Saturday, July 21, 2018

[NJFAC] The Crummy Good Economy and the New Serfdom by Frank Stricker

            For about a year now, the unemployment rate has been around 4%. That's supposed mean full employment, labor shortages, and rising pay. But the latest earnings report is the same old story: no gains in real hourly wages from June of 2017 through June of 2018. Most employers have been able to find new workers without having to raise pay offers much.
           
            What's going on?  There are screwball right-wing diversions and explanations. A Trump economist, D. J. Norquist, opines that it will take time for the Republican tax-cuts to work their way through the economy. This is nonsense. Just because the lords of creation get more money doesn't mean more will filter down to workers. We have the evidence of forty years on that issue. Then we have Stephen Moore at the Heritage Foundation. He suggests that the economy might be creating a disproportionate number of low-wage jobs, which could outweigh rising wages higher on the job ladder. But this compositional shift is not happening. And if it were, we would be right back to asking why a booming labor market was generating more lousy jobs.

            It's true that scattered labor shortages are lifting wages and employment opportunities for some people. California farm workers' average pay is now about $14 an hour. More prisoners and ex-prisoners are getting regular jobs and the unemployment rate for disabled people has fallen to 7%. These are positive events. But average real wages have been stuck for two years.
 
           So what are the causes for the general wage drag? Here are the important ones.

1. There is still a plentiful supply of jobless workers. The official unemployment rate tells us nothing about millions of people who are essentially unemployed and ready to work, but who are not currently searching for work and are not labeled as unemployed. Five million people came off the sidelines to take jobs in June. We are not close to full employment.

2. Few workers are unionized; most do not have collective power to take full advantage of good labor markets. Employers love dealing with workers one at time. Most employers don't want unions. Quite a few don't want regular employees. Millions of employees are  involuntary part-timers, temps, or "independent" contractors who get no company contributions for Social Security and health insurance and may earn less than the minimum wage.
 
3. U.S. employees have less job security than employees in other rich nations. They are more likely to be laid off or fired, and less likely to get enough unemployment benefits to carry on a careful search for a better-paying job.
 
4. Capitalists and their financial overlords are more determined than ever to limit pay raises for rank-and-file workers. Everything, including executive pay, is about corporate earnings, stock prices, and shareholder gains. When American Airlines offered wage increases to employees, there was bitching and boo-hooing on Wall Street. "Labor is being paid first again," said Citigroup's analyst. "Shareholders get leftovers." Really?  In what evil parallel universe do people like this guy live?  Shareholders have been making out like bandits for years, and they are benefitting now from the Republican tax-cut giveaway which lowers rates on personal and corporate income, and gives companies tons of money for share-buybacks. Yes, I am aware that capitalism is inherently self-interested and amoral. But American capitalists seem more parasitic than ever. The invisible hand of self-interest does less to promote the general welfare than it once did. Wages are too low, poverty rates too high, global warming races ahead, and so on.   
 
5. Another factor keeping wages down is akin to serfdom: employers rig labor markets with non-compete and no-poaching contracts. Employees must promise not to move to a competitor, even within the same company. Franchise owners pledge not to hire employees from other franchisees in the company. Company arguments are that employees have trade secrets, and also that employers must protect their investments in worker training. But the average fast-food worker doesn't get trade secrets, and there can't be a lot of training for fast-food workers. The real issue is that when employees have more freedom to search for a better deal, average wages are more likely to rise.
            How restrictive are these contracts? In 2014 Jimmy John's required low-level employees to sign non-compete contracts that prohibited them from going to work for any business that earned more than 10% of its revenue from "selling submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches" within three miles of any JJ's franchise anywhere in the United States. This meant, for example, that a Jimmy John's employee in Chicago would not be able to take a new job making sandwiches in the Chicago area.
            These anti-competitive contracts occur in many occupations, but they have been common in the fast-food industry. And truly wicked: you are an owner and you are paying very low ages--the median hourly rate at six fast food chains is $9.58--and now you and your company are barring employees from searching for a better job in the industry.  
            There's some reform at the state level. As I composed this article, the Attorney General of the State of Washington announced binding agreements to end no-poaching practices with McDonald's (which had stopped enforcing its contracts last year), Auntie Anne's, Arby's, Carl's Jr., Jimmy John's, Cinnabon, and Buffalo Wild Wings. Meanwhile, Democratic Attorney Generals in ten other states and Washington, D.C. announced investigations of six companies, including Panera Bread and Burger King.
            So here's a little good news at a time when the Supreme Court, the White House, and Congress are dominated by people whose main labor policy is to limit the power and the living standards of workers. So treasure small victories. But remember other, bigger things that make for more subtle forms of modern serfdom.
 
Frank Stricker is on the board of the National Jobs for All Coalition, and emeritus professor of history and labor studies at California State University, Dominguez Hills. He has just finished What Ails the American Worker: Unemployment and Crummy Jobs: History, Explanations, Remedies.
 
 
Useful sources
 
Abrams, Rachel, "Why Aren't Paychecks Growing? A Burger-Joint Clause Offers a Clue," New York Times, September 27, 2017, accessed at nytimes.com on 7/11/2018.
 
Bureau of Labor Statistics, U.S. Department of Labor, "Real Earnings--June 2018," USDL-18-1114, released July 12, 2018.
 
Cohen, Patricia, "Paychecks Lag as Profits Soar, and Prices Erode Wage Gains," July 13, 2018, accessed at nytimes.com, 7/13/2018.
 
Dougherty, Conor, "Losing the Right to a New Job," New York Times, May 14, 2017, 1, 4-5.
 
Hiltzik, Michael, "Labor Losing Out to Wall Street," Los Angeles Times, July 12, 2018, C1, C5.
 
Krueger, Alan B., and Eric A. Posner, "A Proposal for Protecting Low-Income Workers from Monopsony and Collusion,"  Hamilton Project Policy Proposal 2018-5, February, 2018.
 
Stein, Jeff, "Fast-Food Hiring Practices Are Probed," Los Angeles Times, July 10, 2018, C6
 
Van Dam, Andrew, "Why Many U.S. Workers Feel Left Behind in Hot Economy," Los Angeles Times, July 6, 2018, C3.
 
Velshi and Ruhle, MSNBC, July 11, 2018, "What 'No Poach' Rules Mean for Fast Food Workers."
 
 

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Thursday, July 12, 2018

[NJFAC] Trade: It’s About Class, Not Country; Six Lies on Trade--Dean Baker

Two good pieces by Dean Baker:

There is a fundamental flaw in the way that both Donald Trump and his critics generally talk about trade. They make it an issue of country versus country, raising the question of whether China, Canada and other trading partners are treating the United States fairly as a country.
Trump of course does this more explicitly with his "America First" rhetoric and complaints about other countries cheating us because they run trade surpluses, but his critics also often use similar language. After all, it is common for the adults in the room to make assertions about China's theft of "our" intellectual property.

Have you had any intellectual property stolen by China?

The economist and policy types who have been pushing the trade agenda of the last four decades often make assertions like "everyone gains from trade." This is what is known in the economics profession as a "lie." 

No models show that everyone gains from trade. Standard models show that some groups are benefitted by trade and others are hurt. The usual story is that the winners gain more than the losers lose.
This means in principle that the winners can compensate the losers so that everyone is better off. In the real world, this compensation never takes place, so when we talk about trade we're talking about a policy that redistributes from some groups to others.

Our trade policy over the last four decades has been quite explicitly designed to redistribute income upward. This was the point of deals like NAFTA, or admitting China to the WTO.

These deals were about putting US manufacturing workers in direct competition with much-lower-paid workers in the developing world. The expected and actual effect of these policies is to reduce employment in manufacturing. This also put downward pressure on the wages of the manufacturing workers who kept their jobs, as well as on the wages of less-educated workers more generally, since manufacturing has historically been a source of relatively high-paying employment for workers without college degrees.....


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June Zaccone
National Jobs for All Coalition
http://www.njfac.org

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Wednesday, July 4, 2018

[NJFAC] Increased Minimum Wage’s Positive Effects Grow

Report: Increased Minimum Wage's Positive Effects "Persist and Indeed Grow in Magnitude over Several Years" Paul Constant, 4/18  Here's the best news about the minimum wage that nobody is reporting.

Last month, Kevin Rinz and John Voorheis from the U.S. Census Bureau published an astounding new working paper on the minimum wage. (It's titled "The Distributional Effects of Minimum Wages: Evidence from Linked Survey and Administrative Data," and you can read it in full in PDF form here.) The study examines decades' worth of unique data, and it comes to some pretty thrilling conclusions. You'd think that a study about the minimum wage coming from Census employees in the Trump era would be worth a juicy headline or two, don't you?

Not one single news outlet that I can find picked up on this report. Seriously. Go check Google News for yourself, and let me know if I'm wrong. Granted, Rinz and Voorheis are economists and the language they use in the report is highly technical, but technical language has never stopped a news outlet from reporting on a negative study. In fact, the only difference I see between this study and some of the other minimum-wage studies that have been heavily covered in the media over the last few years is that the results are overwhelmingly favorable.
....
So how is the Census report different? They take information from the Social Security Administration and cross-reference it with Census data in order to track how the effects of the wage "persist over time."This allows the Census report to follow how individuals were affected by the wage increase. The majority of studies, even the most positive examples, are unable to prove that the higher minimum wage benefits the people it's intended to help. Critics will often argue that a higher minimum wage pushes the most undereducated or under-skilled employees out of the labor market entirely, rendering them unemployable. This study puts that thesis to the test.
....
After running the data, Rinz and Voorheis find it reasonable to argue that "a minimum wage increase comparable in magnitude to the increase experienced in Seattle between 2013 and 2016 would have blunted some, but not nearly all of the worst income losses suffered at the bottom of the income distribution during the Great Recession."

Further, their findings suggest that "raising the minimum wage increases earnings growth at the bottom of the distribution, and those effects persist and indeed grow in magnitude over several years." So raising the minimum wage increases the wages of the poorest Americans, and an increased minimum wage has positive effects that grow over time.
....

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June Zaccone
National Jobs for All Coalition
http://www.njfac.org

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