Blog | Economic Policy Institute Research and Ideas for Shared Prosperity Thu, 28 May 2020 18:00:40 +0000 en-US hourly 1 Republicans and corporate interests exploit coronavirus crisis to erase companies’ liability Tue, 26 May 2020 19:58:22 +0000 Senate Majority Leader Mitch McConnell (R-Ky.) and Senator John Cornyn (R-Texas) announced that they are working on legislation to give companies enhanced protections against lawsuits by employees and consumers who contract COVID-19 and claim that the business is responsible for their infection. Instead of advancing crucial worker protections and aid to state and local governments, Republicans and corporate advocacy organizations have made “liability shield” legislation the main priority for additional pandemic relief and recovery measures—claiming that it is necessary to remove liability from businesses in order to reopen the economy. To be clear, removing legal accountability from businesses would jeopardize the health and safety of workers and consumers and threaten the overall economic recovery.

In the last several months, there have been many examples of businesses failing to provide workers with the necessary personal protective equipment to enable them to perform their jobs safely and effectively. Further, some workplaces have continued to operate when workers reported infection and have become epicenters of a local outbreak. Eliminating all legal liability for businesses will likely lead to more businesses acting irresponsibly and placing potential profits ahead of worker and consumer safety.

Compounding this problem is the fact that policymakers have gutted federal budgets for worker protection enforcement over the last decade, as shown in Table 1.

Table 1
Table 1

As the workforce has expanded, the number of inspectors available to ensure that businesses are operating in compliance with health and safety regulations have also declined. According to the Occupational Health and Safety Administration (OSHA), there is approximately one compliance officer for every 59,000 workers. Figure A shows worker protection agencies are responsible for far more workers than they were a decade ago.

Figure A
Figure A

In addition to weak federal enforcement of worker protections, policymakers have failed to impose meaningful penalties when employers violate labor and employment laws. For example, OSHA has a maximum penalty of just $13,494 per each violation that results in the death or serious harm of a worker. These penalties are insufficient to serve as a deterrent. Companies merely factor these penalties into the cost of doing business. Therefore, it is imperative that corporations have some legal incentive to adhere to health and safety guidelines.

Ensuring that workers and consumers can hold companies accountable for their actions is critical to establishing a safe reopening of our economy. Currently, workers who are injured or become ill as the result of workplace exposure face tremendous hurdles in holding their employer accountable. Many workers are barred from taking legal action against their employer because their state workers’ compensation laws preclude them from filing suit unless they can demonstrate that their employer’s gross negligence caused their injury. The lack of OSHA guidance makes it difficult for workers to pursue or win a personal-injury claim because it is difficult for workers to demonstrate that an employer did not take the necessary steps to protect workers. Even if the worker is able to build a case and take their employer to court, the worker may be subject to forced arbitration to resolve the claim.

This most recent effort to limit corporate accountability must be examined in the larger political and legal context. It is not, as Republican lawmakers suggest, simply a response to the pandemic. Republicans and corporate interest groups have long-pursued policies aimed at making it more difficult for workers and consumers to sue corporations. In fact, over the last several decades corporations have severely restricted workers’ and consumers’ right to sue by forcing them arbitrate all claims. In the employment context, companies require workers, as a condition of employment, to resolve all workplace disputes through arbitration, often on an individual basis. This makes it nearly impossible for workers to hold their employers accountable for violating their labor and employment rights.

A recent study found that forced arbitration clauses already bar 56.2% of nonunion private-sector workers from seeking justice in court. Forced arbitration is imposed in nearly two-thirds of low-wage workplaces. Based on the dramatic increase in forced arbitration in recent years and the free rein granted to corporations by the Supreme Court in the Epic Systems decision, it is likely that within five years over 80% of nonunion private-sector workers will be unable to sue their employers.

Forced arbitration clauses often include class and collective action bans as well. This means that workers must pursue their claim in arbitration individually. Although their rights have been diminished, workers depend on collective and class actions to enforce many workplace rights. Employment class actions have helped to combat race and sex discrimination and are fundamental to the enforcement of wage and hour standards. Without the ability to aggregate claims, it is very difficult, if not impossible, for workers to find legal representation in these matters. This is particularly true for low-wage workers, whose cases are unlikely to involve large enough awards to attract attorneys to invest time in the case. Class and collective action suits allow workers to pool their claims, making it possible for an attorney to earn enough to make the case worth pursuing. Additionally, class and collective action efforts enable workers to gather supportive evidence from each other and demonstrate pattern and practice violations that inure to the benefit of the entire workplace, not just one worker.

Further, corporations set the rules in arbitration and may impose costly fees on workers, shorten periods for initiating a claim, limit workers’ ability to collect evidence to prove their case, and prevent arbitrators from awarding the level of relief that would be available in court. In addition, employers also select the arbitrator pool. Because employers are “repeat players” (who will be hiring arbitrators in the future, unlike their employees) arbitrators have a big incentive to find in their favor. As a result, businesses win in arbitration the overwhelming majority of the time—even more often than they do in federal court. A 2015 report found that workers in mandatory arbitration win only about a fifth of the time (21.4%), whereas they win over one-third (36.4%) of the time in federal courts. And, when workers do win in arbitration, they are awarded far less money than they would receive in the courts. This makes individual arbitration completely different from the bilateral—and voluntary—arbitration used in unionized workplaces to resolve disputes arising under collective bargaining agreements. As a result, an estimated 98% of workers who would otherwise bring employment claims in court abandon their effort when the only option is arbitration.

Figure B
Figure B

Workers and consumers already face significant challenges in holding corporations accountable. Any effort to immunize corporations from responsibility to ensure workers a safe workplace will only lead to fewer protections for working people. Unfortunately, several states have already taken steps to shield corporations from liability of exposing workers and consumers to COVID-19. Compounding this problem is lax enforcement of worker protections and the Trump administration’s and congressional Republicans’ efforts to deregulate. Many companies had safety and health issues before the pandemic, and they should not be benefited by the public health crisis and awarded with a shield from liability.

More than a quarter of the workforce in 10 states has filed for unemployment Thu, 21 May 2020 20:31:02 +0000 The Department of Labor (DOL) released the most recent unemployment insurance (UI) claims data this morning, showing that another 2.2 million people filed for regular UI benefits last week (not seasonally adjusted) and 1.2 million for Pandemic Unemployment Assistance (PUA), the new program for workers who aren’t eligible for regular UI, such as gig workers.

While most states saw a decline in UI claims filed relative to the prior week, 12 states saw increases in UI claims. Washington saw the largest percent increase in claims (31.0%) compared with the prior week, followed by California (15.7%), New York (13.6%), and North Dakota (10.1%).

A note about the data: Unless otherwise noted, the numbers in this blog post are the ones reported by the U.S. Department of Labor, which they receive from the state agencies that administer UI. While DOL is asking states to report regular UI claims and PUA claims separately, many states are also including some or all PUA claimants in their reported regular UI claims. As state agencies work to get these new programs up and running, there will likely continue to be some misreporting. Since the number of UI claims is one of the most up-to-date measures of labor market weakness and access to benefits, we will still be analyzing it each week as reported by DOL, but we ask that you keep these caveats in mind when interpreting the data.

Figure A and Table 1 below compare regular UI claims filed last week with the prior week and the pre-virus period, in both level and percent terms. It also shows the cumulative number of unemployment claims since March 7 and that number as a share of each state’s labor force. In 10 states, more than a quarter of the workforce filed an initial claim during the past 10 weeks: Georgia (39.2%), Kentucky (38.0%), Hawaii (35.0%), Washington (30.9%), Louisiana (29.9%), Rhode Island (29.7%), Nevada (29.6%), Michigan (29.2%), Pennsylvania (28.4%), and Alaska (27.9%).

Figure A
Figure A

All states continue to see astonishingly high numbers of claims relative to the pre-virus period, but the rise in claims has been particularly pronounced in the South. Last week, Florida and Georgia saw the largest percent increase in claims (4,319% and 3,198%, respectively) compared with the pre-virus period. Eight of the 10 states that had the highest percent change in initial regular UI claims relative to the pre-virus period are in the South: Florida, Georgia, Mississippi, Kentucky, North Carolina, Virginia, Louisiana, and Oklahoma.

Table 2 below displays the reported number of people who applied for Pandemic Unemployment Assistance (PUA)—the new federal program that extends unemployment compensation to workers who are not eligible for regular UI but are out of work due to the pandemic, such as gig workers and people who left their jobs to care for a child. The U.S. DOL’s release on 5/21/2020 reported that 1,184,792 initial PUA claims were filed in Massachusetts last week, but the correct number is 115,952. The total number of initial PUA claims in the U.S. last week has also been corrected to 1.2 million to reflect this change.

In the last three weeks, about three million workers in 36 states have filed for PUA, with the most PUA claims in California (547,188), Michigan (388,749), New York (269,426), Massachusetts (255,242), and North Carolina (184,304).

To mitigate the economic harm to workers, the next federal relief and recovery package should extend the across-the-board $600 increase in weekly unemployment benefits well past its expiration at the end of July. The package should also include substantial aid to state and local governments (without which, a prolonged depression is inevitable), worker protections, investments in our democracy, and resources for coronavirus testing and contact tracing, which is necessary to reopen the economy.

Table 1
Table 1
Table 2
Table 2
Nearly one in four workers has applied for unemployment benefits: Congress must do much, much more Thu, 21 May 2020 13:53:44 +0000 Last week, 3.3 million workers applied for unemployment benefits. That is an improvement over the 6 million per week we saw in late March/early April, but is an increase from the prior week—and is still well over three times the worst week of the Great Recession.

Of the 3.3 million who applied for unemployment benefits last week, 2.2 million applied for regular state unemployment insurance (UI), and 1.2 million applied for Pandemic Unemployment Assistance (PUA). PUA is the new federal program for workers who are not eligible for regular UI (e.g., gig workers) but are still out of work as a result of the virus. At this point, 15 states and the District of Columbia are not yet reporting PUA data, so PUA claims are being undercounted. Note, the number of PUA claims for Massachusetts was misreported as 1,184,792. It should have been 115,952. I have corrected for that error throughout this blog post.

It is also worth noting that the Department of Labor (DOL) reports that 2.4 million workers applied for regular state unemployment insurance last week on a “seasonally adjusted” basis, compared with 2.2 million on an unadjusted basis. Seasonal adjustments are usually helpful—they are used to even out seasonal changes in claims that have nothing to do with the underlying strength or weakness of the labor market, typically providing a clearer picture of underlying trends. However, the way DOL does seasonal adjustments is distortionary at a time like this, so I focus on unadjusted numbers when looking at regular state UI. PUA claims are available only on an unadjusted basis.

Figure A
Figure A

What is the total reported number of workers on (or trying to get on) UI or PUA in this recession so far? We can add up various data points to get at that. As of May 9, 22.9 million workers had made it through at least the first round of regular state UI processing (these are known as “continued” claims), and 4.5 million had filed initial UI claims but not yet made it through the first round of processing. And, as of May 2, 6.1 million workers had made it through at least the first round of PUA processing, and 3.0 million had filed initial PUA claims but not yet made it through the first round of processing. So altogether, that’s 36.6 million workers—close to one in four people in the U.S. workforce. And the situation is still deteriorating. The most recent Goldman Sachs forecasts imply that the unemployment rate will average more than 30% for May and June. Further, millions are also losing their health insurance, since our health care system ties health insurance to work. It is also worth always keeping in mind that any overall numbers mask the fact that recessions hit different race and gender groups differently, because of things like occupational segregation, discrimination, and other labor market disparities.

Policymakers need to do much, much more. For example, a prolonged depression is virtually guaranteed without significant federal aid to state and local governments. Indeed, we are at a fork in the road as a country right now. As of mid-April, about two-thirds of workers who are out of work as a result of the virus report they expect to be called back to their prior job. Whether they will actually be called back or whether those furloughs will turn into layoffs is in the hands of policymakers. It will hinge on whether policymakers enact an effective plan of testing and contact tracing so that people will feel safe enough to reengage in normal activity as the economy reopens, and whether federal policymakers provide enough aid to individuals, businesses, and state and local governments so that confidence and demand are relatively high as the economy reopens and those furloughed workers are able to get back to work.

The coronavirus recession will become a long depression unless federal policymakers act now Wed, 20 May 2020 17:47:35 +0000 This blog post was originally posted in Newsweek.

The coronavirus recession is well upon us. In the U.S., layoffs related to the coronavirus began to intensify around the middle of March. By mid-April, the labor market had shed more than 20 million jobs, by far the most dramatic job loss on record—about two and a half times the job loss of the entire Great Recession. And the situation continues to deteriorate—an additional 12 million workers have applied for unemployment compensation since mid-April. There has never been anything like this.

The official unemployment rate was 14.7% in mid-April, up from 3.5% in February. And even though that is the highest unemployment rate since the Great Depression, it is not actually reflecting all coronavirus-related job losses. In fact, only about half of people who are out of work as a result of the virus are showing up as unemployed. About a quarter are being misclassified—they have been furloughed and should be counted as unemployed and on temporary layoff, but are instead being counted as “employed but not at work.” Another quarter are being counted as having dropped out of the labor force altogether, rather than unemployed. This is because jobless people who have not been furloughed are only counted as unemployed if they are actively seeking work, which is currently impossible for many. How is a jobless worker supposed to look for work in a lockdown or if he/she needs to care for a child whose school or day care has been shuttered?

If all workers who are out of work as a result of the virus had shown up as unemployed, the unemployment rate would have been 23.5% in mid-April instead of 14.7%. And the situation is going to get worse before it gets better—reasonable forecasts predict that the unemployment rate will average over 30% in May and June. Further, because our health system ties health insurance to work, people aren’t just losing their jobs. We estimate that 16.2 million workers have already lost the health insurance they get directly from their employer since the pandemic began—and these workers often cover family members through their employer-based plan, so the total number of people who have lost health insurance is likely almost twice as high.

Job loss is occurring across virtually the entire economy, but it is hitting low-wage sectors (think restaurants, bars, hotels, personal services, and brick-and-mortar retail) particularly hard. Because of disparate access to education, occupational segregation, discrimination, and other labor market disparities, black and Latinx workers and women of all races are more concentrated in these jobs. As a result, they are facing greater job loss.

One counterintuitive dynamic in the coronavirus labor market is that average wages have jumped up dramatically. Unfortunately, this is not because workers are getting big raises. Instead, it is because a large share of low-wage workers were dropped from the calculation of average wages simply because their jobs disappeared. Further, many people who have managed to hang on to their jobs have seen their hours cut—think of restaurant workers whose place of work is now only doing takeout. The number of people who want full-time hours but are working part-time because their employer didn’t have enough work for them has more than tripled since the coronavirus crisis began.

Despair is an understandable and reasonable response to all this. We should despair for the millions who have lost jobs, for their families, and for the immeasurable amount of lost potential. But then we must demand our policymakers do much, much more. The one bright spot in the recent jobs numbers is the fact that as of mid-April, about two-thirds of workers who are out of work as a result of the virus report they were furloughed or on temporary layoff—in other words, they expect to be called back to the jobs they had before the coronavirus shock. Whether they will actually be called back or whether those furloughs will turn into layoffs is the fork in the road upon which we are now standing as a nation. If effective public health measures—widespread testing, contact tracing, self-isolation of those who have been exposed, and mask-wearing—are enacted, nonessential sectors of the economy that have been shut down will be able to successfully reopen in phases.

If the federal government provides sufficient aid during this crisis so that people’s income doesn’t drop dramatically (even if they have been unable to work), so that businesses stay afloat (even if they have been totally or significantly shuttered), and so that state and local governments whose tax revenues are plummeting are not forced to make drastic cuts that will hamstring the economy, then those furloughed workers could get back to their prior jobs and the recovery could be rapid because confidence and demand would be relatively high. But if the federal government doesn’t act, then those furloughs will turn into permanent layoffs and the country will face an extended period of high unemployment that will do sweeping and unrelenting damage to the economy—and the people and businesses in it.

Federal lawmakers get to choose which path we take. They must act quickly and boldly.

Ending offshoring and bringing jobs back home will take more than tweets, press releases, and op-eds Wed, 20 May 2020 04:08:40 +0000 Despite repeated warnings, America’s industrial base has been whittled away by corporations offshoring work to Mexico, China, and other countries. The offshoring of much-needed medical equipment in the midst of the COVID-19 pandemic heightens the urgency to bring these supply chains home.

While U.S. Trade Representative Robert Lighthizer’s recent op-ed heralding an end to “the era of reflexive offshoring” highlights some positive steps forward by the USTR, much more needs to be done to bring supply chains home. It is not enough to—as the administration has done—set tariff policy by tweet, negotiate trade agreements that do not directly take on outsourcing across manufacturing and service sectors, and hope that corporations finally “see the light” and bring jobs home. Rather, returning jobs to America requires a robust, comprehensive strategy that coordinates policies in trade, currency valuation, investment, financing, energy, technology, tax, education, training, government procurement, and labor.

To start, this strategy would include the following:

  • Insist that the Defense Department and other U.S. agencies cease their reflexive support for continued use of outside supply chains in Mexico and elsewhere and instead push for bringing work home.
  • Ensure that “Made in the U.S.” in government procurement programs actually means that a product is manufactured by U.S. workers with U.S. supplies and materials.
  • Require employment impact statements in government contract and award determinations in order to maximize U.S. job creation.
  • Create a U.S. Manufacturing Investment Bank.
  • Address currency misalignment.
  • Eliminate tax incentives that encourage corporations to outsource production.

Insist that the Defense Department and other U.S. agencies push for bringing work home

The Trump administration could start to bring work home by scrutinizing its own departments, starting with the Pentagon. Several days ago, Pentagon officials acknowledged the dangers of relying on supply chains in other countries for defense products, especially in aviation and shipbuilding. But their response to that danger missed the point. Citing how the COVID-19 crisis has led to the closures of factories in Mexico that are critical to the defense industry, Undersecretary of Defense for Acquisition and Sustainment Ellen Lord said she would be asking the Mexican Foreign Affairs Minister to help reopen international suppliers there that provide parts for U.S. airframe production.

What is wrong with this picture? Instead of demanding that Mexico open its factories in the midst of COVID-19 to produce items for the United States, Pentagon officials should be demanding that U.S. companies move work back home. How can some officials reinforce the use of supply chains outside of the U.S. when over 36 million U.S. workers, many of them in manufacturing, are unemployed?

Also extremely troubling is the simple fact that many factories in Mexico cannot provide proper personal protective equipment for workers and forcing them back to work without needed safety measures jeopardizes lives. It’s bad enough that U.S. workers in certain industries are being asked to return to work without proper personal protective equipment, reliable testing and strict adherence to the Centers for Disease Control guidelines. U.S. government officials’ demands that Mexico reopen factories and subject unprotected workers to the dangers of COVID-19 are unconscionable.

It is no secret that U.S. companies have flocked to Mexico over the past 30 years. As I have previously written, Mexico now employs between 30,000 and 40,000 workers in just one industry alone, aerospace. Aerospace manufacturers promote Mexico’s low wages to draw business across the border. Analysts have commented that “Mexico’s proximity to the U.S. and its lower labor cost structure have drawn approximately 300 foreign manufacturers to areas in five Mexican states.” As one review of the aerospace industry noted, “The downside of this is that the country may be used increasingly for its cheap labor by profit-hungry companies from more established markets.” Mexico’s aerospace industry is now a major exporter to the U.S., as highlighted by the Pentagon’s announcement.

And it is not just aerospace manufacturing that has shifted supply chains to Mexico. In addition to medical supplies, other essential sectors are greatly impacted by supply chains in Mexico, including all sorts of manufacturing, electronics, communications (especially call centers), and food products.

Now is the time for all federal departments—starting with Defense—to insist that U.S. companies bring work home, especially work that is essential to our economy and national defense. The administration can start by using the Defense Production Act to ensure that the U.S. immediately step up production of essential items like desperately needed personal protection equipment and ventilators. There are hundreds of factories that have closed across the country that could be used for this important mission.

Ensure that “Made in the U.S.” in government procurement programs actually means that a product is manufactured by U.S. workers with U.S. supplies and materials

For most consumers, a U.S. product is one that is domestically manufactured at home with U.S. materials and supplies. They would be shocked to learn that our federal government considers a product to be domestically made even when a significant number of parts and components were produced in other countries. Although the government has adopted domestic content requirements in certain procurement programs, these content requirements can be as low as 51%. Moreover, methods for calculating domestic content are a mess. What factors do agencies include in determining content? Is the calculation limited to raw materials, production, assembly, and maintenance? Or can the calculation include intangible items that can be used to inflate domestic content—like the value of marketing, research, development, and intellectual property rights? How is the origin of components and subcomponents considered?

The administration should move quickly to make domestic content calculations effective and transparent. Domestic sourcing requirements for all government procurement programs (e.g., “Buy American” laws) and programs that support U.S. exports (e.g., the U.S. Export-Import Bank) should also be reviewed to ensure that the requirements are strong, taken seriously, and effectively implemented.

Further, waivers that allow exemptions from domestic procurement requirements should be greatly narrowed, including when exemptions are granted for the use of foreign-sourced goods that are in the “public interest,” not reasonably available in sufficient commercial quantities, or not available at a reasonable cost.

The Buy American requirements should also be equally rigorous with sectors like food products. Government commissaries and cafeterias should be using products made here at home. This includes items from sugar and flour to baked goods.

Require employment impact statements in government contract and award determinations in order to maximize U.S. job creation

The administration should adopt a simple, common-sense policy that directly links domestic employment with certain government activities. One way to accomplish this is to require detailed employment impact statements (EIS) as part of the decision-making process for government procurement contracts, assistance, grants, and awards. The results reflected by the EIS would be a significant factor in the final determination concerning the project or transaction under consideration. The EIS would contain information pertaining to employment that would be maintained, created, or lost if the program in question were approved.

To assure that employment impact statements and reliance upon them are fully and effectively implemented, federal agencies would need to submit annual reports summarizing the procedures used and the results. The reports would furnish the administration and Congress with valuable information about how government programs are supporting the creation and maintenance of jobs.

Create a U.S. Manufacturing Investment Bank

Similar to the concept of the U.S. Export-Import Bank (Ex-Im Bank), a new U.S. Manufacturing Investment Bank would provide financial support for the revitalization of the U.S. manufacturing sector. The U.S. Manufacturing Investment Bank would target large, medium, and small manufacturers that cannot obtain affordable credit on commercial terms. Financing would be in the form of loans at or below commercial rates or of a federal guarantee of a commercial loan. These loans would be paid back directly to the U.S. Treasury, similar to the procedures implemented by the Ex-Im Bank.

In order to receive financing, eligible companies would need to demonstrate a reasonable assurance of repayment within the terms of the agreement and agree to the following requirements:

  • Loans will be used to domestically manufacture, assemble, and/or service goods, equipment, parts, and components.
  • Materials used for manufacturing will be domestically produced or mined.
  • Work will not be outsourced to other countries.

Also, companies that receive loans must not be found in violation of any federal labor and employment laws for one year prior to the inception of the loan and through its term.

Address currency misalignment

As detailed in EPI’s Policy Agenda, policymakers must focus their attention on making the dollar competitive. Cheap imports achieved through [foreign] currency undervaluation continue to make production in China and elsewhere attractive. Combined with addressing the effects of the strong dollar on trade imbalances, bringing supply chains home will require that policymakers take actions outlined in the EPI Policy Agenda:

  • Engage in international negotiation to lead to a competitive dollar, as the U.S. did with the 1985 Plaza Accord.
  • If negotiations fail, rely on the U.S. Treasury and the Federal Reserve to sell dollars in global markets to realign the dollar’s value against other currencies.
  • Impose a tax on the purchases of dollar-denominated assets by foreign governments and investors.

Eliminate tax incentives that encourage corporations to outsource production

If the administration is serious about bringing jobs back home, it should support legislation that would remove tax incentives for corporations to create and maintain production overseas. Introduced last year by Sen. Sheldon Whitehouse and Rep. Lloyd Doggett, The No Tax Breaks for Outsourcing Act would go a long way toward removing these incentives. According to Whitehouse’s office, the measure would, among other things:

  • Tax income from overseas subsidiaries at the same rate that applies to domestic income.
  • Treat “foreign” corporations that are managed and controlled in the U.S. as domestic companies.
  • Crack down on so called “inversions” by maintaining the U.S. tax treatment of merged companies that retain a majority of U.S. ownership.

While strong statements from some administration officials, like the USTR, about bringing jobs home are laudable, current policies will not achieve these much-needed results. With over 36 million people out of work and an unemployment rate which has reached Depression-era levels, Americans are in desperate need of a well-coordinated, comprehensive policy to stop the erosion of our nation’s industrial base.

Of course, changing the flow of supply chains back to the U.S. will not occur overnight. But we need to start somewhere and we need to start now. Never again should our highest officials in the Defense Department have to plead for help from another country to produce the essential equipment that should be produced here at home. Nor should our officials demand that another country force its workers to produce goods for the U.S. under unsafe conditions.

Who are essential workers?: A comprehensive look at their wages, demographics, and unionization rates Tue, 19 May 2020 15:25:50 +0000 While the coronavirus pandemic has shut down much of the U.S. economy, with over 33 million workers applying for unemployment insurance since March 15, millions of workers are still on the job providing essential services. Nearly every state governor has issued executive orders that outline industries deemed “essential” during the pandemic, which typically include health care, food service, and public transportation, among others. However, despite being categorized as essential, many workers in these industries are not receiving the most basic health and safety measures to combat the spread of the coronavirus. Essential workers are dying as a result. While the Trump administration has failed to provide essential workers basic protections, working people are taking action. Some are walking off the job in protest over unsafe conditions and demanding personal protective equipment (PPE), and unions are fighting to ensure workers are receiving adequate workplace protections.

What is essential work?

The coronavirus pandemic has revealed much about the nature of work in the U.S. As state executive orders defined “essential services,” attention was focused on the workers performing those services and the conditions under which they work. Using executive orders from California and Maryland as models, we identify below 12 “essential” industries that employ more than 55 million workers, and we detail the demographics, median wages, and union coverage rates for these workers. In doing this, we build on the excellent work by the Center for Economic and Policy Research in their report?A Basic Demographic Profile of Workers in Frontline Industries. Key differences are that we use a different data set—the Current Population Survey (CPS) instead of the American Community Survey (ACS), so we could get union breakdowns—and we expand the definition of essential to include occupations found in California and Maryland’s executive orders.

As shown in Table 1, a majority of essential workers by these definitions are employed in health care (30%), food and agriculture (20%), and the industrial, commercial, residential facilities and services industry (12%).

Table 1
Table 1

Table 2 shows the demographics of essential workers by industry, including gender, education level, and race and ethnicity.

  • Women make up the majority of essential workers in health care (76%) and government and community-based services (73%).
  • Men make up the vast majority of essential workers in the energy sector (96%), water and wastewater management (91%), and critical manufacturing (88%).
  • People of color make up the majority of essential workers in food and agriculture (50%) and in industrial, commercial, residential facilities and services (53%).
  • Nearly 70% of essential workers do not have a college degree. Three in 10 essential workers have some college (30%) or a high school diploma (29%). One in 10 have less than a high school diploma.
Table 2
Table 2

Table 3 shows the median wages for nonessential and essential workers by gender, education, and race and ethnicity. Half of the essential industries have a median hourly wage that is less than the nonessential workforce’s median hourly wage. Essential workers in the food and agriculture industry have the lowest median hourly wage, at $13.12, while essential workers in the financial industry have the highest, at $29.55.

Table 3
Table 3

Table 4 shows the union coverage rates of essential and nonessential workers by industry. One in eight (12%) essential workers are covered by a union contract, with the biggest share working in emergency services (51%). Strikingly, some of the most high-risk industries have the lowest unionization rates, such as health care (10%) and food and agriculture (8%).

Table 4
Table 4

How unions help working people

Prior to the coronavirus pandemic, essential workers provided critical services that often went unnoticed. Now, more than two months into the pandemic, many essential workers are still risking their lives without basic health and safety protections, paid leave, or premium pay. Before the coronavirus pandemic, unions played a critical role in ensuring workers receive fair pay and working conditions. The following are examples of how unions help working people.

  • Union workers earn more. On average, a worker covered by a union contract earns 13.2% more in wages than a peer with similar education, occupation, and experience in a nonunionized workplace in the same sector.
  • Union workers have greater access to paid sick days. Ninety-one percent?of workers covered by a union contract have access to paid sick days, compared with 73% of nonunion workers. Almost all union workers in state and local government (97%) have paid sick days compared with 86% of their nonunion peers. In the private sector, 86% of union workers have paid sick days compared with 72% of their nonunion peers.
  • Union workers are more likely to be covered by employer-provided health insurance. Ninety-four percent of workers covered by a union contract have access to employer-sponsored health benefits compared with just 68% of nonunion workers.
  • Unions improve the health and safety practices of workplaces. Unions create safer workplaces through their collective bargaining agreements by providing health insurance and requiring safety equipment. Unions also empower and allow workers to freely report unsafe working conditions without retaliation, which can lead to a reduction in work hazards. Furthermore, states with so-called “right-to-work” laws, which weaken unions, are more likely to have workplace injuries. Researchers have found that so-called “right-to-work” legislation has been associated with about a?14% increase in the rate of occupational fatalities.

The Trump administration’s failure to provide essential workers basic protections during the coronavirus pandemic sheds light on the importance of unions. The following are examples of how unions are fighting for protections for essential workers.

The coronavirus pandemic has revealed the lack of power far too many U.S. workers experience in the workplace. There are roughly 55 million workers in industries deemed “essential” at this time. Many of these workers are required to work without protective equipment. They have no effective right to refuse dangerous assignments and are not even being granted premium pay, despite working in difficult and dangerous conditions. Policymakers must address the needs of working people in relief and recovery legislation, and that should include ensuring workers have a meaningful right to a union.

A prolonged depression is guaranteed without significant federal aid to state and local governments Tue, 19 May 2020 14:53:58 +0000 Congress is currently debating a new relief and recover package—the HEROES Act—that would deliver significant amounts of fiscal aid to state and local governments—more than $1 trillion over the next two years, all told. This is a very welcome proposal. The incredibly steep recession we’re currently in is guaranteed to torpedo state and local governments’ ability to collect revenues. Further, nearly all of these governments are tightly constrained—both by law as well as by genuine economic constraints—from taking on large amounts of debt to maintain spending in the face of this downward shock to their revenues. The result will be intense pressure for large cutbacks in public spending by state and local governments in coming years. Such cutbacks would be absolutely devastating to the cause of restarting the economy and allowing people to find jobs, even if the virus has completely abated.

We know how devastating these cutbacks would be because we have lived through the mistake of allowing them to drag on growth in the quite recent past. State and local governments became relentless anti-stimulus machines during most of the recovery from the Great Recession of 2008–2009. This post highlights a couple of findings from that period that should inform policymakers’ decisions this time around.

  • Growth in state and local spending was far slower during the recovery following the Great Recession than in any other post–World War II business cycle on record.
  • This state and local spending austerity dragged heavily on growth during that time. If this spending had instead followed the trajectory it established following the recovery from the similarly steep recession of the early 1980s, pre-recession unemployment rates could have been achieved by early 2013 rather than 2017. In short, this austerity delayed recovery by over four years.
  • Recent justifications for denying aid to state and local governments sometimes rest on claims that this spending has been profligate in recent years. This is absolutely not so—growth in state and local spending has been historically slow for nearly two decades. Given the importance of what this spending focuses on (education, health care, public order), this decades-long disinvestment should be reversed, not accelerated due to an unforeseen economic crisis.
  • If federal aid is passed that is sufficient to close the enormous revenue shortfalls the economic crisis will cause for state and local governments, it will create or save roughly 5–6 million jobs by the end of 2021. Without this aid, we will remain at least that far away from a full economic recovery by then.

Public spending austerity was a catastrophe for recovery and growth following the Great Recession of 2008–2009. During the official recession from January 2008 to June 2009, policymakers instituted significant fiscal recovery efforts, including the American Recovery and Reinvestment Act that was passed in early 2009. However, one year after the recession’s official end, the unemployment rate was at 9.4%, and fully two years after it was still at 9.1%. The lesson here is simple: The criteria for whether or not the economy needs continued fiscal support is not “is it in official recession or not?” Instead, it is “is the economy at full employment or not?”

The spending austerity in the 2010s was the entire reason?why it took a full decade to return to pre-crisis unemployment rates following the onset of the Great Recession. It is why millions of Americans struggled—through no fault of their own—to find work and it is a key reason why wages for tens of millions of Americans barely kept pace with price inflation over this time, as labor markets remained too soft to give workers the bargaining power they needed to demand better-paying jobs.

Figure A below shows state and local spending growth following each of the post–World War II recessions. The outlying red line on the bottom is growth in the recovery following the Great Recession that began in 2008. In the 31 quarters between the second quarter of 2009 (the beginning of the recovery) and the first quarter of 2017 (when the pre-crisis unemployment low was again attained), cumulative growth in state and local spending was fully 35% lower than the average that characterized comparably long recoveries in the 1960s, 1980s, and 1990s. In the beginning of 2017, this would have translated into roughly $1 trillion additional state and local spending in that quarter.

Figure A
Figure A

This slow growth clearly delayed economic recovery for U.S. workers by years. If one takes the trajectory of spending that characterized the 1980s and assumes this had been replicated after the 2009 recovery began, state and local spending would have been $800 billion higher by the first quarter of 2013. At that point in the recovery, unemployment was still at 8%?and the Federal Reserve was years away from thinking about raising interest rates. This means that this extra spending, if financed by federal aid, would have translated directly into extra economic output and jobs. $800 billion in spending, even with modest multipliers, would have supported roughly 8 million more jobs?in that year, enough to restore the economy to pre-crisis unemployment rates (4.4%) even with higher labor force participation than prevailed in 2013. In short, state and local spending austerity by itself delayed the recovery to pre-Great Recession unemployment rates by probably about 4 years.

Another thing to note on this graph is that besides the recovery from the Great Recession, the next-slowest growth of state and local spending on record is during the recovery following the 2001 recession. This means that the past two recoveries have seen abnormally slow growth of state and local government spending. This in no way supports recent claims that states only need federal aid in the current moment because of their own profligacy. Instead, they need aid because a once-in-a-generation shock has smashed in the economy.

Finally, state and local governments are currently forecast?to be facing revenue shortfalls as large as $1 trillion over the coming years. If no help is forthcoming from the federal government to close these shortfalls, the result will be an economic disaster—one that is not confined to these governments.

Besides the obvious loss of valuable public services, cuts of this size would quickly ripple out from the public sector and destroy private-sector jobs. Filling in these shortfalls and averting these cuts would save or create more than 5 million jobs by the end of 2021, with a majority of these in the private sector. The arithmetic of this is straightforward—$1 trillion of state cuts averted between now and the end of 2021 corresponds to an average annual increase in spending of roughly $570 billion. This corresponds to $740 billion in additional economic activity when taking multiplier effects into account (for multipliers for state and local aid, see Table 1 in this). This represents just under 4% of total national income, and would support (all else equal) about 4% more employment in that year. Based on the severely depressed employment level of April 2020, this would be a bit over 5 million jobs.

These multiplier effects include the reduced spending on private-sector businesses that would result if public-sector workers were laid off, as well as the income-depressing effect of cutting needed safety net programs (Medicaid) or public goods (like public transportation or education). As households have to pay out of pocket for goods formerly provided in part by the public sector, they would have less money to spend on other businesses’ output. In the first two years following the Great Recession, federal aid to states to support Medicaid spending?has been shown to have been possibly the single most effective bit of fiscal support provided over the entire crisis.

In many ways, the economy is currently approaching a knife edge in how recovery will proceed. If the virus relents and effective public health measures are undertaken that allow a phased reopening of business, and if the federal government provides sufficient measures for relief and recovery during this crisis, then recovery could be rapid. Many workers who lost their jobs in recent months are on temporary layoff and could reestablish ties with employers quickly if confidence and demand for output was high. But this confidence and demand will be savaged if policymakers allow state and local governments’ spending to be hamstrung by the crisis. These subnational governments spend about $4 trillion every year in the economy, making them the second-largest source of spending outside of the federal government. If they are forced into crash-cutting, the entire economy will suffer. And this crash-cutting is unnecessary—the federal government has the capacity to transfer resources to these governments to keep this suffering from happening. They need to use it.

Radical far-right CFPB task force threatens consumer protection Mon, 18 May 2020 14:47:18 +0000 This blog post is cross-posted in the American Constitution Society’s Expert Forum Blog.?

As unemployment approaches levels last seen during the Great Depression, and requests for mortgage forbearance increase every week, the Consumer Financial Protection Bureau (CFPB) has proceeded doggedly ahead in undermining consumer protection. The CFPB has suspended enforcement of most of the rules requiring mortgage servicers to help homeowners who have fallen behind in their payments; eased disclosure requirements for remittance transfer providers; and reduced collection and reporting of critical fair lending data. Apparently unsatisfied with rolling back regulatory requirements in the middle of a pandemic-driven economic crisis, the CFPB is also paying hundreds of thousands of dollars to a small “task force” of conservative academics and industry lawyers whose charter is to reconsider every aspect of consumer protection.

Although Congress specifically mandated that the CFPB’s advisory committees follow federal sunshine laws, the CFPB has allowed the task force to meet without notice behind closed doors. The first public glimpse of its plans was a sweeping request for information issued in late March. While the rest of the country was struggling to address the spiraling economic threats posed by COVID-19, the task force asked questions about weakening fair lending laws and deregulating consumer finance markets.

Following the CFPB’s expected repeal of consumer protections on payday loans and encouragement to banks to make their own high-priced, short-term loans, the task force asked about “impediments” to expanding such lending. It questioned whether consumer benefits like privacy and accuracy in credit reporting are worth the cost to industry and suggests that enforcement penalties discourage competition. In the midst of the pandemic, the CFPB task force is giving the public a mere two months to comment on fundamental questions like “the optimal mix of regulation, enforcement, supervision, and consumer financial education,” how best to measure whether or not consumer protection is effective, and which markets should and should not be regulated.

The task force explicitly centers “informed choice” and “competition” as the preferred means of providing consumer protection, with enforcement only as a backstop. Left unchallenged, this framework threatens a dangerous future. Lenders, not consumers, choose debt collectors and loan servicers, and decades of competition in those markets has not reduced the volume of consumer complaints about harassing and abusive behavior. Even in markets where consumers can, in theory, choose the product and provider, abusive lenders often make that choice for them. The vast majority of homeowners don’t comparison shop for a mortgage, the largest portion of many family budgets, and in the last great economic crisis, millions of homeowners lost their homes because of loans they couldn’t afford with terms they couldn’t understand.

Informed choice is a fantasy in most modern consumer credit markets, with pricing driven by obscure algorithms and marketers focused on exploiting consumer weaknesses. Competition in many consumer financial markets may benefit corporations and investors but not the ordinary people who foot the bill and lose their homes.

The task force cites the National Commission on Consumer Finance as its inspiration. But unlike the five-member, ideologically homogeneous task force, accountable only to the director of the CFPB, the National Commission on Consumer Finance was specifically authorized and funded by Congress; its work was bipartisan; a majority of its 12 members, supported by dozens of staff and student researchers, were members of Congress accountable to the public; its work spanned four years and drew on multiple public hearings with hours of testimony from leading consumer advocates as well as individual consumers and lenders. Whereas the National Commission concerned itself with “market excesses,” the task force asks only about “informed choice.” Whereas the National Commission recognized that consumers can be burdened with excessive debt, the task force’s only reference to burden is that of the cost of compliance with consumer protections.

We have only until June 1 to submit comments on this information request. This may be our only chance to weigh in before the task force issues its report. If we think—as Congress did in 2010 when it created the CFPB, mandated consumer protections, and set the parameters for measuring the effectiveness of consumer protections—that consumer protection requires more than informed choice and competition; that enforcement and supervision and regulation are critical pieces of ensuring effective consumer protection; and that education alone is not and never can be enough, then we must comment.

In the wake of the 2007–2008 foreclosure crisis and the Great Recession, Congress recognized the central role that vigilant, focused consumer protection plays in ensuring economic stability. It created the CFPB so that never again would haphazard consumer protection derail economic prosperity. That focus and those consumer protections are threatened now.

Latest Job Openings and Labor Turnover Survey data further illustrate the catastrophic COVID-19 labor market Fri, 15 May 2020 15:27:26 +0000 This morning, the Bureau of Labor Statistics released the latest Job Openings and Labor Turnover Survey (JOLTS) data for March, which further confirms what we already know: The labor market deteriorated quickly through the month of March. As a reminder, JOLTS data are for the whole month (not just mid-month, like the monthly employment numbers). JOLTS shows a net decline of 9.3 million jobs in March, while the monthly employment numbers showed a loss of 870,000. The difference is due to the labor market collapse in the last half of March.

Total separations hit an all-time high of 14.5 million in March. The increase from February of 8.9 million was nearly 13 times faster than any other point in the history of the survey, which dates back to 2000. Separations occurred across nearly all sectors of the economy, but the largest losses were found in leisure and hospitality, other services, retail trade, and education and health services.

The number of layoffs more than account for the increase in the total number of separations. Between February and March, layoffs increased by 9.5 million, hitting 11.4 million in March. In April 2009—the worst month of the Great Recession for layoffs—there were nearly 2.7 million layoffs, or 2% of the workforce. Layoffs in March were more than four times larger than the worst month in the Great Recession.

The layoffs rate—the number of layoffs during the entire month as a percent of total employment—hit 7.5%, more than three times larger than the series high. As with separations, the largest numbers of layoffs occurred in the service sectors. There were nearly 4.9 million layoffs in leisure and hospitality, almost all in accommodation and food services. There were more than 1.1 million layoffs in retail trade and 1.2 million layoffs in education and health services.


On the flip side, workers are quitting their jobs at much lower rates than in the pre-pandemic economy: quits dropped by 20% in March, from 3.4 million to 2.8 million. This is not a good sign—a large number of quits signifies a healthy labor market in which people can leave their job to find one that is better for them. One likely reason quits didn’t drop even further is because people had to, for example, leave a job to take care of a child whose school closed as a result of the virus.

Job openings fell precipitously from 7.0 million on the last business day of February down to 6.2 million on the last business day of March. While this drop of -813,000 was the largest one-month drop in the history of the survey, it’s a bit surprising it didn’t fall further given other labor market indicators. Hires also fell in March from 5.9 million to 5.2 million, again the largest drop on record. Nearly all sectors experienced a drop in hires, with the exception of construction.

Six states saw increases in unemployment claims last week: Many workers who are not usually eligible have filed for unemployment Thu, 14 May 2020 20:33:23 +0000 Correction: This blog post has been updated on 5/15/20 with the correct number of claims for Connecticut. The U.S. Department of Labor’s release on 5/14/20 reported that 298,680 initial claims were filed in Connecticut last week, but Connecticut’s Department of Labor reported that the correct number is 29,846. The total number of initial claims in the U.S. last week, not seasonally adjusted, has also been corrected to 2.3 million to reflect this change.

Another 2.3 million people filed for unemployment insurance (UI) benefits last week (not seasonally adjusted), bringing the total to more than 33 million workers filing for UI benefits in the past eight weeks during the coronavirus pandemic.

While most states saw a decline in UI claims filed relative to the prior week, six states saw increases in UI claims. South Dakota saw the largest percent increase in claims (30.6%) compared with the prior week, followed by Florida (26.9%), Washington (13.7%), Georgia (5.7%), New York (2.7%), and Wisconsin (1.8%).

Georgia had 241,387 initial UI claims last week—more than any other state—followed by Florida (221,905). This comes after several states, including Florida and Georgia, have allowed restaurants and similar businesses to reopen, indicating that state policymakers are risking a greater outbreak with very little of the economic benefits they had expected.

Figure A and Table 1 below compare UI claims filed last week with the prior week and the pre-virus period, in both level and percent terms. It also shows the cumulative number of unemployment claims since March 7 and that number as a share of each state’s labor force. In three states, over a third of the workforce filed an initial claim during the past two months: Georgia (35.8%), Kentucky (35.8%), and Hawaii (33.4%).

Figure A
Figure A

All states?continue to see astonishingly high numbers of claims relative to the pre-virus period, but the rise in claims has been particularly pronounced in the South. Last week, Georgia and Florida saw the largest percent increase in claims (4,409% and 4,279%, respectively) compared with the pre-virus period. Eight of the 10 states that had the highest percent change in initial UI claims relative to the pre-virus period are in the South: Georgia, Florida, Kentucky, Mississippi, Louisiana, North Carolina, Oklahoma, and Virginia.

The data we have provided so far has not included people who applied for Pandemic Unemployment Assistance (PUA)—the new federal program that extends unemployment compensation to workers who are not eligible for regular UI but are out of work due to the pandemic, such as gig workers and people who left their jobs to care for a child. Today’s news release from the Department of Labor (DOL) provided our first look at the number of workers who have applied for PUA in each state. In the last two weeks alone, more than 1.8 million workers in 29 states have filed for PUA. Table 2 displays the limited information we have so far on initial state-level PUA claims. In the last two weeks, California reported the most PUA claims (434,397), followed by Michigan (224,057), North Carolina (142,302), Massachusetts (139,290), and New Jersey (127,334).

To mitigate the economic harm to workers, the?next federal relief and recovery package should extend the across-the-board $600 increase in weekly unemployment benefits?well past its expiration at the end of July. The package should also include substantial aid to state and local governments, worker protections, investments in our democracy, and resources for coronavirus testing and contact tracing, which is necessary to reopen the economy. The HEROES Act, introduced by Democrats in the House of Representatives on Tuesday, would provide critical relief and recovery measures for U.S. workers and is an essential step forward.

Table 1
Table 1
Table 2
Table 2