux as EPI president in 2002, as exemplified by Mishel’s hire that year of Josh Bivens and, a year later, Elise Gould. Bivens would go on to become research director and chief economist, while Gould would become EPI’s key expert and commentator on wages—taking those reins from Mishel—in the mid-2010s. 

“It was an exciting place to work,” recalls Baker. “We shared what we’d found in weekly seminars, but on any day, you could just go down the hall to find out something new.” 

It helped that EPI practiced what it preached. It encouraged the creation of the staff union. And Faux—an employer—was asked to speak at the national convention of the parent union’s national convention.

From its earliest years, EPI put full employment at the center of its argument for reducing inequality and meeting the economic needs of the lower and middle classes. “I spent years in the mid-’90s working with Dean on full employment,” recalls Bernstein, “on how the structure of the economy led to slack labor markets most of the time.” The way to take up that slack, EPI argued, was public investment. Before the 1992 Democratic presidential primaries, Faux argued that the party needed to address three deficits: fiscal, trade, and public investment. EPI produced papers calculating the job impact of infrastructure and other public investment; Faux co-authored a book with Todd Schafer on the topic that outlined a policy agenda on which Democrats could run and win. 

“We always said that full employment was essential to combating inequality, and our work showed it was essential in combating racial and gender inequality in particular,” Mishel says. The tight labor markets of a full-employment economy bring employment opportunities and wage increases to those groups historically at the economy’s margins when it’s not running at full strength. EPI’s understanding of full employment’s salutary effects—influenced by such earlier advocates as Michal Kalecki and Michael Harrington—underpinned its support for more stimulus spending to revitalize an economy walloped by the 2008 financial panic. The same understanding informed EPI’s opposition to the fiscal austerity and budget cuts proposed by the 2010 Bowles-Simpson Commission and many mainstream Democrats and center-left think tanks in order to reduce the deficit, even as unemployment levels remained high in the wake of the Great Recession. 

Through the first five presidencies that overlapped EPI’s existence—Reagan’s Clinton’s, both Bushes,’ and Obama’s—EPI’s numbers came to be viewed as consistently reliable by growing numbers of Democratic elected officials and by policy wonks and economists of all tendencies. Its policy recommendations, however, were routinely rejected by the same political and economic establishments.

Bill Clinton’s 1992 campaign mantra that Americans were working harder for less, for example, came from EPI’s numbers on stagnant wages. As president, though, Clinton surrounded himself with Wall Street financiers and the pro-business Democratic Leadership Council who blamed stagnant wages on the workers themselves—their lack of skills and education, and their unwillingness to relocate.

In an economic policy briefing a month after Bill Clinton’s election, Robert Rubin of Goldman Sachs, who went on to dominate Clinton’s economic policy, used an early version of an EPI chart to show how bad things had been under Republicans. But then, to Faux’s shock, Rubin concluded that the chart showed that the answer to the wage problem was more education and training, the exact opposite to what the chart implied. 

This emphasis on workers’ ostensible deficiencies enabled mainstream Democrats to vow they would “do something” for workers, even if that just meant subsidizing worker training for corporations without engaging issues of diminishing worker power and the increasing maldistribution of income. 

This establishment refusal to acknowledge the policy implications of the very data the establishment did not contest was a common occurrence throughout EPI’s early years. When centrists praised EPI, it came with an invariable caveat: Their numbers are honest and accurate even though I disagree with their conclusions. Of course, EPI’s policy conclusions were based on the numbers. 

By the late 2010’s, however, EPI’s once heretical economics had become the common sense of most Democratic policymakers and Democratic voters. When Joe Biden became president and confronted an economy still in pandemic shutdown, he proposed the American Rescue Plan, which the Democratic Congress then enacted. The plan kept millions of Americans from plunging into poverty, saved hundreds of thousands of small and mid-sized businesses, and created the fastest recovery, with the greatest gains for the lowest-paid workers, in the nation’s history.

“For decades, the government had worried about inflation and ignored workers and wages when the economy was in trouble,” Mishel says. “This was a major change”—one that EPI, often as a voice in the wilderness, had been persuading the Democrats to make virtually since its inception. 

The leftward movement of Democratic party on economic fundamentals from Clinton’s presidency to Biden’s is due chiefly to Americans’ growing experience and awareness of the economy’s dysfunctions and its towering levels of inequality. Occupy Wall Street, the Fight for 15 and Bernie Sanders’ presidential campaigns all played a crucial role in boosting that awareness. But the movement of the centrist and center-left economists who play a large role in shaping economic understanding, discourse, and policy is in no small part due to the credibility of EPI’s work since the mid-1980s.

“I first became aware of them in the early ’90s,” says Harvard economist Lawrence Katz. “Larry and Jared and the State of Working America put them on the map for an academic like me. Clearly, the empirical work they presented was very carefully done; the comprehensive and transparent presentation of publicly available facts made them clear and credible.” 

Even when EPI’s politics were far from the economic mainstream, says David Card, a Nobel laureate in Economics who chairs the economics department at UC Berkeley, “I’ve never heard anyone say they manipulate the data from the population surveys. They’re invariably reliable.” 

Another economist who attests to EPI’s reliability is Jason Furman, who once was the chief economist for the Hamilton Project, which was founded (and funded) to advance a Robert Rubinesque perspective on the economy. “In 2004, I was working for the [John] Kerry [presidential] campaign, and I needed some minimum wage numbers,” Furman says. “I’d thought of EPI as some lefty organization, but when I called an academic labor economist, he said Jared Bernstein runs the data better than anyone. That was the first time I learned to rely on the data analysis they produce, and I’ve relied on and used their data for the past 20 years, even when I may disagree with them on a particular position. On the state of working America, on CEO pay, on a lot of key issues, they don’t make mistakes. They’re really good.” 

“The transformative nature of the data they put out was very important,” says Card. “That graph—showing poor wage performance relative to productivity—really helped build the new mainstream.” 

Among economists, EPI’s reputation has extended well beyond the various factions of the Democratic party. Kevin Hassett, who directed economic policy at the American Enterprise Institute, served as chief economic adviser on the McCain and Romney presidential campaigns, and chaired President Trump’s Council of Economic Advisers from 2017 to 2019, called EPI’s work, “Really reliable, professional, carefully thought-out.” 

Faux had been right. EPI succeeded because it had been good with the numbers—better, in fact, than just about anyone else.

Everybody wins, except for most of us

By the mid-1990s, EPI was known chiefly for two things: its revelation that wages had stagnated even as productivity was rising, and its critique of and opposition to the free trade agreements—at that point, chiefly NAFTA —that Republicans and corporate Democrats were promoting and enacting. 

The North American Free Trade Agreement had first been proposed by Ronald Reagan in the 1970s but was dropped for lack of support in the Congress when he became president. When George H.W. Bush became president, NAFTA’s time had come. Bush negotiated a three-way deal with Mexico and Canada that would allow U.S. capital to build factories in Mexico and ship the production to the U.S. virtually duty free. In effect, the deal forced Americans to compete with exploited workers whose wages came to one-tenth of theirs.

NAFTA was something new. Until it became a governmental priority in the last years of the Bush presidency, “our only trade agreements were with [the comparable economics of] Canada and Israel,” says Thea Lee, whom EPI hired in 1991 and put on the trade desk the following year. “We’d never had a trade agreement with a developing country like Mexico.”

Following his election in 1992, Bill Clinton made passing this Reagan/Bush initiative a major priority of his presidency. The proposal was anathema, however, to much of the Democratic base—not only to unions (particularly those that represented workers in manufacturing), but also to environmental groups who deplored its absence of any enforceable environmental standards. Liberal Democratic House members, especially those from manufacturing-heavy districts, led by Michigan’s David Bonior, strongly opposed the deal.

Yet NAFTA was almost universally praised by the economic policy pundits, whose catechism held that free markets would be “win-win” for all three countries. Mexicans, the pundits argued, would take low-skilled jobs in the production chain, while Americans would move up to even higher-paying technically advanced work.

But as EPI saw it, this completely ignored the vast institutional differences between these two economies. It also hid the implicit racism that underpinned the conventional wisdom—that Mexicans were incapable of meeting the skill levels of U.S. workers.

At the time, Mishel had already compelled the BEA to concede that the level of manufacturing in the U.S. had declined. “Offshoring was a visible explanation for that,” Faux recalls. “So, we jumped into that. As for academics and think tanks—well, there wasn’t anybody else.” 

“EPI was already grappling with how much of the emerging wage gap and deindustrialization was caused by trade,” says Roger Hickey. “There weren’t many experts in this field; it was really only EPI that even considered it to be a field.”

One of those very few experts was Richard Rothstein, who’d had to deal with factory relocation to Mexico when he’d headed the clothing workers union in Southern California in the 1980s. With Faux, Rothstein co-authored an EPI paper entitled “Fast Track Fast Shuffle,” which pointed out not just the deficiencies in NAFTA, but also in the “fast track” process in which the tri-national agreement could not be subjected to congressional amendment but rather be presented as a fait accompli for an up-or-down vote.

As far as nearly every economist was concerned, the merits of free trade were self-evident. “The economic establishment treated us as complete ignoramuses,” Mishel recalls. It was ignoring the fact that “basic economic theory says that trade will lead to inequality, and you don’t get the benefits of trade unless it does,” Mishel adds. “That meant you had to deplete the number of jobs of workers without college educations, or lower their pay. But [NAFTA’s advocates] wouldn’t acknowledge that. [President] Clinton’s economic advisers would deny it was so.” 

After his paper with Rothstein was published, says Faux, “I became our trade person. But I didn’t even have an M.A. in economics. So, we hired Thea.” 

“In 1991, I was basically not finishing my dissertation [in economics at the University of Michigan], and teaching at UDC [the University of the District of Columbia],” says Thea Lee. “I’d read about EPI in Dollars and Sense, where I’d been an editor. A job opened up there as a research assistant, but Jeff and Larry decided I was overqualified, so Larry created a trade economist job.” 

Initially, the scope of that job was confined to two industries already moving abroad: textiles and steel, on which Lee worked with the University of Maryland’s Rob Scott. “Then NAFTA was thrown into the mix,” she recalls, as it became clear that Bush was determined to sign the accord with Mexico and Canada, and that Clinton, his successor, was equally determined to push it through Congress. “I became part of a group with Richie [Rothstein] and Mark [Levinson, then the clothing workers union’s economist] insisting that trade deals needed enforceable labor standards.”

“We were treated as nut cases. That made the job fun.”

The trade “experts” whom Lee debated, by contrast, didn’t find it fun at all. “I was a no-name grad student,” Lee says, “who ended up debating Carla Hills [the U.S. Trade Representative under Bush] and James Tobin [Yale’s Nobel laureate economist]. “She debated Tobin at Yale and killed him,” Mishel recalls. “These guys just assumed that free trade must be good. She’d say, ‘Have you read the treaty? It’s just about protecting high profits for our corporations’ foreign investments.’ She called out the special ‘courts,’ which weren’t part of any country’s judiciary, that would rule on disputes. She was a star. She was great on TV.” 

“We were never comfortable with a nationalist argument,” Lee says. “We made clear that NAFTA didn’t benefit—wasn’t designed to benefit—Mexican workers. We built a trinational coalition with workers and environmentalists from Mexico and Canada. What we insisted on was that we wanted rules for globalization that actually developed economies so that they benefited workers. Instead, what NAFTA would do was let corporations bully governments so they couldn’t set standards.” It established private pro-business “courts” to rule on cases that companies could bring against the governments in all three nations when they believed that governmental regulations might impede NAFTA’s guarantees of free trade. 

The U.S. establishment’s strategy was to use NAFTA as a way to ensure that Mexico would remain a docile client of Washington. In 1988, leftist candidate Cuauhtémoc Cárdenas had lost the Mexican presidential election very narrowly to the business-friendly Carlos Salinas (though most reporting at that time and since has held that Cárdenas actually won but for fraudulent vote tallying). The prospect of the pro-labor Cárdenas winning the presidency had alarmed both Wall Street and Washington. Faux recalls that during a pause in their debate over NAFTA before members of Congress, a high Clinton trade official told him that they had to keep the left from power in Mexico. To that, one Democratic member added. “You may be right about the economics, but we have to support Salinas. He is our man down there.”

NAFTA was designed by corporate and financial powers to establish their permanent foothold in Mexico regardless of changes in its government. Once it passed, tariffs on their Mexican-made goods would be a thing of the past, and Mexico’s status as a low-paid, nonunion element in the production chain would be set in stone.

While Lee was rebutting her fellow economists, Faux was making that case to the larger Democratic universe, addressing countless union gatherings and liberal groups.

Their efforts persuaded many congressional Democrats, but not enough to offset the lobbying of corporations, Wall Street and the Clinton administration. In the end, although Senate Democrats narrowly voted against NAFTA (27 nos, 25 ayes) and their House Democratic counterparts rejected it more decisively (156 nos, 102 ayes), NAFTA was enacted with heavy support from Republican members who joined forces with the pro-corporate Democrats.

After the NAFTA fight, EPI worked with like-minded researchers in other countries. With assistance from the Ford Foundation, EPI helped foreign researchers and activists develop their own national versions of EPI. Among the results were a State of Working Mexico (in Spanish), a State of Working Canada, and State of Working Brazil (in Portuguese). 

There was an ugly side to the reaction to labor’s and EPI’s critique of NAFTA: the charge that opponents were anti-Mexican. In fact, it was NAFTA’s advocates who made a nativist argument that the trade deal would benefit the U.S. by reducing immigration from south of the border. EPI’s critique of trade deals has always been based on the harm they do to workers in all countries. Indeed, a poll of Mexican public opinion showed that a majority there opposed NAFTA, accurately fearing it would devastate that country’s agriculture in the face of heavily subsidized corn and other farm exports from the U.S.

Within a few years after NAFTA went into effect, the logic and data on EPI’s side of the argument began to erode some of the economic profession’s knee-jerk support for such trade accords. Within a couple years, both MIT economist Dani Rodrik and Nobel laureate Joseph Stiglitz came forth with the same critiques of corporate free trade that EPI had leveled. EPI’s three-part argument—the damage such deals did to labor standards, to environmental standards, and to the democratic sovereignty of governments by curtailing their capacity to enact such standards—became the baseline critique of trade skeptics. In 1995, it informed the congressional opposition to establishing the World Trade Organization, which gave global corporations the power to override national governments. It was EPI that provided opponents with arguments and data. 

With each successive piece of free-trade legislation that came before Congress, the number of Democratic opponents in the House grew steadily larger. In 1997, Lee was hired away by the AFL-CIO to coordinate its trade work, and EPI hired University of Maryland economist Rob Scott to take her place. Scott was soon to provide the job-loss projections that informed both Lee and Faux’s presentations against the Clinton administration’s proposal to establish permanent normal trade relations (PNTR) with China, which came before Congress in 2000. Scott’s projections proved to be prescient, as did the arguments others advanced against the administration’s contention that opening China to global capitalism would inevitably turn China into a democracy—a contention that was to prove not merely wrong, but fundamentally and spectacularly wrong. 

If there is a summary statement of EPI’s stance on the trade deals of the past quarter century, it’s EPI’s 2008 book by economist Josh Bivens, with the inspired title Everybody Wins Except for Most of Us. Here, as in EPI’s earlier work, Bivens looked at the effects of these agreements not on the nation’s overall GDP, which factor in the increased income (from the lower costs of offshored labor) that redounds to large shareholders in global corporations, but on Americans at the level of the median wage and on non-college-educated workers overall. 

Using conventional models, including one introduced by Paul Krugman in the mid-’90’s, Bivens showed that globalization reduced the wages of the median wage earner by $1,400 in 2006, and a household with two wage earners by $2,500.

The error that establishment economists and politicians make, Bivens wrote,

is conflating national income and national welfare. As global integration generally raises national income (gross domestic product, or GDP), many economists rest arguments for it there. If pressed, they often argue that concern about how this national income is distributed post-integration is just not their business—that’s politics, not economics. This is a dodge, pure and simple. Economists expressing a preference for global integration are, in fact, expressing a purely political or ethical preference, not a scientific judgment. Nothing in the discipline of economics tells us that a policy that raises national income but leaves some individuals better off and some worse off is one that raises national welfare. 

How this national income is distributed has always been EPI’s business, of course. In time, as Democrats began to understand how greatly free trade had weakened its hold on much of the working class, and as pandemic-era Americans began to understand the nation’s vulnerability to on-again off-again global supply chains, EPI’s emphasis on domestic full employment and global worker rights became the dominant emphasis of many Democratic elected officials. It became a particular emphasis of the Biden administration, where a number of EPI alumni serve in key positions, among them Jared Bernstein as chairman and Heather Boushey as a member of the president’s Council of Economic Advisers and Thea Lee as the Labor Department’s Deputy Undersecretary for International Affairs.

Even as the Democratic mainstream has come to accept EPI’s analyses and conclusions, the economics establishment has increasingly been compelled to do so, too. In Everybody Wins, Bivens had calculated the amount by which trade with China had lowered wages for non-college-educated workers. In 2016, MIT economist David Autor co-authored a widely publicized paper on what he termed the “China Shock.” In it, Autor and his co-authors calculated the economic effects that the relocation of U.S. manufacturing to China, propelled by PNTR, had on U.S. workers.

His numbers were identical to those Bivens had published eight years before! 

Tragically, the failure to heed EPI’s argument that NAFTA and PNTR would squeeze and anger the U.S. working class was a political as well as a policy error. In his 2016 presidential victory, Donald Trump swept previously Democratic working-class districts in the industrial Midwest with his attacks on free trade in general and NAFTA in particular. By 2016, acknowledging the public’s backlash against such deals, Hillary Clinton had changed her mind and become a NAFTA critic. By then, however, it was too late.

Class and schools

EPI and education

Beginning in the 1980s, critics on the American Right launched a new line of attack on the nation’s public schools: Their budgets were rising, but their standardized test scores were declining. Clearly, something had to be wrong with the public schools that more funding wouldn’t help. The most prominent of these critics was William Bennett, who served as Secretary of Education during Ronald Reagan’s second term as president. 

Reagan’s successor as president, George H.W. Bush, extended this critique with the claim that the United States “lavishes unsurpassed resources on schooling,” thus demonstrating, presumably, that the failings of U.S. education couldn’t possibly be attributed to insufficient funding. A 1990 paper by Mishel and Edith Rasell, however, documented that the U.S. investment in K-12 schools was, in fact, surpassed by 12 of the 16 largest industrialized nations. And shortly thereafter, EPI was to embark on the most extensive research on school funding. 

In the late ‘80s and early ‘90s, Richard Rothstein had worked as a budget analyst for the elected school board of the Los Angeles Unified School District, the nation’s second largest. Like the schools’ right-wing and centrist critics, he looked at budgets and performance—and came to distinctly different conclusions, which EPI began publishing as a series of books and articles in 1995. Beginning with his work with Jeff Faux and Thea Lee on trade policy, Rothstein’s status was that of an EPI research associate and later an EPI fellow; he was never on EPI staff. By any measure, his was an extremely productive association. 

A 1994 Brookings Institution report on schools typified both the establishment and the right-wing critiques that then were current. “Despite increasingly large amounts of resources devoted to schools,” it proclaimed, “student performance has shown few tangible improvements…[O]ur schools are demonstrably inefficient.” 

Rothstein undertook detailed case studies of school districts to determine how much spending had grown and in what areas. With the assistance of a small flock of research assistants, Rothstein canvassed the budgets of nine school districts and found that the share of those districts’ budgets devoted to regular education had actually declined from 80% in 1967 to 59% in 1991, while the share spent on special education had soared, and that spent on school lunches and other services had increased as well. Spending on regular education—what was expected to lead to better test scores—had risen by far less than the public school critics claimed. From 1995 through 1999, Rothstein documented this budgetary shift in three successive EPI studies, beginning with 1995’s Where’s the Money Gone? 

In other work for EPI during this period, Rothstein also compared student achievement in the postwar decades to its current level, concluding that when factoring in the greatly more socioeconomically diverse and non-English-speaking student bodies of recent decades, schools had continued to do a good job educating their pupils. Looking at the international landscape, he showed in a paper co-authored by Stanford economist Martin Carnoy that U.S. public schools had done a better job improving student achievement than such presumably stellar nations as Finland, once the socioeconomic backgrounds of their students were taken into account. 

Rothstein’s work was so persuasive that the New York Times contracted with him to write its regular education columns from 1999 through 2002, after which he lectured at Columbia University’s Teachers College through 2005. 

“Richard was our guru,” says Larry Mishel. “He documented how a host of factors— housing, neighborhood, health—were key to understanding variables in student achievement.” 

That analysis achieved its fullest expression in Rothstein’s book Class and Schools: Using Social, Economic, and Educational Reform to Close the Black–White Achievement Gap, which EPI published in 2004. As Rothstein wrote in the book’s introduction:

For nearly half a century, the association of social and economic disadvantage with a student achievement gap has been well known to economists, sociologists, and educators. Most, however, have avoided the obvious implication of this understanding—raising the achievement of lower-class children requires amelioration of the social and economic conditions of their lives, not just school reform.

Aggregating a wealth of data, Rothstein laid out the social and economic disadvantages that most “education reformers” had opted to overlook. At the time, Rothstein recalls, the idea that the source of disparate educational outcomes was the schools themselves wasn’t confined merely to the right. “A lot of people on the left, like Jonathan Kozol, focused on there being something fundamentally wrong with the schools,” Rothstein says. “I argued that the achievement gaps depended on the kind of neighborhoods where children grew up, on the whole social and economic environment.”

Some on the right derided Rothstein’s attention to varying levels of student health, such as toothaches—but his observations struck thousands of teachers as accurate reflections of what they saw in their classrooms every day. “Richard’s work was very important in debunking the unexamined prejudices of the education reform types,” says Leo Carey, who until recently headed the Albert Shanker Institute. “It had a particularly wide influence in the education policy and research world.” 

Rothstein’s Where’s the Money Gone? studies also inaugurated EPI’s ongoing work on teacher compensation, a subject that Mishel turned to in the 2000s with Sylvia Allegretto and Sean Corcoran. These studies showed that teachers earned substantially less than comparably educated and experienced workers, and that this pay penalty (even after incorporating benefits) widened steadily after the mid-’90s. Readers of EPI’s ongoing documentation of teachers’ comparative under-compensation should not have been surprised when the “Red for Ed” wildcat teacher strikes swept a number of Republican-governed states (Arizona, Oklahoma, West Virginia) in 2018. In late 2022, an EPI report co-authored by senior economist John Schmitt correlated the post-pandemic teacher shortage with the low levels of teacher pay and the high levels of teacher stress. 

The influence of Class and Schools on teachers themselves was evident in the big city strikes, beginning in Chicago in 2012, that saw teacher unions demanding not just the standard increases in pay and benefits, but also greater funding for a host of community services. This approach, which has been called “Bargaining for the Common Good”—in which teachers and other employees bargain not just for their own wages and benefits, but also for improvements to the communities they serve—is rooted in the arguments that Rothstein made in his EPI publications. 

Advocacy, outreach, and growth 

EPI’s mission expands

Throughout its first 20 years, 1986 through 2006, EPI’s work centered on documenting and analyzing the actually existing economy—not just its growth and contractions (the traditional objects of economists’ research), but also the distribution of its growth and contractions, its impact on classes and quintiles, on races and genders, and on median-income Americans.

During this time, EPI’s focus did not regularly include policy advocacy, though there always was some, on such issues as raising the minimum wage. The great exception to policy reticence during these years came, of course, on trade, where EPI’s opposition to such initiatives as NAFTA and PNTR made it something of a pariah to the economics establishment, and certainly cost it funding from some established foundations.

Beginning around the time that PNTR passed Congress in 2000, some within EPI wanted the organization to increase the accessibility of its work, to more regularly add stories to its numbers, as Faux and Lee were doing on trade, and to state more clearly its differences with the economics of mainstream academics, corporate Democrats and Republicans. Economist John Schmitt, who worked at EPI from 1995 through 2001 and then again, as vice president and senior economist from 2018 until recently, wrote an internal memo in 2000 giving voice to those sentiments. “The State of Working America,” he wrote, “conveys a vast amount of information.”

The book, however, fails to communicate the “story,” the lay person’s “model,” the explanation that a reader can apply to new evidence and new circumstances and then deploy against a brother-in-law at a family barbecue. EPI has done a masterful job fighting the other side with numbers. But, as economists are fond of saying, it takes a theory to beat a theory. We need to start offering a coherent story that stands in opposition to the one that the other side is selling—successfully—and to many of our allies in the Democratic party. 

In coming years, EPI would indeed add stories and frameworks to its numbers. Most importantly, it would add advocacy to its analyses. If EPI’s first two decades primarily exposed the bankruptcy of neoliberal economic policies, its next two decades have been directed at establishing the alternatives to such policies.

Some of EPI’s early work had included significant advocacy on issues before Congress. In 2002, attorney Ross Eisenbrey came over to EPI from the Occupational Health and Safety Administration and, before that, Senator Edward Kennedy’s staff. “My job was lobbying and policy,” Eisenbrey says. “I’d bring policy issues to the staff; we’d do what we could do on it, and take it to the Hill.” 

“In 2002, after the dot-com crash,” Eisenbrey continues, “millions were still unemployed and the rate wasn’t going down. We lobbied for extending UI [unemployment insurance] benefits and we won. Later, Bush’s Labor Department changed regulations so that millions of workers could no longer qualify for overtime. Jared and I calculated the number of people who’d lose their coverage, while the administration was insisting their change would actually increase the number of eligible workers. A bill blocking the change carried in both houses, but it died in conference.” 

EPI was far from alone in its efforts on policy issues, of course; the labor movement always had a much heftier presence on the Hill than EPI did. But it was with Bernstein’s and Eisenbrey’s numbers that labor convinced legislators to back their position on overtime eligibility. 

It was in 2006 that EPI really made policy advocacy more central to its mission. One proximate provocation was the formation of the Hamilton Project, staffed by economists close to former Clinton Treasury Secretary Robert Rubin, which announced that it would provide an economic agenda for the candidates running in the 2008 Democratic presidential primaries. Hamilton also profiled interesting policy ideas from academic economics but didn’t undertake any efforts to provide comprehensive policy solutions to health care, inequality, or other problems. To counter that compendium of neoliberal nostrums, EPI concluded, it would produce, for the first time, an agenda of its own.

Over the course of 2006 and 2007, EPI unveiled its “Agenda for Shared Prosperity,” a panoply of progressive policies that could reshape the terrain on issues ranging from worker rights to full employment to affordable housing to health care. Under the co-directorship of EPI Vice President Eisenbrey, and economist Mark Levinson (then on leave from UNITE HERE), it published articles not only by staff and associates but also by such noted figures as Joseph Stiglitz, Paul Krugman, James K. Galbraith, Ray Marshall, Heidi Hartmann, Richard Freeman, Thomas Kochan, Beth Shulman, Teresa Ghilarducci, Harley Shaiken, and Susan Helper, among many others. Ghiularducci’s proposal on Guaranteed Retirement Accounts helped shape retirement policies in various states and launched EPI’s ongoing work on retirement insecurity. 

The agenda also included political scientist Jacob Hacker’s first detailed proposal for a public option in health care, in which individuals or employers could opt to purchase a plan run by Medicare, which, minus the profit motive, would be a more affordable and comprehensive offering than those of private insurers. EPI also commissioned and published a detailed financial analysis of the plan from the Lewin Group.

EPI provided multimedia presentations of its agenda, as well as publishing a detailed summary of its elements. It also held a series of forums on agenda particulars, which featured prominent members of Congress, leading advocates, and such notable figures as writer Barbara Ehrenreich. One measure of the agenda’s success was that a version of Hacker’s public option was part of the initial Affordable Care Act (ACA) that the Obama administration sent to Congress in 2009, which had majority support in the Senate but failed to clear the 60-vote cloture hurdle when Connecticut’s Joe Lieberman said he’d not give that 60th vote to the ACA if the public option was part of it. Other features of the agenda—such as reviving U.S. manufacturing—had to await the coming of the Biden presidency in 2021. 

The Agenda for Shared Prosperity wasn’t a one-shot. The Obama presidency afforded EPI a number of opportunities to advocate for and against policies, and it most vociferously made the case against cutting spending and balancing the budget that was pushed by the Bowles-Simpson Commission, as well as a number of figures within the administration, the chatterati of editorial pages and even center-left think tanks late in Obama’s first term. Papers by Mishel and Josh Bivens predicted that such policies would condemn the recovery that followed the 2008 financial panic to move at a snail’s pace—as it turned out, an entirely accurate prediction.

During this period, EPI also began to issue shorter publications that made it easier for its progressive and union allies to convey the case against austerity to public officials and the media. With the inauguration of its Working Economics Blog in 2011, EPI was better able to put forth its data, arguments and analysis of current events in even more concise form. 

In 2017, EPI inaugurated its Perkins Project on Worker Rights and Wages, named after Frances Perkins, FDR’s Labor Secretary, who was the first woman Cabinet member and a key architect of the Social Security law. Led by Heidi Shierholz, then EPI’s director of policy, and Celine McNicholas, then EPI’s counsel, the project tracked the Trump administration’s wage, labor, and employment policies, documenting the many ways that Trump’s economic policies took a toll on the very working Americans he claimed to champion. 

More changes came to EPI in 2017, when Thea Lee returned from the AFL-CIO to succeed Mishel as EPI president. During Lee’s three years as president (she left in 2021 to handle international issues at the Biden administration’s Labor Department), EPI’s yearly budget grew from $6 million to $11 million, and its staff grew to roughly 50. The additional funding was coming largely from the foundation world that had considered EPI too radical and too close to labor in earlier years. EPI was no less radical or close to labor than it had been, of course; it was the political priorities of the foundations, and the general political climate, that had changed.

In its first years, roughly 90% of EPI’s funding came from unions. By 2018, while unions still supported EPI at the same levels they always had, their contributions, thanks to the greater foundation support, amounted to roughly a third of EPI’s total income. 

In a sense, Lee was building on the credibility that EPI had attained under Faux and Mishel. By 2017—one year after Bernie Sanders’ primary race had demonstrated the growing support for social democratic and pro-labor perspectives within the Democratic party—it had become apparent to policymakers, foundation officials, and many within the mainstream media that EPI’s analysis of the U.S. economy had been more accurate and germane than those of the economics establishment, and its prescriptions for change more on point. “By the time I came back,” says Lee, “we’d won the argument on the growth of inequality, on raising the minimum wage, on the effects of our trade policies.” 

The sense of anger and abandonment that white working-class voters had expressed in casting their ballots for Donald Trump gave a particular urgency to this belated acknowledgment of EPI’s focus on the plight of nonaffluent Americans—on the state, as it were, of working America. The mountain, or more precisely, the mainstream, had come to EPI. (Well, the center-left mainstream.) 

Taking advantage of the increased financial commitment from foundations, and responding to the threats to U.S. democracy posed by the Trump presidency and the rise of neofascism, Lee took a series of actions that sharpened EPI’s focus.

Upon taking office, Lee initiated a staffwide project to devise a strategic plan for the organization. It came to include the considerable expansion of two projects that had begun some years earlier: the Economic Analysis and Research Network (EARN), which linked EPI to a host of state-based advocacy organizations that drew on EPI’s expertise, and the Program on Race, Ethnicity, and the Economy (PREE), which dealt chiefly with the economic state of Black and brown America and the policies that could improve it. Both projects had been initiated on a far smaller scale under Mishel’s leadership: EARN in 1997 and PREE a decade later. Each will be discussed in the following separate chapters. 

Before he’d stepped down, Mishel had strengthened EPI’s capacity for advocacy. He’d formed a policy department, hiring Heidi Shierholz to direct it in early 2017. Shierholz had first come to EPI in 2007 as a labor economist, in 2014 moving to the Obama administration’s Labor Department as its chief economist. At the same time, Mishel had also hired Celine McNicholas, who’d been handling congressional liaison for the National Labor Relations Board during Obama’s second term, to succeed Eisenbrey as EPI’s director of governmental affairs and its general counsel. Like Eisenbrey, McNicholas maintained close contacts with Democratic legislators, but with two signal differences: The new policy department had a bigger staff than Eisenbrey had had, and EPI was more proactive not just in its back-and-forth with legislators, but also in putting forward its own policy proposals, which the policy department developed in collaboration with EPI’s economists and researchers.

“Rather than just wait for a call, for requests from the Hill, we’d send up proposals,” says McNicholas. “Our research could be targeted for a particular debate or for members who’d advance certain arguments. We did more outreach; we developed more relationships. We did weekly reports on how policies supported by the Trump administration would hurt workers. We did the preparatory work for bills to raise the minimum wage and for the PRO Act. Thea really prioritized this policy work.” 

Lee also made sure that the work was more widely accessible. She expanded EPI’s communications department, bringing on communications director Eve Tahmincioglu, and worked on making communications both clear and concise. “Think tanks can be those falling trees in a forest,” Lee says. “They can do amazing work, but if nobody reads them, it doesn’t help anything. Some of our researchers were turning out 75-page papers. Our communications team worked with them to boil down the takeaways. That helped us turn out punchier products.”

What all of this has meant is that EPI is now more directly engaged than ever before with both a wider range of readers and a wider range of groups and constituencies. With the expansion of the policy staff and of the EARN staff, too, “we’re now more oriented to what the Hill, and what state capitols, are interested in,” says EPI Chief Economist Josh Bivens. This lengthened to-do list is now addressed by a much larger, broader, and more diverse EPI.

In the states

EPI and EARN

In recent years, EPI has greatly expanded its work with state and local economic research and advocacy groups, but its history of involvement with local policy work and campaigns for economic justice goes back to the 1990s. In 1995, when city contract workers in Baltimore became the first in the country to campaign for and win a living wage, EPI and University of Massachusetts economist Bob Pollin provided research and analysis making the case for that raise. When living wage campaigns and then minimum wage campaigns began springing up in states and localities later in the nineties, EPI added a staff member to provide technical assistance to those efforts. 

In 1997, Mishel joined with University of Wisconsin academic and activist Joel Rogers, and several state groups to convene a meeting that explored setting up a network, anchored at EPI, that would work on economic issues at the state level. This meeting led to the creation of the Economic Analysis and Research Network (EARN), connecting EPI directly with a small group of progressive policy research organizations across the country, including Joel Roger’s Center on Wisconsin Strategies (COWS), Pennsylvania’s Keystone Research Center headed by Steve Herzenberg, Policy Matters Ohio then led by Amy Hanauer, and Washington state’s Economic Opportunity Institute, which was explicitly modeled by its founder, John Burbank, to be a state-level version of EPI. Some of these groups already belonged to a network affiliated with the Center on Budget and Policy Priorities, which focused on using government tax and transfer policies to help the poor.

EARN’s focus, like EPI’s, would be on policy issues affecting working people, especially the working poor and middle-class, such as wages, working conditions, access to health care and retirement security. Today, EPI’s EARN program helps build and strengthen the progressive economic justice infrastructure at the state and local levels, providing funding and technical assistance to nearly 60 state groups, facilitating cross-state collaboration and learning through a very active listserv, webinars, and large annual conferences, where policy ideas are debated, skills are taught (e.g., Data 101), and successful initiatives are profiled, so other states can adopt them.

One of EARN’s first efforts was to collaborate with the Wisconsin group that Rogers had founded (the Center on Wisconsin Strategy, or COWS) on the first state version of EPI’s signature publication—in this case, the State of Working Wisconsin. This has led to dozens of such reports produced on a regular basis by EARN’s state partners to this day.

The EARN network remained relatively small for nearly two decades, doing important work in the states that had affiliates. Its Virginia affiliate, for instance, began publishing annual State(s) of Working Virginia during President Obama’s first term, which helped lay the groundwork for the state’s minimum wage increases when the Democrats won trifecta control of state government in 2018. 

In 2018, Lee hired Naomi Walker to direct EARN—a move that was key to the expansion of both EARN and EPI. Walker had directed state government relations for the AFL-CIO and then coordinated AFSCME’s coalition work with progressive groups around the country. Much of the higher levels of financial support that EPI has received in recent years is the result of Walker’s fundraising; during her time running EARN, the project’s staff grew in size from 1.5 employees to nearly a dozen.

With Walker at the helm and with EARN staffed up, the network became a national resource and training ground for policy scholars and activists across the country. In 2021, Walker became EPI’s vice president, and she was succeeded at EARN by David Cooper, a longtime EPI staffer who’d been EARN’s senior economic analyst and then deputy director. 

The election of Donald Trump changed the political and economic landscape in ways that made EARN more central to the progressive project. With Trump in the White House, “there was no opportunity to enact good economic legislation on the federal level,” says Walker. Lee and Walker both understood the opportunity this created to both deepen and broaden EPI’s work with state organizations—states suddenly becoming the sole level of government where legislation like minimum wage increases could be enacted. Walker presented this proposal to a number of foundations that found it compelling. With the additional funding and responding to the focus on states, the EARN network has grown since 2016 to include 57 “think-and-do-tanks” in 42 states. 

“Many of the state-level groups had been focusing on their states’ tax structures, budgets and safety net—issues that the CBPP network worked on,” says Walker. “They weren’t doing work on labor standards, on worker power, on race and gender equity, on public employee collective bargaining—the issues EPI has worked on. We had the resources to give them the capacity and the space to do that.” 

Virginia’s Commonwealth Institute for Fiscal Analysis—which Levi Goren, its director, describes as a “think-and-do” organization—joined the EARN network in 2010. Its experience working with EPI typifies that of the various state organizations. “EARN provides us with the expertise, data, and thought partners that help us explain the policies that have shaped the state’s economy and the consequences for all kinds of Virginians,” Goren says. “They gave us the tools to do that analysis, so we could show how workers and farmers were doing, how many were unemployed, how Virginians at all income levels were making out—so we could tell this story in ways meaningful to a range of different groups and activists.” 

During the Commonwealth Institute’s years-long campaign to raise the state minimum wage, Goren says, “EPI enabled us to show the impact of the different proposals, how many workers would benefit from each, breaking the numbers down by race, gender, and industry.” That material helped shape the bill that the legislature finally passed in 2020, which phased in major hikes to the state’s minimum wage, which currently has risen from $7.25 to $12 and will go to $15 in 2026. 

EARN’s role in the Virginia minimum wage fight wasn’t exceptional: The minimum wage tracker that Cooper developed for Virginia has been adapted to their own state’s conditions by groups in many states and localities to document the problems that low wages inflict on specific populations and to highlight the gains those populations would make with different levels of higher minimum wages.

When Walker came to EPI and EARN in 2018, she pushed to have the network focus more on issues of worker power and racial justice. In several states, the issue of establishing collective bargaining for public employees, at either the state or local level, was before the legislature, and EARN worked with its Virginia and Colorado affiliates to show how organized workforces—both more stable and more productive—could more than pay for themselves and create a more efficient government in the process. Goren notes that once local collective bargaining was established in Virginia, EPI has worked with their organization and others to make that case in the localities where public employees were unionizing. 

Such campaigns reached well beyond the various state think tanks that belonged to the EARN network, and so the EARN network expanded accordingly. “We moved beyond just the research groups,” says Goren, “as we moved into campaigns more explicitly about worker power. We added grassroots organizations to our network, and EPI provided the support that enabled us to do that.” 

In Alabama, says Walker, “our affiliate worked with groups like the Adelante Worker Center in Birmingham. It interviewed workers and integrated their stories into the State of Working Alabama. We worked to create the space for research groups and community groups to work in coalition, to create the trust that can cement a coalition for the long haul.” In Virginia, Goren’s institute worked with New Majority Virginia, for instance, on the issue of pretrial detention and cash bail, tallying the number of Virginians who’d lost their jobs while behind bars for crimes for which they’d then be acquitted. 

In structuring that campaign, Goren says, they learned from the experience of their counterpart group in Oklahoma. That, in turn, was the result of EPI’s decision to form regional networks of their EARN member groups in both the South and Midwest. “Our Southern affiliates needed something specifically for them,” says Walker. “They’d say, ‘We’re not facing the same things they face in New York and California; we need a space to talk about the challenges particular to the South.”

EARN created that space and now convenes regular conferences for its Southern and Midwestern affiliates. For its part, EPI is now also producing research and analysis specifically for those regions. Its work on the South, says Goren, “emphasizes how policy has affected different races there, with specific socioeconomic breakdowns of the consequences. It’s more useful to us than a national analysis.” 

EPI’s embrace of advocacy as well as research has been particularly notable in its work in EARN. Last year’s annual conference of all EARN affiliates, held in Detroit, very intentionally focused on showing how EPI and the state research groups could work on a diverse group of issue and legislative campaigns, and highlighted examples from states where that had already happened.

“As with EPI broadly,” says Walker, “we’re now partnering more directly with community groups and unions on policy campaigns. Previously, some EARN affiliates may have provided important data but stood back from involving themselves more fully in the campaigns. Now, they’re full partners in those policy campaigns as well.” 

The exploitation of Black, female, and immigrant workers 

EPI and PREE

EPI never looked at the economy solely through the prism of class. From its earliest days, from its first papers breaking down how workers at different income levels were faring, those papers also included tables showing how Black workers and Hispanic workers were faring relative to each other, to whites, and to the national population. Those papers also measured how women workers were making out compared with their male counterparts. EPI’s studies often addressed policy areas that disproportionately affected women, including part-time/contingent work, minimum wages, child care, the need to raise pay in “caregiver” work, balancing work and family, paid leave, and sick leave. The workers whom EPI studied in its papers and reports had class, racial, and gendered identities as invariable complements to their combined “all-worker” identities. 

Such comparative measurements and analyses informed a number of EPI’s early publications, among them Richard Rothstein’s book Class and Schools: Using Social, Economic, and Educational Reform to Close the Black–White Achievement Gap, which EPI published in 2004. That said, EPI began to deepen its focus on race in the 2006, and in 2008 it formed its Program for Race, Ethnicity, and the Economy (PREE), with guidance from EPI Secretary-Treasurer and board member Julianne Malveaux, Howard University professor and AFL-CIO economist Bill Spriggs, and activist/scholars Deepak Bhargava and Manuel Pastor. At the same time, EPI substantially increased the diversity of its board and staff, which led to a shift in governance and personnel, and an expansion of its areas of work. 

PREE’s work also involved a deeper engagement with a range of civil rights and community-based organizations. As it had with the labor movement, EPI’s work thus came both to reflect and inform the perspectives of those communities, as well as connecting them in new ways to the labor movement.

PREE’s first director was Algernon Austin, and its early work focused on detailing the wage, income and employment inequities faced by Blacks, Hispanics, Asian Americans, and Native Americans. PREE was also a pioneer in documenting the racial and ethnic disparities in unemployment at the state level. 

At the time of its 2008 founding, PREE was something new in the think tank world: EPI was the first such organization to establish a research program specifically focused on race, ethnicity, and economy policy. “Only in the last three-to-five years have we seen other think tanks do this sort of thing,” says Valerie Wilson, who has headed PREE since 2014. “Several of those organizations reached out to us to see how to do this kind of work.” 

Wilson, an economist, came to EPI and PREE in 2014 from the Urban League, where she’d headed the league’s research initiatives. “It was the perfect job for me,” she says. “It enabled me to continue to work on race, ethnicity, and economics, at an organization distinctly focused on economic research and policy.”

Wilson’s work began with a study she co-authored that looked at various states’ cutbacks to unemployment insurance, whose raison d’être was that they were supposed to increase employment levels. Wilson’s study showed that they did nothing of the sort. 

Her largest early project looked at Black-white wage gap levels between 1979 and 2015. Disaggregating the causes for its persistence, she was able to measure the relative weight of educational and regional disparities and of racial discrimination, finding that discrimination was the most important factor. The study also showed that policy mattered, “When policies [minimum wages, collective bargaining] made it more difficult to pay less, wage gaps narrowed,” she says. The converse, unfortunately, was also true. 

Since the study’s release, EPI has continued to provide the data and analyses of the wage gaps—both by race and by gender—online, through the State of Working America data library. “There are so many ways that inequality shows up in the workplace,” Wilson says. More recent PREE studies have focused on the disparity in available work hours between Blacks and whites, on the particular importance of a full employment economy for racial minorities and women, and on the disparate income challenges for women with children in the absence of affordable child care.

In the past half-decade, the staffing for PREE, like that for EARN, has grown. Under the leadership of Thea Lee and now Heidi Shierholz, EPI has devoted time and resources to increasing funding specifically for these projects. “We’ve invested more not just in these work products,” Wilson says, “but organizationally into diversity, equity, and inclusion. The [EPI staff] union made recommendations on how and where to post job openings,” to which management added its own. Departmental hiring committees worked with management to recruit a less preponderantly white and male workforce. Since 2017, even as EPI has been rapidly growing, it has been growing steadily more diverse. 

PREE’s expansion coincided with EPI’s growing emphasis on policy formation and advocacy. “We now have a policy agenda on our website, some of which focuses on issues of gender and race,” says Wilson. Several years ago, PREE was able to hire a designated policy analyst, Adewale Maye, who works with EPI’s policy department as well. In 2019, PREE hosted a series of workshops on its analysis of racial disparities, the issues they raised and the policies that could mitigate them, which was attended by several dozen researchers from other think tanks. It followed this up with an anti-racist research and policy guide based on the workshops, which provides the data and analyses of racial disparities in labor markets, health outcomes, incarceration rates, wealth accumulation—“lots of information in one place for researchers and advocates,” Wilson says. A recent study by Maye charted the disparities that have persisted or even grown in the 60 years since the 1963 March on Washington. It documented, for instance, that the wealth of the typical white family is eight times that of its Black counterpart. 

EPI’s projects inform one another. EARN’s national conference in 2022 was planned in conjunction with PREE, and featured a plenary session put together by PREE on “the complex history of unions and race,” says EARN director Dave Cooper, and the important role unions have played in the fights for racial and economic justice.

One of EPI’s most notable contributions to the understanding of American racism was a result of the institute’s open-ended support for Richard Rothstein’s research. “In Class and Schools,” says Rothstein, “I was writing about disparities in the individual characteristics of students—the ‘dental theory of education,’ critics called it, since there were disparities in dental care. But schools concentrated children with problems like this, and if almost every child in a school had one or more such problems, the school was overwhelmed. If most of its students were stressed about violence or had levels of lead poisoning, or asthma, or other similar challenges, student achievement fell: The school couldn’t handle the concentration of these problems in its neighborhood. So residential segregation was the root cause of lower student achievement.” 

“I had this epiphany in 2007, when I was still under my EPI contract.” In that year, the Supreme Court issued a ruling about school districts in Louisville and Seattle, which had tried to integrate schools across city lines to overcome the residential segregation between cities and their suburbs. “[Chief Justice John] Roberts wrote the majority opinion,” Rothstein continues, “saying that the segregation of neighborhoods was de facto, not de jure. And since it wasn’t the government that had created it, the government couldn’t address it.” 

“Then I remembered [longtime civil rights activists] Carl and Ann Braden. They had lived in Louisville. An African American family who were friends of Carl and Ann wanted to move to the suburbs, and Carl [who was white] bought a home for them,” as no one in the suburb would sell to the family. “The house was dynamited—and then, the state of Kentucky tried and convicted Carl of sedition for provoking a riot by selling a home in a white neighborhood to a Black family. This wasn’t de facto segregation. It was de jure.” 

“It was widely accepted on the left as well as the center and right that residential segregation was de facto. It wasn’t. The left said it was bank redlining and the norms of realtors. I told Larry I wanted to look into the roots of residential segregation as my next EPI project. Larry said, ‘go ahead.’” 

Rothstein’s project took a decade to research and write, and its findings were so important and, in his words, “so explosive,” that Mishel and he decided to take it to a trade publisher, rather than have EPI publish it, as it had done with all but one of Rothstein’s previous books. The Color of Law, which was published in 2017, brilliantly and comprehensively documented the government policies that had segregated U.S. cities and suburbs. It was on the New York Times nonfiction bestseller list for the better part of a year, and was also on the Times’ list of the year’s 50 best books. Five years later, Mishel says, royalties from sales of the book have brought EPI more than one million dollars.

During George W. Bush’s second term as president, at roughly the same time that EPI was expanding its advocacy and adding PREE to its departments, the most intensive effort to enact immigration reform since the mid-1980s was floundering in Congress, which ultimately failed to pass it.

Partly in response, EPI produced its own plan for comprehensive immigration reform, based largely on the work of former Labor Secretary and longtime EPI board member Ray Marshall, who adapted it, in collaboration with EPI vice president Eisenbrey, into an article that first appeared in EPI’s Agenda for Shared Prosperity. In 2009, EPI followed up, publishing Immigration for Shared Prosperity, a short book by Marshall which addressed and, where necessary, reconciled the needs of immigrants seeking citizenship and worker rights with those of the labor movement to which many of them belonged. The elements of the plan outlined in the book became the unified plan of the previously divided labor movement for immigration reform. 

The “Marshall plan,” as some referred to it, was submitted to the Obama administration and friendly members of Congress for consideration—with parts of the plan appearing in proposed bills from progressive immigration reformers—and became an ongoing part of union advocacy on immigration. Like EARN and PREE, this initiative put EPI directly in touch with groups of activists with whom it had scant contact before. 

“When the reform initiative pushed by [George W.] Bush in his second term fell apart, unions got blamed for not being on board, but the criticism was unjustified” says Daniel Costa, who is EPI’s director of immigration law and policy research. “Most of the unions were critical only of the bill’s guest worker provisions because they would’ve vastly expanded the number of workers who would have very few workplace rights, who’d be indentured to their employers, and who’d never be able to become citizens.”

Costa was hired as a policy analyst to support EPI’s immigration work in 2010 and a few years later began leading that work. The son of immigrants, he’d received degrees in international and comparative law from Syracuse and Georgetown—becoming only the second lawyer EPI ever hired, with Eisenbrey being the first—and had worked on immigrant integration in California, and before that, on developing the legal frameworks for disaster response and humanitarian relief for the Red Cross and Red Crescent in Geneva, Switzerland.

Once he came to EPI, he was heavily involved in the immigration reform efforts of Obama’s second term, in which the Senate passed the bipartisan “Gang of Eight” legislation only to see it never even get a vote in the Republican-controlled House. When the Gang of Eight legislation was being developed in the Senate, Senator Chuck Schumer outsourced one key component of the bill jointly to the AFL-CIO and the U.S. Chamber of Commerce, tasking them to come up with an agreement that would enable low-wage migrant workers to come to and work in the U.S. without undermining existing labor standards. With EPI economists and Eisenbrey, Costa produced research and data used by the Federation. After an agreement was reached, Schumer told the New York Times that the guest worker issue “has always been the deal breaker on immigration reform, but not this time.” 

Some of Costa’s first work for EPI also included a paper on the State Department’s J-1 visa program, under which foreign exchange students are supposed to spend four months working in the United States as a form of “cultural exchange.” Costa’s work coincided with the strike of J-1 exchange students who’d somehow ended up working long hours for a subminimum wage on assembly-line jobs in Hershey Chocolate’s Pennsylvania factories—a story that ended up on the front page of the New York Times. “No one had ever written about J-1 jobs before,” Costa says, “and how they’d gone from a student exchange program to indentured servitude.” Costa’s paper helped put EPI on the immigration-issue map, and led to new State Department rules for its exchange program. 

Since then, he has been working extensively on work visa programs dealing with farm labor, landscaping, traveling carnivals, construction, and computer occupations—“just about everything about immigration and labor,” as he puts it. In 2020, EPI published a paper he co-authored analyzing wage and hour data for farmworkers over a 20-year period. A new EPI paper he authored reports that federal spending on enforcing laws to deport immigrants is ten times what the government spends on enforcing labor standards for all of America’s workers. “There are 80,000 federal workers employed on immigration enforcement and fewer than 10,000 employed across all the agencies seeking to ensure that labor laws are followed in the United States,” Costa notes. 

Costa’s writing and testimony in hearings have also informed the updating of farm labor standards, such as overtime laws, enacted in blue states like New York. At the federal level, by contrast, such victories are few and far between. “On immigration matters, it’s really hard to get good stuff accomplished,” he says, “but at least we’ve had the ability to slow down or stop the bad stuff that corporate lobbyists push for that would harm immigrant and American workers alike.” 

Winning the battle of ideas

EPI’s trajectory from heretic to oracle 

On Friday, April 7, 2023, the New York Times ran a story on the disjuncture between an economic problem and its supposed economic cure. The problem was inflation; the cure that the Federal Reserve was pursuing was raising interest rates, which was intended to diminish investment, hiring, and consequently, wages and spending. 

The disjuncture, as many economists have noted, was that wages, though having risen, didn’t seem to be the cause of inflation. The war in Ukraine, the supply chain kinks, and a host of other causes seemed the more likely culprits behind the rise in prices. That said, the Times didn’t present any data, any real numbers, pointing to alternative causes of inflation. 

Until, halfway down the piece, it began to quote Josh Bivens, EPI’s chief economist. Here’s what followed: 

Josh Bivens, the chief economist at the Economic Policy Institute, a liberal think tank, said that while higher unemployment generally curbs wage growth and price pressures, wages “are no guide at all” right now with “the unexpected and weird shocks we’ve had over the past couple of years.” 

According to Mr. Bivens’s research, profit markups have “relented a bit”—accounting for about a one-third share of price increases in the fourth quarter of last year, down from more than half in the comparable period in 2021 — but are “still quite high relative to a baseline,” which has been closer to 13 percent in previous business cycles. 

What Bivens provided was precisely what EPI’s founders had hoped their fledgling institute could add to the analytic, policy and public discourse: real numbers that could dispel unfounded beliefs and show policymakers what really ailed the economy. 

What had changed over the nearly four decades since the founders’ first deliberations was the prominence that mainstream institutions gave to what were once viewed as EPI’s heresies. In recent years, the media have frequently—at a number of media outlets, routinely—gone to EPI staffers for their data-based analyses of economic events: Elise Gould on the monthly employment figures, Rob Scott on trade, Valerie Wilson on economic issues in minority communities, and Heidi Shierholz on—well, just about anything.

This is not because EPI has moved toward what was once the neoliberal consensus. It’s because much (by no means all) of the economics establishment, a growing share of economics journalists, and most Democratic policymakers have been persuaded by the force of EPI’s arguments—and the growing irrelevance of neoliberal doctrine to the actually existing economy—to move toward EPI. 

“It’s good to feel that you’ve had some influence on the way that people now talk about economic issues,” says Wilson, attributing this shift not just to EPI’s message but to its messaging as well. “Some of the value EPI brings to the discussion is to simplify how we talk about these things: telling the story plainly, with statistics and data that support the story. We’re good on creating graphics that are easily understandable”—the famous productivity and hourly wage graph being a prime example. 

Over the years, EPI has produced papers and studies identifying the causes behind the lagging wages that its pay versus productivity graph so forcefully illustrated. That process culminated in a Bivens/Mishel study in May of 2021 that disaggregated and quantified the particular causes of wage stagnation—which, the authors argued, was in fact a misnomer. “We refer in this analysis,” they wrote,

to wage suppression rather than wage stagnation because it was an actively sought outcome—engineered by policymakers who invited and enabled capital owners and business managers to assault the leverage and bargaining power of typical workers, with the inevitable result that those at the top claim a larger share of income. These policy changes and the change in business practices they enabled have systematically undercut individual workers’ market (exit and voice) options and the ability of workers to obtain higher pay, job security, and better-quality jobs. These corporate and policy decisions had the most adverse consequences for low- and middle-wage workers, who are disproportionately women and minorities, the groups whose legacy of being discriminated against in labor markets means that they especially need low unemployment, unions, strong labor standards, and policy supports for leverage when bargaining with employers.

Neither slow productivity growth nor inevitable economic forces can explain U.S. wage problems. Rather, wage suppression reflects the failure of economic growth to reach the vast majority. It was a “failure by design” (Bivens 2010), engineered by those with the most wealth and power. The dynamics are primarily located in the labor market and the strengthening of employers’ power relative to their rank-and-file workforce (which increasingly includes those workers with a four-year college degree). In other words, the dynamics that have challenged the growth of living standards for the vast majority are based on workers not sharing in economic gains, not, as some have argued, on consumers suffering from monopolistic prices. Changes in product market monopoly and corporate structures have had an impact, but primarily by squeezing supply chain profits and wages rather than by spurring higher consumer prices through much wider profit margins. 

The Bivens/Mishel paper examined the role that, according to neoliberal theory, the skills gap played in lagging wages, and found it so bogus as to be inconsequential. They then looked at a series of policy decisions—the interest rates and deficient public investment that drove up unemployment rates, the increased trade with low-wage nations, the all-too-successful war on unions and workers’ ability to collectively bargain, the failure to raise the federal minimum wage, the mislabeling of workers as independent contractors, and the spread of forced arbitration and noncompete agreements, which curtailed workers’ means of redress and even of exit.

It was these factors, whose effect on lagging wages they quantified based on publicly available data, that were responsible for the wage stagnation—which, since it was the result of corporate and governmental policy, they termed “wage suppression.” Combined, these factors contributed heavily to the redistribution of the nation’s income to the wealthiest 1%. Combined, they accounted for three-quarters (76.1%) of EPI’s signature gap between the levels of productivity and median hourly compensation that rose relentlessly between 1979 and 2017 (the most recent year with available data). 

Looking back on his (still ongoing) work at EPI, Bivens highlights both his wage suppression paper with Mishel and a solo effort he produced in April 2011, entitled “Abandoning What Works.” The paper was written as a response to the report of the Simpson-Bowles Commission, which had appeared at the end of 2010. That commission had been charged by President Obama to suggest ways to reduce the federal government’s deficit, which had swelled in response to the deep recession triggered by the bank collapses of 2008. Responding to the cries of Republicans and centrist Democrats to reduce the deficit by cuts to spending, particularly spending on Social Security and Medicare, the report laid out how those cuts could—and should— be made. 

In response, Bivens noted that unemployment was still at its highest levels in 30 years and that the recovery was proceeding at a glacial pace. “The key to jobs recovery,” he argued, was “stabilization through fiscal support.” Obama, he wrote, needed to support more and bigger stimulus programs—old ideas that had worked to curtail previous recessions and get the nation closer to full employment. Absent such policies, he showed, it would be minorities and the young who would pay the price in lost jobs and reduced incomes. Bivens’s paper prodded the Congressional Progressive Caucus to move to a full-throated endorsement of greater stimulus spending. It preceded—and in a sense, predicted—the challenge to austerity and the case for egalitarian economics that was soon to erupt in the Occupy Wall Street movement and, later, in Bernie Sanders’s presidential campaign.

By the time COVID-19 shut down the economy in 2020, a deep downturn that persisted into 2021, many mainstream economists and most Democratic policymakers had taken Bivens’s argument—which he forcefully renewed in 2020—to heart. “Josh was key to organizing the center-left coalition to fight the recession with a genuine stimulus,” says Shierholz, referring to the trillion-dollar-plus American Rescue Plan passed at the outset of the Biden presidency. “Josh deserves a lot of the credit for this recovery being five times as fast as the one that followed the 2008 collapse.” 

‘We used to quote Joan Robinson’s line that ‘the reason we study economics is to avoid being deceived by economists,’ Shierholz says. ‘That’s far less the case today.’

The establishment economists had long defined economics for the economic policy world. They were the gatekeepers determining what idea could be let in. Thus, as Bivens adds, “EPI used to spend a great deal of time fighting with academic economists. That was important since academic economics was really pretty dreadful. Now, that’s changed: We have fewer fights, and more of the time, we’re acting as transmission belts from academia to policymakers.” 

What’s changed, of course, is the substance of mainstream academic economics—not all of it, but a lot. During its first 25 years, EPI had been the odd-man-out in U.S. economics, as an internal memo that economist John Schmitt wrote to his EPI colleagues in 2000 made clear. “It is sad but true,” he began, “that EPI has become one of the last intellectual homes of the great American ‘institutionalist’ school of labor-market analysis. We have a responsibility to keep the flame alive, at least until it can catch again more widely in the academic world.” 

Over the past decade, it has indeed caught on more widely. “The field [of economics] itself has changed,” says Shierholz. “There are now lots of young economists, like those on our newly formed academic advisory board, who are at elite universities and who understand that policy decisions, institutional factors, and power relations are key drivers of economic outcomes. They’ll be around for decades.” 

Even more important than the conversion of much of the economics establishment is the conversion of Democratic policymakers and the Democratic rank-and-file. “The shift from Clinton’s and Obama’s economic policies to Biden’s is remarkable,” Shierholz adds. “It took a long time, but it’s so gratifying to see our fingerprints all over the ways that Democrats now write and talk about the economy.”

“The wonderful things that Jeff and Larry started have continued and expanded under Thea and Heidi,” Heather Boushey adds. “EPI wasn’t a one-trick pony. It’s delivered solid analysis and built an institution around that work. It needs to continue for generations to come.” 

American Prospect founding co-editor Robert Kuttner was also one of EPI’s founders and has served on its board since its beginnings. In a recent Prospect column headlined “What Comes After Neoliberalism?” he wrote, “We are winning the battle of ideas. We have a long way to go before we win the politics.” 

It’s in no small measure EPI’s doing that we’re winning the battle of ideas. Winning the politics remains the task of all of us.

A few initial caveats: First, the discussion below concerns enforcement and actions, not recommendations for new laws, rules, or regulations. Second, it is primarily geared not toward safety and health enforcement agencies (which have direct jurisdiction and a clear enforcement and policymaking role in the crisis), but rather toward labor standards enforcement agencies, which are not generally directly involved in safety and health matters. Third, we offer these suggestions not as a comprehensive plan, but as a kind of menu of possibilities for agencies to consider, depending on their circumstances and resources. Our objective is to spark new thinking given changed circumstances.

Background: Strategic enforcement and the rise of municipal labor agencies

Over the past decade, a broad consensus has been developing about what effective labor standards enforcement should look like, generally framed as a strategic enforcement model (Weil 2018):

• Be proactive. Rather than waiting for workers to complain about violations of workplace rights they may not even know exist, agencies should be proactive in targeting industries with high rates of violations, seeking to broadly change conduct in a lasting manner, including through pursuit of up-chain employers.
• Use data and collaborate. Such proactive enforcement requires both reliance on data to identify problem industries, as well as close collaboration with unions, community organizations, and worker organizations to learn about violations and reach workers.
• Focus resources. Labor enforcers should focus limited resources on industries with high rates of violations; resource limitations also require triage of incoming complaints.
• Use multiple tools. Labor enforcers should use a range of tools, including publicity, in order to drive deterrence (Johnson 2020).
• Be flexible. Strategic enforcement is not static or rigid but rather iterative, nimble, and dynamic, and responsive to new developments.

The U.S. Department of Labor’s Wage and Hour Division under the leadership of David Weil began implementing this strategic enforcement model during the Obama administration. Numerous state labor standards enforcement agencies have also adopted, or are striving to adopt, a similar approach. From California to New Jersey, states have moved beyond a model that waits for complaints to come in before acting and, instead, proactively seeks bad actors based on data and community-driven priorities.

This shift toward strategic enforcement has occurred during the same time period in which scores of municipalities have taken on a new role: setting labor standards and protecting workers’ rights. Historically, worker protection has been handled at the federal and state levels; it has not been a role of localities, and it has not been included in their own conception of what they do for their communities. But responding to a federal and—in some cases—state vacuum, over 50 local governments have passed municipal minimum wages, over 20 have established paid sick leave laws, and others have passed wage theft, fair workweek, and other laws (UC Berkeley Labor Center 2020; ABB 2020b). Many have also created or designated municipal agencies to enforce these new laws, including Chicago, Denver, Flagstaff, Los Angeles, Minneapolis, New York City, Philadelphia, Seattle, St. Paul, and the first such office, San Francisco.1

Understood narrowly, a state labor standards enforcement agency or local office of labor standards exists to enforce the state or local wage and hour, fair workweek, or paid leave laws. But understood more broadly, the role of these agencies is to be the governmental advocate or protector for workers: fighting for decent treatment and working conditions for people at work. As one office website states, “We are a dedicated voice in City government for workers” (NYC DCA 2020).

This role has never been more important: Only 6.2% of private-sector employees are unionized, with the protections union membership provides (although over half of workers would join a union if given the chance) (BLS 2020; Gould 2020; Walsh 2018).

The other 93.8% of private-sector employees are without any large institution to safeguard their well-being in relation to work. At the same time, the rise of forced arbitration has meant that workers who want to enforce their rights privately through class or collective action lawsuits often cannot do so. In this context, state and local labor agencies are one of the few potential forces to stand up for the rights of working people.

The current crisis

Against this backdrop, labor agencies are suddenly faced with the COVID-19 crisis.

Workers are being exposed to COVID-19 on the job and some are dying from it—health care workers as well as transit, grocery store, and other workers. People need paid sick leave in order to be able to care for themselves or their family members, to quarantine, or to care for children whose schools have closed. A shocking total of over 24 million workers have filed for unemployment in the last five weeks, and many more workers can’t or haven’t filed (Shierholz 2020; Gould and Zipperer 2020). Countless businesses are at least temporarily shut down. Previously thriving industries, like restaurants or travel, may see a long-term reduction, while other industries, like online grocery stores or any kind of delivery services, have seen a spike in business.

Local and state labor enforcement offices are flooded with calls, but with different problems than the usual intake. Along with calls about unpaid wages, overtime, or paid sick leave (where it exists), there are new calls for help from:

• People who have lost their jobs and want information about unemployment insurance;
• People who are being required to work, but who believe that their employer or their particular job is not essential;
• Essential workers whose unsafe workplaces expose them to infection risks that could be avoided; and
• Workers who need paid sick or family leave, to care for themselves or their families, and are trying to navigate a complicated new set of leave laws.

Meanwhile, the federal government has failed to protect workers. The Occupational Safety and Health Administration (OSHA) first issued an interim enforcement plan in response to COVID-19 on April 13 and has not otherwise enforced workplace safety laws or passed emergency standards or rules in response to the crisis (OSHA 2020d; Schwing 2020; Felsen 2020; Michaels 2020). Further, the interim plan contemplates on-site inspections only among health care employers, with no real enforcement (beyond informal measures like letters or phone/fax efforts) for non-health-care companies. OSHA has also relieved non-health-care employers of the responsibility to report COVID-19 illnesses and deaths among their workforce (OSHA 2020d). The Centers for Disease Control, meanwhile, passed rules making it easier for essential workers exposed to COVID-19 to get back to work (CDC 2020).

But even if the federal agencies were doing a better job, this would still be an all-hands-on-deck moment in which strong action by state and local labor enforcers is critically needed.

A reoriented approach

How should state and local labor enforcers conceive of their role and strategic priorities at this moment? It’s difficult to even consider such questions amid the deluge of incoming calls for help. At the same time, our existing enforcement systems were not built with the current reality in mind. State and local labor enforcers need to reorient operations to fit that new reality.

As an initial threshold matter, the work should still be undertaken in a strategic manner, but the goals may be different. As public health becomes a paramount concern, some enforcement priorities may change. Some existing cases also may no longer make sense to pursue: For example, well-selected cases involving systemic overtime violations may involve employers that are now already out of business or insolvent. An overtime lawsuit against a local restaurant chain based on their treatment of assistant managers as overtime-exempt might no longer be the highest priority, at least for the immediate future. New priorities may need to be considered.

We would suggest that the work should be oriented around four current worker needs:

1. Safety on the job (for essential workers);
2. The ability to stay home, either when sick or caring for family, or if someone is a nonessential worker;
3. Income for those who have lost their jobs or cannot currently work; and
4. Ability to exercise voice on the job and protect one’s safety and health on the job (both individually and collectively) without retaliation.

While some of these priorities are not within the general expertise or experience of state and local labor standards enforcement agencies, if these goals are the North Star, then new operational activities and priorities will begin to logically flow from these goals. The key is to utilize the tools and lessons learned from strategic enforcement, while building in new flexibility in response to changed priorities and circumstances. The skill set and expertise of labor standards enforcement agencies may not be 100% on point for all of the varied needs of the moment, but their expertise is still highly relevant and largely transferable and applicable.

Applying key strategies to new priorities

Given the heightened demands on agencies and their resource limitations, we offer the following suggested possibilities for putting these new priorities into practice. We recognize that labor standards enforcement agencies face significant resource limitations and often operate within an administration and chain of command that itself has competing priorities. However, within these constraints, a great deal can be accomplished for workers at this time.

Safety on the job

Workplace safety and health are generally regulated and enforced at the federal level, by OSHA. However, states can choose to become an OSHA-approved state plan, which means that states take on this responsibility; 21 states and Puerto Rico have chosen to do so (OSHA 2020c). This paper is focused on the potential role of state and local agencies enforcing labor standards and not on OSHA state plans.

It may initially be challenging for state and local labor standards enforcers to get involved in workplace safety and health, given their lack of specialized knowledge and experience in this area, but this moment requires creative strategies from state and local enforcers, especially given OSHA’s inaction. Moreover, states and localities are not preempted from enforcing their own safety and health laws, as long as OSHA does not have a specific rule or “standard” in place covering the particular issue.

Ensuring workplace safety is currently of paramount concern not only for workers but also for overall public health. This will only become more salient as the economy begins to reopen in certain locations.

State and local labor standards agencies also have many existing skills and capabilities that can be employed to improve workplace safety, including direct contact with workers and worker organizations; experience communicating about legal requirements directly with employers, workers, and the public; and the power of the government’s voice and leadership to promote worker health and safety. Some specific ideas include:

1. Issue guidance and step up enforcement in states with state plans. In jurisdictions with OSHA state plans, states can issue COVID-19-specific workplace guidance and step up enforcement to protect workers’ safety and health. While specific recommendations for state plan enforcement are beyond the scope of this paper, we note that state plans should be aggressively enforcing workplace safety and health laws, using any and all methods that can protect workers during this unprecedented crisis. Where there are state plans, state and local labor standards enforcers should seek to collaborate with their corresponding occupational safety and health enforcers more directly in whatever manner will best protect workers within the jurisdiction.
2. Partner with health officials. State and local labor standards enforcement agencies can partner with local public health officials, such as city or county health departments, to jointly enforce safety and health requirements. These departments may be overwhelmed at this moment and may welcome a collaboration of this sort. Such a collaboration is mutually beneficial: It weds the health departments’ jurisdiction and subject matter expertise with the labor standards enforcement agencies’ experience engaging with workers and employers. This kind of partnership could be effectuated in several ways: informally (probably the quickest), through a memorandum of understanding, or even through cross-designating or deputizing if local laws permit this.
3. Partner with licensing authorities. Agencies can also partner with their jurisdiction’s licensing and permitting authorities to provide occupational safety information to employers and to consider potential licensing and permitting consequences for a business that has failed to comply with safety and health requirements. Similarly, labor standards enforcement agencies can collaborate with state or local contracting agencies to consider whether such violators could be barred from government contracting with the jurisdiction.
4. Widely disseminate information about proper safety practices. Agencies can prominently publish and/or link to accessible information about workplace safety and health, directed at both workers and their employers, including information about OSHA’s free small business consultation program (OSHA 2020b). Useful materials are available from a range of sources, such as the National Employment Law Project, the National Council for Occupational Safety and Health, some state OSHAs, and unions (in relation to specific industries) (Berkowitz 2020, National COSH 2020, Washington L&I 2020, UFCW 2020). This information can be made available on agency websites, as well as on local government TV channels or on social media sites like Facebook, Twitter, or Instagram. In keeping with existing best practices, this information should be provided in other languages as appropriate given the language needs of the particular community. This simple act of disseminating reliable information is helpful to workers who want to know how to keep themselves and others safe. It’s also helpful for employers, particularly small employers (like the local grocery store or nursing home) who don’t have ready access to legal counsel and who may not themselves know the best way to enable social distancing and hygiene practices during this unprecedented moment.
5. Publicize employers’ worker-protection actions (or inaction). Agencies can survey employers within one or more high-risk industries about what actions they are taking to protect workers and make results (or failure to respond) public on the agency website. Seeking this information through a letter request may itself spur changed practices among some employers, as they review procedures in order to respond. One California union local provides a good example of this approach: It surveyed grocery stores with which the union had contracts about steps they are taking to protect workers in light of COVID-19, and published the results (UFCW 770 2020).
6. Encourage the public to take steps to protect workers. State and local labor standards agencies can help the general public understand their own important role in following best practices to keep workers safe at the businesses they patronize (such as restaurants with takeout, pharmacies, and supermarkets), as well as in reporting working conditions that endanger employees and others. A campaign similar to New York’s long-standing “if you see something, say something” campaign (which is now a national campaign; see DHS 2020) could be developed, with a hotline number for people to call.
7. Directly contact employers about reported safety issues. When state and local labor standards agencies receive complaints from workers or the general public about unsafe conditions, in addition to referring the matter to OSHA or the state plan, they can directly contact the employer about the situation—letting them know what is needed to improve the situation. A phone call from a government agency can often make a real difference.

The ability to stay home

Ensuring public health at the moment requires (1) that essential workers receive pay when they need to stay home in order to care for their own health, a sick family member, or children whose schools and child care providers have closed, and (2) that nonessential workers stay home. (We will discuss income concerns for these workers in the following section.) These priorities create two distinct enforcement needs:

1. Protect essential workers’ access to paid sick or family leave. Where such laws already exist at the state or local level, many labor standards offices have routinely been enforcing them. It goes without saying that this work should continue and should be a top priority now, particularly in relation to COVID-19-related leave. Also, where there are local paid sick days laws but no paid leave laws at the state level (or vice versa), state agencies can collaborate with their local counterparts (and vice versa) in enforcing paid leave laws.
   1. Publicize new federal requirements. In all jurisdictions (but especially those without state or local paid leave laws), agencies can provide information about the new requirements contained in the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief and Economic Security Act (CARES Act) (ABB 2020a) and try to help workers by advocating with employers, especially those with a number of workers at high risk.
   2. Address violations quickly using “soft power” tools. Agencies can also take complaints and, as with workplace safety and health violations, seek to address these issues through a combination of “soft power” tools, including negotiation and mediation with employers and workers’ groups, as well as public exposure of employers who are putting their workers at risk. Agencies can and should consider traditional enforcement tools, such as citations and lawsuits where appropriate, but these tools may be slower and less available given court closures or slowdowns.
   3. Publicize employers’ sick leave policies (or lack of). Also, as with workplace safety and health, state and local agencies can send letters surveying key employers (in essential industries) about their paid sick leave policies and publish the results (or their failure to respond) on their websites (Miller, Schulte, and Swenson 2020). This may be especially useful for companies with 500 employees or more that are exempted from the new federal legislation. Obtaining this information will be useful for the public—not only for workers, but also for potential customers—and will help provide state and local legislators with more complete and accurate information as they consider pending or potential paid leave proposals.
2. Ensure that nonessential workers are not being required or pressured to work onsite. Almost all states have issued some kind of executive order requiring people to stay at home. While these orders have different titles (shutdown, shelter-in-place, stay-at-home) and are set to expire at different times, they all define certain businesses as essential and prohibit other, nonessential businesses from operating. State methods of enforcement for these orders vary; in some cases, the state attorney general and/or other state agencies (labor, health, economic development) are playing the lead role in enforcement, while in other places enforcement is mostly handled on a local level. In many instances, workers have experienced considerable uncertainty about where to go for help if their employers are not following these guidelines. In some cases, employers that are nonessential (or are arguably nonessential) are disregarding stay-at-home orders and continuing to operate. In other cases, businesses that are essential have some workers who are nonessential or who could work from home, but those businesses are using their “essential” status to require those workers to work onsite. State and local labor standards agencies can help address workers’ uncertainty about how to address such situations and assist in enforcing stay-at-home orders in the following ways:
   1. Provide (and publicize) a phone number that workers can call. In jurisdictions where there is no central phone number for workers to call, state and local labor standards agencies can volunteer their number as the point of contact for workers on this issue. In other jurisdictions, these agencies should train their staff on how to properly respond to such inquiries even if they are not directly charged with enforcement.
   2. Collaborate with worker advocates. State and local labor standards agencies should also stay in touch with unions, advocacy groups, community organizations, and other worker organizations, who may have real-time information about what is happening on the ground.
   3. Collaborate with other states. To the extent that national or regional nonessential employers have remained open, state or local labor standards agencies can collaborate with their counterparts in other states and jointly publicize noncompliance and seek change.

Income

The current stay-at-home orders have put many workers in extremely difficult financial situations. Workers need income for basics like buying food and paying rent. Workers who have lost their job because their workplace has closed may be at risk of food or housing insecurity. The spectre of income loss also poses a public health issue if it incentivizes nonessential businesses to remain open and nonessential workers to continue working in violation of stay-at-home orders.

State and local labor agencies can and should ensure that staff are trained to respond to basic questions about unemployment insurance and the new federal relief programs and know where to refer callers for assistance accessing these income sources. State and local labor standards agencies can also reach out to sister agencies (or divisions) that administer unemployment benefits to see if there are ways to collaborate or provide assistance.

With regard to wage claims, state and local labor standards agencies should prioritize enforcement actions that will put money back in workers’ pockets, while also bearing in mind the long-term viability of their employers. It is worth noting that some of the essential industries remaining open are also some of the industries that traditionally have the highest violation rates, including food processing, delivery services, warehouses, and others. Assessing urgent needs and long-term viability will impact both ongoing enforcement and prospective enforcement priorities.

1. Ensure workers receive back wages that have already been collected from employers. In terms of ongoing enforcement, labor standards agencies can step up efforts to locate workers who are owed back wages and have not picked up or received their checks yet. For example, in the last week alone, one municipal office was able to provide checks for back wages to 100 workers who likely desperately need them now.2
2. Institute payment plans to collect back wages from employers. Where there are administrative orders or settlements in place that require employers to pay back wages, agencies can work with employers where necessary to create payment plans that allow employers to pay a small amount of back wages over a longer period of time. These measures are less than ideal, but they are preferable to having an employer close up, disappear, or stop paying back wages altogether.
3. Prioritize wage claims to target issues amplified by the current crisis. In terms of prospective or ongoing enforcement of wage claims, some potential priority areas might include: industries that are currently operating at usual or higher than usual capacity during the crisis (such as online grocery stores, warehouses, some manufacturing) and essential businesses (including food processing, agriculture, home health agencies); employers alleged to be engaged in ongoing nonpayment of wages or using threats of job loss to silence employees; and employers who have allegedly misclassified workers as independent contractors. Employee misclassification is important because if workers are properly reclassified as employees, this can potentially result in access to paid sick leave, workers’ compensation insurance, and easier access to unemployment insurance (with employers paying the appropriate taxes to fund the UI system), among other things.
4. Prioritize cases involving immigrant workers. Another important area of focus should be cases involving immigrant workers or undocumented workers, who are particularly vulnerable in the current crisis. These workers, especially undocumented workers, are ineligible for almost all emergency relief, and immigrant workers with documentation may be hesitant to seek relief because of concerns about the impact on immigration status. This is not only a human rights concern, it is also a public health issue—we must ensure that everyone has the resources to stay home and stay healthy (including making sure they have received all income they have earned), regardless of immigration status. Although most labor standards agencies have a policy against asking workers about their immigration status—and that policy should absolutely continue—agencies can prioritize enforcement in contexts where immigration-related abuses are most likely to occur: in the underground economy, in industries that have high shares of immigrants in their workforces, or in the cash economy. It is worth consulting resources about immigrant workers’ rights in light of the pandemic (NILW, NELP, and OSH Law Project 2020).
5. Consider use of tolling agreements to stop the clock on statutes of limitation during the pandemic. Workplace statutes, like all laws, have time limits, or statutes of limitations, within which time workers must file lawsuits in court. Tolling agreements temporarily press “pause” on a statute of limitations during a negotiation or for any other reason. In states or cities where initiating an investigation does not itself toll the statute of limitations, agencies may want to consider reaching out to employers to try to resolve the case based on an estimate or entering into a tolling agreement, given anticipated COVID-19-related delays and in order to be able to focus limited resources on COVID-19-reoriented enforcement for the present time.
6. Ascertain current status of businesses under investigation. Moving forward, agencies’ ability to collect back wages may be severely impacted by the number of employers who are going out of business. As an initial information-gathering step, offices should assign staff within one or two months to ascertain the current status of all employers under investigation, including of course whether they are still in business.
7. Be alert to emerging wage theft trends. At the same time, the dearth of employment and the high rate of unemployment may give rise to greater and more severe wage theft by employers, which will be important to monitor and address. It will also be critical for agencies to stay abreast of new schemes that may emerge and to act on those quickly to promote deterrence. For example, there have been reports that some employers intend to decrease their workers’ pay by the amount of the federal government’s stimulus checks (Barr 2020).

Protections for collective voice and from retaliation

Workers’ ability to speak out, organize, or refuse to work is inextricably linked to their safety at work and ability to stay home when necessary. As noted above, very few private-sector workers are unionized and most workers lack any formal or organized mechanism for exercising collective voice. Despite this, many workers have taken powerful and impactful collective action in recent weeks, from an Instacart strike to an Amazon walkout (both of them for such basics as hand sanitizer and other protections to mitigate the risk of infection at work) (McNamara 2020; Selyukh and Bond 2020).

Federal law protects collective action to demand safer working conditions or higher wages; specifically, the National Labor Relations Act (NLRA) protects collective action to improve working conditions.

Federal preemption under the NLRA limits the jurisdiction of state and local labor standards agencies. Regardless, state and local labor standards agencies can still play a role, in several ways:

1. Collaborate with worker advocates. Many state and local labor standards agencies have strong relationships with local community groups and workers’ centers. They can communicate with unions and worker organizations, as well as leaders or informal worker organizing efforts, to learn what is happening and assess whether agency intervention might be helpful. For example, labor enforcers in multiple jurisdictions are currently playing more informal roles in helping to bring both parties to the table or broker agreements between workers and their employers.
2. Utilize OSHA state plans. In jurisdictions with an OSHA state plan, state labor standards agencies have more leeway to take action to address retaliation for collective action taken to address workplace safety.
3. Support worker collective action and voice by enforcing laws that are not preempted by the NLRA. In other jurisdictions, state and local labor standards agencies can try to find other sources of non-preempted jurisdiction. This may mean relying on less commonly used relevant statutes. For example, New York’s Labor Law Section 740 prohibits employer retaliation against workers who have objected to or refused to participate in an activity that is a violation of a law when the violation presents a specific danger to public health or safety.3 Other states may have similar laws. Also, there may be ways to avoid federal preemption by framing enforcement actions in terms of the impact on public health; i.e., agencies are taking these actions to prevent risk to customers and the broader public.
4. Use “soft powers.” Again, there is considerable space to use soft powers to address these situations. State and local labor agencies can clearly communicate that retaliation is unlawful conduct, on their website and in the press or through other venues, and can attempt informal resolution of the situation, including reinstatement of employees and improvement of safety conditions. They may also be able to assist workers’ advocates in obtaining information about how to file a federal charge or otherwise making federal agencies aware of retaliation or other illegal conduct by employers.

Observations

Reenvisioned enforcement in light of COVID-19 will employ many of the tools routinely used, but also with key changes. Agencies will need to:

• Transition effectively to remote/virtual enforcement. Although it varies by jurisdiction, many agencies will need to adjust to conducting more enforcement work than usual remotely or virtually. Not going to worksites will create enforcement challenges, especially in taking a proactive approach. One way to deal with this is through letter requests or surveys asking for responses, as well as close relationships with worker organizations (discussed below).
• Listen to worker advocates and media reports. Agencies will need to also be proactive about learning what is happening to workers on the ground.
  • Close communication with worker organizations and advocacy groups is more important than ever. These groups are in touch with workers on the ground and know what problems are emerging. Also, they often possess detailed knowledge of specific industries that can be useful for identifying realistic solutions for safety issues.
  • Following media reports closely is also important. There has been a recent surge of reporting on labor and workplace issues. Labor journalists often learn about problems that need to be addressed, or they are directly contacted by workers seeking help.
• Employ virtual tools for public outreach. Direct outreach to and engagement with the public remains vitally important. For example, offices could provide regular virtual town halls or a series of webinars for workers (in English, Spanish, and other languages, as appropriate to the community’s needs) (Racine 2020; ABC7 Chicago Digital Team 2020). There is a great deal of confusion about workers’ rights at this time and about the various federal, state, and local programs available to assist workers, so simply providing accurate and accessible information is a critical service.
• Continue to disseminate information through trade associations. Working with employer trade associations also remains a useful method for disseminating information about compliance, and, in this situation, ways to keep workers safe.
• Collaborate with other government agencies. Intragovernmental cooperation and coordination are always important, but are particularly crucial to consistent, accurate, and effective public enforcement, information, and services right now.
• Use soft powers. This is a time to use soft powers in addition to traditional legal authority. In some instances, pressure, negotiation, publicity, and the like may result in quicker resolution than issuing subpoenas, reviewing documents, and eventually filing a lawsuit.
• Recognize that media outlets are important allies in getting information to the public and deterring employer violations. The importance of media outreach cannot be understated. Issuance of press releases and bad publicity can have a significant impact on employer conduct (Johnson 2020). Outreach and public education is also critical to ensure workers know their rights (Rankin and Lew 2018). State and local labor standards agencies should make use of these tools to drive safer conditions for workers as well as compliance with wage, paid leave, and other requirements.
• Understand and emphasize the positive aspects of reconsidered priorities. Finally, although pivoting to changed priorities will require staff to be adaptable and take on new types of work, agencies and their staff should strive to remember how critical their actions on behalf of workers are during the pandemic. One agency leader reported that it has been meaningful and invigorating for her team to take on work that is directly responsive to the current crisis.4

Conclusion

Perhaps offices will be able to return to their prior methods of operations once the pandemic is over. For now, however, state and local labor standards enforcement agencies should consider not only how the unfolding events and emerging issues fit into their office operations, but also how operations can be structured to respond to a flood of urgent new worker needs.

Endnotes

1. City of Chicago 2020; City and County of Denver 2020; City of Flagstaff 2020; City of Los Angeles 2020; City of Minneapolis 2020; NYC DCA 2020; City of Philadelphia 2020; City of Seattle 2020; City of St. Paul 2020; City of San Francisco 2020.

2. Email message from head of the municipal office to Terri Gerstein, April 8, 2020.

3. New York Labor Law § 740 et. seq.

4. Reported by the agency leader in conversation with the authors, April 23, 2020.

References

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A Better Balance (ABB). 2020b. Interactive Overview of Paid Sick Time Laws in the United States. (online resource). Accessed April 26, 2020.

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Barr, Jody. 2020. “Austin Company Looking to Dock Paychecks for Those Receiving Stimulus Checks.” KXAN News, last updated March 30, 2020.

Berkowitz, Debbie. 2020. “Worker Safety & Health During COVID-19 Pandemic: Rights & Resources.” National Employment Law Project, April 9, 2020.

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We recommend that states follow the lead of the U.S. Department of Labor’s 2016 final rule and:

• Raise the salary threshold required for exemption from eligibility for overtime pay (avenues for raising the threshold are described below). Base the threshold on a simple, appropriate benchmark (options for setting the threshold are given below).
• Establish an automatic update of this salary level at regular intervals according to the same benchmark.

We are not opposed to strengthening the “duties test” for determining eligibility for overtime pay protection (more on the duties test below). However, for the sake of simplicity in messaging and implementation, we recommend focusing on the salary threshold alone.

State action is imperative because the path forward at the federal level is unclear. The Trump administration DOL has declared its intent to appeal the court’s decision—defending DOL’s right to set a threshold—but is likely to set the threshold at a much lower level (in the low $30,000s). A threshold at that level would leave unprotected nearly three-fourths of workers who would have benefited under the 2016 raise.1 Campaigns to raise overtime thresholds in the states could create momentum to push for a stronger federal standard. For this reason, we encourage state organizations to focus on state thresholds but also to follow the federal overtime rulemaking process and any congressional action on EPI’s overtime issue page (www.epi.org/research/overtime/) and push for a stronger federal overtime rule if the opportunity arises.

Specific ways state organizations can support efforts to raise the overtime salary thresholds in their states

Modest wage earners in all states have lost automatic overtime protection due to the blockage of the new federal overtime pay rule.2 The losses are smaller in New York and California, which have both enacted state policies establishing overtime salary thresholds higher than the $23,660 federal level.

State options for raising the overtime salary threshold

There are several possible avenues for raising the overtime salary threshold in states. State organizations may pursue updates to state thresholds in the following ways:

• Help draft and promote state legislation providing the protections that the 2016 federal overtime rule would have provided to workers. The strongest action states could take at this moment would be to pass legislation raising the state overtime threshold, following the parameters of the 2016 federal overtime rule. Even in states where passage of such a law would be difficult, introducing it and seeking public hearings or staging press conferences would raise awareness and could help create a constituency to advocate for better protections for overworked low- and moderate-wage workers.
• Start a ballot initiative so that voters can weigh in to provide the protections that the federal overtime rule would have provided to workers. In states that are amenable to ballot initiative campaigns, groups could place an initiative on the ballot to raise the state’s overtime threshold to provide more low- and moderate-wage workers with overtime pay.
• Support executive action. In some states, the overtime salary threshold may be changed through an administrative regulation. Working with the governor and/or state department of labor could be a good way to obtain an administrative change, if this is an available option and the local political climate is conducive to such a change.

How the salary threshold fits into the “white collar exemption” to overtime protections

The federal overtime regulation, which is authorized under the Fair Labor Standards Act (FLSA), is the basis for many state overtime rules and serves as the effective regulation in states that lack their own overtime rules or have weaker overtime rules. The federal law says that workers must be paid time and a half for every hour worked beyond 40 in one week. But it carves out exemptions—worker groups that employers could pay overtime to, if the employer wanted to, but are not required to. One key exemption is for workers considered sufficiently senior in duties and in pay that they don’t need overtime protection.3 In order for a worker to be exempt from (ineligible for) guaranteed overtime pay based on this “white collar exemption,” all three of the following requirements must be met:

1. Salary basis test: The employee must be paid a salary, not by the hour or on a piece-rate basis.
2. Salary threshold test: The employee must be paid above a certain threshold. Before the Department of Labor updated the regulations in 2016, this threshold was $455 weekly, or the equivalent of $23,660 annually for an employee who works year-round.
3. Duties test: The employee must perform actual executive/managerial/professional duties, as defined in the regulations.4

If any one of these three requirements isn’t met, a worker is eligible for overtime pay. If all three requirements are met, the worker is exempt from the overtime protections of the Fair Labor Standards Act and the employer does not have to pay the worker overtime.

How the U.S. Department of Labor’s 2016 final rule updated the white collar exemption

The 2016 U.S. DOL rule updated the overtime salary threshold to more closely track a level of salary that would reasonably be paid to a managerial, administrative, or professional worker today.

• The rule set the threshold at the 40th percentile of weekly earnings of full-time salaried workers in the census region with the lowest wages (the South).

• This adjustment (which used earnings data from the fourth quarter of 2015) raised the salary threshold required for exemption to $913 weekly, which translates into $47,476 for a year-round worker. (Note that if data from the third quarter of 2017 were used, the threshold would be $951 weekly.5)
• The rule established an automatic update of this salary level every three years to precisely the same standard (i.e., every three years, the salary threshold would be adjusted to the updated 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage census region).
• The rule did not change the duties test or the salary basis test.

State options for setting the standard for the salary threshold for exemption

As noted, the 2016 rule is in legal limbo. Organizations seeking to raise wages for low- and middle-wage workers in their state will want to consider what is the most meaningful standard to propose for setting the salary threshold in their state. Options include:

• Raise the threshold to match the 2016 federal rule standard. However, because the federal threshold is set to the 40th percentile of weekly earnings of full-time salaried workers in the South, this option makes less sense for states outside of the South.
• Adapt the 2016 federal standard based on the wages in the state’s census region. To set the salary threshold to the 40th percentile of full-time salaried workers in a state’s census region, use publicly available data provided quarterly by the Bureau of Labor Statistics quarterly (these data are also provided in the tables below).
• Adapt the 2016 federal standard based on the wages in the state. To set the salary threshold to the 40th percentile of full-time salaried workers in a specific state, use data calculated by EPI and provided in the tables below.
• Set the threshold to a multiple of earnings at the state’s minimum wage. For example, in California, the threshold for exemption is set at a monthly earnings rate equivalent to two times the state’s minimum wage, assuming a full-time schedule.

Why is the 40th percentile of earnings an appropriate threshold for overtime eligibility?

The “40th percentile of earnings” means that 40 percent of full-time salaried workers earn at or below that amount. The Obama administration Department of Labor concluded that the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage census region (currently the South) represented the most appropriate line of demarcation between workers who are bona fide executives, administrators, or professionals, and those who are not. It represents a much-needed increase from the prior salary threshold, which covers less than 7 percent of full-time salaried workers. But it is still lower, after taking inflation into account, than the threshold was in 1975. In 1975, more than 60 percent of workers were below the salary threshold; under the 2016 threshold it is 33 percent.6

Draft language

Below is language that may be used to draft overtime legislation. This language may also be adapted for use in an executive order or state DOL rule. The bracketed and boldfaced text would be modified depending on what threshold is chosen. Note that all of the named occupations in clause (A)(1)(c) are standard for the exemptions in statutory language.

A. (1) To qualify as an individual who is employed in a bona fide administrative, executive, or professional capacity and is exempt from the statute’s overtime pay requirements, an individual shall be compensated on a salary basis:

a. In an amount per week not less than [the 40th percentile of weekly earnings of full-time nonhourly workers in the lowest-wage census region]; and

b. In an amount per week, exclusive of board, lodging, or other facilities, that is not less than:

1. [$913]; and

2. Beginning [January 1, 2018], determined by the Commissioner under Subsection (B) of this section.

c. The salary requirements in this section shall not apply to teachers, certain licensed medical professionals, licensed attorneys, or other individuals employed in a professional capacity to whom the salary requirements for exemption under U.S. Department of Labor regulations in effect in 2015 would not have applied.

(2) The required amount of compensation per week under Paragraph (1) of this Subsection may be:

a. For an individual employed in an administrative capacity or a professional capacity, paid on a fee basis; or

b. Translated into equivalent amounts for periods of time longer than one week, including compensation that is paid on a biweekly, semimonthly, or monthly basis.

B. On [January 1, 2021], and every [three years] thereafter, the Commissioner shall adjust the salary amount under the Subsection (A) of this section to equal [the 40th percentile of weekly earnings of full-time nonhourly workers in the lowest-wage census region in the second quarter of the year immediately preceding the update published by the United States Department of Labor, Bureau of Labor Statistics].

C. The Commissioner may adopt regulations to implement this section.

A note on the duties test

As noted earlier, workers whose earnings exceed the salary threshold still qualify for overtime pay if they do not have work duties that are managerial, administrative, or professional in nature. (The U.S. Department of Labor’s Wage and Hour Division has a fact sheet that explains this “exemption for executive, administrative, professional, computer, and outside sales employees.”7 State DOLs may have fact sheets for their own laws.)

Changes at the federal level in 2004 simplified the duties test by switching to a single duties test but made it less rigorous by allowing workers to perform an unlimited amount of nonexempt work (such as operating cash registers, stocking shelves, and sweeping floors) and still be classified as an exempt manager or professional. Here, states should follow the lessons learned at the federal level. During the 2016 rulemaking process, changes to the duties test were overwhelmingly opposed by businesses, with many articulating that most employers are already very familiar with the standard duties test and that a new duties test would be complex to learn and apply in practice. In the 2016 final rule, the U.S. Department of Labor decided not to change the duties test because it would have been disruptive to employers and businesses to learn and apply a new test. That is a key reason why the federal rule significantly raised the salary threshold—so that it would cover workers subject to the less rigorous, and less protective, duties test. States that are unable to substantially raise the salary threshold (say, to the 40th percentile of salaried earnings or higher) would need to revert to a more rigorous duties test. California, for example, has enacted a more protective duties test than the federal standard.

EARN and Economic Policy Institute resources

The EARN staff at EPI and the network of state EARN affiliates are available to support organizations and officials who are interested in taking action on overtime policy. The Economic Policy Institute has a broad array of policy, data, and legal resources, as well as social media and communications assets that can support state efforts on this and other economic issues. Please contact us at earn@epi.org for further information.

Endnotes

1. In his hearing to be confirmed as Labor Secretary, Alexander Acosta suggested that an overtime salary threshold equivalent to the 2004 threshold adjusted for inflation might be appropriate. See “Labor Secretary Nominee Acosta on Overtime: $33K Minimum Salary?” (user-created clip by Tammy McCutchen on C-SPAN, March 23, 2017). The 2004 threshold adjusted for inflation would be around $31,000 today. Importantly, while the OT threshold was raised in 2004, it did not come close to adjusting for inflation since its prior increase almost 30 years earlier. If the 1975 threshold had been adjusted for inflation, it would be well over $50,000 today. If the threshold were $31,000, 9.1 million (nearly three-fourths) of the 12.5 million benefiting from raising the threshold to $47,476 would be left out. Only 3.4 million eligible workers earn at least $23,660 but below $31,000 (EPI analysis of 2015 Current Population Survey Outgoing Rotation Group data). The Trump administration’s efforts to weaken the overtime rule extend back to July. See Heidi Shierholz, “The Trump Administration Is Trying to Take Away the Rights of Millions of Americans to Get Paid for Their Overtime,” Economic Policy Institute, July 25, 2017; and Ronald Klain, “An Issue Democrats Can Love: Overtime,” Washington Post, September 3, 2017.

2. Ross Eisenbrey and Will Kimball, The New Overtime Rule Will Benefit Working People in Every State, Economic Policy Institute, May 18, 2016.

3. This “white collar exemption” is in the statute, FLSA section 13(a)(1), but the statute delegates authority to the U.S. Secretary of Labor to define the terms and scope of the exemption, which is done in the regulations. Exempt workers are not technically ineligible for overtime pay because there is no law stopping their employers from providing it to them. The critical fact—and why they are described as ineligible for automatic overtime protection—is that their employers cannot be required to provide overtime pay to them.

4. U.S. Department of Labor, Wage and Hour Division, “Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Acts (FLSA),” revised July 2008.

5. “Research Series on Deciles of Usual Weekly Earnings of Nonhourly Full-Time Workers,” Labor Force Statistics from the Current Population Survey, Bureau of Labor Statistics, last modified October 18, 2017.

6. Authors’ analysis of Current Population Survey Outgoing Rotation Group microdata, various years.

7. U.S. Department of Labor, Wage and Hour Division, “Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Acts (FLSA),” revised July 2008.

Table 1

Table 2

[THIS PIECE ORIGINALLY APPEARED IN TAPPED, THE AMERICAN PROSPECT ONLINE BLOG, ON MAY 9, 2007.]

By Jared Bernstein

As predicted, those wild and crazy members of the Federal Open Market Committee (FOMC) decided to keep their feet off both the brake and the accelerator, holding interest rates steady at 5.25%, where it has been stuck since June last year. That was widely expected. The important thing is that, despite new evidence that the economy is slowing, their accompanying statement was virtually unchanged from that of their last meeting.

I think they’re falling behind the curve, and that could have serious negative consequences for economic growth.

Perhaps you have a life that doesn’t involve fascination with a bunch of high-powered economists who have gotten together every six weeks for the past year, decided not to do anything, written a few paragraphs to that effect, and gone home.

I don’t have that life. We Fed watchers troll those statements for signs that even though the tune’s the same, the words are different. That is, though they left rates alone, did the Fed suggest that their view of the economy has shifted at all?

Not at all. Today’s statement was almost a carbon copy of March’s statement.

Before we get to the significance of no change, a quick comment on context. The FOMC, under the leadership of Fed chairman “Big Ben” Bernanke, meets periodically to decide whether they should try to goose or restrain the pace of economic growth by lowering or raising the federal funds rate.

That’s the interest rate that banks charge each other for loans, and when it goes up, as it did 17 times since mid-2004, it raises the cost of borrowing throughout the economy. That, in turn, usually dials economic activity down a bit, with the ultimate target being inflation. Bernanke and company are solidly on record saying that they’ll sleep better when core inflation is growing in a range of 1-2 percent. (They like the core because it leaves out food and energy prices, which are both more volatile and less amenable to Fed rate changes).

By holding steady for the past year, the Fed has been signaling that they view the economy as not too hot, not too cold. However, Fed rate changes take some time to work through the system, so to be effective they’ve got to be forward looking.

Ergo, the importance of their statement, which tells us what they see down the pike, and hints at where rates might be heading. In March they wrote that their “predominant policy concern” was that “inflation will fail to moderate as expected.” Today, they said … are you ready? … “the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected.” (For this they get the big money?)

In fact, things economic have changed for the worse since their last meeting. The two big numbers are gross domestic product, which came in at 1.3% for the first quarter of the year, and last month’s employment report, which revealed a significant slowdown in the rate of hiring. In the GDP report, slumping housing shaved a point off of the economy’s growth, as it had in the prior two quarters. On the jobs side, the private sector added 63,000 jobs, the worst showing in a couple of years.

Moreover, wage growth slowed, which is big for the Fed, since they worry that tight labor markets could lead to higher wages that get passed through to prices. With slower wage growth and fewer employment opportunities, a forward-looking Fed needs to start worry less about inflation and more about growth.

In other words, we want them to start thinking seriously about cutting rates to offset the various drags on economic growth right now. By failing to adjust their statement, they showed that they’re down-weighting these factors, and that’s leads me to worry that they’re already behind the curve.

Despite the fact that wage growth has been steady, not accelerating, Fed officials have expressed too much concern about what, in a global economy with severely diminished worker bargaining power, is the phantom menace of wage-push inflation. Also, as noted, these guys and gals are targeting inflation, not job growth, and most inflation readings have been in or only slightly above the upper level of their (awfully cramped, IMHO) comfort zone.

So, Big Ben et al: this is no time to be hawkish on price growth. Sure, the stock market is frothy, but every other important sector of the economy — housing, investment, manufacturing, jobs — is showing weakness that is sure to show up as slower inflation sooner than later. The housing slump, by shutting down the stimulus of mortgage equity withdrawals, is a particular source of concern, especially with wage growth slowing. Ask yourselves, oh great ones, if economic activity doesn’t soon accelerate, won’t consumption, that one consistently stalwart component of recent GDP reports, stumble?

So, get to work FOMC, and stop xeroxing last month’s statement. Times are changing and you need to reflect that in your June meeting so you can cut rates at your August meeting.

Jared Bernstein is a senior economist at the Economic Policy Institute in Washington, D.C.

[ POSTED TOV IEWPOINTS ON MAY 10, 2007. ]

[ THIS OP-ED ORIGINALLY APPEARED IN THE SALT LAKE TRIBUNE  AND THE JACKSON (MS) CLARION-LEDGER ON OCTOBER 19, 2006. ]

The U.S. economy’s on the table

By  Jared Bernstein

How about a little election year Jeopardy? Answer: “Are you better off than you were four weeks ago?” Question: “How are the Republicans hoping to play the economy in the upcoming midterm election?”

For the party that controls the White House and both houses of Congress, the fact that retail gas prices are down 70 cents over the past two months is unquestionably a boon. Sure, there’s a lot going on right now that’s making conservative strategists as jumpy as spit on a skillet. But incumbents are hoping that the drop in the price of oil takes the economy off the table as a resonant issue for challengers to exploit.

It’s true that voters have a lot on their minds right now: the Iraq war and terror are at the top of issue-priority polls. But the economy is consistently right behind them, typically in second or third place (http://www.pollingreport.com/prioriti.htm). And this is significant, given a) Karl Rove’s strategy of raising the terror threat to the point where it crowds out any other concerns, and b) the gas price decline.

There are at least two good reasons why the economy remains solidly in play as an election issue: first, the negative trends affecting working families, and second, the way the administration has tried to spin those trends.

Start with the second point. When asked recently about why the administration’s good news on the economy was failing to reach the public, Treasury Secretary Henry Paulson responded “That’s the $64,000 question.”

Well, Paulson’s $64,000 question has a $3,000 answer. That’s how much the inflation-adjusted income of the typical working-age household is down since 2000.

Rob Portman, the head of the Office of Management and Budget, said the problem was that “we probably haven’t done as good a job communicating the strength of our economy.”

Or maybe it’s the fact that the buying power of the typical, full-time worker’s weekly paycheck is down 3 percent since this recovery got underway in late 2001.

On this point, two top Bush economic officials recently assured readers of The Wall Street Journal that real wages would be rising were it not for higher energy costs, and helpfully reminded wage earners of all the wonderful attributes of the energy bill the president signed last year.

Among the millions of workers who’ve lost ground in recent years, I’d be amazed if you could find one person who was moved by that argument. “Gee, it’s been tough paying the bills lately – were it not for that sweet energy bill last year, I’d be feelin’ pretty disappointed about now.”

It’s not that these officials are wrong about some impressive aspects of the current economy. Productivity growth, a vital indicator of our increased efficiency in producing goods and services, has been quite stellar in recent years. But put that together with these wage and income trends, and you see the problem: These officials are praising the bigger and better pie baked by the American work force, but they’re missing the fact that the bakers are walking away with smaller slices.

Granted, we in the electorate have short memories and we’re easily distracted. And sure, we’re better off than we were a few weeks ago when prices at the pump were higher. But the protracted gap between the economy that the elites are crowing about and the economy working families live in every day remains fair game.

For those who want to win that game, the challenge is clear: Tell us what you’re going to do to help reconnect growth and living standards.

Jared Bernstein is the Director of the Living Standards program at the Economic Policy Institute in Washington, D.C.

[ POSTED TO VIEWPOINTS ON OCTOBER 20, 2006. ]

Tax relief for working people: The Simplified Family Credit (SFC)

What is the SFC?
The Simplified Family Credit (SFC) is proposed as a replacement for the dependent exemption for children, the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), and the Additional Child Credit (ACC). In a nutshell, it unifies, simplifies, and expands benefits for families with children in the Federal individual income tax. It is fully refundable, which means that even if your tax liability is zero, as long as you do work and have labor earnings, you still receive the benefit in the form of a cash refund from the IRS. If you do not have labor earnings, you cannot receive the credit as a cash refund, but it still does reduce any income tax liability you may have. The SFC was first proposed by Robert Cherry, of Brooklyn College, and Max B. Sawicky, of the Economic Policy Institute (EPI), in the paper published in 2000 by EPI, Giving Tax Credit Where Credit is Due: A ‘Universal Unified Child Credit’ that expands the EITC and cuts taxes for working families.

Tax simplification
The SFC replaces approximately 200 pages of instructions, worksheets, forms, and tables in the current tax code with this postcard-sized form.

SFC Calculator
Calculate your savings under the SFC tax proposal

Related reports and articles
Making Work Pay With Tax Reform
by Max Sawicky and Robert Cherry, EPI Issue Brief #173

The Middle Class Parent Penalty
by David Ellwood and Jeffrey Liebman; who arrived at an SFC-type proposal concurrently with Cherry and Sawicky.

Making Minnesota Taxes More Family-Friendly
by Max Sawicky, EPI Issue Brief #147

Making Illinois Taxes More Family-Friendly
by Max Sawicky, EPI Issue Brief #151

British perspective on refundable tax credits
by Her Majesty’s Treasury

Expanding the Earned Income Tax Credit
by Bernard Wasow (The Century Foundation)

The EITC and USAs/IDAs: Maybe a Marriage Made in Heaven
by Timothy Smeeding

The Earned Income Tax Credit
by V. Joseph Hotz and John-Karl Scholz

How Do You Spell Relief?
by Max B. Sawicky and Robert Denk, The American Prospect

It Takes a Tax Credit to Raise a Child
by Max Sawicky, The American Prospect

Chicago Mayor Richard Daley endorses the SFC!

The Bush Administration’s budget proposal, if enacted, will seriously affect federal discretionary grant-in-aid programs provided to state and local governments. Overall, these programs would be cut by 6.9% in FY2002 and by 11.2% in FY2011.

An EPI Briefing Paper, Changes in federal aid to state and local governments, as proposed in the Bush Administration FY2002 budget, by Lawrence Mishel, presents the impact of the Bush budget proposal by state and program.

The report presents data on federal discretionary (non-entitlement) aid to states and localities for 192 programs, totaling $122 billion in FY2001. This amount represents 87% of total discretionary federal spending for state and local governments; it also represents about 38% of all federal non-defense discretionary spending and roughly 10% of total spending by state and local governments.

Read the report and the methodology behind the projections.

Click on the map below for details of the spending impact of the Bush budget proposal, in sum and by program, for each state or territory. A spreadsheet available for each state has information on all 192 program areas examined in the report. These spreadsheets have been constructed to allow the user to display every program or just the largest forty programs. Read the useful tips section for more information on how to configure these spreadsheets.

Download the entire report in Acrobat (PDF) format (Introduction and 54 tables, 306 kb)

The limited amount of research that does examine the effect of right-to-work laws on wages can be divided into two areas: RTW laws effects on union wage premiums or the average effects of these laws on wages. Our research focuses on the latter. Since right-to-work laws affect union density and effectiveness (Farber 1985), the effect of the union wage premium is not easily disentangled from the effects of RTW legislation. Our analysis tried to overcome the shortcomings in previous research in this area. First, we control for differences in cost of living throughout the United States, thereby making comparable wages in various parts of the country. Secondly, we examine how metropolitan areas located in both right-to-work and non-right-to-work states affect wages.

We find that the mean effect of working in a right-to-work state results in a 6% to 8% reduction in wages for workers in these states, with an average wage penalty of 6.5%. Controlling for regional costs of living reduces this amount to approximately 4%. We find that previous research reporting real wage gains associated with right-to-work states is almost purely the result of border cities that benefit from their proximity to a non-RTW state.

Data and Analysis
To determine the effect of right-to-work laws on wages we estimate log wage equations using the Bureau of Labor Statistic’s current population survey-outgoing rotation group (CPS-ORG) data for 2000. The sample consists of 152,576 prime age workers, ages 18-64, who earn wages or salaries. Average hourly wages for the sample were $15.54, and median hourly wages were $12.25. Median wages for workers living in right-to-work states were $11.45, while wages for those living in non-RTW states were $13.00, indicating that wages were 11.9% lower in RTW states.

Whether this wage disadvantage in these states is due to RTW laws can only be determined by controlling for other characteristics. To this end, we specify wage regressions (Model 1) that control for the following personal and geographic characteristics: race/ethnicity, age, age squared, marital status, sex, education, urbanicity, employed full-time, hourly worker, union status, industry (22 categories), and occupation (13 categories). A second set of regression results (Model 2) controls for state of residence, which should control all the characteristics of a state-other than its RTW status-that differ from other states, including cost-of-living. A third set of results (Model 3) controls for differences in intra-state and inter-state costs of living.2 Our regression results follow Dumond, Hirsch, and MacPherson’s (1999) specification of the regional cost of living controls. However, we have limited confidence in these estimates, since there is no universally accepted method of adjusting for regional costs of living, and it is impossible to test the accuracy of using an index based on fair market rents. In each model the mean effect is estimated using a simple indicator variable for right-to-work states.

Our first set of regression results indicate that workers living in right-to-work states earn 6.5% less than comparable workers in non-RTW states. This regression model essentially compares workers with similar demographics (education, age, race, etc.) and occupations within an industry across the two types of states, those with RTW laws and those without. The second regression model controls for different state effects not captured by industry and occupation, partially capturing price differences between states. These results indicate that a worker living in a right-to-work state earns, on average, 7.8% less than a comparable worker in a non-RTW state. The final regression model compares workers with similar demographic, industry and occupations but also controls for cost of living using an index of the fair market rents. These results indicate that, on average, a worker living in a right-to-work state earns 3.8 % less than a worker living in a non-RTW state. Estimates from this last regression model, however, are suspect given the lack of an established series for controlling for regional, inter-state, or intra-state costs of living (see Table 1). Our best estimate is that workers living in right-to-work states earn, on average, 6.5% less than similar workers in non-RTW states.

An analysis along gender lines reveals similar trends. On average, men in RTW states earn 7.8% less than their counterparts in non-RTW states; women in RTW states earn 6.8% less (Table 2).

Unlike previous research by Bennett (2001), we find that, even after controlling for regional costs of living, workers in right-to-work states earn less per hour. Particularly interesting is the affect on workers living in cities that are stretch across state line, placing it in both a right-to-work state and a non-RTW state. Seventeen out of 433 metropolitan areas in our sample (nearly 4%) spill over from a right-to-work state to a non-RTW state. Our analysis indicates that, in areas where a pure RTW state effect exists (i.e., no spill-over effect), the right-to-work penalty is larger (see Table 3). In fact, we find that living near a non-RTW state helps raise workers’ wages. 3

There may be reasons why states choose to adopt right-to-work laws that this analysis fails to address. It may be that the wage structure or industry mix within a state helps determine why state legislatures or voters adopt right-to-work laws. To control for this, we estimate a series of regressions that model a state’s decision to adopt right-to-work. Both Wessels (1981) and Moore et al. (1986) have designed models that consider the endogeneity of right-to-work law, and find that “once the influence of wages in the passage of RTW laws is accounted for, RTW laws have no independent effect on wages” (Moore 1998, 459). We estimate the probability of a state passing a RTW law using mean and median wages as well as other state-level demographic characteristics. We then use these estimated values in a two-stage least-squares estimation. Even after correcting for endogeneity in this way, we find that RTW laws have statistically significant and negative impacts on workers living in right-to-work states.

Conclusion
The most important aspect of right-to-work law is its effect on wages. That there have only been a handful of studies directly assessing the impact of these laws
on workers’ earnings is surprising. What research there is on the subject is mixed, with findings critically dependent on model specification. Unlike most research up to this point, this analysis focuses on the impact of regional costs of living and finds that workers living in RTW states earn significantly less than workers living in non-RTW states. We also find that care must be taken in examining the true effect of right-to-work legislation.

Perhaps the most compelling evidence of the effect of RTW legislation can be found in those metropolitan areas that occupy both RTW and non-RTW states. In these cases, estimating the effects separately indicates that workers living in these metropolitan areas are helped by the higher earnings typical of the non-RTW state.

Endnotes
1. Currently the following states have right-to-work laws: Alabama, Arizona, Arkansas, Florida, Georgia, Idaho, Iowa, Kansas, Louisiana, Mississippi, Nebraska, Nevada, North Carolina, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wyoming. [return to text]

2. Inter-state and intra-state cost of living controls are based on the Department of Housing and Urban Development “Fair Market Rents” for Metropolitan Statistical Areas (MSA). We use the 45th percentile in each MSA. [return to text]

3. To test the robustness of these results, we estimate a model that combines both state-level indicators, regional indicators, and costs of living variables as well as all the control variables listed in model (1). In this combined model we find that both the pure right-to-work effect and the total right-to-work effect are -1.9% and -1.7%, respectively; in neither case are the estimates statistically different from zero. As with other estimates that include a measure of cost of living (COL), we find these estimates to be sensitive to the particular COL measure and unreliable since we have no faith in any particular measure of COL. [return to text]

References
Bennett, J.T. 2001. Right To Work – Prescription for Prosperity and Opportunity. Washington, D.C.: National Institute for Labor Relations Research. Dumond,J.M., B.T. Hirsch, and D.A. MacPherson. 1999. Wage Differentials Across Labor Markets and Workers: Does Cost of Living Matter? Economic Inquiry. Vol. 37, No. 4, pp. 577-98.

Farber, H. S. 1985. “The Extent of Unionization in the United States.” in Thomas Kochan, ed., Challenges and Choices Facing American Unions Cambridge, Mass.: MIT Press.

Moore, W. J., and R.J. Newman. 1985. The Effects of Fright-to-Work Laws: A Review of the Literature. Industrial and Labor Relations Review. Vol. 38, No. 4, pp. 571-85.

Moore, W.J. 1998. The Determinants and Effects of Right-To-Work Laws: A Review of the Recent Literature. Journal of Labor Research Vol. 19, No. 3, pp. 449-69.

Moore, W.J., J.A. Dunlevy, and R.J. Newman. 1986. Do Right-to-Work Laws Matter? Comment. Southern Economic Journal. Vol. 53, No. 2, pp. 515-24.

Wessels, W.J. 1981. Economic Effects of Right to Work Laws. Journal of Labor Research. Vol. 2, No. 3, pp. 55-75.