New York Times columnist David Brooks, in an article sub-titled “No, Virginia, there is no class war,” recently trotted out an old argument about why wage growth has been so sluggish for so many U.S. workers for so long: they’re just not very good workers. Specifically, he argues that “wages are still mostly determined by skills and productivity.” Ergo, if there is growing inequality in wages, it must be driven by inequality in workers’ own productivity.
But the evidence he cites is totally unconvincing on this.
First, he notes that wages for lower-wage workers have recently grown more rapidly than for middle-wage workers. But it’s been shown again and again that this is driven in large-part by those states that have raised their minimum wages. It’s also been shown that tighter labor markets disproportionately benefit the lowest-paid workers. The argument that changes in relative bargaining power and economic leverage have been the prime mover of wage trends in recent decades is not an argument that wages can never rise, period. When policies change—like minimum wages increase and the Fed allows labor markets to tighten without slamming on the interest rate brakes—good things happen. We just need to change a lot more policies.
Second, he cites a study that looks at wage and productivity growth in high-skill and low-skill industries between 1989 and 2017. The first odd bit of this evidence is that the wage growth he reports the study claims for high and low-skill industries is essentially identical: 26 percent versus 24 percent. The second odd bit is that this means even high-skill industries only gave average annual wage increases of 0.8 percent over that time, even as aggregate productivity grew by almost twice as fast over that time (about 1.4 percent annually). Finally, and most important, using industry-level productivity growth to infer anything about the productivity of individuals working in these industries cannot be done. To put it most simply, productivity growth within an industry can occur because each input used in production gets more productive, or, there is a shift in the mix of inputs. This might sound wonky but I’ll explain a bit more in the next paragraph:Read more
“We can never be satisfied as long as the Negro is the victim of the unspeakable horrors of police brutality…We cannot be satisfied as long as the Negro in Mississippi cannot vote and the Negro in New York believes he has nothing for which to vote.” —Martin Luther King Jr.
Two historic events occurred in American history in different years on August 28. In 1955, Emmett Till was lynched in Mississippi—and in 1963, Martin Luther King Jr. addressed the nation from Washington, D.C., with his “I Have a Dream” speech. While both events have been ingrained in many Americans’ memories, few are aware that they share a common link between brutality and voter suppression.
The prevailing belief of the circumstances surrounding 14-year-old Emmett Till’s killing is that he was accused of whistling at a white woman. Yet, the truth is he was lynched as an act of voter intimidation. After being acquitted by an all-white jury, one of Emmett Till’s killers confessed to the lynching and gave voting as the first reason he killed Emmett.
“But I just decided it was time a few people got put on notice. As long as I live and can do anything about it, [racial slur] are gonna stay in their place. [Racial slur] ain’t gonna vote where I live. If they did, they’d control the government.”—J.W. “Big Milam”
Although Emmett Till was brutally lynched 65 years ago, historical events like his killing continue to suppress the political participation of black Americans. Using data on historical lynchings and present-day voter registration of blacks in southern states, Figure A shows that blacks who live in counties that experienced more lynchings in the past are less likely to register to vote today.Read more
The White House has announced plans for a ceremony to sign a “phase one” trade deal with China on Wednesday, although details of the agreement have yet to be announced. As one analyst noted, this deal may not amount to more than a hill of soybeans. It is unlikely to significantly reduce massive U.S. job losses due to growing U.S. trade deficits—the difference between imports and exports—which are dominated by trade deficits in manufactured goods. As shown in a forthcoming EPI report to be released later this month, growing U.S. trade deficits with China eliminated 3.7 million U.S. jobs between 2001 and 2018 alone (see Figure A), including 2.8 million jobs in manufacturing (details will be provided in the forthcoming report).
U.S. jobs displaced by the growing goods trade deficit with China since 2001 (in thousands of jobs)
|Year||Jobs displaced (thousands)|
Source: Authors’ analysis of U.S. Census Bureau American Community Survey data, Bureau of Labor Statistics Employment Projections program data, and U.S. International Trade Commission Interactive Tariff and Trade DataWeb database. Adapted from Rob Scott and Zane Mokhiber, Growing China Trade Deficits Cost 3.7 Million American Jobs between 2001 and 2018, Economic Policy Institute, forthcoming.
Trade deficits and jobs losses with China continued to grow during the first two years of the Trump administration—despite the administration’s heated rhetoric and imposition of tariffs. The U.S. trade deficit with China rose from $347 billion in 2016 to $420 billion in 2018, an increase of 21.0%. U.S. jobs displaced by those China trade deficits increased from nearly 3.0 million jobs lost in 2016 to 3.7 million jobs lost in 2018, an increase of more than 700,000 jobs lost or displaced in the first two years of the Trump administration.
Although the bilateral trade deficit with China has declined in 2019 (through November), the overall U.S. trade deficit in non-oil goods, which is dominated by trade in manufactured and farm products, has continued to increase, suggesting that trade diversion has grown in importance. These are important topics for future research.
While growing exports support some American jobs, growing imports eliminate existing jobs and prevent new job creation—as imports displace goods that otherwise would have been made in the United States by domestic workers. As a result, growing trade deficits result in increasing U.S. job losses. The top half of Table 1 shows just how much the trade deficit has grown: The U.S. trade deficit with China increased from $83.0 billion in 2001 to $420 billion in 2018. While U.S. exports to China increased in this period, growing exports were overwhelmed by the massive growth of imports from China, which increased by $437 billion in this period. Read more
The labor market continues to improve in 2019 as women surpass men in payroll employment, but wage growth slows
Today’s Bureau of Labor Statistics (BLS) jobs report provides the opportunity to look at 2019 as a whole and in comparison with previous years. As the recovery has strengthened over the last several years, we’ve generally seen improvements in most measures of the labor market: employment, unemployment, and wage growth. These measures tell a consistent story—an economy on its way to full employment, but not there yet. Wage growth continues to be the lagging indicator, which is not as strong as would be expected given the health of the labor market and actually slowed through much of 2019.
Payroll employment growth in December was 145,000, bringing average job growth in 2019 to 176,000. This is a bit softer than the 223,000 average for 2018, but still more than enough to keep up with growth in the working-age population and pull in thousands of workers off the sidelines every month.
Average monthly total nonfarm employment growth, 2006–2019
|Year||Average monthly total nonfarm employment growth|
Source: Data are from the Current Employment Statistics (CES) series of the Bureau of Labor Statistics and are subject to occasional revisions. This chart was based on data accessed in January 2020.
For the first time in nearly 10 years, women’s share of payroll employment has just surpassed that of men’s. The figure below shows payroll employment for both men and women since 2000. From 2000 to 2007, men’s share of total employment was about 1–2% higher than women’s. In the recession, employment fell markedly in male-dominated professions—notably manufacturing and construction—and women’s share of employment rose in kind. Since 2010, women’s and men’s employment have both increased, with men’s growing faster than women’s initially. In the last couple of years, women’s payroll employment has grown just a bit faster than men’s.
We can turn again to a sector approach as one explanation for why women’s employment has now just surpassed men’s in December. Men make up 77% of employment in construction and manufacturing combined. Coincidentally, women make up 77% of employment in education and health services. Between 2018 and 2019, construction and manufacturing together increased by 356,000, but education and health services employment increased much more—by 603,000. Furthermore, manufacturing employment has faltered late in the year, helping women’s employment eke ahead of men’s in December.
It is important to note that in absolute terms the shares of men’s and women’s employment haven’t changed that dramatically. But, it holds true that women’s payroll employment is now 50.04% of the total, the first time it has been a majority since the depths of the (construction and manufacturing-led) Great Recession.
Women’s share of payroll employment ekes ahead of men’s in December 2019: Payroll employment, men and women, 2000 to 2019
|Date||Payroll employment, women||Payroll employment, men|
Source: EPI analysis of Bureau of Labor Statistics' Current Employment Statistics public data series
Turning to the household survey, the labor market continues to not only absorb population growth, but also chip away at the slack remaining in the labor market—namely workers who continue to be sidelined and who I expect will enter or re-enter the labor market as opportunities for jobs and better pay expand. As the unemployment rate has continued to fall between 2018 and 2019, labor force participation has increased as people re-enter the labor market and find jobs. Since December 2018, the unemployment rate dropped 0.4 percentage points (3.9% to 3.5%) while the employment-to-population ratio, or the share of the population with a job, rose 0.4 percentage points (60.6% to 61.0%). This means the unemployment rate over the last year fell for the right reasons—not because workers gave up looking, but because more would-be workers actually found jobs.
The last Bureau of Labor Statistics (BLS) jobs report of 2019 comes out on Friday, giving us a chance to step back and look at how working people fared over the entire year. The report also marks the 12th anniversary of the official start of the Great Recession. My expectation is that the December data will confirm that the economy has nearly recovered its immediate pre-Great Recession health—the last year before the Great Recession hit. Wage growth, which slowed over the last year, is a notable exception.
However, as I have often noted, 2007 should not be considered a benchmark for a fully healthy economy for America’s workers. Almost all labor market measures were notably weaker in 2007 than they were at the previous business cycle peak in 2000. There was very little reason to think that the U.S. economy in 2007 was at full employment. If one looks at the stronger business cycle peak of 2000 as a more appropriate benchmark, the economy in 2019 looks even further from full employment. Many working people are still not seeing the recovery reflected in their paychecks—and the economy will not be at genuine full employment until employers are consistently offering workers meaningfully higher wages.
In this blog post—and Friday when the December numbers come out—I’m going to look at average payroll employment growth over the last several years. Because there is always a bit of volatility in the monthly data—especially in the household series that has a smaller sample size—taking a year-long approach allows us to smooth out the bumps and take stock of the key measures: payroll employment growth, the unemployment rate, the employment-to-population ratio, and nominal wage growth.
The figure below shows average nonfarm employment growth for 2007–2018 and for the first 11 months of 2019. With an average of 180,000 new jobs being added each month, job growth in 2019 is a bit softer than 2018 and more in line with what we saw in 2017. This pickup in 2018 can be attributed to the shift in federal policy from austerity to stimulus in the form of both tax cuts and an increase in government spending. In particular, Congress boosted spending by almost $150 billion, contributing significantly to economic growth in 2018. But, in 2019, spending held steady at $150 billion, meaning there was no additional government spending to continue stimulating demand, and we saw a mild softening of employment growth.
Average monthly total nonfarm employment growth, 2006–2019
|Year||Average monthly total nonfarm employment growth|
Note: Because full 2019 monthly employment data are not yet available, the chart compares average monthly job growth between January and November for 2019.
Source: Data are from the Current Employment Statistics (CES) series of the Bureau of Labor Statistics and are subject to occasional revisions. This chart was based on data accessed in January 2020.
At the current pace of growth, however, the labor market continues to not only absorb population growth, but also chip away at the slack remaining in the labor market—namely workers who continue to be sidelined and who I expect will enter or re-enter the labor market as opportunities for jobs and better pay expand. As it turns out (and what we’ve long argued), workers who left or never entered the labor force during the Great Recession and its aftermath were not necessarily permanently sidelined, but have systematically been returning to the labor market as job opportunities have strengthened. Over the last few years, the newly employed have been coming both from the ranks of the unemployed as well as from outside the labor force, those who were not actively seeking work the month prior to finding a job. In fact, as the figure below illustrates, the share of newly employed workers who did not look for work the previous month is at a historic high. About three-fourths of newly employed workers are coming from outside the labor force.
Share of newly employed workers who said that they were not actively searching for work in the previous month
|date||Share of newly employed workers who said that they were not actively searching for work in the previous month|
Note: Because of volatility in these data, the line reflects three month moving averages
Further evidence of a steadily improving economy is the unemployment rate, which—after falling steadily for eight years from its peak in the fourth quarter of 2009—continued to fall through 2019 to a low of 3.5% in November, an average of 3.7% for the first 11 months of the year. It is now far below its Great Recession peak (10.0%), and significantly below its pre-Great Recession low of 4.4% in the spring of 2007. But despite today’s low water mark, there is still room for improvement. And evidence suggests that the unemployment rate may be overstating the strength of the labor market. The previous figure supports this claim, given that a record high share of newly employed workers are coming from outside the labor force and are not counted in the official measure of unemployment in the previous month, despite clearly being ready and willing to work.Read more
Beginning in January 2021, new rules will go into effect that will allow NCAA student-athletes to profit from the use of their names, images, and likeness. While the details of these new rules will require much deliberation among each NCAA division, one thing will not be considered—salaries for college athletes from the universities.
Why won’t college athletes be paid a salary?
Several reasons are floating around. One reason is the NCAA does not consider college athletes employees of the universities. Another reason is that these players are given a lot of perks. In a recent Los Angeles Times article, Dan Radakovich, athletic director at Clemson University, argued against paying college athletes since they have access to “world-class facilities, world-class coaching, and incredible academic support.”
But there already exists a group of students who are employees of the university, have access to world-class facilities, teaching, and academic support, and no one calls them selfish when they receive their salaries. Who are these students? Ph.D. students.
Wait, are you saying Ph.D. students receive a salary?
Yes, because they work for the university. A large percentage of Ph.D. students are funded via fellowships or assistantships. Funding, which covers tuition and provides a stipend, varies across institutions and doctoral programs due to what can be viewed as “educational hierarchy.” Assistantships require that Ph.D. students’ work anywhere from 20 to 40 hours per week that include duties such as grading, managing labs, or lecturing. Additionally, doctoral students are awarded (or sometimes apply for) money that allows them to attend international or out-of-state conferences to present their research and network with others in their field.
In short, Ph.D. students sign a contract with an institution, agree to work a certain number of hours per week, maintain a certain GPA, and conduct research. In exchange, the university covers their tuition and pays them a salary. What do college football players do? Sign a contract (you may have seen signing day on ESPN), maintain a certain GPA, and kick butt on Saturday, which requires countless hours of practice! Additionally, their success can help recruit up to tens of thousands of students and generate millions of dollars for the institution.
Note: This post was updated to clarify that Delaware’s minimum wage increase took effect on October 1, 2019.
At the start of the new year, minimum wages will have gone up in 22 states, lifting pay for 6.8 million workers across the country.i In total, workers affected by the increases will earn an extra $8.2 billion over the course of 2020 as a result of the changes. The increases range from a $0.10 inflation adjustment in Florida to $1.50 per hour raises in New Mexico and Washington. Affected workers who work year-round will see their annual pay go up between $150 and $1,700, on average, depending on the size of the minimum wage increase in their state.
The map and table below describe the increases in each state. Note that these estimates do not account for changes in local minimum wages separate from state law.ii There are 22 cities and counties with higher minimum wages taking effect on January 1, all of which can be found in EPI’s Minimum Wage Tracker. The estimates also do not include any “indirectly affected workers” making just above the new minimum wage who may receive raises as employers adjust their overall pay scales.
State minimum wage increases will raise pay for nearly 7 million workers on January 1: States with minimum wage increases effective January 1, 2020, by type of increase
|State||Share of workforce directly benefiting||Type of increase||New minimum wage as of Jan. 1, 2020||Amount of increase||Total workers directly benefiting||Total increase in annual wages||Average increase in annual earnings of year-round workers|
|Ohio||1||1.60%||Inflation adjustment||$ 8.70||$ 0.15||84,000||$ 12,303,000.00||$ 150.00|
|South Dakota||1||1.70%||Inflation adjustment||$ 9.30||$ 0.20||7,300||$ 1,560,000.00||$ 220.00|
|Florida||1||1.90%||Inflation adjustment||$ 8.56||$ 0.10||160,700||$ 23,766,000.00||$ 150.00|
|Montana||1||1.90%||Inflation adjustment||$ 8.65||$ 0.15||8,900||$ 1,588,000.00||$ 180.00|
|Minnesota||1||2.40%||Inflation adjustment||$ 10.00||$ 0.14||68,100||$ 11,030,000.00||$ 162.00|
|New Mexico||2||2.70%||Legislation||$ 9.00||$ 1.50||22,900||$ 20,736,000.00||$ 900.00|
|Alaska||1||3.00%||Inflation adjustment||$ 10.19||$ 0.30||10,500||$ 5,348,000.00||$ 510.00|
|Illinois||2||3.30%||Legislation||$ 9.25||$ 1.00||192,900||$ 173,533,000.00||$ 900.00|
|Michigan||2||3.40%||Legislation||$ 9.65||$ 0.20||147,000||$ 32,907,000.00||$ 220.00|
|Delaware||2||4.00%||Legislation||$ 9.25||$ 0.50||17,200||$ 10,811,000.00||$ 630.00|
|New York||2||4.00%||Legislation||$ 11.80||$ 0.70||411,700||$ 399,246,000.00||$ 970.00|
|Vermont||1||5.20%||Inflation adjustment||$ 10.96||$ 0.19||16,200||$ 3,932,000.00||$ 240.00|
|Missouri||3||5.40%||Ballot measure||$ 9.45||$ 0.85||153,600||$ 123,505,000.00||$ 800.00|
|Maryland||2||7.60%||Legislation||$ 11.00||$ 0.90||204,300||$ 216,530,000.00||$ 1,060.00|
|Arkansas||3||11.00%||Ballot measure||$ 10.00||$ 0.75||119,300||$ 113,142,000.00||$ 950.00|
|Washington||3||11.60%||Ballot measure||$ 13.50||$ 1.50||386,000||$ 655,972,000.00||$ 1,700.00|
|New Jersey||2||11.70%||Legislation||$ 11.00||$ 1.00||460,400||$ 480,308,000.00||$ 1,040.00|
|Massachusetts||2||12.00%||Legislation||$ 12.75||$ 0.75||420,600||$ 409,981,000.00||$ 970.00|
|Colorado||3||12.10%||Ballot measure||$ 12.00||$ 0.90||318,400||$ 382,354,000.00||$ 1,200.00|
|California||2||16.90%||Legislation||$ 13.00||$ 1.00||2,950,200||$ 4,376,241,000.00||$ 1,480.00|
|Maine||3||16.90%||Ballot measure||$ 12.00||$ 1.00||102,900||$ 130,250,000.00||$ 1,270.00|
|Arizona||3||17.70%||Ballot measure||$ 12.00||$ 1.00||511,900||$ 653,915,000.00||$ 1,300.00|
Notes: *The New York minimum wage changes take effect on December 31, 2019. Delaware's minimum wage increase took effect on October 1. “Legislation” indicates that the new rate was established by the legislature. “Ballot measure” indicates the new rate was set by a ballot initiative passed by voters. “Inflation adjustment” indicates that the new rate was established by a formula, reflecting the change in prices over the preceding year.
Directly affected workers will see their wages rise because the new minimum wage rate exceeds their current hourly pay. This does not include additional workers who may receive a wage increase through “spillover” effects, as employers adjust overall pay scales.
Estimates for New York reflect changes in the minimum wage applicable to upstate New York ($11.80) and Nassua, Suffolk, and Westchester counties ($13.00). New York City's minimum wage reached $15 at the end of 2018 and there are no further increases scheduled.
Population growth between the data period and January 2020 estimated using state-specific projections for growth in the total population or the population ages 15—69, where available. Nominal wage growth between the data period (2017) and January 2020 estimated using the 3-year average of nominal wage growth of the bottom 20 percent of wage earners in each state from 2015 to 2018. A full methodology is available in Minimum Wage Simulation Model Technical Methodology.
Source: Economic Policy Institute Minimum Wage Simulation Model using data from the Census Bureau, Bureau of Labor Statistics, and Congressional Budget Office. See Minimum Wage Simulation Model technical methodology [https://www.epi.org/publication/minimum-wage-simulation-model-technical-methodology/].
In seven states, the changes are the result of automatic annual inflation adjustments. Alaska, Florida, Minnesota, Montana, Ohio, South Dakota, and Vermont all have provisions in their state minimum wage laws that require the wage be adjusted annually to reflect changes in prices over the preceding year. Doing so ensures that the minimum wage never declines in purchasing power, and workers paid the minimum wage can afford the same amount of goods and services year after year. 10 other states and the District of Columbia have enacted similar automatic adjustment provisions in their minimum wage laws that will begin after their minimum wages reach a higher statutory level in the coming years.
The increases in nine states—California, Delaware, Illinois, Maryland, Massachusetts, Michigan, New Jersey, New Mexico, and New York—are the result of legislation passed by state lawmakers to raise their state’s wage floors. Lawmakers in six of these states—California, Illinois, Maryland, Massachusetts, New Jersey, and New York—enacted legislation that will eventually bring their state minimum wages to $15 an hour. For 2020, minimum wages in these states will range between $11.00 and $13.00.
In six states—Arizona, Arkansas, Colorado, Maine, Missouri, and Washington—the January 1 raises result from ballot measures passed by the state’s voters. In the last several election cycles, voters have increasingly passed higher minimum wages, often in the face of inaction by their state legislatures. In fact, voters in Missouri passed a higher state minimum wage at the ballot box after state lawmakers nullified city minimum wage ordinances that had been enacted by local governments in Kansas City and St. Louis.Read more
Newly available wage data for 2018 show that annual wages for the top 1.0% were nearly flat (up 0.2%) while wages for the bottom 90% rose an above-average 1.4%. Still, the top 1.0% has done far better in the 2009–18 recovery (their wages rose 19.2%) than did those in the bottom 90%, whose wages rose only 6.8%. Over the last four decades since 1979, the top 1.0% saw their wages grow by 157.8% and those in the top 0.1% had wages grow more than twice as fast, up 340.7%. In contrast those in the bottom 90% had annual wages grow by 23.9% from 1979 to 2018. This disparity in wage growth reflects a sharp long-term rise in the share of total wages earned by those in the top 1.0% and 0.1%.
These are the results of EPI’s updated series on wages by earning group, which is developed from published Social Security Administration data and updates the wage series from 1947–2004 originally published by Kopczuk, Saez and Song (2010). These data, unlike the usual source of our other wage analyses (the Current Population Survey) allow us to estimate wage trends for the top 1.0% and top 0.1% of earners, as well as those for the bottom 90% and other categories among the top 10% of earners. These data are not top-coded, meaning the underlying earnings reported are actual earnings and not “capped” or “top-coded” for confidentiality.
Cumulative percent change in real annual wages, by wage group, 1979–2018
|Year||Bottom 90%||90th–95th||95th–99th||Top 1%|
Source: EPI analysis of Kopczuk, Saez, and Song (2010, Table A3) and Social Security Administration wage statistics
As Figure A shows, the top 1.0% of earners are now paid 157.8% more than they were in 1979. Even more impressive is that those in the top 0.1% had more than double that wage growth, up 340.7% since 1979 (Table 1). In contrast, wages for the bottom 90% only grew 23.9% in that time. Since the Great Recession, the bottom 90%, in contrast, experienced very modest wage growth, with annual wages—reflecting growing annual hours as well as higher hourly wages—up just 6.8% from 2009 to 2018. In contrast, the wages of the top 0.1% grew 19.2% during those nine years.Read more
Yesterday marked the end of Democratic National Labor Relations Board (NLRB) Member Lauren McFerran’s term. McFerran ended her term offering the lone dissenting voice in the Trump board’s efforts to slow down union elections to give employers more time to campaign against the union, give employers the ability to make unilateral changes without bargaining with their workers’ union, weaken remedies when employers break the law, and more.
McFerran is the former Chief Labor Counsel for the Senate Committee on Health, Education, Labor, and Pensions (HELP Committee) and is widely respected by both labor and management. Her departure leaves a second open seat on the board that the Trump administration is tasked with filling. However, the Trump administration has not yet acted to nominate McFerran for a second term, nor has it nominated a Democrat to fill the other vacant Democratic seat that has been open since August 2018. The failure of the Trump administration to act is not for lack of a qualified nominee with widespread support. Former deputy general counsel and longtime NLRB career attorney Jennifer Abruzzo has reportedly been under consideration.
As a result, the NLRB has only Republican appointees for the first time in its 85-year history, and the three Republicans are all white men—two lawyers who represented corporations before coming to the NLRB, and one former Republican congressional staffer. There is no Democratic appointee to offer alternative views on workers’ rights under the National Labor Relations Act (NLRA), or to issue dissenting opinions when the Trump board goes off track. And there are no women or people of color participating in these decisions, even though women and people of color make up the majority of workers.
EPI previously reported on the unprecedented rollback of workers’ rights happening at the hands of these three NLRB appointees. The U.S. Chamber of Commerce—the nation’s largest business lobby—is 10 for 10 in winning action on its top 10 “wish list” for the Trump board. Unfortunately, things are likely to get worse, not better. With no Democratic appointee there to provide an alternative or dissenting viewpoint on the Trump board’s actions, we are likely to see a continued rollback of workers’ rights under this bedrock statute that, after all, is supposed to protect workers’ rights.
It’s been two years since Republicans passed their Tax Cuts and Jobs Act (TCJA), enough time for its effects to have come into full view. As we lay out in a report released today with the Center for Popular Democracy, the economic data that has come in since its passage has not been kind to the argument of the TCJA’s proponents.
The centerpiece of the TCJA was a large cut in the corporate tax rate. Supporters of the TCJA made the supply-side argument that higher corporate profits would juice investment, which would eventually trickle down to faster productivity growth that would mechanically boost workers’ wages. The theory behind this relied on a long chain of economic events occurring, and it was clear from the very beginning that there was little reason to trust a single link in the chain.
Despite some disingenuous and cynical arguments surrounding wages and bonuses, if the TCJA is to work as its supporters claimed, then the first thing we would see is a substantial uptick in investment. After two years, there is no evidence of any investment boom. Instead, investment growth followed along its pre-TCJA trend for a couple of quarters and then cratered. Year-over-year investment growth has sunk from 5.4% at the time of the TCJA’s passage to just 1.3% in the most recent quarter.
More evidence the Trump tax cuts aren’t working as advertised: Change in real, nonresidential fixed investment shows no investment boom
|Years||Real, nonresidential fixed investment|
Note: Chart shows year-over-year change in real, nonresidential fixed investment from 2003Q1 to 2019Q3.
Source: Adapted from Figure A in Hunter Blair, "The Tax Cuts and Jobs Act Isn’t Working and There’s No Reason to Think That Will Change," Working Economics (Economic Policy Institute blog), October 31, 2019.
Source: Adapted from Figure A in Hunter Blair, The Tax Cuts and Jobs Act Isn’t Working and There’s No Reason to Think That Will Change, Economic Policy Institute, October 2019. Data are from EPI analysis of data in Table 1.1.6 from the National Income and Product Accounts (NIPA) from the Bureau of Economic Analysis (BEA).
To be blunt, this means that the $4,000 annual boost to average incomes that the White House Council of Economic Advisers promised to working families because of the TCJA did not—and will not—happen. While it’s been worse-than-advertised for working families, the TCJA has been an even bigger boon to large corporations and rich households. In fact, corporate tax revenues have come in even lower than the Congressional Budget Office originally projected, allowing corporations and their shareholders to make out like bandits.
The Farm Workforce Modernization Act allows employers to hire migrant farmworkers with H-2A temporary visas for year-round jobs: Impacts are unknown and other wage-setting formulas should be considered
My last blog post described in detail how the Farm Workforce Modernization Act (FWMA)—a bipartisan piece of legislation in the House of Representatives that would legalize unauthorized immigrant farmworkers, make major reforms and expansions to the H-2A temporary work visa program, and require farm employers to use E-Verify—included an updated H-2A wage rule that could lower wages for migrant farmworkers. I also called on the House of Representatives to further assess the impacts of that the FWMA could have on the farm labor market by holding public hearings in the relevant committees of jurisdiction with expert testimony before voting on the bill. One of the other major provisions in the bill that also desperately needs a closer look is the FWMA’s proposal to allow H-2A jobs—which currently must only offer temporary or seasonal work—to become eligible for year-round agricultural occupations.
A look at annual average employment in in the Bureau of Labor Statistics’ (BLS) Quarterly Census of Employment and Wages (QCEW) data set shows there were just over 419,000 jobs in greenhouse and nursery production (155,000) and animal production and aquaculture (264,000), which represent the major year-round occupational categories in agriculture. Farm employers have been clamoring for years for Congress to allow them to hire temporary H-2A workers for many of these 419,000 permanent, year-round jobs, especially on dairies. Since they haven’t had the requisite support to pass legislation that would accomplish this, members of Congress have attempted multiple times to circumvent the regular legislative process by pushing to make the change through legislative riders on annual omnibus appropriations bills.
The FWMA contains provisions to make H-2A year round: For the first three years after enactment, 20,000 three-year H-2A visas per year would be made available for year-round agricultural jobs—meaning 60,000 after three years—with half allocated for the dairy industry. Although the maximum allowed number of year-round H-2A jobs seems relatively small at first, the number could rise rapidly—in years four through 10, the cap could increase by 12.5% per year—and after the tenth year, the cap could be eliminated.
While unemployment rates are sitting at their lowest levels in decades, wage growth (adjusted for inflation) remains slower than in previous periods of comparably low unemployment. Part of the reason why wage growth remains subdued is that productivity growth has been generally weak since the Great Recession ended. This week’s newsletter provides some guidance on a key question for macroeconomic policymakers like the Federal Reserve: do we need to take this slow rate of productivity growth as a given, or can we nudge productivity upward by allowing unemployment to sink even lower for longer?
Specifically, I address the widespread speculation about the possibility of “wage-led productivity growth”—the hypothesis that tight labor markets that push up labor costs lead firms to invest more in labor-saving equipment and practices. Some suggestive evidence of this wage-led productivity growth has been shown in patterns of macroeconomic data. This newsletter provides some more suggestive evidence from patterns of productivity growth broadly but also across a set of very detailed industries when the labor share of industry income rises and falls. Here are the key findings:
- At the aggregate level, a rise in the labor share of corporate-sector income is associated with a small but significant rise in the pace of average productivity growth over the subsequent two years.
- At detailed industrial levels (looking at 124 industries mostly in manufacturing), this relationship is even stronger: a 1 percentage-point rise in the labor share of industry income is associated with a 0.1 percentage-point increase in the average pace of productivity growth over the subsequent two years.
- These relationships between labor share of income and productivity growth are consistent with a scenario in which firms try harder to make labor-saving investments and organizational changes when labor becomes scarcer and the need to pay higher wages threatens to pinch profits. If the labor share of corporate-sector income rose from today’s 78% to the 82% that characterized the tight labor markets of 2000, this would imply a boost to productivity of roughly 0.4 percentage points—an amount that would cut almost in half the gap between the productivity growth in recent years and the productivity growth of the late 1990s.
These results are obviously suggestive, not dispositive. The key challenge to testing the causal link that runs from higher pressure labor markets to increased effort by firms to find and adopt labor-saving practices and investments is finding truly exogenous changes in labor market tightness. This search for exogenous changes in the cost pressures firms face should be a prime preoccupation for macroeconomic policymakers in the near future. In the rest of this newsletter, we’ll describe our findings in a bit more detail and discuss their potential implications.Read more
House vote imminent on the bipartisan Farm Workforce Modernization Act—which would lower wages for migrant farmworkers: Hearings and assessments of impacts still needed
On October 30, Representatives Zoe Lofgren (D-Cal.) and Dan Newhouse (R-Wash.), along with dozens of other bipartisan cosponsors, introduced the Farm Workforce Modernization Act (FWMA), a compromise bill negotiated between representatives of agribusiness, farmworker advocates, and unions that would legalize unauthorized immigrant farmworkers, make major reforms and expansions to the H-2A temporary work visa program, and require farm employers to use E-Verify, an electronic employment verification system, to verify whether newly hired workers are authorized to be employed in the United States. The FWMA could legalize hundreds of thousands of unauthorized farmworkers while restructuring the landscape for farm employment. The House of Representatives looks set to vote on the FWMA as early as this week.
The FWMA would solve an important farm labor issue—perhaps the most important issue—legalizing unauthorized farm workers and their families. But it would also change the rules of a problematic temporary work visa program, H-2A, where migrant workers are indentured to their employers, often abused and exploited in the fields, paid low wages and robbed of their wages, sometimes live in substandard housing, and have at times been victims of human trafficking.
The H-2A rule changes in the FWMA would expand the H-2A program to year-round occupations, prohibit wage growth that might otherwise occur in the free market, and codify into law most of a new H-2A wage regulation that was recently put into place by the Trump administration—which is geared towards lowering the wages of most migrant workers in the H-2A program—and which many worker advocates opposed publicly. These provisions should raise concerns about the impact of the FWMA on the H-2A program and the future farm labor force but have not yet been explored in any congressional hearing focusing on the FWMA or through the publication of any government reports, or even credible research by non-governmental organizations.
Considering the large and emerging role of H-2A in farm labor, perhaps the single biggest question about the FWMA from a labor standards perspective is: what will happen to H-2A wage rates under the bill? The FWMA updates and codifies a new H-2A wage rule—known as the Adverse Effect Wage Rate or AEWR. In the absence of any existing credible analysis of the FWMA, I offer some comments below outlining my concerns with some of the H-2A wage provisions in the bill. In order to understand its possible impact however, a brief discussion of the current AEWR and the recently proposed Trump H-2A wage rule is needed because the FWMA mostly incorporates the proposed Trump H-2A wage rule.Read more
As we approach the end of 2019, it’s important to keep the long-run perspective on economic health in mind, but also investigate new trends that have emerged in the last several months that need to be closely monitored. Two concerning trends are the slowdown in nominal wage growth as well as the slowdown in payroll employment growth.
Let’s start with payroll employment growth. On its face, the pace of job growth in 2019 hasn’t been particularly troubling. The economy continues to move in the right direction—though at a slightly slower pace than the last couple of years—soaking up sidelined workers as the unemployment rate remains at historically low levels. But, when you factor in the preliminary benchmark revisions—which showed a half million fewer jobs created between April 2018 and March 2019—the data indicate weaker employment growth this year than originally reported. The final benchmark revisions won’t be released until the January 2020 employment numbers are released in February, but the preliminary release is troubling. And large downward revisions are sometimes associated with early signs of a recession because it means the Bureau of Labor Statistics (BLS)’s model for predicting the births and deaths of firms is off, often accompanied by a turning point in the economy. These revisions don’t tell us a recession is necessary on the immediate horizon, but they are certainly something to keep in mind as the year winds down.
While the topline numbers are important to track, it’s also important to look under the hood. Manufacturing employment, for instance, has exhibited a notable slowdown in employment growth this year. The figure below shows the month-to-month change in manufacturing employment over the last two years with two important modifications. First, I’m using a three-month moving average to smooth the volatility in the series. Second, I’m removing the effect of the 46,000 striking GM workers that depressed the October numbers.
Manufacturing employment growth tapers off: Manufacturing monthly employment growth, in thousands, three month moving average, October 2017–October 2019
|Date||Three month moving average|
Note: Adjusted for striking workers: https://www.bls.gov/ces/publications/strike-report.htm.
Source: EPI analysis of Bureau of Labor Statistics' Current Employment Statistics public data series
This obvious slowdown in manufacturing employment is troubling in itself, but the reason to look more closely at manufacturing isn’t simply because it’s a significant share of the economy (10% of private-sector employment) and historically has been a place for decent non-college jobs—largely due to the relatively high levels of unionization in that sector in the past. Manufacturing is one of the most cyclical sectors, bested only by construction (among major industries) in its prediction of upcoming economic slowdowns. And, construction isn’t looking too hot either. Average monthly construction job growth so far in 2019 is about half as fast as it was in 2018. This does not mean we are necessarily headed toward a recession, but this is certainly an indicator to keep an eye on in coming months.
The Federal Reserve is doing the right thing by cutting the federal funds rate this year, helping to keep the economy from stalling and for workers to hopefully see stronger wage growth. The figure below shows year-over-year nominal wage growth over the last several years. After rising to 3.4% in February 2019, the rate of growth has been tapering off. Wage growth is now back down to 3.0% over the year, significantly lower than levels consistent with inflation targets and productivity potential. This is slower than expected given that the unemployment rate has been at or below 4.0% for 20 months in a row. All else equal, the relative scarcity of workers should be driving up wages as employers have to compete to attract and retain the workers they want.Read more
The 2019 edition of the Organization for Economic Cooperation and Development’s (OECD) annual International Migration Outlook report included a new chapter, “Capturing the ephemeral: How much labour do temporary migrants contribute in OECD countries?” It’s a good question, and one that had not yet been answered.
There is a dearth of data on temporary labor migration programs (TLMP) or schemes—aka guestworker programs, where migrants are employed temporarily in a country outside their own—and it hinders the ability of policymakers to make informed decisions. The OECD declared TLMPs are “a core concern in the public debate across OECD countries” but warns that their impacts are “understudied.” This information deficit exists despite the fact that TLMPs are controversial and make up an increasing share of labor migration, and in the United States in particular have been at the center of debates about how to reform the U.S. immigration system.
Why are TLMPs controversial and at the center of public debates? First, their size. One of OECD’s key findings is that the 4.9 million temporary labor migrants that entered OECD countries in 2017 is “almost as many… as permanent migrants in all categories combined.” Ignoring temporary labor migration in the OECD means ignoring nearly half of all migration.
Many employers want larger TLMPs and fewer regulations governing their use. But there are high economic, social, and psychological costs for the migrant workers who participate in temporary programs, including frequent human rights violations suffered in both countries of origin and destination. Further, some abuses that are technically legal are facilitated by the legal frameworks of TLMPs. In most TLMPs, employers control the visa status of their temporary migrant employees or “guestworkers”—which means getting fired makes them deportable. In part, that’s why TLMPs have been called things like “The New American Slavery.”
TLMPs raise technical issues that are not easily resolved. For example: Which industries are permitted to hire migrant workers? How will appropriate numerical limits in TLMPs be determined? What rights will migrants have once they’ve been admitted into receiving country labor markets? Can they bring their families? Will migrants be tied to one employer or be allowed to change jobs and employers? How will receiving country governments ensure that migrants return after their employment contracts end, or will migrants be allowed to become permanent residents? Do citizens in receiving countries have first preference for jobs that employers want to fill with migrants? Will migrants be paid the same wages as similarly situated local workers?Read more
In October, the Trump administration published a proposed rule regarding tips which, if finalized, will cost workers more than $700 million annually. It is yet another example of the Trump administration using the fine print of a proposal to attempt to push through a change that will transfer large amounts of money from workers to their employers. We also find that as employers ask tipped workers to do more nontipped work as a result of this rule, employment in nontipped food service occupations will decline by 5.3% and employment in tipped occupations will increase by 12.2%, resulting in 243,000 jobs shifting from being nontipped to being tipped. Given that back-of-the-house, nontipped jobs in restaurants are more likely to be held by people of color while tipped occupations are more likely to be held by white workers, this could reduce job opportunities for people of color.
The background: Employers are not allowed to pocket workers’ tips—tips must remain with workers. But employers can legally “capture” some of workers’ tips by paying tipped workers less in base wages than their other workers. For example, the federal minimum wage is $7.25 an hour, but employers can pay tipped workers a “tipped minimum wage” of $2.13 an hour as long as employees’ base wage and the tips they receive over the course of a week are the equivalent of at least $7.25 per hour. All but eight states have a subminimum wage for tipped workers.
In a system like this, the more nontipped work that is done by tipped workers earning the subminimum wage, the more employers benefit. This is best illustrated with a simple example. Say a restaurant has two workers, one doing tipped work and one doing nontipped work, who both work 40 hours a week. The tipped worker is paid $2.50 an hour in base wages, but gets $10 an hour in tips on average, for a total of $12.50 an hour in total earnings. The nontipped worker is paid $7.50 an hour. In this scenario, the restaurant pays their workers a total of ($2.50 + $7.50) * 40 = $400 per week, and the workers take home a total of ($12.50 + $7.50) * 40 = $800 (with $400 of that coming from tips).
Analyses claiming that taxes on millionaires and billionaires will slow economic growth are fundamentally flawed
In recent weeks, a number of policy analyses of progressive economic policies—a surtax on high-incomes, a wealth tax, and Social Security expansion—have claimed these policies would damage economic growth. Policymakers should give these analyses very little weight in debates about these issues, for a number of reasons.
First, and most important, is the fact that all of these analyses are grounded in an economic view of the world that sees growth as constrained by the economy’s productive capacity (or the supply side of the economy) and not by the spending of households, businesses and government (the economy’s demand side). These estimates have other problems too—they are not even particularly convincing supply-side estimates and even if the economy’s growth really was constrained by supply, these estimates would still be misleading about the effects of these policies on welfare. But the biggest reason why policymakers should give these analyses zero weight is because they assume that growth is almost never demand-constrained.
Before the Great Recession, the assumption that growth was nearly always supply constrained was almost universally held by economists and macroeconomic policymakers. It was recognized that demand (or aggregate spending) could occasionally be too weak to fully employ the economy’s productive capacity and hence cause rising unemployment, but it was generally thought that such periods were rare and would end quickly after the Federal Reserve sensibly cut interest rates. Because shortfalls of demand relative to supply were rare and short and easy to fix, the reasoning went, any real constraint on the economy’s growth over the long-run must be the pace of growth of supply. Growth in supply is generally driven by growth in the quality of the workforce, the productive stock of plants, equipment and research, and growth in technological progress, which together lead to growing productivity—or the amount of income or output generated in an average hour of work.
The assumption that supply constraints are much more likely to bind overall growth than demand constraints drove almost all macroeconomic policymaking in the decades before the Great Recession. For example, the Federal Reserve for decades feared lower unemployment far more than lower inflation. Lower unemployment was a signal that demand was rising relative to supply, and if one thinks growth was generally supply-constrained, this meant that demand growth would quickly outstrip supply growth and lead to rising inflation. Lower inflation, conversely, meant that supply growth was outpacing demand growth—but that was always a temporary and easy-to-fix condition. The decades-long bipartisan overreaction to rising federal budget deficits is also a byproduct of assuming the economy’s growth is supply constrained. Deficits boost demand growth. If one assumes that demand is generally marching in lock-step with supply, then larger deficits that boost demand imply that supply constraints will soon bind and cause inflation (or interest rate increases). Smaller deficits, conversely, reduce demand growth. But if the danger of demand growth slowing too much is low and easy-to-fix, then that’s not a problem.Read more
Last week, the Senate Budget Committee passed a bipartisan set of budget reforms out of committee. While they include some important steps forward, such as effectively eliminating the archaic debt limit, their centerpiece is a deeply damaging provision that, if passed into law, would make recessions far more damaging by forcing Congress to consider steep cuts just when the economy would be most hurt by them.
Under the reforms, instead of passing a budget every year, Congress would be on a two-year budget cycle. This is not totally objectionable. The damaging provisions are the “special reconciliation instructions“ provided in the second year of this budget cycle. In the first year, the Congressional Budget Office (CBO) would project the debt-to-GDP ratio from the budget. In the second year, CBO would report on whether the federal government is meeting those debt-to-GDP targets, and if not, trigger the special reconciliation instructions. These instructions would require the Senate Budget Committee to recommend an amount of deficit reduction in response to missing the debt-to-GDP targets and create a fast track for passing those deficit reductions.
Others have rightly focused on the extent to which this could line up budget cuts to programs that U.S. families rely on, like Medicaid, Medicare, and the Affordable Care Act. For example, revenues have come in even lower than CBO expected following the Republican Tax Cuts and Jobs Act (TCJA). If this reform bill were in place, Congress would be expected to respond to these larger-than-expected tax cuts for the rich with deficit reduction. This has been in the Republican leadership playbook all along, as they have made it abundantly clear that cuts to vital programs for low- and moderate-income families are the intended next step after passing regressive tax cuts for the rich and corporations. Read more
The Trump administration’s harsh enforcement tactics and human rights violations at the border have rightly gotten most of the attention in press coverage about immigration lately, and enforcement has been the basis for the very few questions that Democratic presidential candidates have been asked about immigration so far in the primary debates. What’s gotten less attention and no discussion after five Democratic primary debates are the 17% of workers in the U.S. labor force who are foreign-born, including the 5% of the workforce who are vulnerable to wage theft and other abuses because they lack an immigration status, or the 1% who have an immigration status that is mostly owned and controlled by their employer, by virtue of being employed through U.S. temporary work visa programs.
Only a miniscule number of mentions have been made in the candidates’ published immigration plans about the intersection of immigration and the labor market, and there’s been no discussion on the debate stages about what the Democratic candidates would propose to reform future U.S. labor migration—i.e., migration for the purpose of work. In the past this has sometimes been referred to as “future flows” of migrants: the pathways available to persons from abroad who want to come to the United States to be employed, or avenues for employers that wish to hire migrants, either through temporary work visa programs or as permanent immigrants.
The fifth Democratic Presidential Primary Debate on November 20 was no different than the past four: virtually no discussion of immigration in general—with only one narrow question about the border wall—and no discussion at all about labor migration. Will this change during the sixth debate in December? I hope so, because a positive vision of U.S. labor migration that is fair to immigrants and Americans and fosters solidarity—rather than a corporate-driven race to the bottom on wages and labor standards, which employer groups often push for—is something worth talking about and an argument that progressives can win.
Migrants in the United States are living and working during a time when the president in office clearly doesn’t value their contributions, but nevertheless benefits economically from their labor: President Trump has hired undocumented workers at his companies—some of whom have alleged they were exploited—as well as guestworkers with temporary visas in programs he has expanded, where migrant workers are tied to employers and often underpaid—all while demonizing and scapegoating migrants as criminals and rapists. For the most part, President Trump has gotten a pass on his blatant hypocrisy.
By failing to bring up labor migration issues, the Democratic presidential candidates have not managed to expose Trump’s glaring weakness on the issue. While a significant share of the blame for not discussing the topic at the debates falls at the feet of the moderators, the candidates are making a mistake by not mentioning the contributions that migrant workers make or the challenges they face in the workplace. The candidates also haven’t offered many details about how they would re-make the immigration system so that future migrant workers can enter the U.S. labor market with equal rights and fair pay in their plans for immigration that are published on their campaign websites. A quick summary of what’s included in the immigration plans of a few of the major candidates makes this abundantly clear.Read more
Latina workers have to work nearly 11 months into 2019 to be paid the same as white non-Hispanic men in 2018
November 20 is Latina Equal Pay Day, the day that marks how long into 2019 a Latina would have to work in order to be paid the same wages her white male counterpart was paid last year. That’s nearly 11 months longer, meaning that Latina workers had to work all of 2018 and then this far—to November 20!—into 2019 to get paid the same as white non-Hispanic men did in 2018. Put another way, a Latina would have to be in the workforce for 57 years to earn what a non-Hispanic white man would earn after 30 years in the workforce. Unfortunately, Hispanic women are subject to a double pay gap—an ethnic pay gap and a gender pay gap. And, this pay gap widened over previous year when it “only” took until November 1 for Hispanic women catch up to non-Hispanic men.
The date November 20 is based on the finding that Hispanic women workers are paid 53 cents on the white non-Hispanic male dollar, using the 2017 March Current Population Survey for median annual earnings for full-time, year-round workers. We get similar results when we look at average hourly wages for all workers (not just full-time workers) using the monthly Current Population Survey Outgoing Rotation Group for 2018—which show Hispanic women workers being paid 56 cents on the white male dollar.Read more
Welcome developments on limiting noncompete agreements: A growing consensus leads to new state laws, a possible FTC rule making, and a strong bipartisan Senate bill
There is a growing bipartisan consensus that noncompete agreements harm workers and the economy. This bipartisanship scarcely seemed possible back in 2015 when we were government lawyers coordinating investigations by the Offices of the Illinois and New York Attorneys General into Jimmy John’s use of noncompete agreements for sandwich makers and delivery drivers. But earlier this month, in what seems like the first bipartisan federal effort in far too long, Senators Todd Young (R-Ind.) and Chris Murphy (D-Conn.) introduced a bipartisan bill that would effectively stop the abuse of noncompete agreements. This builds on a year in which six state legislatures also passed significant noncompete reforms.
The growing use of noncompete agreements
Employer use of noncompete agreements has mushroomed in recent years. These agreements prevent people from working for their former employer’s competitors, and they were once used sparingly to prevent, for example, executives with trade secrets or confidential business information from sharing them with new employers. Now, they’re often used indiscriminately to chill job mobility for employees with no access to such information. A 2015 study found that 40% of Americans have had a noncompete agreement at some point in their career. As lawyers, we’ve worked on cases involving noncompete agreements used for janitors, receptionists, customer service workers, fledgling journalists, even employees of a day care center.
Why are noncompete agreements so bad? They fly in the face of our fundamental American belief that anyone can work hard, gain skills, and move on to a better opportunity to build a better life. Noncompete agreements can trap workers in jobs they want to leave—whether because of sexual harassment or other poor working conditions, or even just a bad boss. They limit the talent pool, preventing employers from hiring the best worker for the job. Noncompete agreements can also stifle economic dynamism, blocking people from starting their own businesses.
Workers’ inability to leave their jobs because of noncompete agreements and similar limitations has also contributed to the wage stagnation of recent decades. Two studies released just last month found that noncompete agreements adversely affected wages and job mobility. This makes sense, given that the agreements erode the leverage that workers typically get from the threat of leaving their jobs to work elsewhere. That threat is now empty for millions of Americans subject to these provisions, showing that noncompete agreements aren’t really about trade secrets anymore. They’re about limiting workers’ bargaining power.Read more
Proponents of the Tax Cuts and Jobs Act (TCJA) made bold claims about the effects that the TCJA’s corporate rate cuts would have on the paychecks of U.S. households. The economic theory rests on corporate rate cuts bringing forth enough additional savings to finance new investment spending. Specifically, higher after-tax corporate profits are passed down to shareholders in the form of higher dividends. These higher dividends attract more savings from abroad and incentivize U.S. households to save more. These extra savings finance new investments in plants and equipment, which boost the productivity of workers, and eventually that increased productivity boosts workers’ wages.
We pointed out at the time that in practice, this theory wasn’t likely to hold. After the TCJA passed, we indicated that by increasing deficits, the specifics of the TCJA didn’t even conform to the economic theory that was supposed to support it.
But that wasn’t enough to stop the TCJA’s proponents from making disingenuous arguments about the effects it was having on the economy. Proponents pointed to corporate claims that they were giving out bonuses or raising wages in the wake of the TCJA. The economic theory above shows clearly how this was nothing but a corporate PR ploy. Even in theory, it takes time for corporate profits to trickle down into worker wages, and we weren’t the only ones pointing this out. Unsurprisingly, data since then show those bonuses didn’t materialize for workers.Read more
The uneasy question on everyone’s lips these days seems to be about when the next recession is coming. Ironically, every month that gets added to the longest economic recovery in modern history brings increasing scrutiny to even the slightest sign of a downturn. As we turn our attention to the Bureau of Labor Statistics (BLS) October Employment Situation Report this week, two of those signs—a drop in payroll employment and a slowdown in nominal wage growth—are deserving of deeper exploration.
First, we expect some noise in the October payroll estimates due to two temporary, but fully anticipated and measurable effects. According to the BLS CES Strike Report, October payroll estimates will be reduced by 46,000 because of the General Motors (GM) strike, which started in mid-September 2019 and ended last Friday. What that means, in practical terms, is that private sector payroll employment for the month of October, in the absence of the GM strike, was actually 46,000 higher than what will be reported. Another event that could have some effect on the number of jobs added in October will be temporary hiring for the Decennial Census, which could potentially inflate the number of public sector jobs.
While the October jobs report may not be the most straightforward indicator of current job growth patterns, in August BLS reported a major downward revision in the number of jobs added over the past year. Specifically, the release of the preliminary estimate of its benchmark revision to payroll employment revealed that there were a half million fewer jobs created between April 2018 and March 2019 than was originally reported. Given weaker private sector employment growth in September relative to the prior 3- to 6-month averages, we will be watching for whether October employment growth, net of the effects of the GM strike and Census hiring, is stronger or weaker than recent trends.Read more
A little-known agency that is supposed to protect workers is instead eroding workers’ basic labor rights
Donald Trump ran for president promising to uplift workers. But his actions have done the exact opposite.
According to a new EPI report, Trump appointees on the board of a small, independent agency called the National Labor Relations Board (NLRB)—and the NLRB’s Trump-appointed general counsel (GC)—are working hard to undermine workers’ rights to join together in collective action to improve pay and working conditions.
As authors Celine McNicholas, Margaret Poydock, and Lynn Rhinehart warn, Trump’s appointees have ticked off one by one the 10 items on a U.S. Chamber of Commerce hit list of NLRB policies to overturn. And they’re not done yet: The NLRB plans to go after more worker protections in the months ahead.
Under the National Labor Relations Act (NLRA), most nonsupervisory private-sector workers have the right to join together in collective action—whether that is through forming a union or some other means—to negotiate with employers about the terms and conditions of their employment. The NLRB was established to safeguard those rights by investigating and prosecuting violations of the law.
Instead, the three Trump appointees to the agency’s board and the agency’s Trump-appointed GC are systematically rolling back workers’ rights through a flurry of employer-friendly case decisions, rulemakings, and guidance memos. At the same time, the agency has downsized by 10 percent of its staff: The ratio of covered workers to NLRB staff is now roughly 96,000-to-1, up from 65,000-to-1 in 2011.
For all of the hype surrounding U.S. electoral debates, the flashy cable news forum and gladiator-style tone of the questions often lead to candidates jostling for soundbites rather than debating actual substance.
Economic inequality and the erosion of worker power are not only central to EPI’s mission, they are also key to the American political landscape today. With that in mind we tapped our experts for a bit of a wishful thinking exercise, collecting questions on a variety of issues that are core to our research.
Here are seven issues we would like to see raised in tonight’s presidential debate:
- Stagnant wages are one of the main challenges facing American workers. What do you see as the chief culprit and what policies would you implement to address this problem?
- What do you see as the key causes of income inequality, and what are your top two solutions? Is CEO pay too high? What would you do to rein it in?
- How do you plan to address America’s racist institutions, and the persistent lack of minority and woman representation in the most powerful offices of the land?
- Trump’s trade policies are chaotic, but he appears to have tapped into a problem that resonates with voters—trade deals that favor corporations over people. What is your positive alternative to Trump on trade?
- Name one way in which your thinking about the economy has changed over time. What’s an economic policy you’ve supported in the past that you no longer support?
- Teachers in Chicago are on the brink of a massive strike, part of a nationwide trend, as they push for social and educational justice for students of color. What is your long-term plan to fully support America’s public schools and how would you ensure that students of color get additional resources needed to overcome decades of disinvestment?
- Upon taking office, you will inherit a humanitarian crisis at the border that is mostly the result of Trump’s draconian policies and his administration’s mismanagement. What would you do to address the reports of human rights violations by agents of the United States government and to end the poor conditions inside ICE immigration jails and Border Patrol facilities?
On August 12, 2019, Democratic presidential candidate Andrew Yang tweeted, “I’ve done the MATH, it’s not immigrants taking our jobs, it’s automation. Instead of blaming immigrants, let’s give our citizens the means to thrive through the fourth industrial revolution.” This, like much of Yang’s and others’ current discourse regarding automation, is focused on an exaggerated fear that automation can and soon will replace workers’ roles in production, resulting in widespread job loss. But for hundreds of years, technological progress has continually reshaped the way work is done—and yet this progress has never resulted in a long-term decline in the labor force. Focusing on overstated risks of job loss from automation distracts from efforts to advocate for higher wages, better benefits, and increased bargaining power—issues that have been, and will continue to be, essential to the well-being of workers and their families.
However, while there is no reason to believe that automation will lead to widespread, sustained decline in the overall number of jobs, there will be specific jobs, industries, and workers for whom the impact of automation will come with real costs, at least in the short term. One industry in which concerns about automation may be warranted in the near term is transportation. Ford and Volvo have both announced plans to put fully autonomous vehicles on the road as early as 2021; Honda has announced a partnership with GM to begin developing autonomous vehicles; and Nissan recently introduced “no-hands driving” on highways in its ProPilot 2.0. While consumer skepticism may slow down the industry’s timelines, many advances have already been made: Most new cars have computerized driver assistance options; Tesla’s Autosteer has logged at least one billion miles of supervised autonomous driving; and Caterpillar is already producing autonomous vehicles for hauling mining materials.Read more
On Friday, the Bureau of Labor Statistics will release September’s numbers on the state of the labor market. As usual, I’ll be paying close attention to nominal wage growth as well as the prime-age employment-to-population ratio, which are two of the best indicators of labor market health. Friday’s report will also give us a chance to examine the “teacher shortfall”—the gap between local public education employment and what is needed to keep up with growth in the student population.
Thousands of local public education jobs were lost during the recession which began in 2008, and those losses continued deep into the official economic recovery, even as more students started school each year. This has been true of public sector jobs in general—continued austerity at all levels of government has been a drag on public sector employment, which has failed to keep up with population growth.
Teacher strikes in several states over the last few years have highlighted deteriorating teacher pay as a critical issue. My colleagues Sylvia Allegretto and Larry Mishel find that average weekly wages of public school teachers have fallen over the last two decades and the teacher wage penalty continues to grow, reaching a record 21.4% in 2018. My colleagues Emma García and Elaine Weiss have further documented shortcomings and teacher shortages and recently how much teachers have to pay out of their own pockets for school supplies for their classrooms. Low pay makes it harder to attract and retain teachers who have the qualifications associated with teacher effectiveness in the classroom.
The costs of a significant teacher employment gap are high, consequences measurable: larger class sizes, fewer teacher aides, fewer extracurricular activities, and changes to curricula. Last year, the local public education job shortfall remained large. To solve this problem, state and local governments need to fund more teaching positions and raise pay to close the teacher pay gap and attract and retain the qualified teachers our children deserve. On Friday, I will compare where jobs in public education should be, using the pre-recession ratio, student population growth, and the most recent jobs numbers.
The state income data from the American Community Survey (ACS), released this morning by the Census Bureau, showed that in 2018, household incomes across the country rose—albeit more slowly, and in fewer states, than in the previous year. From 2017 to 2018, inflation-adjusted median household incomes grew in 33 states and the District of Columbia (14 of these changes were statistically significant.) This marks a decline from the broader growth seen between 2016 and 2017 when median household incomes grew in 40 states and the District of Columbia, with 24 of those changes being statistically significant.
The ACS data showed an increase of 0.2% in the inflation-adjusted median household income for the country as a whole—an increase of just $130 for a typical U.S. household and a slowdown in growth compared to the past three years: household incomes increased by 3.8% in 2015, 2.0% in 2016, and 2.5% in 2017. [i] Despite these increases, households in 23 states still had inflation-adjusted median incomes in 2018 below their 2007 pre-recession values, which makes this year’s slowdown particularly disappointing.
From 2017 to 2018, the largest percentage gains in household income occurred in Idaho, where the typical household experienced an increase of $2,085 in their annual income—an increase of 3.9%. Maryland remains the state with the highest median household income at $83,242, having experienced a slight increase (0.6%) from 2017 to 2018. The District of Columbia has the highest median household income in the country at $85,203—though comparing D.C. to states is problematic, since D.C. is a city, not a state. Read more
The 2018 American Community Survey (ACS) data released today shows that the slowdown in income growth from 2017 to 2018 reported earlier this month by the Census Bureau also indicates a slowdown in progress reducing poverty in many states. From 2017 to 2018, the poverty rate decreased in 36 states and the District of Columbia, with 14 of those states experiencing statistically significant declines. For comparison, from 2016 to 2017, poverty fell in 42 states plus the District of Columbia, with 20 states and the District of Columbia having statistically significant reductions.
The poverty rate rose in 14 states, with increases of 1.3 percentage points in Rhode Island, and 0.8 percentage points each, in Connecticut and Arkansas—although only Connecticut’s increase was statistically significant.
The continued reductions in poverty rates for most states are welcome news; however, most states have still not recovered to their 2007, pre-Great Recession poverty rates. Moreover, 38 states had higher poverty rates in 2018 than in 2000.
The national poverty rate, as measured by the ACS, fell 0.3 percentage points to 13.1 percent in 2018, making it nearly the same as the ACS poverty rate in 2007, when it was 13.0 percent. It remains 0.9 percentage points above the rate from 2000.
Between 2017 and 2018, West Virginia had the largest decline in its poverty rate (-1.3 percentage points), followed by Delaware (-1.1 percentage points), Louisiana (-1.1 percentage points), Idaho (-1.0 percentage points), and Arizona (-0.9 percentage points). Poverty increased most in in Rhode Island (1.3 percentage points), Connecticut (0.8 percentage points), Arkansas (0.8 percentage points), Maine (0.5 percentage point), Montana (0.5 percentage point), and Iowa (0.5 percentage point). Read more