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Hints of Progress for Labor in the United States

Friday, June 9th, 2017

With Donald Trump sitting in the White House and right-wing Republicans controlling Congress, there is not much for labor to cheer about on the American national political scene. In addition, the overall prospect for union organizing does not look very good. Republicans are pursuing policies at both the national and state level to further erode union membership. But with all the bad news, there have been some important victories at the state and local levels that can perhaps lay the groundwork for gains nationally in future years.

The most important of these battles has been the drive for an increase in the minimum wage. The national minimum wage has been set at $7.25 an hour since 2009. In the intervening eight years, inflation has reduced its purchasing power by almost 17%. Measured by purchasing power, the current national minimum wage is more than 25% below its 1968 peak. That is a substantial decline in living standards for the country’s lowest-paid workers.

However, the situation is even worse if we compare the minimum wage to productivity. From 1938, when a national minimum wage was first put in place, until 1968, it was raised in step with the average wage, which in turn tracked economy-wide productivity growth. If the minimum wage had continued to track productivity growth in the years since 1968, it would be almost $20 an hour today, more than two and a half times its current level. That would put it near the current median wage for men and close to the 60th percentile wage for women. This is a striking statement on how unevenly the gains from growth have been shared over the last half century.

The Obama administration tried unsuccessfully to make up some of this lost ground during his presidency. While it may have been possible in his first two years when the Democrats controlled Congress, higher priority was given to the stimulus, health care reform and financial reform. Once the Republicans regained control in 2010, increases in the minimum wage were off the table. Needless to say, it is unlikely (although not impossible) that the Trump administration will take the lead in pushing for a higher minimum wage any time soon.

Although the situation looks bleak nationally, there have been many successful efforts to increase the minimum wage in states and cities across the country in recent years. This effort has been led by unions, most importantly the Service Employees International Union (SEIU), whose “Fight for $15” campaign is pushing to make $15 an hour the nationwide minimum. The drive gained momentum with its endorsement by Bernie Sanders in his remarkable campaign for the Democratic presidential nomination last year. While Sanders was of course defeated for the nomination, his push for a $15 an hour minimum wage won the support of many voters. It is now a mainstream position within the national Democratic Party.

However, the action for the near term is at the state and local levels, where there have been many successes. There are now 29 states that have a minimum wage higher than the national minimum. The leader in this effort is California, which is now scheduled to have a $15 an hour minimum wage as of January 2022. With over 12% of the US population living there, this is a big deal. Washington State is not far behind, with the minimum wage scheduled to reach $13.50 an hour in January 2020. New York State’s minimum wage will rise to $12.50 an hour at the end of 2020 and will be indexed to inflation in subsequent years.

Several cities have also jumped ahead with higher minimum wages. San Francisco and Seattle, two centers of the tech economy, both are set to reach $15 an hour for city minimums by 2020. Many other cities, including New York, Chicago and St. Louis have also set minimum wages considerably higher than the federal and state levels.

What has been most impressive about these efforts to secure higher minimum wages is the widespread support they enjoy. This is not just an issue that appeals to the dwindling number of union members and progressive sympathizers. Polls consistently show that higher minimum wages have the support of people across the political spectrum. Even Republicans support raising the minimum wage, and often by a large margin.

As a result of this support, minimum wage drives have generally succeeded in ballot initiatives when state legislatures or local city councils were not willing to support higher minimums. The last minimum wage increase in Florida was put in place by a ballot initiative that passed in 2004, even as the state voted for George W. Bush for president. Missouri, which has not voted for a Democratic presidential candidate in this century, approved a ballot initiative for a higher minimum wage in 2006. South Dakota, Nebraska and Arkansas, all solidly Republican states, approved ballot initiatives for higher minimum wages in 2014. In short, this is an issue where the public clearly supports the progressive position.

These increases in state and local minimum wages have meant substantial improvements in the living standards of the affected populations. In many cases, families are earning 20-30% more than they would if the minimum wage had been left at the federal minimum.

In addition, several states, including California, have also put in place measures to give workers some amount of paid family leave and sick days. While workers in Europe have long taken such benefits for granted, most workers in the United States cannot count on receiving paid time off. This is especially true for less-educated and lower-paid workers. In fact, employers in most states do not have to grant unpaid time off and can fire a worker for taking a sick day for themselves or to care for a sick child. So the movement towards requiring paid time off is quite significant for many workers.

This progress should be noted when thinking about the political situation and the plight of working people in the United States, but there are also two important qualifications that need to be added. The first is that there are clearly limits to how far it is possible to go with minimum wage increases before the job losses offset the benefits. Recent research has shown that modest increases can be put in place with few or no job losses, but everyone recognizes that at some point higher minimum wages will lead to substantial job loss. A higher minimum wage relative to economy-wide productivity was feasible in the past because the US had a whole range of more labor-friendly policies in place. In the absence of these supporting policies, we cannot expect the lowest-paid workers to get the same share of the pie as they did half a century ago.

The other important qualification is the obvious one: higher minimum wages do not increase union membership. The SEIU, the AFL-CIO and the member unions that have supported the drive for a higher minimum wage have done so in the best tradition of enlightened unionism. They recognize that a higher minimum wage can benefit a substantial portion of their membership, since it sets a higher base from which they can negotiate upward. Of course, it is also a policy that benefits the working class as a whole. For this reason, unions collectively have devoted considerable resources to advancing the drive to raise the minimum wage.

However, this has put a real strain on their budgets at a time when anti-union efforts are reducing the number of dues-paying members in both the public and private sectors. This will make it more difficult to sustain the momentum for raising minimum wages and mandating employer benefits. For this reason, the good news on the minimum wage must be tempered. It is a rare bright spot for labor in the United States in the last decade, but it will be a struggle to sustain the momentum in the years ahead.

This blog was originally published at CEPR.net on June 7, 2017. Reprinted with permission.

About the Author:  Dean Baker co-founded CEPR in 1999. His areas of research include housing and macroeconomics, intellectual property, Social Security, Medicare and European labor markets. He is the author of several books, including Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. His blog, “Beat the Press,” provides commentary on economic reporting. He received his B.A. from Swarthmore College and his Ph.D. in Economics from the University of Michigan

Foundations of Inequality are in Wages

Wednesday, May 31st, 2017

While rising capital share and greater concentration of wealth explain some of the story of economic inequality, the largest part of the story is the growth in wage inequality over the last several decades. Available data from the Social Security Administration unfortunately doesn’t go past 1990, overlooking considerable upward distribution of wages beginning in 1980. However, wage distributions from 1990 to 2015 show a clear, and unequal, upward trend.

The share of wages earned by the top 0.1 percent of wage earners increased 36 percent in that time period, from 3.5 percent of all wages earned to 4.8 percent. These earners are largely Wall Street bankers and top executives from private companies, as well as hospitals, universities, and other non-profits. Although the data from such a small pool of workers is erratic, they show soaring gains over ordinary workers that coincide with stock market peaks. Wages at this income level are likely paid in part in stock options, so that connection is unsurprising, but the magnitude of wage increases for this group compared to the others supports the argument that wages are part of the inequality picture.

The top 1 percent of wage earners (excluding the 0.1 percent) are largely doctors, dentists, and other highly paid professionals with an average pay of around $333,000 a year. These workers have experienced impressive gains in their share of wages, although they do not compare to those of the 0.1 percent. From 1990 to 2015 the share of wages earned by this group increased 24 percent from 10.7 percent to 13.2 percent.

Lawyers, general practitioners, university professors, and other professionals with advanced degrees make up the top 5 percent of earners (excluding the aforementioned groups). Since 1990 their share of wages earned has grown 18 percent, from 24.0 percent to 28.5 percent. Most of the difference between the share of wages earned by this group and the next lowest, the 90th to the 95th percentile, was gained between 1994 and 2000. Prior to that period both percentile groups’ share of wages grew at a similar rate, and since 2000 the two groups have had similar growth.

The final group of workers included in this analysis adds those who mostly have college degrees but not necessarily advanced degrees. The share of wages earned by the top 10 percent taken as a whole grew 14 percent from 35.5 percent in 1990 to 40.3 percent in 2015.

This blog originally appeared at CEPR.net on May 30, 2017. Reprinted with permission.

About the Authors: Sarah Rawlins is a Domestic Program Intern at the Center for Economic and Policy Research. Dean Baker co-founded CEPR in 1999. His areas of research include housing and macroeconomics, intellectual property, Social Security, Medicare and European labor markets. He is the author of several books, including Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. His blog, “Beat the Press,” provides commentary on economic reporting. He received his B.A. from Swarthmore College and his Ph.D. in Economics from the University of Michigan.

Public Employees Under Attack

Wednesday, October 13th, 2010

Image: James ParksThe people who teach our children, protect us from crime, put out fires in our homes and make sure our water is clean are under attack. Conservative pundits and politicians across the country are using the economic crisis to attack public employees and portray them as privileged compared with everyone else. They use the fact that public employees, many of whom are union members, have been able to keep their well-funded pensions, reasonable hours and decent pay to stir up rage from those who have lost these benefits in the private sector.

Many cash-starved state and local governments have used these same arguments as a cover to cut services, personnel and pension benefits to balance their budgets and weaken unions.

Several new studies should put those arguments to rest. The Economic Policy Institute (EPI) found that state and local public employees are actually underpaid. In “Debunking the Myth of the Overcompensated Public Employee: The Evidence,” Rutgers University professor Jeffrey Keefe found that, on average, state and local government workers are paid 3.75 percent less than similar workers in the private sector.

The study also found the benefits that state and local government workers receive do not offset the lower wages they are paid. The differential is greatest for doctors, lawyers and professional employees, the study found. Read Keefe’s report here.

Public employees also work hard for their lower pay, often putting themselves in danger. According to the Center for Economic and Policy Research (CEPR), nearly two in five state and local government workers—more than 1.4 million— worked in either physically strenuous jobs or jobs with difficult working conditions. Notably, almost half (47.5 percent) of local government employees between ages 55 and 65 held such jobs. If the retirement age were increased, the report says, many of these workers, due to the physical challenges of their jobs, would have to leave the workforce before they are eligible for full retirement benefits. Read the CEPR report here.

Writing in the New York Daily News, Dan Morris of the nonpartisan Drum Major Institute for Public Policy says the attacks on public employees are absurd and dangerous.

…if public-sector workers become cheap, expendable labor, they will contribute less to the tax base and spend less, blunting private-sector job creation. A healthy public sector is just as good for the investment banker as it is for the unionized electrician.

EPI estimates that every 100 public-sector layoffs result in about 30 private-sector layoffs because the subsequent loss of income dampens consumer spending and thus weakens the economy. Says Morris:

The race to the bottom is a callous attempt to lower expectations for employment at a time when millions of people are counting on them to be raised. No victory worthy of the name can be achieved on those terms.

This article was originally posted on AFL-CIO Now Blog.

About The Author: John Petro is an urban policy analyst at the Drum Major Institute for Public Policy. He runs the Progressive Urban Model Policies (PUMP) Project, a first-of-its-kind initiative to organize and share best practices in policy design and implementation. His writing on urban issues has appeared in the San Francisco Chronicle and his recent research has been covered in Politico, The New York Times, Reuters, and other media outlets.

Pace of Job Loss Slows Sharply, as Unemployment Edges Down

Monday, August 10th, 2009

Employment of older workers has increased by almost 1 million in the downturn.

The economy lost 247,000 jobs in July, bringing the rate of job loss over the last three months to 331,000. This is down sharply from the 700,000 monthly rate of decline in the months from November to February. The unemployment rate actually slid slightly to 9.4 percent, although this was entirely attributable to people dropping out of the workforce. The employment-to-population ratio fell by 0.1 percentage points to 59.4 percent, four full percentage points below the pre-recession peak.

The slower rate of job decline is largely due to a moderation of the pace of job loss in manufacturing and employment services, two sectors that had seen employment plummet during the worst of the downturn. Manufacturing lost 52,000 jobs in July; by contrast, it lost 205,000 jobs per month between November and February. This improvement was, in turn, driven largely by the auto sector, which lost jobs at a rate of 30,000 per month in the winter plunge. By contrast, employment in the auto sector rose by 28,200 in July. This is entirely a seasonal story as unadjusted employment in the sector actually decreased by 8,600 in July. Workers who ordinarily would have been laid off for retooling in July had already lost their jobs earlier in the year.

The employment services sector lost 25,600 jobs in July, compared to an 86,000 monthly rate of job loss between November and February. Temporary jobs are always the easiest for firms to shed. The July data still shows that the direction is clearly negative, but the rate is far slower than in the months of free fall. Construction lost 76,000 jobs, with all sectors of the industry still shedding employment, although the pace is down from a 115,000 peak monthly rate.

The establishment data showed a modest 0.1 hour increase in the average workweek. This was driven largely by the 1.6 hour increase in the workweek reported in the auto sector. However, even though the increase may prove to be an artifact of seasonal adjustment, it appears that the length of the workweek has at least stabilized.

The picture in the household data continues to be mostly bad, but there were a few somewhat encouraging signs. Consistent with the rise in hours reported in the establishment survey, there was a decline of 198,000 in the number of people involuntarily working part-time. As a result, the U-6, the broadest measure of labor market slack, fell from 16.5 percent to 16.3 percent, the first drop since November of 2007.

There continues to be the extraordinary trend of increased employment among older workers in spite of the economic downturn, as employment among workers over age 65 increased by 11,000 in July, even as it fell by 166,000 for everyone else. Since November of 2007, employment of people over age 55 has increased by 957,000 even as it has decreased by 7,581,000 for everyone else. To some extent, this presumably reflects not only the desire of baby boomers to work later in life than the cohorts that preceded them, but also the need of older workers to secure health care coverage through employment.

One especially disturbing item was a jump of 0.9 percentage points to an unemployment rate of 12.6 percent for women who maintain families, the highest rate since the peak of the 1982 recession. While this rate peaked at 13.6 percent in early 1983, there are almost 80 percent more women who maintain families in the labor force today.

The increase in the average hourly wage was 3 cents, bringing the annual rate of increase over the quarter to 1.2 percent. The 14 cent reported rise in manufacturing wages accounted for more than half of the month’s increase.

Given the steepness of the winter decline, this report has to be viewed as positive news. The stimulus has worked in stabilizing the economy and ending the free fall. The main impact to date was felt through tax cuts and benefit increases which raised the annual rate of consumption in the quarter by roughly $100 billion, adding more than 2 percentage points to growth. However, without further stimulus, the economy will have excessive unemployment for years to come.

Dean Baker: Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC. He is frequently cited in economics reporting in major media outlets, including the New York Times, Washington Post, CNN, CNBC, and National Public Radio. He writes a weekly column for the Guardian Unlimited (UK), and his blog, Beat the Press, features commentary on economic reporting. His analyses have appeared in many major publications, including the Atlantic Monthly, the Washington Post, the London Financial Times, and the New York Daily News. He received his Ph.D in economics from the University of Michigan.

This article appeared originally at CEPR on August 7, 2009 and is reprinted here with permission from the author.

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