Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘economics’

New CFPB Rule – a Poster Child for Regulation

Tuesday, July 25th, 2017

The new CFPB rule is critically important in its own right, but it is also interesting to view the battle over this rule as a microcosm of the fight we so often see between free market devotees and fans of regulation. Bankers, credit card issuers, payday lenders and the Chamber of Commerce have urged for many years that consumers should be free to “choose” to resolve disputes through individual arbitration – supposedly a quicker, cheaper better mode of dispute resolution as compared to litigation and class actions.  In contrast, those who oppose forced arbitration assert that such arbitration is unfair for consumers and bad for society as a whole.  Ultimately this battle between free marketeers and pro-regulation forces turns on principles of economics, psychology, and political philosophy, as I have detailed elsewhere.

While those who oppose regulation urge that financial consumers should be free to choose to resolve future disputes through individual arbitration rather than through class actions, empirical studies and common sense tell us that consumers do not knowingly choose a contract based on the arbitration clause.  We do not focus on such clauses, we do not usually understand them and our human psychology leads us to be overly optimistic that no disputes will arise in any event.  Nor would it make sense for all consumers to spend the time and energy to try to figure out such clauses.

We also cannot count on the miracle of Adam Smith’s invisible hand to ensure that financial service companies act in the best interest of consumers.  The lack of perfect competition, customers’ lack of complete information, the impact of clauses on third parties and the unequal initial distribution of resources all ensure that the market will not miraculously do what is best for customers.

Philosophically, how can one argue with a straight face that clauses imposed unknowingly in small print contracts are supported by principles of freedom or autonomy?  As Professor Hiro Aragaki has explained, perhaps autonomy supports freedom from contracts of adhesion more than freedom of contracts of adhesion.

So, we need regulation. What should the regulation look like? Is forced arbitration the quicker, cheaper, better form of dispute resolution that its advocates suggest? Do class actions help consumers or do they only enrich the lawyers who bring them? The CFPB used extensive empirical investigation to answer these questions.  It found that (1) financial consumers are typically unaware of the arbitration clauses to which they are subjected; (2) only miniscule numbers of financial consumers actually bring claims in arbitration; and (3) financial class actions, e.g. over improper check bouncing charges, have brought billions of dollars of benefits to millions of consumers and also imposed non-monetary sanctions, all helping to deter future illegal conduct.  Thus, CFPB concluded that, at minimum, it should prevent financial companies from using arbitration to insulate themselves from class actions.  It issued the rule to achieve that end.  The new CFPB rule also requires companies to submit additional information to CFPB regarding their arbitration programs so that CFPB can conduct additional analyses and decide whether more/different regulation may be needed.

Hurrah for the CFPB!   Its new rule is supported by psychology, economics, and political philosophy.  Nonetheless, the new rule is under serious threat.  Congress may consider proposals to gut the rule as early as next week, and the Acting Comptroller of the Currency is threatening to void it on the ground that allowing financial consumers to sue in class actions would threaten the soundness of the banking system.

The CFPB says otherwise, and expresses surprise that such a claim is being made at the tail end of a very public three year study.

Let’s now all take what steps we can to preserve this rule against the attacks that are coming in Congress, from elsewhere in the bureaucracy, and in the courts.

The Consumer Financial Protection Bureau (CFPB) just issued a new rule prohibiting financial service providers from using forced arbitration to prevent their customers from suing the company in class actions.  While many of us believe this rule is a “great win for consumers,” others are trying to gut it in Congressin the courts, or through administrative action by the Comptroller of the Currency.

People’s Budget Puts Forward An Aggressive Plan To Green Our Economy

Wednesday, March 16th, 2016

Isaiah J. Poole

Members of the Congressional Progressive Caucus will formally unveil their fiscal 2017 People’s Budget on Tuesday, and when they do one of the key features they will tout is an aggressive plan to shift the country to a green energy future.

“Climate change is no longer just a problem for a future generation — it is here today,” the budget document says, adding that the nation needs “to take bold action to fight climate change and invest in a clean-energy economy that supports green jobs with good wages.”

The policies embodied in the People’s Budget closely track the policies that the Campaign for America’s Future, along with partners National People’s Action, Alliance for a Just Society and USAction, called for in their progressive policy platform last year. The budget even echoes the platform language: “Catastrophic climate change is a clear and present danger. The United States should lead the global green revolution that builds strong and resilient communities.”

The People’s Budget would impose a tax on carbon polluters that would start at $25 per ton of carbon dioxide emissions and increase at a rate of 5.6 percent a year. Much of the money raised from that tax would be used to fund a range of renewable energy initiatives and to help low-income individuals cope with any increases in their energy bills that might result from the combination of the carbon tax and the switch to renewables.

This carbon tax would, according to the Energy Information Administration, lead to the U.S. cutting its carbon emissions 26 percent below 2005 levels within five years. That would be a significant contribution toward the United States’ pledges during the Paris climate talks last year to help limit global warming to no more than 3 degrees Celsius (about 5 degrees Fahrenheit), and preferably much lower.

The budget would also eliminate about $135 billion in fossil fuel subsidies over 10 years. These tax expenditures, combined with other loopholes fossil fuel companies typically exploit, enable these companies to pay a tax rate that is on average only about 11 percent of their profits, according to one study by the conservative-leaning Taxpayers for Common Sense. By shutting down these subsidies, the People’s Budget is able to pour resources into helping communities protect themselves from the consequences of climate change that are already beginning to unfold.

Lukas Ross of Friends of the Earth called the People’s Budget “the greenest option in Washington” in a post on DailyKos. Ross noted that in addition to what the budget proposes to do that is directly related to climate change, it includes $12 billion to cover the public financing of elections. That’s important to the environmental movement because so far this election season, “Big Oil has already poured over $13 million into Congressional races and over $100 million into the presidency. Climate solutions require politicians who aren’t beholden to Big Oil, and even though public financing can’t guarantee direct climate results, it can guarantee a more level playing field for candidates not drowning in oil money.”

The People’s Budget is a comprehensive road map for economic reform that will stand in sharp contrast to what Republican congressional leaders will propose this week as they launch their own 2017 budget debates. As the National Priorities Project outlines, the budget “includes a $1 trillion in much-needed investment in our national infrastructure …. fully funds Early Head Start, giving kids a strong start early in life, and adopts the president’s proposals for universal preschool … provide[s] federal matching funds to states so that students could go to college debt-free … does away with the Pentagon slush fund after fiscal year 2017 (Overseas Contingency Operations), saving $761 billion over ten years … [and] If you earn a billion dollars or more each year … the People’s Budget would assign you a tax rate of 49 percent [that] is still lower than the highest individual tax rate during most of the presidency of conservative hero President Ronald Reagan.”

The budget also serves as a standard for what a presidential or congressional candidate should be willing to embrace in order to earn progressive support. In that regard, a coalition of grassroots organizations are telling Democratic house members that their vote on the People’s Budget, expected the week of March 21, will be a key vote in weighing their support.

To declare yourself a citizen co-sponsor of the People’s Budget, and to show Congress that the ideas in the People’s Budget have broad support, sign this petition that will be delivered to Congress when the House begins floor debate.

This blog originally appeared at OurFuture.org on March 14, 2016. Reprinted with permission.

Isaiah J. Poole worked at Campaign for America’s Future. He attended Pennsylvania State University and lives in Washington, DC.

When a Coin Drops in Asia, Jobs Disappear in Detroit

Tuesday, March 8th, 2016

Leo Gerard

Last year, free trade hammered Michigan’s 11th Congressional District, located between Detroit and Flint, killing manufacturing, costing jobs and crushing dreams.

It’s not over, either. Another 11th District company, ViSalus Inc., told the state it would eliminate 87 jobs as of last Saturday, slicing its staff by nearly 400 since 2013 when ViSalus was the second-largest direct sales firm in the state.

The numbers are staggering. The Economic Policy Institute (EPI) released a report last week showing that America’s $177.9 billion trade deficit in 2015 with the 11 other countries in the proposed Trans-Pacific Partnership (TPP) trade deal caused 2 million job losses nationwide.

This trade deficit reduced jobs in every U.S. congressional district except two, EPI said, but Michigan’s 11th had the ignoble distinction of suffering more as a share of total employment than any other district in the country. It was 26,200 jobs. Just in 2015. It was tech workers in January and teachers in July and tool makers in August and auto parts builders in October.

Manipulation of money killed those jobs. It works like this: Foreign countries spend billions buying American treasury bonds. That strengthens the value of the dollar and weakens foreign currencies. When a country’s currency value drops, it acts like a big fat discount coupon on all of its exports to the United States. And it serves simultaneously as an obscene tax on all U.S. exports to that country.

Among the TPP countries, Malaysia, Singapore and Japan are known currency manipulators, and Vietnam appears to be following their example. EPI found that currency manipulation is the most important cause of America’s massive trade deficits with TPP countries. Trade deficits mean products are shipped to the United States rather than made in the United States. The math is simple. A drop in Asian currency means a drop in U.S. jobs.

EPI looked at what types of imports the 11 countries sent the United States last year to determine what types of industry and jobs America lost as a result. The overwhelming majority was motor vehicles and parts. That’s why Michigan was the biggest loser of all of the states. The auto sector was followed by computer and electronic parts ­– including communications, audio and video equipment – and primary metals – including basic steel and steel products.

In addition, EPI found job losses in industries that serve manufacturers, like warehousing and utilities, and services like retail, education and public administration.

Each of these kinds of losses occurred last year in Michigan’s 11th district, located in the heart of America’s car manufacturing country in southwestern Oakland County and northwestern Wayne County, where Detroit is parked just outside the district’s lines.

In January, in Michigan’s 11th, Technicolor Videocassette of Michigan, Inc., a subsidiary of the French multimedia giant Technicolor SA, laid off 162 workers in Livonia. That same month, what was once a vibrant chain of cupcake stores called Just Baked shuttered several shops, putting an untold number of bakers and clerks in the street, some with last paychecks that bounced.

In February, the Sam’s Club store in Waterford closed, throwing 122 in the street. Waterford municipal official Tony Bartolotta called it another “nail in the coffin” for the township’s east side.

In April, Frito-Lay told 17 workers that they’d lose their jobs later that year when it closed its Birmingham warehouse.

In July, 231 teachers in the Farmington Public Schools learned they would not have work in the new school year. One of them, 25-year-old Val Nafso, who grew up in Farmington, told the Oakland Press, “I hope things change where people who are passionate about teaching can enter the profession without 1,000 people telling them “Don’t do it…get out now.”

In August, DE-STA-CO, a 100-year-old tool manufacturer, told Michigan it would end production in Auburn Hills, costing 57 workers their jobs.

In October, Waterford laid off 39 firefighters. The township had received a $7.6 million grant in 2013 to hire them, but just couldn’t come up with local funds to keep them. That happens when factories close and bakeries shut down. Township officials told concerned residents they’d looked hard at the budget, “We started projecting out for 2017 and it flat lined,”Township Supervisor Gary Wall told them.

Later that month, FTE Automotive USA Inc., an auto parts manufacturer, told Michigan it would close its Auburn Hills plant and lay off 65 workers.

In the areas around Michigan’s 11th, horrible job losses occurred all last year as well, which makes sense since EPI found 10 of the top 20 job-losing districts in the country were in Michigan.

Ford laid off 700 workers at an assembly plant in Wayne County in April. GM eliminated a second shift, furloughing 468 workers at its Lake Orion Assembly Plant in Oakland County in October.

Auto supply company Su-Dan announced in September it would close three factories in Oakland County by year’s end, costing 131 workers their jobs.

In October, a division of Parker Hannifin Corp. in Oxford, Oakland County, that manufactured compressed air filters told its 65 workers they wouldn’t have jobs in 2016. “There’s a lot of people there that are paycheck to paycheck, and it’s going to hurt them,” Michelle Moloney, who worked there 25 years, told a reporter from Sherman Publications.

The threat of the TPP is that it does absolutely nothing to stop this job-slaughter. Lawmakers, public interest groups, manufacturers, and unions like mine all pleaded with negotiators to include strong provisions in the deal to punish currency manipulators. They didn’t do it.

They included some language about currency manipulation. But it’s not in the main trade deal.  And it’s not enforceable.

Swallowing the TPP would be accepting deliberately depressed currency values in Asian trading partner countries and a permanently depressed economy in the U.S. car manufacturing heartland.

It’s the TPP that should disappear. Not Detroit.

This blog was originally posted on ourfuture.org on March 8, 2016. Reprinted with permission.

Leo Gerard is the president of the United Steelworkers International union, part of the AFL-CIO. Gerard, the second Canadian to lead the union, started working at Inco’s nickel smelter in Sudbury, Ontario at age 18. For more information about Gerard, visit usw.org.

Boston’s Hyatt Hotels: Not Much Hospitality Toward Their Own Workers

Friday, September 25th, 2009

An ongoing labor story here in Boston underscores why jobs and employment must remain one of our highest political, economic, and policy priorities. It involves three Hyatt hotels whose management abruptly terminated some 100 housekeeping workers after having them train replacement workers from a Georgia-based contracting company. The workers claim they were deceived into thinking they were training vacation fill-ins.

As reported last week in the Boston Globe:

When the housekeepers at the three Hyatt hotels in the Boston area were asked to train some new workers, they said they were told the trainees would be filling in during vacations.

On Aug. 31, staffers learned the full story: None of them would be making the beds and cleaning the showers any longer. All of them were losing their jobs. The trainees, it turns out, were employees of a Georgia company, Hospitality Staffing Solutions, who were replacing them that day.

Labor advocates and elected officials have responded with dismay and outrage, and with good reason. Hyatt employees with 20 years service were making a modest wage of a little over $13/hour plus benefits, which based on a full-time work week adds up to annual earnings of around $26,000. Their replacements will earn about $8/hour, which leads to annual earnings of around $17,000. Hyatt, in effect, has eliminated 100 jobs that pay barely a living wage and replaced them with jobs that pay less than subsistence wages in an expensive metro area like Boston.

In response to the growing firestorm, the Hyatt Corporation said that it is setting up a task force to help the terminated workers find employment and extending their health benefits to the end of the year. This strikes me as being too little, too late, and a shallow attempt to look better in the public eye.

Contracting has become a common form of replacing full-time employees, and at times, economic necessity may require changes in staffing arrangements. But one has to wonder about the social responsibility and ethics of a major corporation that deems loyal 20-year employees earning $26,000 “too expensive.” And if the allegations about deceiving their workers into training their replacements are true, then we can only wonder if they have any decency.

On a broader scale, this disturbing situation raises at least three questions that are front and center when we consider jobs and employment:

1. How can we create an economy that delivers a living wage for all who work to support themselves and their families?

2. The Hyatt workers were not unionized. How can we encourage unionization as one path toward safeguarding America’s workers from this type of sudden, devastating job loss?

3. How can we ensure a viable safety net of health care benefits, transitional income replacement, and placement assistance for those who have lost their jobs?

About the Author: David Yamada is the Founder of New Workplace Institute and a Professor of Law at Suffolk University Law School in Boston. He is an internationally recognized authority on workplace bullying and psychologically abusive work environments, having written leading analyses of workplace bullying and the law and authored the Healthy Workplace Bill, model anti-bullying legislation that has been the basis of bills introduced in over a dozen state legislatures since 2003.  For more about David’s background, see his bio at: http://law.suffolk.edu/faculty/directories/faculty.cfm?InstructorID=59.

This article originally appeared in Minding the Workplace on September 24, 2009. Reprinted with permission by the author.

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