On a bipartisan basis going back at least to the Reagan administration, the Occupational Safety and Health Administration (OSHA)—the Department of Labor agency that enforces the right of workers to have a safe workplace—has required employers to keep accurate logs of injuries and illnesses, and has fined them if they fail to keep those logs for five years. Every OSHA administrator has recognized the value of this record-keeping, as a way to make employers pay attention to unsafe practices and address them, as well as to ensure accurate statistics for research, to show progress or lack of progress in improving workplace safety, and to help target the most dangerous workplaces.
Nevertheless, in Volks Constructors v Secretary of Labor, a court blocked OSHA from fining employers for various record-keeping failures that occurred more than 6 months before the citation. The court ruled that OSHA’s regulations didn’t clearly establish that the duty to maintain accurate records is an ongoing duty rather than just a duty to record each incident accurately at the time it occurs. Thus, if OSHA finds that an employer has for many years been hiding the fact that workers have repeatedly been burned, for example, or has failed to record numerous forklift accidents and injuries, it can only cite the employer for inaccuracies arising within the past six months.
A report in the LA Times last week explored why farmers in the Central Valley are having a hard time finding enough workers, despite reportedly paying up to 40 percent more than the California minimum wage. “Today, farmworkers in the state earn about $30,000 a year if they work full time—about half the overall average pay in California,” notes the Times. “Most work fewer hours.” The second sentence here is key: most farmworkers are not employed 40 hours a week 52 weeks a year, so most earn far less than $30,000 per year. In fact, in 2015, workers who received their primary earnings from agricultural employers earned an average of $17,500—less than 60 percent of the average annual wage of a full-time equivalent (FTE) worker in California.
Many farmworkers are paid an hourly rate higher than California’s minimum wage—$10.00 or $10.50 an hour in 2017, depending on whether the employer has 25 or less, or 26 or more employees, respectively—and workers who are paid piece rates, which reflect how much they pick or prune, often earn $12 to $14 an hour. Many young male farmworkers aim to earn $100 a day, which is $12.50 an hour for an eight-hour day and $14.30 an hour for a seven-hour day. But farmworkers typically are not employed in agriculture year-round. Many farm jobs are seasonal, and few workers migrate between California farming regions—those who pick vegetables in southern California deserts between January and May rarely move to the San Joaquin Valley to pick fruit between July and September.
Yesterday, the Trump administration released its budget blueprint, which, while it’s unlikely to be passed in its current form by Congress, sets out the administration’s priorities for the years ahead. Simply put, the Trump budget transfers funds from programs that keep people fed and sheltered, protect them from disease and environmental threats, or educate them—and gives those funds to defense contractors to build more weapons, planes, and ships. But it also seems to have the purpose of making America more ignorant, less informed about the challenges and problems that face us, and less able to understand and develop solutions to those challenges and problems. It could be called a “lobotomy budget” because it effectively removes big pieces of the government’s brain.
Here are some examples of how the budget leaves students less educated and less prepared for the 21st century workforce:
- The budget eliminates the Federal Supplemental Educational Opportunity Grant, a need-based grant program that helps 1.6 million undergraduate students pay for college.
- The budget cuts $1.2 billion for the 21st Century Community Learning Center before and after school programs:
Today the White House laid out its priorities in its first budget blueprint. And these priorities are simple enough to describe: paying for increased spending on defense and border security with cuts across the board to nondefense discretionary spending (NDD). Among other reasons why these are bad decisions, they would have devastating consequences for public investment.
It’s worth looking at one specific cut that seems fairly telling. Despite campaigning on a $1 trillion infrastructure program, the president’s budget actually cuts the Department of Transportation’s funding by 13 percent. Coupling this cut with the fact that the campaign’s original proposal was simply not a serious plan, and the rumors that the president and Congress are punting infrastructure to next year, it starts to become increasingly clear that increased infrastructure investment isn’t a promise that the Trump administration is taking seriously.
The broader cuts in the budget blueprint foreshadow an even worse fate for overall public investment. NDD is only about 16 percent of all federal spending, but fully half of it is public investment. The Trump budget essentially puts a long-run decline in NDD spending on overdrive. NDD budget authority fell from almost 7 percent of GDP in 1977 to about 3 percent by 1990. It has hovered around 3 percent since then, beginning a slow decline in recent years. The administration’s budget intends to accelerate this decline, reducing NDD spending swiftly and sharply from 2.8 percent of GDP in 2016 to 2.3 percent by 2018.
Next week, the Senate Committee on Health, Education, Labor and Pensions holds its hearing on the nomination of Alexander Acosta to be secretary of labor. While Mr. Acosta has had several confirmation hearings in the past, and is expected to do well next week, it is important that he receive a thorough and tough vetting. In the context of an administration that has shown itself to be remarkably anti-worker, it’s more important than ever that the labor secretary be prepared to enforce our labor laws and advocate for all working people.
Senators should ask Acosta specifically about his views on labor and employment laws as they pertain to undocumented workers. For example, it’s been reported that a spate of raids by Immigration and Customs Enforcement have left undocumented workers—who are already easily exploited—unwilling to report wage theft and labor violations. Now more than ever, we need a labor secretary who will argue for a fair economy and a labor market that works for all workers.
As a member of the National Labor Relations Board (NLRB), Acosta once voiced his adamant belief that undocumented workers deserve the protection of our country’s labor laws. In Double D Construction Group, 339 NLRB No. 48 (2003), the board found the company’s owner had unlawfully terminated an employee, Thomas Sanchez, for his participation in union activity. Not only did Acosta join the board majority overruling the judge’s contrary finding, Acosta wrote a separate concurrence chastising the judge, who had discredited Sanchez’s testimony at the trial on the ground that Sanchez had once knowingly used a false Social Security number to obtain employment. The administrative law judge reasoned: “If Sanchez demonstrated a willingness to use a false government document to obtain work… he may also be willing to offer false testimony” at the trial.
The Federal Reserve’s announcement today that it would raise short-term interest rates is not surprising, but is disappointing. As always, the issue is less about the direct impact of today’s 0.25 percentage point hike, and more about what this hike means, especially given that it has come relatively hard on the heels of a hike in December. Today’s hike seems to signal that Fed policymakers think that we’re currently at or very near full employment, and that failing to slow the pace of economic growth in coming months would soon lead to accelerating wage and price inflation. They could be right, of course, but it is important to note that there is little in actual economic data to indicate this.
Even the headline unemployment rate (today’s healthiest economic indicator) remains significantly higher than what it reached in 1999 and 2000, when we saw 4.1 percent unemployment for a full two years without accelerating inflation. The share of adults between the ages of 25 and 54 with a job hasn’t even recovered to pre-Great Recession levels, which were, in turn, far below the peaks reached in the late 1990s. And, most importantly, no durable and significant acceleration of wage growth to healthy levels has happened yet. Finally, the Fed’s preferred price inflation indicator—year-over-year growth in “core” (excluding food and energy) prices for personal consumption expenditures— remains stubbornly below the Fed’s professed target and shows no upward trend at all.
The risks regarding the Fed’s interest rate decisions remain deeply asymmetric, and point strongly to erring on the side of continuing to prioritize further improvements in the labor market rather than forestalling possible future inflation, which would mean not raising rates. If the Fed is wrong and raises rates enough in coming months to keep unemployment from falling to the low 4s, this implies millions of potential workers who can’t find jobs or the hours they want, and likely implies tens of millions of workers who will receive lower wage increases than they otherwise could have had. This is especially important for low and middle-wage workers, who need low rates of unemployment before they have any serious chance to bargain for higher wages.
Yesterday, the Congressional Budget Office (CBO) released its analysis of the American Health Care Act (AHCA)—legislation designed to “repeal and replace” the Affordable Care Act (ACA). The AHCA makes substantial changes to current law, which have large effects on both the costs of care and the coverage rates. I’m going to walk through some key provisions and their effects on specific populations below, but the bottom line is that the number of uninsured Americans will grow by 24 million by the year 2026. This is the result of about 14 million fewer people on Medicaid, 2 million fewer with nongroup insurance coverage, and 7 million fewer with employer-sponsored health insurance. In addition to the outright losses in coverage, the law increases economic vulnerability and health insecurity for millions of Americans by disproportionately exposing those with low income to additional risk through the elimination of cost sharing subsidies in the nongroup market, forcing them to face higher out-of-pocket costs like higher deductibles and co-pays.
Some key highlights of the AHCA score can be found in one highly illuminating table and one brilliantly designed figure. Let’s start with the table. I’ve copied Table 4 below, highlighting some particularly interesting findings. (For full notes on this table, see page 34 of the CBO cost analysis.) The table constructs comparisons of various age profiles in two income groups for individuals seeking coverage in the health insurance nongroup market in 2026. Premiums, tax credits, net premiums, and actuarial value of plans for single individuals at age 21, age 40, and age 64 are constructed at income levels of $26,500 and $68,200 in the top and bottom panels, respectively.
Senator Baldwin is right: AHCA is particularly great for health insurance CEOs, bad for almost everybody else
There are plenty of outrageously bad things about the American Health Care Act (AHCA), the recently proposed Republican replacement for the Affordable Care Act (ACA). The 24 million people who will lose their health insurance coverage by 2016. The $12,900 increase in premiums for older, low-income Americans who will get much shoddier insurance coverage in exchange. The $275 billion in tax cuts aimed directly at the richest Americans. The 7 million decrease in even employer-sponsored coverage under the plan. The $880 billion cut to Medicaid over the next decade. To get a near-comprehensive look at what the AHCA does to taxes, spending and insurance coverage, check out the recent Congressional Budget Office (CBO) analysis of AHCA.
But maybe the most gratuitous way that AHCA coddles rich people is its repeal of an ACA provision that limited the deductibility of executive pay for health insurance companies. The rationale for this provision was clear—the federal government was providing an enormous windfall to private health insurance companies by mandating that all Americans have insurance and by providing subsidies for them to purchase it. In return, we wanted these companies to use that extra money from subsidies and new customers to actually provide health care, not just fatten corporate executives’ salaries. So, the maximum amount that a health insurance company could deduct in an executive’s salary from their corporate income tax bill was reduced to $500,000. Under the AHCA, these companies could deduct up to $1 million in cash pay, and could deduct unlimited amounts of “performance-based” pay.
Two quick things to note: the “performance-based” pay carve-out is a bad loophole that should be closed generally. And $500,000 is an awfully healthy salary; presumably, companies should be able to hire decent people at this salary or less. This sounds like a shocking thought in modern America, I know, but the president of the United States earns less than this (or, if you’re unconvinced that our current president counts as an example of having “hired decent people”, I’d note that the Chair of the Federal Reserve earns well under half of this amount).
Senator Tammy Baldwin of Wisconsin recently criticized AHCA and mentioned these top executive pay deductibility provisions, and argued that the proposed legislation would greatly enrich health insurance CEOs. PolitiFact Wisconsin took odd exception to this. They’re wrong and Baldwin is right.
First, AHCA slashes tax rates faced by the richest Americans. Health insurance CEOs are in this group, so they will make enormous amounts of money from the tax cuts in AHCA. For top 0.1 percent income households in America (and top executives at large companies are extraordinarily over-represented in this group), the AHCA tax cuts will deliver an average tax cut of $165,000 annually.
OK, maybe it’s a slight exaggeration, but almost everyone—99 percent of Americans and all members of Congress—will win if the GOP health plan fails.
Let’s start with Congress. Democrats win if they vote against a bad, unpopular plan. Republicans, meanwhile, minimize their losses if they vote it down—even for the wrong reasons. Basically, incumbents in both parties are better off if it goes away, though Republicans have to go through the motions since they’ve bluffed that they had a better plan than “Obamacare” since day one.
Win or lose, it’s obvious that Republicans don’t want to drag out the process of deliberating the American Health Care Act (which Case Western Reserve University Professor Joseph White has aptly dubbed the “Unaffordable Care Act”). That’s why they rushed committee votes ahead of a Congressional Budget Office review while web traffic to analyses of the plan has been so heavy that it crashed the Center on Budget and Policy Priorities’ website.
Until recently, railing against Obamacare played well politically, and Democrats lacked the party discipline to defend the Affordable Care Act (ACA) against attacks, especially after a botched rollout. The ACA slowed—but did not stop or reverse—excess health cost growth in the United States, and also did a good job of spreading these costs among sick and healthy and poor and rich to make health care affordable for most Americans, if not quite the fundamental right enshrined in the World Health Organization’s constitution. (House GOP leader Paul Ryan seems unaware that risk pooling is the whole purpose of insurance.) The CBO report, released this afternoon, confirms that the GOP plan will cause millions to lose coverage—an estimated 14 million next year and a whopping 24 million by 2026.
President Trump has recently claimed that he inherited an economic “mess,” calling the American economy a “disaster.” From a broad macroeconomic perspective, this is simply untrue. The overall unemployment rate has been steadily falling and is essentially back to where it was immediately before the Great Recession started. Recent years have even seen improvements in labor force participation as the labor market continues to firm up. And while other measures, such as the prime-age employment-to-population ratio and nominal wage growth, continue to lag, they have still shown continued improvement over the last several years. To be clear, the economy is still weak and still hasn’t reached genuine full employment like it did in the late 1990s and early 2000s. Many workers and their families are still struggling, and the lower unemployment rate is only now beginning to translate into broad-based wage growth. But the economy is on track to recover, and there are no obvious signs of any underlying weakness that would lead to a recession in the near term. Inheriting a “mess” would accurately describe what President Obama was handed in January 2009—with the economy having lost 3.4 million jobs just in the previous six months and with unemployment having risen 3.4 percentage points over the previous 18 months. President Trump has clearly inherited something quite different—a stable albeit too-slow recovery that is on extremely firm ground.
It’s important to keep this steady improvement in mind as we assess economic progress moving forward. No policymaker should be allowed to claim credit for improvements that are simply a continuation of a trend. To that point, I’m going to lay out some key labor market indicators, discuss their recent trends, and assess their likely progress over the next two years.
Tomorrow’s jobs report is notable, because it will cover the first full month that President Trump has been in office. While the president has recently claimed that he inherited a “mess” of an economy, the fact is that the economy has been recovering slowly but steadily, and I expect the February jobs numbers to reflect that. The unemployment rate has been ticking down, the prime-age employment-to-population ratio has been improving, and wages grew across the board in 2016.
To be clear, there is still room for improvement. While we are on the road to full employment, we are not there yet. But the economy is on track and there are no obvious signs of any underlying weakness that would lead to a recession. It’s important to keep this steady improvement in mind as we assess economic progress moving forward. No policymaker should be allowed to claim credit for improvements that are simply a continuation of a trend. Conversely, failure to deliver still lower unemployment in the coming years should be seen as a policy mistake—either by the Federal Reserve or by fiscal policymakers.
The average unemployment rate over the last three months was 4.7 percent, a fall of 0.3 percentage points from the average rate from the same three months last year (5.0 percent). At that rate, the unemployment rate will hit 4.0 percent sometime in 2019. This is not an unrealistic aspiration. The U.S. economy sat at roughly 4.0 percent for two solid years in 1999 and 2000, and policymakers should be aiming for that level today. Only when the labor market is tight enough to deliver sustained rising wages for all workers—regardless of gender, race, or educational attainment—should we say our work is done. Simply put, we want an economy where worker wages are rising, and in order to get there employers need to be competing for workers rather than workers competing for jobs.
Janet Yellen, not Donald Trump, is far more likely to decide whether or not we reach genuine full employment in 2017
In recent weeks, a number of stories have been written about the Trump administration’s excessively rosy projections for economic growth in coming years. And three weeks ago, Federal Reserve Board Chair Janet Yellen testified before Congress about the likely path of monetary policy over the next year. The Trump administration forecasts and Fed decisions are deeply intertwined. While the Trump administration’s precise forecasts are clearly unrealistic in the long-run, we should be clear in noting that the next couple of years could easily see a substantial pickup in economic growth. If this happens, however, we will have Janet Yellen and her colleagues at the Fed to thank, not Donald Trump.
The reason is straightforward: 2017 is the year when the Fed will finally decide whether or not to guarantee genuine full employment by giving the economy “room to run” by not raising rates aggressively. While Fed policy largely sputters when trying to spur growth with lower short-term interest rates, raising rates does reliably slow growth. So for all the chatter about the importance of Fed policy in recent years, their attempts to spur growth with low short-term rates were often futile. But once they firmly decide to start reining in growth with higher rates their policy choices will have real bite.
The metaphor used to describe the problem with using low rates to boost growth was that you can’t “push on a string”. Essentially, the Fed can lower rates to try to induce businesses and households (and even governments) to borrow and spend more, but they cannot force this spending to actually happen. If governments ignore low rates and indulge in spending austerity for ideological reasons, or if households do not respond to low rates because their housing wealth had been torpedoed and hence home refinancing is impossible, or if businesses do not take advantage of low rates to build new factories because they do not have customers for what their current factories are producing, then the Fed cannot do much about any of this.
It’s time we acknowledge women’s contributions to the economy—and how much bigger a role they would play in a more inclusive economy
Women hold 49.5 percent of payroll jobs. The health of the female workforce is hugely important to the health of the overall labor force. And yet—in crucial ways—lawmakers in the United States have avoided commonsense policy changes that have been shown to make it easier for women to balance paid work and their still disproportionate share of responsibilities at home.
Policies like paid parental leave and subsidized child care increase parental labor force participation, which would boost the economy. Many of our peer nations have such policies, and, not surprisingly, their employment rates are much higher than ours. The figure below shows just how far U.S. women have fallen behind some of our international peers. The graph shows the share of women age 25–54 with a job between 1995 and 2015 in Germany, Canada, Japan, and the United States. While women’s prime-age employment-to-population ratio (EPOP) rose over that 20-year period in those peer nations, it actually fell in the United States.
The share of prime-age women with a job has fared worse in the U.S. than in peer countries: Employment-to-population ratio of women workers age 25–54, select countries, 1995–2015
Source: EPI analysis of OECD Labour Force Statistics
Last week, Senator Warren, joined by her colleagues Senator Murray and Senator Sanders, asked Attorney General Sessions to open a criminal investigation into the deaths and serious injuries of workers employed by VT Halter Marine, Inc., a shipbuilder with United States Navy contracts. Senators argue that, while the Occupational Safety and Health Administration (OSHA) has assessed penalties against VT Halter, the fines “are clearly not a sufficient deterrent for VT Halter.” The senators’ request follows a report from the Center for Investigative Reporting documenting VT Halter’s history of violating workplace safety regulations. Despite the company’s track record, it has continued to receive hundreds of millions of dollars in federal contracts.
Today, the Senate is voting on a resolution of disapproval to block the Obama administration’s Fair Pay and Safe Workplaces rule that would help ensure that law-breaking employers, like VT Halter, do not receive federal contracts. The rule requires contractors to disclose violations of federal labor and employment laws, including the Occupational Safety and Health Act, and directs agency contracting officials to consider a company’s record of violations in awarding federal contracts. President Trump has already stated that he will sign the resolution and block the rule. This, as he announced his intention to increase military spending, leading to hundreds of millions in taxpayer dollars going to federal contractors for the development of new ships, planes, and technology in support of our military. By blocking the rule designed to reform federal contracting, the president and congressional Republicans have essentially ensured that taxpayers will continue to support contractors with a history of violating worker protection laws and regulations.
Following a directive from President Trump, the Labor Department has proposed a two-month delay in implementing an Obama administration rule requiring financial professionals to act in clients’ best interests when recommending investment products or strategies to people saving for retirement (known as the “fiduciary rule”). Under the proposed extension, the rule would take effect June 9 rather than April 10. The public has 15 days to submit comments on the delay.
The rule was six years in the making and has survived three court challenges backed by the financial services industry, which stands to lose an estimated $17 billion a year from ending predatory practices by brokers and other financial professionals passing themselves off as disinterested advisors. It incorporates input from four days of public hearings, over 3000 public comment letters, and more than 100 stakeholder meetings.
Unbeknownst to most people, it is currently legal for financial professionals to recommend higher-cost investment products or rollovers from 401(k)s to higher-cost IRAs when similar but lower-cost options are available, without disclosing that they are working on commission rather than making recommendations that are in their clients’ interest.
Yesterday, the Chamber of Commerce released ten recommendations to “fix” the National Labor Relations Board (NLRB). The Chamber’s policy suggestions are recycled positions that have been the subject of the nearly two dozen hearings on the agency since Republicans assumed control of the House in 2011. Arguing that President Obama’s board “overturned over 4,500 years of precedent,” the Chamber advances a platform that would roll back workers’ rights to the Stone Age.
Since the NLRB issued its decision in Specialty Healthcare, clarifying the standard for determining an appropriate bargaining unit, corporate special interests have assailed it as inviting the proliferation of “micro” units that will allow unions to gerrymander workforces. The Chamber echoes this argument in advocating for the NLRB or Congress to overturn the decision. However, the NLRB’s standard for determining an appropriate bargaining unit in Specialty Healthcare has been upheld in all seven U.S. Courts of Appeals in which it has been challenged. Data on the median size of bargaining units disproves the argument that the standard would lead to the proliferation of so-called “micro-units.” Why then are the Chamber and other corporate interest groups committed to doing away with the Specialty Healthcare standard? They want employers that are committed to defeating an organizing campaign to be able to manipulate who is in a bargaining unit to make it harder for workers to organize. The National Labor Relations Act (NLRA) directs the NLRB to allow employees to organize into units that assure employees “the fullest freedom in exercising the rights guaranteed by this Act.” The standard in Specialty Healthcare does just that.
This week, the House of Representatives will consider three bills that further advance a deregulatory agenda that jeopardizes worker safety, consumer protections, and our environment. The House has already passed several bills this session that limit agencies’ ability to regulate. The trio of bills on the House floor this week includes the Regulatory Integrity Act of 2017, the OIRA Insight, Reform, and Accountability Act, and the Searching for and Cutting Regulations that are Unnecessarily Burdensome (SCRUB) Act. The House will also vote on additional Congressional Review Act resolutions to block existing rules, including an Occupational Safety and Health Administration (OSHA) regulation that enables OSHA to hold employers accountable for failing to keep accurate records of workplace injuries and illnesses. It is clear that Congress is laser-focused on rolling back regulatory protections and making it as hard as possible for agencies tasked with safeguarding our nation’s workers to do their job.
President Trump is expected to outline plans for trade policy development in his speech to a joint session of Congress. He outlined some of those plans in remarks to the Conservative Political Action Conference, where he said “We’re going to make trade deals, but we’re going to do one-on-one, one-on-one, and if they misbehave, we terminate the deal.”
The United States had a global current account deficit (the broadest measure of all trade in goods, services and income) of $470 billion (2.5 percent of GDP) and a goods trade deficit of $750 billion (4 percent of GDP) in 2016. Meanwhile, a handful of countries have developed large, structural trade surpluses that reached $1.2 trillion, which have effectively transferred millions of manufacturing jobs from the United States and other countries to these surplus countries—have hampered economic recovery in much of the globe—and now threaten to destabilize the global economy again in coming years if not reduced.
The battle over the future of the Affordable Care Act (ACA) has clearly begun in earnest. A striking feature of this debate is the disconnect between commonly cited complaints about the ACA and prescriptions offered by Republican lawmakers. For example, the most common complaint about the ACA’s exchange-based insurance policies is that they are too “thin”—deductibles, co-pays, and other cost-sharing burdens are too high. This complaint is understandable. For people used to getting employer-sponsored insurance (ESI) who find themselves now buying in the exchange, it is true that these plans are thinner than most ESI plans. But we should remember that the pre-ACA individual market for insurance offered much less comprehensive plans that required much larger out-of-pocket costs. For example, fully half of the plans offered on the individual market before the ACA would not be allowed today precisely because they demanded too-costly out-of-pocket exposure.
Fixing the problem of too-high exposure to out-of-pocket costs is straightforward: the exchange subsidies for premiums and cost-sharing could be increased. There would be plenty of members of Congress—mostly (or exclusively) Democratic—who would sign onto this. The obvious objection to this is that it costs taxpayer money. This, in turn, begs the question of are there any policy changes that could both lower the cost of health care to consumers and also the tax bills of households?
Luckily, there are such policies. Senator Bernie Sanders and co-sponsors are introducing the Affordable and Safe Prescription Drug Importation Act. This would instruct the HHS Secretary to put forward regulations allowing the importation of qualifying prescription drugs from Canadian sellers. In two years, importation from other advanced countries would also be allowed. The bill sets high standards to insure that only safe and effective prescription drugs could be imported, and there would be strict controls following the drugs into the United States to insure their proper dispensing.
Another week and Congressional and White House attacks on worker rights and safety continue. Here’s another proposed Congressional action guaranteed not to make headlines, but which will nevertheless have a damaging impact on worker safety.
Last week, Rep. Bradley Byrne (R-Ala.) introduced a “resolution of disapproval” under the Congressional Review Act (CRA) to overturn the “Volks Rule,” which allows the agency to continue prosecuting recordkeeping violations as it had done in the first 40 years of its existence.
Overturning the Volks Rule will result in more workers being injured, and it will penalize responsible employers.
This article was originally published in Quartz.
Donald Trump’s promise to renegotiate or tear-up the 1994 North American Free Trade Agreement was a major reason why he won the support of working class voters in the Midwestern states that were crucial to his election. It’s also a trap.
As US president-elect, Trump quickly scored some points with his Rust Belt constituency after claiming to get the Carrier and Ford corporations to reduce the number of jobs they are sending to Mexico. He also clearly exaggerated the effect of his personal persuasiveness: Carrier was moved by a $7 million tax break from the state of Indiana and Ford might well have made its decision before Trump intervened. In any event, as the Wall Street Journal reports, other companies, such as Rexnord, Caterpillar, and Nucor continue to send jobs south of the border. Renegotiating NAFTA is therefore the first real test of Trump’s pledge to create good new jobs by negotiating better trade deals.
Will he deliver on this pledge? No. But the reason is not, as the conventional economic wisdom has it, because outsourcing work to low-wage countries is the inevitable result of immutable global forces that no president can reverse. The problem for American workers is not international trade, per se. America has been a trading nation since its beginning. The problem is, rather, the radical new rules for trade imposed by NAFTA—and copied in the myriad trade deals signed by the US ever since—that shifted the benefits of expanding trade to investors and the costs to workers.
78 percent of baby boomers are more afraid of retirement than of death. Sound extreme? Not really. The median retirement savings for near-retirement households is $14,500. At least half of households are at risk of having insufficient resources to maintain themselves into retirement. And four in 10 people age 56–61 have nothing at all saved for retirement.
How can this be? There are a number of reasons, including the demise of private and public pensions and growing income inequality, which has shrunk the capacity of workers to save. But one cause is fairly easy to fix: millions of people do not have access to 401(k) plans or other savings options at their workplace.
What if people who wait tables, wash cars, take care of children, or perform other low-wage jobs for small businesses—which often don’t offer 401(k) savings plans—could have money taken out of every paycheck and deposited into a low-cost retirement savings account operated through the state government? Five states have enacted plans that are making this possible, and 28 states are at various stages of considering such plans. If all of these states did enact these laws, 63 million people could have access to retirement savings options.
This was the goal of the Obama administration, which put in place regulations to help states that wanted to provide retirement savings options. Though some states had set out on this path before, this new policy that made it easier and safer for states to offer these plans, paved the way for this positive development in the states.
EPI executive board member Paul Booth has been and continues to be a tireless advocate for American working people, and, in fact, for working people all over the world. Even though he is stepping down from his day job at AFSCME, we trust that Paul’s long career of union organizing and advocating for workers and social justice is far from over.
As a trusted advisor to EPI, Paul has served an important role—often encouraging us to take risks and see the long-game. He never stops pushing to make us more effective, to work harder, to make a bigger difference in the world and in the lives of the America’s working families.
While the headlines are dominated by White House leaks and personnel scandals, the Trump administration and Republicans in Congress have been quietly helping the financial industry siphon off your retirement savings. First, the administration announced that it was reviewing a rule scheduled to take effect in April requiring financial advisors to work in their clients’ best interests. Yes, you read that correctly. Some people presenting themselves as financial advisors can now legally steer you to rip-off investments, a glaring problem the Obama administration addressed in a commonsense rule six long years in the making.
The rule, backed by the Consumer Federation of America, Senator Elizabeth Warren, Vanguard founder John Bogle, and others, applies to brokers, plan consultants, and others advising participants in 401(k)-style plans and IRAs who don’t already adhere to a fiduciary standard. Among other things, it prohibits financial professionals from pretending to offer disinterested retirement advice while working on commission and from steering retirement savers to higher-cost investments when similar but lower-cost options are available. Importantly, the rule protects job-leavers from being lured into rolling over their pensions and 401(k)s into higher-cost IRAs, at a time in their life when many people are vulnerable to bad advice.
How can anyone argue against the fiduciary rule with a straight face? The financial services industry counters that if some clients don’t get bad advice, they may not be able to afford advice at all. This is like dietitians arguing that clients may not be able to afford nutritional advice if it’s not paid for by Coca Cola. The industry also says the rule could put some people out of business, which isn’t reason to oppose it—it goes without saying that we shouldn’t prop up a business model where survival is dependent on fleecing savers.
Brad DeLong is far too lenient on trade policy’s role in generating economic distress for American workers
Brad DeLong posted a widely-read piece on Vox a couple of weeks ago effectively exonerating globalization and trade policy from accusations that it has contributed to economic distress for low- and moderate-wage American workers. He doubled-down on specific claims this week in a piece at Project Syndicate. Below I’ll assess some of his claims in a bit of detail, but here’s a “too-long; didn’t read” checklist of how I grade the accuracy of some of his main claims:
- Putting pen-to-paper on trade agreements contributed nothing to aggregate job loss in American manufacturing. This is almost certainly true.
- The aggregate job loss we have seen in manufacturing is due to automation plus declining domestic demand for manufactured goods, period. This is mostly false. Trade deficits, especially with China in the last 15-20 years, have contributed significantly to overall manufacturing job-loss..
- The source of these rising trade deficits is mostly an overvalued U.S. dollar, which has nothing to do with trade policy. It’s true that an overvalued dollar is what’s behind rising trade deficits, but saying that has nothing to do with trade policy is semantics. Call it macroeconomic policy if you want, but the way an overvalued dollar hurts Americans is through its impact on trade flows.
- The trade agreements we have signed are mostly good policy and have had only very modest regressive downsides for American workers. This is false.
- Globalization writ large has been tough on some American workers and policymakers have failed to compensate losers. This is true, but I think DeLong underestimates the number of losers and the size of their losses.
So, let me dive deeper into each one of these arguments:
The racial wealth gap: How African-Americans have been shortchanged out of the materials to build wealth
Wealth is a crucially important measure of economic health. Wealth allows families to transfer income earned in the past to meet spending demands in the future, such as by building up savings to finance a child’s college education. Wealth also provides a buffer of economic security against periods of unemployment, or risk-taking, like starting a business. And wealth is needed to finance a comfortable retirement or provide an inheritance to children. In order to construct wealth, a number of building blocks are required. Steady well-paid employment during one’s working life is important, as it allows for a decent standard of living plus the ability to save. Also, access to well-functioning financial markets that provide a healthy rate of return on savings without undue risks is crucial.
Failures in the provision of these building blocks to the African-American population have led to an enormous racial wealth gap. The racial wealth gap is much larger than the wage or income gap by race. Average wealth for white families is seven times higher than average wealth for black families. Worse still, median white wealth (wealth for the family in the exact middle of the overall distribution—wealthier than half of all families and less-wealthy than half) is twelve times higher than median black wealth. More than one in four black households have zero or negative net worth, compared to less than one in ten white families without wealth, which explains the large differences in the racial wealth gap at the mean and median. These raw differences persist, and are growing, even after taking age, household structure, education level, income, or occupation into account.
Wisconsin Governor Scott Walker recently visited the White House, prompting speculation that the Trump administration might be looking to follow Walker’s model of anti-unionism. But following Walker’s model means betraying the very people who put President Trump in office: frustrated working-class Americans.
In 2011, at the urging of the billionaire Koch brothers, Walker pushed through a law that effectively eliminated the right to collective bargaining for state and local government employees. School teachers and custodians, child case workers, and road repair crews all lost the right to bargain for decent wages and benefits. Walker portrayed his action as standing up for hard-working nonunion taxpayers in the private sector who were being bled dry by the Cadillac pensions of fat and lazy public employees. In fact, however, Walker’s bill was just one more part of a playbook written by corporate lobbyists to make the rich even richer and our economy even more unequal.
Public employees are working- and middle-class, and all of them suffered dramatic health insurance cutbacks. But when the state cut people’s benefits, what did they do with the savings? They certainly didn’t give it to hard-working families struggling to make ends meet in the private sector. Instead, more than half the savings were doled out in tax cuts to the richest 20 percent of the population. While Walker gave the rich— those who needed the least help— an extra $680 per year per person, those struggling to get by in the poorest fifth of Wisconsin families got less than $50 each. Walker’s model is not taking from the haves and giving to the have-nots: it’s taking from working people and giving to the elite.
Valentine’s Day is next week, and with it one of their busiest days of the year for America’s restaurant workers. For the servers and bartenders who rely on tips for the bulk of their income, the influx of couples celebrating romance with extravagant meals and expensive bills holds the promise of a nice payout. Unfortunately, for restaurant staff in most states, their windfall may not be as big as it seems. In fact, by the end of the week, their Valentine’s Day pay may turn out to have been nothing more than minimum wage. This is because in 42 states and the District of Columbia, there is a separate lower minimum wage for tipped workers, allowing restaurants (and other employers of tipped workers) to subtract a portion of their employee’s tips from the base wage paid by the house. In 18 of these states, restaurants can pay tipped workers as little as $2.13 per hour so long as—over the course of the week—the combination of tips plus the base wage averages out to at least the regular minimum wage.
Setting aside the fact that in almost every state the regular minimum wage is far too low, consider the challenges this separate lower minimum wage creates for tipped workers. The bulk of their paycheck is up to the whims of the customer, and research has shown that quality of service often has little to do with what the customer chooses to tip. Weekly, let alone monthly, income is harder to anticipate, making planning and budgeting more difficult. (Imagine trying to evaluate a mortgage offer or a car loan payment schedule if you have little ability to forecast your monthly income.) Racial bias has been shown to affect tipping, and worker advocacy groups argue that the pressure to ensure customer satisfaction, particularly in a workplace where customers are consuming alcohol, forces restaurant workers to suffer high rates of sexual harassment. Furthermore, although the law requires that employers make up the difference so that tipped workers receive at least the minimum wage, this does not always happen in practice.
President Trump’s nominee for Secretary of Labor, Andrew Puzder, has a new date for his confirmation hearing—February 16, a week from tomorrow. This marks the fifth time the Senate Committee on Health, Education, Labor, and Pensions (HELP) will attempt to consider Puzder’s nomination. While much speculation surrounds the repeated delays, today’s announcement makes one thing clear—President Trump and Senate Republicans are doubling down on a nominee whose policy positions are bad for U.S. workers. Now, senators will have an opportunity to show where they stand.
When HELP Committee members finally get a chance to question Puzder on his positions and plans for the Labor Department, they should demand that he explain his views on minimum wage. Puzder has claimed that increasing the minimum wage costs jobs; senators should ask him how he explains that California has a higher minimum wage than the federal minimum wage yet has seen faster economic growth—including in the restaurant industry—than the country as a whole. Senators should ask Puzder if he knows how many Americans were killed at work before the Occupational Safety and Health Act was enacted in 1970. Does he know how many workers are killed each year now, in an economy twice as big? Still far too many, but fewer than before—demonstrating the importance of meaningful workplace safety standards. Finally, senators should demand that he explain his own company’s record of wage and hour and OSHA violations.
President Trump’s insistence on advancing Puzder as his nominee for labor secretary reveals that his agenda is to pursue an economy that works great for corporate owners and those at top, but does not work for low-and middle- income families. After decades of wage stagnation and weakened worker protections, we need a labor secretary who will advocate for a strong minimum wage and meaningful worker protections. The Senate now has a chance to demand that workers get a secretary who will guard their rights and advance an agenda that works for them. We will see if they agree that America’s workers deserve better than Mr. Puzder.
The U.S. Census Bureau reports that the annual U.S. trade deficit in goods and services increased slightly from $500.4 billion in 2015 to $502.3 billion in 2016, an increase of $1.9 billion (0.4 percent). This reflects a $14.4 billion (5.5 percent) decline in the services trade surplus and a $12.5 billion (1.6 percent) decrease in the goods trade deficit. However, the small increase in the overall goods and services trade deficit, and its downward trend over the past decade, mask important structural shifts in U.S. trade.
Falling petroleum prices and rising domestic petroleum production and exports have obscured surging imports of nonpetroleum goods (NPGs) —the vast bulk of which are manufactured products—into the United States since 2013. The trade deficit in NPGs, which has the most impact on workers and communities, has increased sharply. The U.S. trade deficit in petroleum goods declined by $22.7 billion (32.8 percent) in 2016, while the trade deficit in NPGs increased by $16.4 billion (2.5 percent), continuing the sharp run-up in the NPG trade deficit since 2013.
The U.S. trade deficit in NPGs is now at an all-time high (shown with dark blue bars in the figure below) while the overall U.S. balance of trade in goods and services (shown with light blue bars) has fallen sharply from a peak of $761.7 billion in 2006 to $502.3 billion in 2016—obscuring the much larger (and more important) trade deficit in NPGs.