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Deindustrialization In The Granite State

Written by MARIE DUGGAN. 
This article first appeared in Dollars and Sense

The central room is 65,000 square feet with a high ceiling. This room is noisy, with large machines emitting loud hums and whirrs. The machinists are dwarfed within the canyons between the rows of equipment. Many of the machines have plastic housings, so that each looks like a giant photocopier, a rectangular plastic box taller than a person, and perhaps the length of two or three people. There is a window on the side of each one. Inside, the drilling/lathing/milling operation is performed on the metal. However, someone peering in through the window doesn’t actually see a metal tool hitting the material. The surprising sight of water gushing furiously meets the eye. The tools themselves operate at tremendously high speeds (2,000 inches per minute, or 20,000-50,000 rpm). The water pushes metal debris away, as human hands or air flow did on the previous generation of machines. But water also acts as a coolant to put out sparks and to counteract the tremendous heat created by the friction of metal tool on metal part.

This scene is not from Germany or South Korea, but rather from the southwest corner of New Hampshire, only fifteen miles from the borders with Massachusetts and Vermont. The high-tech machine shop described was Knappe and Koester—in 2011, before it was sold to GS Precision, which has since expanded the operation. Manufacturing industry in Keene specializes in the production of capital-goods—products used as parts or machines at other businesses in other production processes: ball-bearings, diamond turning machines, lens producers, lubricants for machinery, and inks and date-stamp printers for food and pharmaceutical plants around the globe. These factories are so clean and relatively small (employing about a hundred, not hundreds or thousands) that newcomers to New Hampshire, like myself, tend to notice the cows at the dairy farms and the fresh ice cream stands, not the manufacturing plants tucked behind real estate offices or next to hardware stores.

In an effort to repair the connection between economic theory and industrial activity, I picked up the phone and contacted some local managing owners to ask if my undergraduates could tour the plants. The industrialists were excited that someone at “the college” showed interest in what they did. We saw a high-tech machine shop unloading the latest computerized five-axis machines from Japan in 2011. We watched young computer-savvy machinists assemble diamond turning machines by hand, and saw a demonstration of how the machines drill plastic molds for producing touchscreens in factories around the globe.

Keene lies in the Connecticut River Valley, which in the mid-19th century witnessed the birth of the machines that make replaceable metal parts. Machinists from Hartford, C.T., to Lebanon, N.H., drove up global productivity during the industrial revolution, and since that time the machinists’ skills had been passed down from father to son (and occasionally to daughter). This chain was damaged with the layoffs and plant closings between 1980 and 1990. In those years, few fathers told their eighteen-year-old children to become machinists. As a result, there is now a shortage of computer-savvy machinists, so local firms donated funds to build a computerized machine tools laboratory at Keene State and have offered a $1,000 scholarship to train at the local community college, which shares the lab. Many of Keene State’s staff and students are from Connecticut, Vermont, and New Hampshire, and come from families with connections to machining.

The economic forces impacting the machining jobs that continue to sustain local families are hard to see using standard economic datasets. Most databases provide information only on publicly held firms—those that issue shares that are traded on the stock exchange. Ownership transitions between 1998 and 2012 shifted some of the local plants into the hands of large, publicly-held corporations. Yet some of the local manufacturing firms, including some of the most dynamic in the United States, remain smaller in scale and independently owned, and so are absent from standard databases. My students and I began conducting oral histories of owners and workers in order to learn more about the private firms that do not appear in the data.

The Elephant in the Room

In November 2016, Trump started to pick up a surprising amount of support in many parts of the nation. As it turned out, even though Clinton won the popular vote, 2,026 counties went for Trump, while 447 went for Clinton. As I began to pull together my research about deindustrialization in my new hometown, the Trump phenomenon was getting hard to ignore. It suddenly dawned on me: Keene, N.H., wasn’t the only place to have experienced an attack on its export-competitive industrial base between 2000 and 2012. Was it all of New Hampshire? Or was it just about everywhere but San Francisco, Boston, and New York City?

Manufacturing Jobs in the United States

Figure 1 is what I found in five minutes. The crushing loss of manufacturing jobs between 1980 and 1985 is a vivid memory for me, because I graduated from California’s Berkeley High School in 1981, where 90% of my peers were not going on to four-year college. When I arrived at Tufts University in Medford, Mass., I saw storefronts boarded up and watched people in line at the convenience store pay with food stamps. The baleful glares at us privileged college students only got worse as the unemployment rate reached 10.9% in November 1982. When I moved to Brooklyn in 1990, I often drove by the empty industrial buildings along the waterfront.

So, when I saw on this graph that the manufacturing job loss of 2001-2009 was triple that of 1979-1985, my jaw dropped. And why didn’t I know this? I read the New York Times, the New Yorker, the Financial Times. I hang out with heterodox economists, for goodness sake! I now suspect that industry left our intellectual centers between 1979 and 1985—out of sight, and so out of mind—but remained a powerhouse in so-called “rural” areas until 2001, only to suddenly and precipitously decline. I realized how lucky I was to be living in a place that is like a good bit of the United States.

Many economists have been focusing on macroeconomics—the ups and downs of the entire national economy, measured in “aggregate” data—for the past twenty-five years. The instability of the financial sector and rising income inequality could both be analyzed through economy-wide data, so we all rightly got our heads in that game by 2007. If one takes manufacturing jobs as a percent of total employment, there has been a continuous decline since the late 1960s, and one would therefore see little new between 2001 and 2009. Some people point to China’s accession to the WTO in 2001 as the cause of the U.S. decline in manufacturing. However, my own research inside firms suggests that competition from China is not the main story

Keene’s capital goods producers do not compete with producers in low-wage nations, but rather with firms in Europe and Japan, and unit labor costs have generally been higher in those places than in the United States since 1990. The decline in U.S. jobs has less to do with external forces than Americans seem to think, and more to do with the policies taken (or not taken) inside the United States itself. If a firm was going to collapse in the face of cheap labor overseas, that happened in 1982 (as in shoes and textiles). The manufacturers who survived until 2000 were made of sterner stuff. Monetary policy that promoted financial bubbles turns out to be another ingredient in the decline of manufacturing jobs between 1978 and 2012. I will analyze this in a three part-series by exploring three different moments in recent U.S. economic experience: 1980 to 1990, 1990 to 2000, and 2001 to 2012. I use case studies from Keene to illustrate the arguments.

Deindustrialization Part I:

Jim Koontz, CEO of Kingsbury, 1983– 1998, in white shirt presenting an award, 1987.
Photo courtesy of the Historical Society of Cheshire County, N.H.

The Connecticut River Valley Machine Tool Sector, 1980-90 Hank Frechette purchased Kingsbury Machine Tool from his father-in-law, E.J. Kingsbury, in 1963. That year, Frechette also hired the entire graduating class of Wentworth Tech in Boston. “I had never heard of Keene,” relates Donegan, an electrical engineer in that class. But it would become his home and his life for the next forty- odd years. Machinists from Vermont and New Hampshire considered Kingsbury to be one of the most exciting places to work in New England. Their work ethic and skills, plus the innovations of the young electrical and mechanical engineers, plus the management by Hank Frechette and Charlie Hanrahan—a co-owner who was also a member of the founding family—grew the company threefold between 1963 and 1976, so that it employed around 1,000 people. Many machinists commented that, in those days, Kingsbury was like a family. Charlie Hanrahan worked hard to keep it that way. He had a notebook in which he wrote down every man’s name and the names of his wife and children, with their ages. (Yes, all the workers at Kingsbury—indeed, all the machinists in Keene—were men. That is no longer the case, but it was in those days.) He trained new supervisors to make similar efforts to know each member of the shop personally. Once a man got a job at Kingsbury, he was set for life—until 1984.

Hank Frechette made a name for himself nationally and became a leader in the National Association of Manufacturers. There he met another rising executive, Jim Koontz, who was based in Detroit. When Frechette died suddenly in 1976, his astute widow Sally Kingsbury asked Koontz to come to Keene and take the helm of the business. Koontz’ wife had doubts about leaving the community of executives in Ann Arbor for remote Keene, N.H., but the couple made the move with their four children. Between 1978 and 1982, Kingsbury was employing three shifts of workers to keep up with continuous orders as Detroit auto companies tried to re-tool to compete with small cars from Japan. Koontz became CEO in 1983.

Profits in Machine Tool Sector, United States, in Millions of Dollars

In 1984, Kingsbury had its first layoff: over 200 people. This was a shock to the community and many blamed Koontz as an outsider with no local ties—compared to Charlie Hanrahan, for example, who had gone to grade school with many of the men. But this wasn’t just a personality issue—there were larger economic forces at work. In 2012, Jim Koontz related to me that it felt in 1983 as if the company had gone off a cliff, one minute producing three shifts a day with paychecks chock full of overtime and bonuses—to suddenly a period of six months with no orders. It was only in early 2017 that I actually saw in Figure 2 that machine tool industry profits for the nation as a whole dropped in 1983 from nearly $4 billion to $1.5 billion—a drop which does indeed look very much like a fall off a cliff. What was causing that massive decline in industry-wide profits in U.S. machine tools? One factor was a dramatic technological shift from mass production to flexible production, precisely in the 1980s. Jim Koontz explained it:

Kingsbury made machines that could produce one million to two million parts for the Big Three auto manufacturers. After a while, volumes went down. At one point, those three auto makers produced all the autos in the world. By 1980, there were thirty companies producing for the world, but by now [2012], there are three hundred auto companies worldwide. Each automobile has 30,000 parts, and 80% of them today are produced by suppliers, so there must be tens of thousands of suppliers, globally. Because of this, the volumes that auto makers needed their machines to produce went down from one million to 100,000. This changed the style of the technology that the manufacturers needed.

Few businesses today need a machine that can produce millions of identical parts, like Kingsbury produced back in the 1970s. Instead, they need machines that can be reprogrammed to produce different parts. The name for such machines is “CNC”—computer numerical control, which means that the computerized machines are run by software. The modern machinist enters the dimensions of the parts to be produced, and then listens as the machine chooses the tools and goes about making the parts. Kingsbury had purchased such a machine by 1987. Machinist Phil Hilliker thought it was the finest piece of equipment he had ever worked with. The gossip among owners of plants in and around Keene is that Jim Koontz never adopted CNC technology—Kingsbury never adapted to changing technology in changing times—and this is why Kingsbury failed to make profits after 1983. As one financial wizard told me, the reason U.S. machine tool makers did not survive until the 21st century is that they were, “Fat, lazy, and stupid.” But there is evidence that this judgement is far too hasty.

Over time, a couple of reasons—more solid than gut instinct—emerged to challenge the conventional argument that U.S. machine tool firms just didn’t adapt. For one thing, Kingsbury acquired the machine tool firm Hillyer, and Hillyer did make CNC machines. Secondly, the CNC machine Phil Hilliker stands in front of was made by Jones and Lamson (J&L). (One day, a student in my class magnified a photo of the machine and found the company’s name.) J&L was a machine tool maker in Springfield, Vt., a town about fifteen miles from Keene. The company filed for bankruptcy in 1986, so the “can’t adapt” argument had been applied to them, too. But there in front of us was clear evidence that J&L had produced a computerized lathe by 1986, and machinist Phil Hilliker said he was using it by 1987, and it was the finest machine he had ever worked with. Thirdly, the machine shop next door to J&L in Springfield was Bryant Grinding, and it was in decline by 1990. Yet at a recent lecture a computer scientist told me he had applied for a job as a computer programmer at Bryant in 1981, and they were using what he considered a “nifty” program for machine tools. These are three hints that the Connecticut River Valley machine tool sector was adapting. Financial changes were a second factor exacerbating the pressure inherent in a period of technological change and low profits. It was not until 1983 that Jim Koontz became managing owner of the company. He did so by means of an internal leveraged buyout (LBO). That is, Koontz did not have the personal wealth necessary to purchase the company. However, Sally Kingsbury and the rest of the board felt that he had demonstrated the managerial skill in 1978-1982 to take over, and they wanted the manager of the firm to have an ownership stake to tie him to the community. In an LBO, a consortium of banks puts the money up to purchase the company. Specifically, they put the money into a fund, and the fund purchases the company. The profits that the firm makes are then earmarked to pay off the banks. Once the bank loan has been paid off, the fund is owned by management. In this case, Koontz was not the only one “in on” the fund. Some of the engineers wound up being part-owners of the fund, as did members of the Kingsbury family.

Charlie Hanrahan (far right) with other Kingsbury executives. His management philosophy: “Treat people as you would want to be treated.”
He retired as CEO in 1982.
Photo courtesy of the Historical Society of Cheshire County, N.H.

The use of an “inside LBO” to transfer ownership of Kingsbury from one generation/owner to the next was not new. Hank Frechette had done the same thing when he purchased Kingsbury from his father-in-law E.J. Kingsbury. Yet it seems that something went wrong with this second LBO. LBOs were more common by the 1980s, and it is likely that the leverage was higher—meaning a smaller down payment, and a larger amount lent. Everyone who was in on the LBO considers Jim Koontz to have been an outstanding executive who did his best in difficult times. The workers on the shop floor and the supervisors who were not part of the LBO, however, consider Koontz to have been their worst nightmare. As an educated guess, I would say there were two problems: First, paying off an LBO with profits from the firm would be difficult when the profits of the entire industry suddenly fell by 60%. That, in itself, may have increased pressure to cut costs in 1984.

And the second problem was that the stock market rose continuously from 1987 to 1999. Between 1969 and 1982, an investor in the stock market would not have made capital gains, but only dividends. Those ambitious for more dramatic returns (such as the Kingsbury family and Hank Frechette) put their money into physical plant and talented labor, and made profits by expanding market share through quality products. After 1982, industrial profits were hard to come by, while Alan Greenspan kept interest rates relatively low between 1987 to 1999, which made capital gains in the stock market the new normal. At Kingsbury, managers “in on” the fund initially used to pay off the LBO received profits out of production, and invested them into the rising stock market where they must have reaped consistent capital gains—while workers on the shop floor lost their bonuses because the profits made from producing and selling machine tools were meager in the 1980s and the 1990s. At the time, gains made in shares of other companies on the stock market may not have seemed to come at the expense of the workers inside Kingsbury. But a wedge had emerged between the interests of owners and the workers on the shop floor. Supervisor Kenny Johnson described “a change in how [Jim Koontz] handles his people.”

It was his way and no other way. There was a period of time where he managed by fear, in the sense that if people didn’t go along with his idea he would put fear into them and he wanted to make them into a ‘yes’ person. That’s one of the ways he changed and didn’t listen to people. For instance, when the union was being introduced at Kingsbury’s, he’d come up to me and he’d ask me some questions, he thought I was being too easy on some of my employees but my philosophy hasn’t changed then, hasn’t changed today, you treat people how you like to be treated. I’m not a ‘yes’ person. So I told him how I felt. I felt like he had really loyal employees and he thought I was treating the employees—he said I had too much compassion for my employees, ok? I had too much compassion for my employees, that’s not the way management was going to go in a sense of compassion, and I told him the truth, told him how I felt, I know it wasn’t the way he felt and we got in a discussion and he almost fired me on the spot, ok?

Putting his job on the line to stand up to Jim Koontz for the employees in the late 1980s was a turning point in Kenny Johnson’s life, a moment that took great courage and won him the respect of the workers—to this day nearly thirty years later. He had been trained by Charlie Hanrahan to know and care for his employees and their families, as the way to motivate the highest effort from the machinists. But now Koontz was pressuring him to lay off good machinists because they supported a union. Kenny Johnson was not a fan of unions on the grounds that “you don’t need a union if you treat your people right, ok?” However, Koontz was not, in Johnson’s opinion, treating the shop floor right. Koontz hired Jeff Toner as vice president, and the general view was that Toner was a hatchet man to get pro-union workers fired. With considerable struggle, soul searching, difficult conversations, courage and solidarity, the machinists voted for a union in 1991.

What did the union get for the workers? Largely it was access to the gains from the stock market by means of the pension. As one retired machinist put it recently, “I have been retired for eight years, I am getting a pension from that place, and it’s going to keep on going. I mean, the guy who set up the 401k plan or whatever you want to call it, the guys knew what they were doing with this thing.” The trick was to keep your job. The industry’s profits were down, so only half kept those jobs into the 21st century. But that’s 300 or 400 workers gainfully employed for forty years. Many machinists from Kingsbury still meet for breakfast every Thursday, driving from 45 minutes away even when it is ten below and icy road conditions, to gather outside the restaurant at 6:45—similar to their old commute for the 7am day shift.

The layoffs at places like Kingsbury in 1984 broke a social compact between owners and workers, and from 1983 to 1991, the Connecticut River Valley felt like a war zone. Workers lost confidence in management’s intention to look out for product quality and the labor force, and that loss of confidence broke some unspoken taboo. The ratio of owner compensation to worker compensation at the firm was much lower in 1983 than it is today. One form of compensation to the owner was the respect (tinged with fear) of the community and the workers on the shop floor. Kingsbury was also a major philanthropic giver, cementing the owner’s sense of responsibility for and ownership of the entire community.

When the workers at Kingsbury mobilized for a union, they were publicly demonstrating that they had lost confidence in Jim Koontz. At stake was really who owned the plant: the legal owners, or the men whose skill gave the machines their reputation? Machinist Phil Hilliker was one of the first to wear a union shirt. He related to my students in 2015 the pressure he was under:

They would send my work out to have it done somewhere else. ‘I’ve got no work for you Hilly, got to lay you off.’ They didn’t have to lay me off, I had so many things I could do around there. I was their whipping boy. They wanted to break me down because I was an older one. But it couldn’t be done. I said, If B-52s didn’t kill me during the Korean thing, when they bombed me, you sure as hell ain’t gonna be able to do it.

Most of the male workers had served in war, either World War II, Korea, or Vietnam, so a comparison of the tensions on the shop floor to war was not made lightly.

Divisions That Wore People Down

The 1980s were an intense time of technological change, as Kingsbury began to use computerized machine tools to make products, and then also acquired Hillyer Machine Tool to have their own line of computerized products. The loyalty that supervisors like Kenny Johnson exhibited to older workers meant the young were fired first, even though they might have young children to support at home. One of the men laid off in 1984 had lost a finger at Kingsbury’s. Yet, as a young man, he had never favored the union, because unions supported seniority rights. He felt that the younger cohort to which he belonged was better able than the old timers to learn new technology and turn the firm’s prospects around. This younger man hates unions, and blames Kingsbury management for acting like a unionized shop in 1984, though no union was voted in until 1991.

The toll the decade took was not only on the shop floor. Charlie Hanrahan was the managing owner who had gone to elementary school with the men and knew every man’s family members by name. Hanrahan had been Hank Frechette’s right-hand man, and ran the company from 1978 to 1982, teaching Jim Koontz the ropes, before retiring. He gave the speech of his life trying to prevent the vote for a union. He had a heart attack during this period, and his children believe it was caused by his divided loyalties. He respected Jim Koontz, and he developed close ties to the shop-floor workers. That was his way of inspiring people to give their best effort. Though Hanrahan passionately believed a union was the wrong way to go, every machinist I have spoken to goes out of his way to explain the confidence, affection, and appreciation they had for him. Hanrahan may have been caught between a manufacturing world that viewed the workers’ skills as the source of profits (1958–1982) and the new era (1983–2012, at Kingsbury) when the source of wealth was capital gains on the stock market, which could be harvested best by laying workers off from time to time.

The tragedy of the tensions in the 1980s is that both managing owners and machinists cared deeply about the future of the firm. For all the flaws that the workers saw in Koontz, he had virtues also, especially compared with his successor. Koontz was a man who was trained to work with machines—he did not have an MBA—and most machinists prefer working for someone who knows technology. He lived in Keene, rather than the distant corporate ownership of a conglomerate. The pension contributions papers demonstrate that he maintained the workers’ pension with utmost regularity. As auto production went global, he traveled the world from South Africa to Brazil to sell Kingsbury Machine Tools. He used Kingsbury retained earnings to acquire Hillyer to keep up with technological change.

The Volcker Shock Makes Imports Cheap

U.S. Federal Funds Interest Rate

Technological change does not seem adequate to explain the number of firms that closed in the Connecticut River Valley between 1980 and 1990, given that they had weathered so many changes during the previous one-hundred years. What else was going on between 1979 and 1984 that could explain the massive drop in U.S. machine tool profits of 1983? I have taught macroeconomics four times a week for seventeen years, so of course, the hike in the U.S. interest rate between 1979 and 1983 came to mind. Figure 3 is shown with the pink area to indicate that time period.

During the 1979 to 1983 time period, this base nominal rate of interest rose from 9 to 19%. The Federal Funds Rate is what banks pay to borrow from each other for overnight loans, and banks pop a markup on top of that before they lend to consumers, so the interest rate for a credit card to a person of sound credit was probably 29% when the Federal Funds Rate was 19%. The reason Fed Chair Paul Volcker raised the interest rate so high was in order to kill off inflation, which was about 10% per year in the late seventies. He did reduce inflation, but using the interest rate to fight inflation is like using chemo to fight cancer: it killed off a lot more than inflation.

Everyone knew that a high rate of interest would reduce business investment in fixed capital equipment like machine tools. The logic by which high interest rates reduce new capital spending is based on the idea that such spending is financed largely by debt. When interest rates are high, the cost of borrowing rises. U.S. firms probably made the rational decision to delay new capital spending in the hope that the interest rate would come down.

Index of Unit Labor Costs in the U.S., Germany, and Japan

Figure 4 illustrates unit labor costs—the cost of wages and benefits employers incurred in the making a hypothetical widget in various countries. While U.S. unit labor costs (the black line) had long been higher than German (light gray) or Japanese (medium gray), that gap widened precisely between 1979 and 1984. This was due to two factors:

First, U.S. manufacturers may have delayed purchasing new equipment until after interest rates came down, while their Japanese and German counterparts did not. Instead, they invested in new machinery that meant workers could produce more units in the same amount of time.

Second, what U.S. policymakers may not have realized is how much the exchange rate for the U.S. dollar would appreciate in response to the rising rate of interest. Exchange rates had been flexible only since 1971. A rising interest rate pulled wealth from around the globe into U.S. bank accounts and this drove up the value of the U.S. dollar relative to every other currency in the world. The dollar appreciated relative to the German deutsche mark and the Japanese yen, and competitors using those currencies were the ones that the machine tool sector faced. Suddenly, the prices of U.S.-made products went up when converted to deutsche marks or yen, and the prices of German and Japanese products went down when converted to dollars.

This drop in relative unit labor costs gave the Germans and the newly industrializing Japanese an opening they needed into the U.S. market for machine tools. To see how this worked, consider a hypothetical tool such a CNC lathe, produced by a U.S. company. It is 1979, and the tool costs, say, $100,000 in the United States. Let’s say that in 1979, a customer is considering buying a CNC lathe. They have been buying from the U.S. company for fifty years, so they stick with the U.S.-made machine, even though the Japanese or German import costs the same.

Hypthetical Competition Between U.S. and Imported Machine Tool, 1979–1984

However, by December 1984, U.S. machine tools experience inflation of 36%, so the US machine costs $136,000. Meanwhile back in Japan, rising productivity reduces costs by 12%. If productivity rises more slowly in United States than Japan, then the U.S. dollar should depreciate, which would hold steady the price that U.S. buyers pay for a Japanese machine. However, Fed Chair Volcker tries to control inflation by raising U.S. interest rates to 19% in 1981, and the high interest rate drives up the value of the dollar, and the import is now “on sale” for only $85,500. That is a $51,000 savings! Under these circumstances some firms decide to try out the import. In short, the U.S. Federal Reserve gave imports an opening into the U.S. market by creating a 38% discount on the price of an import relative to a U.S.-made machine tool in 1984.

By 1986, Volcker had realized his mistake and did depreciate the dollar by around 38%, so that the Japanese import would cost the same as the American machine. By then 400 people had already been laid off from Kingsbury in Keene, N.H., and Jones & Lamson in Springfield, Vt., sold out in 1986.

Financial Engineers Finished the Job

By 1988, the Goldman Industrial Group had purchased J&L out of bankruptcy, and began applying “financial engineering” techniques to extract value from the firm. “Financial engineering” is used to make profits from dying companies by taking them apart. Of course, many times it’s not clear that the firm was going to die if the financial predator had not attacked. By 1990, Goldman had purchased another once-fine firm, next door to J&L, Bryant Grinding. And in 1998, Goldman protégé Iris Mitropoulis purchased Keene’s Kingsbury from Jim Koontz, where Phil Hilliker still had his job. Mitropoulis owned Ventura Industries, a separate company which owned only one thing, Kingsbury Machine Tool. By 2001, it was clear that she was not investing the retained earnings she had acquired along with the plant into new equipment. “Ah, she took the retained earnings!” erupted one retired executive in sadness and frustration.

By 2007, half of the pension fund was missing as well. Indeed in 1983, the IRS had ruled that a firm facing bankruptcy had the right to use the workers’ pensions to try to keep the company open. In 2016, I submitted a Freedom of Information Act (FOIA) request to the Federal Pension Benefit Guarantee Corporation, and there was a very fat file on Kingsbury. Up to 1998, Jim Koontz ran the company and the accountant Tom Cookson filed nice neat forms verifying the financial health of the workers’ pension fund. He made it through ups and downs of the stock market with only a few bumps, so that $45 million dollars was in the fund by 1998 when Koontz sold it. Mitropoulis, on the other hand, filed messy and incomplete pension documents, and by 2007, the fund had only $26 million in it. Maybe it was all the 2001 decline in the stock market, but maybe not. In addition, she went out tirelessly asking the federal government to lend the company money earmarked for woman-owned businesses. It appears that all the money that was ever granted to Kingsbury by its previous owners, its employees, or lenders was transferred to Ventura Industries, so that Kingsbury declared bankruptcy in 2012. Financial engineering should not be legal. But it is.

When Keene looks at Mitropoulis’ actions 1999-2012, the reign of Jim Koontz at Kingsbury appears in a more nuanced light. Mitropoulis was easy to get along with, and so friendly to the union men, that she disarmed them while she probably transferred value to Ventura Industries. She never traveled overseas to find any customers, she did not invest the retained earnings in the company, half the pension fund vanished on her watch, and she borrowed money at subsidized interest rates and then declared bankruptcy so she wouldn’t have to pay it back. If we step back to see what Kingsbury’s story tells us about U.S. deindustrialization, it’s not only that Volcker’s high interest rates tilted the scale toward imports. There is a second more insidious aspect: it appears that the easy money provided by new Fed Chair Alan Greenspan after 1987 created a rising stock market that rewarded people who took value out of industrial production. Koontz and people of his era stumbled upon those capital gains, while financial engineers such as Mitropoulis actively extracted value from industry to shift the wealth into other assets. Class struggle was nothing new to factories, but between 1980 and 1990, unstable monetary policy was a new pressure hard for either owners or workers to see. They wound up turning on each other. Indeed, the influence of changing monetary policy has been hard for left economists to see, and we are only now, thirty-five years later, beginning to understand what a sea change in the institutional context for industry was taking place.

 is a professor of economics at Keene State College in Keene, N.H. You can follow her and her students’ work on these issues at: industrialsurvival.wordpress.com.

  • On the machine tool firms of the Connecticut River Valley, see Robert Forrant, Metal Fatigue: The Rise and Precipitous Decline of the Connecticut River Valley Industrial Corridor, Baywood Publishers, 2009.
  • On financial engineering, see Eileen Applebaum and Rosemary Batt, Private Equity at Work, Russell Sage (2014).
  • On how an independent firm is affected by rise of stock market, see John Hacket, Race to the Bottom. Author House, 2004. This is a novel, but the author was a PhD economist and chief financial officer at Cummins Engine for decades, so his insights are worth reading.
  • On pensions, the following is still a good overview: Theresa Ghilarducci, Labor’s Capital, MIT Press (1992).
  • Part II of this series will take a closer look at how U.S. industry was damaged by monetary policy in the 1990s.

Republished with permission from Dollars and Sense

Are you angry yet? Tax “reform” will be followed by Medicare, Social Security “reform”

Late last night, the Senate passed its version of the tax cut bill.  Next step? According to GOP leaders, it will be “entitlement reform.” Which includes the Social Security and Medicare benefits you have been paying for – with every paycheck – since you started working. Just like they’ve been talking about since the Bush tax cuts.

Congress won’t have to do anything, to cut Medicare by $25 billion next year.  If President Trump signs a final version of this bill, according to the Congressional Budget Office, it will create a budget deficit that will trigger $25 billion in automatic cuts to Medicare.

And if “chained-CPI” is still in the bill, Congress won’t have to do anything to cut Social Security benefits, long term. “Chained-CPI” is a way of calculating inflation that incorporates a ratcheting-down of benefits. It assumes that senior citizens who can’t afford steak don’t need a cost of living increase because they can buy chicken, instead. And those who can’t afford to buy chicken can buy tuna. And if they can’t afford tuna…  It’s the cat food thing. (Read our 2013 post about chained-CPI here.)

BUT they’re already planning more cuts. Because at some point, our government is going to have to do something about our national debt. Which has quadrupled since the Bush tax cuts.  Which is now equal to more than $170,000 per taxpayer. Which has increased by $745 billion – almost 4% — since the debt limit was suspended on September 8th.  Which was only 11 weeks ago.

Having a hard time wrapping your head around what you just read?  Let’s try it again.

On September 8, 2017, Congress suspended the debt limit.  Since then (only 11 weeks), the debt has grown by more than $745 billion. And Congress is cutting taxes in order to add $1.5 Trillion to that number.

It’s pretty clear that Congress is creating a “debt problem” that they’re going to “solve” by going after Social Security and Medicare.

Newsweek: Republicans will cut Social Security and Medicare after tax plan passes, Rubio says
Forbes: How the GOP tax plan scrooges middle class, retired and poor
Washington Post: GOP eyes post-tax-cut changes to welfare, Social Security and Medicare

This isn’t a surprise.  Back in 2004, Federal Reserve Chairman Alan Greenspan suggested cutting Social Security and Medicare benefits to pay for the cost of the Bush tax cuts.

Looks like that’s still the strategy. Here’s where it goes from being “strategy” to “theft.”

Since 2012, most workers have been paying more into the Social Security system than they can expect to receive in benefits.

People retiring today are part of the first generation of workers who have paid more in Social Security taxes during their careers than they will receive in benefits after they retire. It’s a historic shift that will only get worse for future retirees, according to an analysis by The Associated Press.

Back in 2001, 57% of Americans wanted to roll back the Bush tax cuts to protect (what was then) the budget surplus. A whopping 92% wanted to prevent Congress from using Social Security for any other purpose. But at last report, about $3 trillion of the national debt is now owed to the Social Security system.

So… if you’ve already put more in to the Social Security system than you can expect to get out of it – and Congress wants to put even more tax cuts on the nation’s credit card – and Congressional leadership wants to pay down that extra debt by cutting Social Security… that means the money to pay for these tax cuts is coming out of your pocket.

Are you angry, yet?


Public Citizen reports that at least 6,243 Washington lobbyists have been working on this tax bill.  That’s almost 12 lobbyists per legislator! Read about some of the last-minute add-ons – including an amendment that exempts a college in Michigan and a carve-out for cruise ships docking in Alaska – here. Wondering who benefits from this tax bill? Read about analyses done by the Congressional Budget Office and the Joint Committee on Taxation here.


If you want to contact your elected federal officials about this, please do so on your own time and using your own personal phone/email. (Most employers prohibit using work time or resources for this sort of thing.)

Contact information for President Trump is available here.

You can find contact information for your two US Senators here.

You can find the phone number and website for your US Representative here.  (If you don’t know who your Representative is, check here.)

Leo W Gerard: Subjugation in Steel

Image of USW member at EVRAZ North America by Steven Dietz

One cost of freedom is steel. To remain independent, America must maintain its own vibrant steel industry.

Steel is essential to make munitions, armor plate, aircraft carriers, submarines and fighter jets, as well as the roads and bridges on which these armaments are transported, the electrical grid that powers the factories where they are produced, the municipal water systems that supply manufacturers, even the computers that aid industrial innovation.

If America imports that steel, it becomes a vassal to the producing countries. It would be victim to the whims of countries that certainly don’t have America’s interests in mind when they act. In the case of China, the attempt to subjugate is deliberate. Beijing intentionally overproduces, repeatedly promises to cut back while it actually increases capacity, then exports its excess, state-subsidized steel at below-market costs. This slashes the international price, which, in turn, bankrupts steelmakers in the United States, Canada, Great Britain, Spain and elsewhere. Then, China dominates.

To his credit, President Donald Trump has said America can’t be great without the ability to make its own steel. He ordered the Commerce Department to investigate the extent to which steel imports threaten national security. Commerce officials are scheduled to brief Senate committees on the inquiry today. That’s because they’re being second guessed by a handful of federal officials, exporters and corporations whose only concern is profit, not patriotism. To protect national security, American steel and family-supporting jobs, the administration must stand strong against foreign unfair trade in steel that kills American jobs and creates American dependency.

Imports already take more than a quarter of the U.S. steel market. They rose in May by 2.6 percent, seizing a 27 percent market share. That is dangerous. America can’t rely on unfairly traded foreign steel as it tries to expand manufacturing jobs or when it faces foreign threats. Defense needs are the basis of the administration inquiry, called a Section 232 investigation under the Trade Expansion Act of 1962.

National security relies on dependable, modern transportation and utility systems as well as armaments. To produce defense materials, factories need supplies to arrive routinely and electricity to flow consistently. Steel is just as crucial for roads, bridges, airports and utilities as it is for armor plate.

Some importers are pressuring Commerce Secretary Wilbur Ross not to recommend imposing limits or tariffs on steel imports, asserting that the only consideration should be price. They contend that if China, South Korea, Japan and Turkey subsidize their steel production, which lowers the cost of exports, then American builders should benefit – no matter how much that damages national security or destroys steelworkers’ family-supporting jobs. Their preoccupation with profit at their country’s expense should disqualify them from consideration.

To be clear, American steel companies and my union, the United Steelworkers, have tried repeatedly to resolve the problem of trade cheating through normal channels – filing trade enforcement cases against the violators. But the United States has refused to take currency manipulation by countries like China into account. And every time an American company wins an enforcement case against a trade law violator and tariffs are imposed on a particular type of steel import, China and other cheaters begin subsidizing a different type of steel and exporting that.

American companies  have won dozens of cases – welded stainless steel pressure pipe, rebar, line pipe, oil country tubular goods, wire rod, corrosion-resistant steel, hot-rolled steel, cold-rolled steel, cut-to-length plate, grain-oriented electrical steel. But in every case, countries like China and South Korea find a way to circumvent the rulings by subsidizing some new steel product and exporting that or by trans-shipping – sending the product to another country first to make it look like the steel originated there to evade the tariffs.

American steel producers and steelworkers can compete successfully against any counterpart in the world, but they can’t win a contest against a country.

The USW and American producers are looking for a broader solution now, something that will prevent cheating and circumvention across-the-board. And they have good reason to believe they can count on Commerce Secretary Ross. This is a guy who knows the industry and has a track record of saving steel mills and jobs.

At the turn of the century, as recession and the Asian financial crisis pushed more than 30 U.S. steel companies into bankruptcy, Secretary Ross bought a half dozen failing steel firms and restored them to solvency.

Because of his experience, Secretary Ross can be trusted to know the difference between China and Canada. American steelworkers and steel producers aren’t looking for blatant protectionism. American firms and Canadian companies have relationships in which steel from Canton, Ohio, may travel to St. Catherines, Ontario, where it is converted into engine blocks that are then shipped back across the border to Detroit, Mich., for installation in cars. Canada doesn’t illegally subsidize its steel industry or manipulate its currency. Only countries like China, Russia, South Korea and others that flagrantly violate international trade rules should be subject to the Section 232 sanctions.

Secretary Ross experienced the hell of 30 steel bankruptcies. He knows just how bad it can be for workers, companies and the country. With President Trump at his back, Secretary Ross now is key to ensuring American steel doesn’t descend back into that hell and that America remains steel independent.

BUSTED: Chris Sununu Caught Lying About Creating Jobs

Sununu’s new ad says he created ‘hundreds of jobs’ but NHPR reports ‘the overall number of jobs at Waterville Valley has actually decreased over the last five years’ 

Concord, N.H. – In a devastating article, NHPR reports that Chris Sununu lied when he claimed in his new ad that he created “hundreds of good-paying jobs.” Rather than creating jobs, during Sununu’s tenure as Waterville Valley CEO “the overall number of jobs at Waterville Valley has actually decreased over the last five years.” 

“Chris Sununu lied about his business record,” said NHDP Press Secretary Evan Lukaske. “Not only did Chris Sununu not create ‘hundreds of jobs,’ but Waterville Valley actually lost jobs under his failed leadership. Chris Sununu has run Waterville Valley into the ground and he can’t be allowed to do the same to New Hampshire.”

NHPR released information directly refuting that his false claim that he created “hundreds of good-paying jobs.”


Screenshot of Sununu Ad

 From the article: 

“But, according to information provided by Sununu’s campaign to NHPR earlier this year, the overall number of jobs at Waterville Valley has actually decreased over the last five years. There were 872 employees at the resort in 2011 and, after several years of fluctuation, 809 employees in 2015.”

5c54244c-1771-4f7d-8ca5-3a67e7fdd1abLukaske concluded, “No matter how you slice it, Chris Sununu’s claims that he created ‘hundreds’ of jobs is ludicrous. He should apologize to New Hampshire voters for lying to them.”

Hassan Launches New Ad Highlighting Her Strong Leadership And Always Putting People First

New TV Ad Highlights Governor Maggie Hassan’s Focus on Families, Innovation and Education

CONCORD – Today, Maggie for NH released a new TV ad, “Difference,” highlighting the difference Governor Hassan has made in New Hampshire by focusing on families, innovation and education, and how she will bring this same focus to the United States Senate to continue making progress for New Hampshire.

As Governor, Maggie froze in-state tuition at New Hampshire universities for the first time in 25 years and lowered it at community colleges. Governor Hassan also cut taxes for research & development and small businesses and developed the award-winning “Live Free and Start” initiative to support start-up companies and help them launch and grow. And she has supported job training programs to help ensure New Hampshire workers can thrive in the changing American economy.

“In the United States Senate, I will always put New Hampshire families and small businesses before corporate special interests – just as I have as Governor,” said Governor Maggie Hassan. “I know that by rolling up our sleeves and working together across party lines, we can make progress for all Granite Staters and build a future where everyone who works hard can get ahead and stay ahead.”

Governor Hassan announced her Innovate NH 2.0 economic plan, which outlines the policies she will focus on as a United States Senator to foster innovation, support job-creating businesses and expand opportunity for hard-working families. This plan includes proposals to make college more affordable, including working to expand Pell Grant and fighting to achieve debt-free public college for all families. The Governor will also work to lower the cost of prescription drugs by allowing Medicare to negotiate drug prices and allowing Americans to buy drugs from Canada, which will increase competition. 

Top Small Business Democrats in Congress Back Clinton’s New Plan

Woman Working Business

The two top Democrats on the House and Senate Small Business Committees both released statements praising Hillary Clinton’s newly released small business plan. Hillary Clinton is proposing a comprehensive, job-creating package of reforms and innovations to make it easier to start, grow and sustain a small business. 

“Supporting small businesses is fundamental to growing the economy and creating good paying jobs,” Senate Small Business Committee Ranking Member Jeanne Shaheen (D-NH) said. “As a former small business owner and the current ranking Democrat on the Senate Small Business Committee, I’m pleased to see Secretary Clinton’s comprehensive plan to strengthen and grow small businesses by simplifying the tax code, providing access to credit and unshackling the next generation of entrepreneurs from student debt. Hillary Clinton’s plan shows she will be a true Small Business President.” 

“Hillary Clinton has been a fighter for all Americans and this extends to Main Street small business owners,” House Small Business Committee Ranking Member Nydia M. Valazquez (D-NY) said. “She knows entrepreneurship is the cornerstone of our economy. Her small business plan will empower more Americans to pursue dreams of launching their own business, while creating good jobs locally and ensuring our nation remains globally competitive. By contrast, Donald Trump has a history in the private sector of repeatedly shortchanging small firms that did work for his company.  The choice in this election could not be clearer: Hillary Clinton has the experience and vision to strengthen our small business sector and boost entrepreneurship.”

The new proposals reflect what Clinton has heard since one of her first events of the campaign at an Iowa bike shop and across nearly 100 visits to small businesses since. Over a year ago, Hillary Clinton pledged that she would be the “small business president” if elected. Small businesses create around two-thirds of all new American jobs.

Clinton’s plans are aimed at making it easier to start, grow and sustain a small business in America. Her proposals will streamline the process of starting a small business; improve access to financing for small businesses; provide tax relief and simplification for small businesses; incentivize more health care benefits for small businesses and their employees; ensure the federal government is more responsive to small businesses; and, make it easier to fight back when small businesses get cheated.

Clinton and Senator Tim Kaine both grew up in small business-owning families. Clinton’s father ran a small drapery business in suburban Chicago where she grew up, and Kaine’s father ran a small ironworking business in Kansas City where he grew up. Kaine will discuss the new plan during a roundtable with small business owners this morning in Lakewood, Colorado, and Clinton will discuss it on a nationwide conference call with small business owners from all across the country this afternoon.

“Watching my father run a small business in Chicago, and working side by side with small business leaders throughout my career, I’ve seen firsthand how small business owners lift up their communities — but I’ve also seen the daily struggles they face. This is why I am putting forward a plan that will make it easier for people to create a business and for existing business owners to grow and hire,” said Hillary Clinton. “Whether it’s our efforts to streamline regulation and cut red tape so existing small businesses can hire more or our plans for new tax incentives that help new small businesses get off the ground, this plan is a comprehensive look at what small businesses need to succeed.  It’s clear that small businesses are the engine of our economy and strengthening them is key to making an economy that works for every American, not just those at the top.”

Clinton’s new plan would:

  • Streamline the process of starting a small business. It takes longer to start a business in the U.S. than it does in other countries like Canada or Denmark — often because of unnecessary red tape and licensing requirements at the state and local level. Hillary Clinton will offer state and local governments a deal – new federal incentives if they streamline unnecessary licensing and make it less costly to start a small business.
  • Improve access to financing for small businesses. Small business loans comprised just 29 percent of total bank loans in 2012, as compared with 51 percent in 1995. Clinton will work to boost small business lending by streamlining regulation and cutting red tape for community banks and credit unions, which are the backbone of small business lending in America — while also defending the new rules on Wall Street. Clinton’s plan also would allow entrepreneurs to defer student loan payments with no interest while they get their ventures off the ground.
  • Provide new tax relief and simplification for small businesses. Hillary will create a new standard deduction for small businesses—like the one available to individual filers—so they get tax relief without filing as many forms documenting their overhead costs, potentially including transportation, computer and phone use, maintaining an office and more. She will simplify the rules so small businesses can track and file their taxes as easily as filling out a checkbook or printing a bank statement. And the new plan would quadruple the start-up tax deduction to significantly lower the cost of starting a business.
  • Incentivize health care benefits for small businesses and their employees. Clinton would simplify and expand the healthcare tax credit for small employers in the Affordable Care Act, so that even more employers can provide quality, affordable healthcare to their workers. She will make sure that small businesses with up to 50 employees can be eligible for the credit, and she will simplify complex phase-out and eligibility rules so that it’s easier for many more small businesses to get the credit and cover their workers.
  • Ensure the federal government is more responsive to small businesses. Clinton will push the federal agencies to make government more user friendly and treat small businesses like the customer, including by guaranteeing a 24-hour response time to small business with questions about federal regulations and access to capital programs.
  • Make it easier to fight back when small businesses get cheated.  Clinton will stop large companies from using expensive litigation hurdles to deny small businesses their right to a remedy when they’re denied payment for services—and give small businesses recourse to take on predatory behavior.

The full comprehensive proposal is available here.

Legislative Committee Fails To Act On Governor Hassan’s “Gateway To Work” Program

Republicans Block The Proposal That Is Strongly Supported by New Hampshire’s Business Community 

CONCORD –Today, the Joint Legislative Fiscal Committee failed to act on Governor Hassan’s Gateway to Work proposal, which would have strengthened workforce development in our state and has strong support from the NH Business and Industry Association. An attempt to remove the proposal from the table was defeated by the Republican majority on the Fiscal Committee.

Announced in Governor Hassan’s State of the State Address earlier this year, Gateway to Work will use repurposed existing federal funds to help New Hampshire’s citizens succeed in the workforce through strengthening job training, creating new apprenticeship opportunities, helping remove the barriers that cause too many citizens to fail in the workplace, and helping young people in the Granite State get a leg up on their futures.

“As we educate our young people and build the highly skilled workforce of the future, innovative businesses looking to grow here in New Hampshire need more workers now,” Governor Hassan said at the Gateway to Work kickoff event in March. “We have an opportunity to better use the talent of our own people right here in New Hampshire, helping our businesses thrive while closing the opportunity gap for New Hampshire’s children and families.”

“Through Gateway to Work, we can provide more of the workers our businesses need to thrive,” Governor Hassan said. “We can help give more of our families the opportunity to work their way to self-sufficiency and into the middle class. And we will do so using only existing federal funds, while achieving long-term savings for taxpayers by moving people off of public assistance,” added Hassan.  

The New Hampshire business community has continued to say that New Hampshire does not have enough skilled workers to fill the open jobs currently available now.  Recently the Washington Post highlighted New Hampshire’s growing need for skilled manufacturing workers as the majority of the workforce heads into retirement.

“While New Hampshire’s 2.8 percent unemployment rate is largely a good thing — it’s one of the nation’s lowest — it also means the labor pool is shallow. It’s created a squeeze for manufacturing companies in particular for two reasons: The industry’s workforce is aging at a faster than average rate, while fewer young workers have the proper skills — or interest — to fill the void of retiring workers,” wrote the Washington Post.

Governor Maggie Hassan issued the following statement after the Joint Legislative Fiscal Committee failed to act on Governor Hassan’s Gateway to Work proposal:

“New Hampshire’s continued economic growth depends on our ability to meet the workforce needs of our businesses. As we work to retain existing businesses and attract new ones, the number one concern that I consistently hear from employers is their need for skilled workers.

“Gateway to Work has strong support from the business community because it would move people off of public assistance into sustainable careers, saving taxpayer dollars and providing innovative businesses with the workers they need to grow and thrive. With a strengthening economy and an unemployment rate that is among the lowest in the nation, the business community is desperate for workers. I am disappointed by the Fiscal Committee’s repeated delays with transferring the existing federal funds to launch Gateway to Work, and I am concerned that Republicans on the committee are allowing politics to prevent us from moving forward with this common-sense initiative to fill jobs at growing companies and help close the opportunity gap for New Hampshire’s children and families.”

After the vote, Sen. Lou D’Allesandro (D-Manchester), member of the Fiscal Committee, released the following statement: 

“I am frustrated and disappointed that the Joint Fiscal Committee played politics with our state’s economy today by voting against transferring TANF dollars to fund the innovative Gateway to Work program.  This program that has strong support from New Hampshire’s business community would have gone a long way towards strengthening our economy by providing potential employees with the skills and services they need to successfully gain employment.”  

“We hear constantly that with an improving economy, the most significant challenge our employers face today is finding skilled workers who are able to take jobs when offered. Gateway to Work targets potential employees who have barriers to employment such as reliable child care and transportation and helps lower those barriers to get them into the workforce. Every day that we delay implementation of this program, we leave both our unemployed constituents and our businesses behind.  We should be doing all we can to help Granite Staters escape poverty and move off of public assistance and towards self-sufficiency, and the vote by the Fiscal Committee today is a step in the wrong direction.” 

“Today’s action by the Republican majority forces our unemployed constituents to stay on public assistance programs instead of finding good employment and leaves our businesses without the workers they need to thrive and expand our economy.”

Representative Mary Jane Wallner (D-Concord) issued the following statement after the Joint Legislative Fiscal Committee failed to act on Governor Hassan’s Gateway to Work proposal:

“I am extremely disappointed that Republicans continue to obstruct the implementation of the Gateway to Work initiative. It is a common sense program critical to New Hampshire’s future and should be approved as quickly as possible.

The Gateway to Work initiative would help workers, businesses, and the economy as a whole by investing in job training, apprenticeship opportunities and other supports for hard-working Granite Staters. There is no reason to delay an initiative that benefits everyone: Gateway to Work would help workers to get good-paying jobs, help businesses utilize a skilled workforce, and reduce government spending by moving people off public assistance and into stable careers. Republicans need to stop playing politics with our state’s future and approve Gateway to Work.”

By continuing to block programs like the “Gateway to Work,”  Republicans in Concord are showing that they are less interested in doing what is best for working people and businesses in New Hampshire and more interested in chasing wild conspiracy theories from doctored videos and sticking to their partisan opposition to Governor Hassan.

Republicans routinely complain about having too many people “living off the system” on public assistance and yet oppose one of the strongest proposals to help people “pull themselves up by their bootstraps” by providing them with the skills necessary to find a lasting career that will help lift them out of poverty.

The DOL To Double Overtime Rule Lifting The Wages Of An Estimated 12 Million Workers

Thomas Perez delivers remarks after President Barack Obama announced Perez as his nominee for Labor Secretary, in the East Room of the White House, March 18, 2013. (Official White House Photo by Pete Souza)

Thomas Perez delivers remarks after President Barack Obama announced Perez as his nominee for Labor Secretary, in the East Room of the White House, March 18, 2013. (Official White House Photo by Pete Souza)

12.5 Million Americans: the number of people that the Economic Policy Institute (EPI) estimates will be affected by President Obama’s changes to the overtime rule.

Today, the Department of Labor, under President Obama’s direction, will update the threshold for salaried workers who automatically qualify for overtime when they work more than 40 hours a week.

“We’re making more workers eligible for the overtime that you’ve earned. And it’s one of the single most important steps we can take to help grow middle-class wages,” said President Obama.

“New overtime protections mark a major victory for working people that will improve the lives of millions of families across America,” said Richard Trumka, President of the AFL-CIO. “We applaud the Obama Administration heeding the call for action to ensure working people get paid for all the hours we work. Taking this step to restore overtime is one of the many ways we are beginning to change the rules of our economy that are rigged in favor of Wall Street.”

“The fight for even stronger overtime protections and to raise wages for all working people continues. But today, millions of workers will receive a long overdue raise, healthier and more productive jobs, and more time to spend with our community and loved ones,” added Trumka. 

This simple rule change will have a significant impact on our local and national economy. The White House estimates this rule change will put $12 billion dollars into the hands of hard working Americans over the next ten years.

The DOL is lifting the threshold for salaried workers from just over $23,660 a year to $47,476. This means that if you are a salaried employee who makes less than $47,476 dollars you will now be entitle to overtime (time and 1/2) for every hour worked in a week above 40.

This doubles the current salary threshold while being responsive to public comments regarding regional variations in income by setting the salary threshold at the 40th percentile of full-time salaried workers in the lowest income Census region (currently the South). Tying the salary threshold to the lowest-wage region of the country has strong historical precedent in previous rulemakings.

This salary threshold will be reevaluated and updated every three years ensuring that if continues to meet the 40th percentile mark.

Employers have used this low salary threshold to cheat workers out of higher wages for decades. Many of these workers routinely work 50-60 hours a week and are paid a flat rate. In some cases salaried workers were putting in so many extra hours, without any additional pay, that their per-hour rate would drop below the federal minimum wage of $7.25 an hour.

Now employers will have to choose between raising the wages of salaried employees or keeping employees at their current salary but reducing the number of hours they work in a week. Reducing the number of hours worked would lead to job growth as employers will need to hire additional workers to fulfill their needs.

Check out this short video from the White House that explain the rule change and how it will effect individual salaried workers. 

EPI estimates that raising the overtime salary threshold will directly benefit a broad range of working people, including:

  • 6.4 million women, or 50.9 percent of all directly benefiting workers
  • 4.2 million parents and 7.3 million children (under age 18)
  • 1.5 million blacks, and 2.0 million Hispanics
  • 4.5 million millennials, defined as workers age 16 to 34 (who make up 28.2 percent of the salaried workforce but 36.3 percent of directly benefiting workers)
  • 3.6 million workers age 25 to 34 (who make up 22.9 percent of the salaried workforce but 28.7 percent of directly benefiting workers)
  • 3.2 million workers with a high school degree but not more education (who make up 15.5 percent of the salaried workforce but 25.3 percent of directly benefiting workers)

This is a monstrous step in the right direction to lift the wages of millions of Americans. The White House estimates that the new rule is expected to extend overtime protections to 4.2 million more Americans who are not currently eligible under federal law.

The new rule is slated to take effect on December 1st of this year.

Below are a couple of charts from the EPI that break down what industries will see the biggest boost from this new rule change and the number of workers impacted by the new rule, state by state.

In New Hampshire, over 54,000 workers will be directly effected by this new rule change.  Texas, Florida and California will see the biggest increases with over 1 million workers benefiting from this change.

New Report Shows New Hampshire Workers Are Continuing To Lose Ground

New Report Examines New Hampshire Economy, Finds Wages for Many Workers Losing Ground    

CONCORD, NH – The New Hampshire Fiscal Policy Institute (NHFPI) today released a new report, The State of Working New Hampshire, which finds that while the Granite State economy appears to be flourishing by some measures, the benefits are not being felt by everyone. 

“A well-functioning economy should ensure that the workers contributing to it share in the gains they have helped to produce,” said NHFPI Executive Director Jeff McLynch. “Yet wages for the typical New Hampshire worker have not regained ground lost during the recession. Those workers – and the financial anxiety they face – should be the focus of policymakers’ efforts to shape the New Hampshire economy in the years ahead.”

The State of Working New Hampshire examines short- and long-term trends in employment, workforce demographics, wages, and incomes. Key findings include:

New Hampshire’s workforce is aging in character and stagnating in size. More than 25 percent of the state’s workforce is over age 55; in 2015, only Maine and Vermont had larger shares of the workforce in this age category. As increasing numbers of workers retire, there may not be enough younger workers to replace them, which raises concerns for the future of the workforce.

While employment is expanding in terms of the number of jobs, the quality of these new jobs has declined. An analysis of New Hampshire’s major employment sectors from 1990 to 2015 finds a steady shift away from higher wage manufacturing jobs toward lower wage service sector positions. Employment gains are found largely in the health care, social assistance, administrative support services, and hospitality industries, which traditionally offer lower wages on average.

Economic output for New Hampshire is expanding, but income for the typical household has declined. The state’s median hourly wage fell nearly 7 percent between 2007 and 2015. While New Hampshire has one of the highest median wages in the country, it experienced one of the steepest declines among all states since the onset of the recession.

Since 1990, New Hampshire has experienced uneven wage growth, which has grown increasingly more pronounced over time, particularly for workers on the lower end of the wage distribution. After adjusting for inflation, a worker in the top fifth of the distribution saw wages grow by 11 percent, while the hourly wage for a worker in the bottom fifth is now 7.4 percent lower overall.

As NHFPI explained in its earlier report, Taking the Measure of Need in the Granite State, the official poverty threshold understates the degree of economic insecurity in New Hampshire and elsewhere, as a family of three is considered “not poor” if it earns a collective income of $20,000. Of the roughly 77,900 working age adults living in poverty in New Hampshire, around 54 percent were employed full-time or part-time in 2014, and one-third of these adults – around 28,900 individuals – had attended college at some point in their lives. 

“As we consider public policies that will bolster employment and enable individuals to engage in the workforce more readily, we should be mindful of the fact that some jobs simply may not pay enough for workers and their families to achieve economic security,” said McLynch.


Learn more in NHFPI’s report, The State of Working New Hampshire, available online here 

The New Hampshire Fiscal Policy Institute is an independent, non-profit, non-partisan organization dedicated to exploring, developing, and promoting public policies that foster economic opportunity and prosperity for all New Hampshire residents, with an emphasis on low- and moderate-income families and individuals. Learn more at www.nhfpi.org.

Leo W Gerard: When a Coin Drops in Asia, Jobs Disappear in Detroit

Former Factory Closed (Image Michael Coghlan)

Former Factory Closed (Image Michael Coghlan)

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 reportlast 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.

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