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Millions Are Involuntarily Working Part Time

6.4 million Americans are working involuntarily part time
Employers are shifting toward part-time work as a ‘new normal’

A new paper by Penn State economics professor and University of Illinois’ Project for Middle Class Renewal analyst’s Lonnie Golden explains that, since the end of the Great Recession, there has been a structural shift, concentrated in a few key industries, that has led to millions more workers to be involuntarily working part-time hours when they would like to work full-time jobs.

In Still falling short on hours and pay: Part-time work becoming new normal, Golden shows that the number of people working involuntarily part time has increased 44.6 percent since 2007. While many areas of the labor market have recovered from the recession, the chronically higher level of involuntary part-time workers is evidence of an incomplete recovery.

“The increase is almost entirely due to the inability of workers to find full-time jobs, leaving many workers to take or keep lower-paying jobs with less consistent hours to make ends meet,” said Golden. “In several industries, relying more on part-time work seems to have become the ‘new normal.’”

While virtually all industries employ part-time labor, the retail and the leisure and hospitality industries alone accounted for 54.3 percent of the growth of involuntary part-time employment between 2007 and 2015.

Black and Hispanic workers have been relatively more affected by this structural shift. While 3.7 percent of whites work part time involuntarily, 6.8 percent of Hispanic workers and 6.3 percent of black workers have part-time hours but want to work full time.

part-time-workBesides the frequent lack of sufficient work hours, part-time workers must also navigate unpredictable and/or variable hours, with their work schedules varying from week-to-week at a rate more than double that of full-time workers. Moreover, workers in part-time jobs also suffer from a lower rate of pay and benefits coverage, such as access to health insurance and paid time off. Compared to similar full-time workers, research elsewhere has found that men working part time earn 19 and women working part time earn 9 percent less per hour.

Golden finds that there is no clear association with the implementation of the “employer mandate” in the Affordable Care Act and the time trend in involuntary part-time workers, as the data does not reflect any noticeable increase in involuntary part-time or workers working 29 or fewer hours a week around the dates of its implementation.

Golden highlights policies, such as the “Opportunity to Work” ballot measure passed in San Jose and secure scheduling provisions in Seattle and San Francisco, that could be implemented across the country to improve the quality of part-time positions. These include compensation parity for part-time jobs, reforms to unemployment insurance systems, an employee “right to request” changes in hours and schedules, and laws giving part-time workers priority access to increased hours when available.

“Although there has been a structural shift toward involuntary part-time labor, we can address it with specific policy solutions that will help workers,” said Golden. “We should use every tool in our toolbox to further the economic recovery and help benefit millions of workers with more stable, better-paying job opportunities.”

“Part-time workers face shortages of pay and work hours and deserve policy remedies for their problems,” said EPI President Lawrence Mishel. “They are a sizable and growing share of the workforce. Policymakers need to address their problems.”

Hedrick Smith Speaks to the Community about Who Stole the American Dream.

PaperbackCoverIf you are like me, you have probably never heard of Hedrick Smith before.  Those people a little older than me know his work very well.  Hedrick was a journalist and the former head of the Washington D.C. bureau for the New York Times.  He covered at least four Presidents as a reporter and is an accomplished author.  Hedrick even won a Pulitzer Prize for his work in Russia and Eastern Europe in 1974.

Hedrick’s newest book is called ‘Who Stole the American Dream?’ and it provides a very detailed description of what happened to the middle class in America.

  • What lead to the sub-prime mortgage crisis that nearly bankrupted America?
  • What happened to the labor unions and prosperity of the middle class?
  • Why is business now more powerful in Washington than the people our elected officials are supposed to be representing?

HSmith 2Hedrick addressed all these topics in his lecture to a group of about 50 people at the NH AFL-CIO office last week.

After saying that “being here reminds me of the heyday of the labor movement,”  Hedrick started his lecture by asking the question “How did we get to here?”  How did we get to a point in America where you are either just barely getting by or one of the ultra-wealthy?

Hedrick said “Some people ask me, aren’t you preaching to the choir?” when speaking to labor groups.  His response: “All the choir members need to sing from the same sheet music.”  We will not be able to fight back against these changes until we understand how we got here.  Hedrick described his book as an intellectual arsenal for the labor movement and other socially progressive organizations.

Rebuilding America with excess money from the DOD.

“Labor is a strong protector of the middle class,” Hedrick said. “The heyday of the middle class was a time when the labor movement was strong.”

Hedrick talked about how we need to rebuild our infrastructure and get Americans back to work, how we need to focus on what is happening here, and stop spending all of our tax dollars fighting in other countries.  “Why are we building bridges in Kandahar, and not in Kansas?” Hedrick asked.  He explained that too much of our federal budget is going to the Pentagon; Defense spending is higher now than it was in the Cold War – even though, during the Cold War everyone was afraid of an all-out nuclear war.

In his book, Hedrick details how much money we have spent on the current ‘wars’ that we are involved in: an estimated $3.5 to $4.5 trillion dollars have been spent, even though taxes have not been increased to pay for it.  Even now, as the conflicts in Iraq and Afghanistan are winding down, the “extra” money Congress spent on those war efforts is still in the federal budget.  That means Defense is enjoying grossly inflated appropriations – even though there are no actual ‘wars’ to fight.

Hedrick suggested that if we need to find the money to rebuild our roads and bridges, we should start by looking at the Pentagon budget.  He also proposed the idea of mandatory military service, if not for everyone then for everyone in Congress.  “We would go into a lot less wars if we had mandatory (military) service,” he said.  Hedrick also questioned Congress’ ability to make decisions about war if the representatives have never served themselves.

Stakeholder Capitalism vs. Shareholder Capitalism

HRSmith 4There are two very different perspectives about how a business should be run.  On one hand there is the view – best described by Henry Ford – that a company is there to produce something, and pay people a wage high enough that they could become your customers.  This is commonly referred to as ‘Stakeholder Capitalism’.

There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible.”
HENRY FORD

On the other hand, there is the current business philosophy that companies are only there to make their owners and shareholders money.  This is called ‘Shareholder Capitalism’.

This difference is a major focus in Hedrick’s new book.  He spent a majority of the time during last week’s discussion talking about the differences between these two views – and how ‘Shareholder Capitalism’ has led to the decline of the middle class.

Hedrick explained that ‘Stakeholder Capitalism’ drove the American economy after World War II.  From 1945-1970, the productivity of American workers went up by 96%.  At the same time, the average median income grew by 94%.  “Growth in productivity lead to shared prosperity,” Hedrick observed.  Everyone from the poor to the wealthy prospered during these years – in fact, those at the bottom of the wealth spectrum benefitted even more than those at the top.

Then, beginning in the 1970s, businesses moved into ‘Shareholder Capitalism’.  Productivity continued to rise by leaps and bounds, yet workers’ wages stayed flat.  The added revenue the company received from the higher productivity had to go somewhere – and it went right to the executives and shareholders. This is why the average CEO’s salary is now 380 times higher than the average worker’s salary.  [Read Citigroup’s report “Plutonomy: Buying Luxury, Explaining Global Imbalances” here.]

Through the 1970s, CEOs knew that shared prosperity was good business. “The job of the CEO was to balance the needs of all the Stakeholders,” Hedrick explained.  That means balancing the wages of the workers with the cost to consumers, and the need to turn a profit for the shareholders.  This was the job of the CEO.  Some of those needs were very simple.  The workers needed money.

The middle class had been the major consumer in our economy.  Middle class Americans are spenders, not savers: they spend 90% or more of what they bring home.  For the majority, the only savings they accrue is paying off their mortgages.   If the middle class does not have money to spend (like our current situation) then the economy is very slow to recover from any economic downturn.

In 1948, the United Auto Workers (UAW) and the CEO of General Motors Charlie Wilson signed the first collective bargaining agreement that included a lifetime pension.  This means that after you put in your many years of service to GM they would pay you a salary for the rest of your life.  This trend continued in union and non-union companies for the next few decades.  GM became the model for industry and labor relations throughout the country.

By 1980, 84% of all companies with 100+ employees had a full pension for their retired workers; 70% of them had full healthcare coverage for retirees as well.

Hedrick ArnieAlpertNow that ‘retirement security’ has all but disappeared.  Only 30% of companies with 100+ employees offer a pension; and only 18% offer retiree healthcare.  Those numbers go down every year, as workers who retired with these ‘outdated’ pensions are passing away.

GM used to be the template for a successful industry, now Wal-Mart is the template,” said Hedrick.  Wal-Mart is the modern day success story in the world of ‘Shareholder Capitalism’: they have experienced massive growth and high stock returns.  Just disregard the fact that they do not offer healthcare to the majority of their employees, or pay wages that would keep their workers out of poverty.

In ‘Shareholder Capitalism’ the stakeholders (consumers, shareholders, and workers) are in conflict with each other.  The shareholders are the only people the CEO cares about: business is all about profits and stock prices.  This is also why corporations like Wal-Mart buy back their stock to continue to drive up stock prices.

The middle class is not getting their share of the pie,” said Hedrick.  “The system (economy) will not work until the middle class get more of the pie

The middle class used to drive the political bus

Hedrick discussed how the middle class used to drive our political system.  Especially from the 1960s through the 1980s the middle class effected the most change.

The middle class was made up of many different movements, including the civil rights movement, the environmental movement, and the women’s movement.   Hedrick noted that organized labor was right there in the middle of it: labor was there helping to safeguard the rights of all workers, regardless of color or gender, and ensuring that all were paid equally.

For many years, labor and these organizations pushed the political system.  Hedrick noted that the AFL-CIO nationally seems to be making a push to be more like the labor movement of the past.  Labor is working with outside groups to help workers who are not official union members.  Hedrick praised the union groups who are helping to push legislation in Congress and state Legislatures to raise the minimum wage.

Hedrick described one other thing that helped these organizations move the middle class ahead.  It’s something that has been completely lost in today’s political system: hope.

People in the middle class used to believe that when something was broken in Washington that together they could change it.  They effected a great deal of political change and helped move our country forward.   Many people do not feel they can make a difference anymore.  We need bring hope back. We need people to believe again.

The Shift In Political Power

All through the 1960s, the middle class prospered and dominated the political system.  Now that is completely the opposite.  Business and their paid lobbyists control Washington.  What happened to cause this major shift?

Hedrick asked, “How many of you have ever heard of the Powell Memorandum?”  Hedrick admitted that until he started writing Who Stole The American Dream he had never heard of it before either.  Even though Hedrick was a journalist in Washington, D.C. in 1974, he had never heard of it.  It was not given to the press or the public; instead, it was shared “under the table. ‘

Lewis Powell was conservative, a corporate lawyer, and eventually a Supreme Court Justice. The 1974 ‘Powell Memorandum’ drafted a plan for business and industry to counter middle class movements.  Powell said, “These movements and regulations are killing the free enterprise system.”  He argues that the business industry needed to organize (like many of the other movements of the time), that they needed to put people on Capitol Hill and use their collective will to influence the regulations and policy changes that are hurting business.

Does that sound familiar?”  Hedrick asked the AFL members.

Starting in the mid-1970s, business took this message to heart.  They created the ‘Business Round Table’, a group of businesses who pooled their resources to lobby Congress.  Now the BRT is the largest single lobbying group in the nation’s capital.  The US Chamber of Commerce went from 6,000 members in 1974 to over 600,000 members in 2010.

These changes shifted the power from the people and pushed it toward the business community.  These lobbyists started pushing more and more money into the political system and began to overpower the voices of the people.  They quickly got to work: pushing for lower taxes, lower regulations and what they called ‘business-friendly’ policies.

“They started by deregulating trucking and telecom,” said Hedrick.

In 1978, with a Democratic President and both Houses of Congress controlled by Democrats, the business lobby passed some of the most damaging laws for American workers.  For example, they changed the tax code and wrote in paragraph 401 sub-section K to allow executives to have a tax shelter for their earnings.  The 401(K) provisions quickly became the answer to lowering retirement costs and keeping more profits.  Some companies, such as ENRON, even forced their workers to use their 401(k)s to buy stock in the company – which would force stock prices up and up. But then if the company goes under, as ENRON did, the workers have completely lost their retirements as well as their jobs.

The business lobby also changed the bankruptcy law to allow the current management to continue to control the company through the bankruptcy process.  Previously, a neutral third party was brought in to divide the company assets and ensure that workers’ pensions were protected; but now, companies can file for bankruptcy and sell off all assets, leaving the workers stranded.  In his book, Hedrick uses the United Airlines bankruptcy as an example of how this policy hurts working families.  We can also see the effects of this change in the aftermaths of the Hostess and Patriot Coal bankruptcies.

The ‘Powell Memorandum’ created a political monster.  Now we have the ‘Gang of Six’, a Washington based lobbying group that “represents 40,000 member companies from beer distributors to furniture suppliers, is the dean of a bloc of a half dozen U.S. trade groups. The groups represent companies that employ more than 22 million people and generate at least $5.2 trillion in goods and services, or almost half of U.S. gross domestic product. If the Gang of Six were a country, it would constitute the world’s second-biggest economy, eclipsing Japan’s $4.7 trillion GDP.”

This ultra-powerful lobbying group is lead by Dirk Van Dongen, the “most powerful man you never heard of,” said Hedrick.  This is the guy that Carl Rove had lunch with the day after President G.W. Bush was inaugurated – that is how powerful Van Dongen is.

Making Change

What can we do about this?  How can we stop this cycle and get back to an age of prosperity again?

Many of Hedrick’s ideas have to do with fixing our broken political system. “We need to get the big money out of politics,” said Hedrick.  “We need to fix the gerrymandering” of our Congressional districts.  We need to have open disclosure on all campaign contributions.  “This may mean we need to go back to publicly funded campaigns again,” said Hedrick.   We need the Federal Election Commission to do a better job of regulating the elections and enforcing the current election rules.  Hedrick continued, “The FEC could pass a rule that would enforce open disclosure tomorrow if they wanted to.”

Hedrick talked about ‘Open Primaries’ as a way of countering gerrymandering.   There would be no such thing as safe districts any longer. Regardless of political party, all candidates would be on the same primary ballot – then the top two candidates in the primary would run against each other in the general election.    Hedrick said that in some ‘Open Primaries’ have resulted in two general-election candidates from the same party.  He also noted that places that had ‘Open Primaries’ saw a 20% increase in voter turnout – because people once again believe that their vote will make a difference.

Hedrick also suggested making changes to the corporate tax structure, particularly reducing taxes for corporations that bring jobs here to the United States and raising taxes on those that send jobs away and keep profits overseas.  “Last year corporations held $1.7 trillion in corporate profits overseas,” said Hedrick. “Now they want to bring it back, so they are pushing Congress for another ‘tax holiday’.”  A tax holiday would allow these corporations to bring their money back from overseas without any penalty.  Many of them would immediately buy up shares of their own corporations, forcing stock prices up, and increasing their returns.  The people (the government) get nothing out of this.

Summary

Income inequality, the fall of the middle class, and the rise of business profits are all related.  Our world is very interconnected and what seemed like minor policy changes 30 years ago have turned out to be some of the most damaging.   We need to take back our political system and get back to making Congress work for the people, not the corporations.

Hedrick Smith laid out a number of these ideas in his hour-long lecture – but there is so much more in his new book.  I recommend that everyone go out a get a copy of ‘Who Stole the American Dream’.

New AFL-CIO Report Focuses On The Struggles Of Latino Americans After The Great Recession

A new report released in honor of Labor Day by the AFL-CIO shows that four years after the Great Recession officially ended, Latino working families continue to be disproportionally affected by the weak economic recovery. Across the country, Latino workers are struggling with higher rates of unemployment and underemployment, lower wages, and a dire financial outlook for retirement.

The report titled “The elusive American Dream: Lower wages, high unemployment and an uncertain retirement for Latinos,” compiles economic data  relevant to Latinos from several recent Economic Policy Institute (EPI) studies to show that unemployment and underemployment rates were higher, wages were lower and financial security for seniors was lower among Latino and African American workers. These reports offer both macro- and micro-level solutions to these inequalities.

According to data compiled in this report, the nationwide unemployment rate for Latinos continues to be higher than for whites and is projected to remain “essentially” the same at the end of this year. Furthermore, an August economic snapshot found that among employed Latinos and African-Americans, roughly one in five are underemployed.

Lower wages continue to hold back Latino working families. Between 2007 and 2012, both Latino and Latina full-time workers – defined as those working 35 or more hours per week – earned less in wages than their white and African American counterparts.

Additionally, Latinos and African Americans are more likely than whites to spend retirement mired in poverty, a June EPI report found. 70.1 percent of Latinos, age 65 and older, have incomes less than two times the supplemental poverty threshold. In comparison, only 43.8 percent of whites are economically vulnerable.

“Latino workers have been especially hard hit by the economic crisis.  It doesn’t have to be this way,” said Kelly Ross, Deputy Director for Policy at the AFL-CIO. “Low wages and economic inequality are the result of deliberate policy decisions that can and must be changed.  Increasing wages and reducing inequality is not only a matter of fairness and justice, it is also urgently necessarily if we want to fix what is wrong with our economy.”

The report concludes with several solutions for policy makers to increase jobs and address these problems such as creating large public infrastructure projects, adopting expansionary fiscal policies, passing legislation to increase the federal minimum wage and minimum wage of tipped workers, raising labor standards, reestablishing the right to collective bargaining, and providing a roadmap to citizenship for undocumented workers.

“This report confirms the unfortunate reality that many Latino workers are struggling to provide even the most basic needs to their families,” said Ana Avendaño, AFL-CIO Assistant to the President and Director of Immigration and Community Action. “This is wrong. Latinos work hard every day to build this nation. Let’s honor Labor Day by advocating for policies that will allow them to reach the American Dream.”

View the entire report here.

New Economic Policy Institute Findings on Unions and Income Inequality

Declining unionization a key cause of growth in wage inequality since 1973, new EPI report finds

Declining unionization was responsible for roughly a third of the growth of wage inequality among men from 1973 to 2007, a new Economic Policy Institute report finds. Declining unionization can explain roughly a fifth of the growth of wage inequality among women over the same time period. The report, Unions, inequality, and faltering middle-class wages by EPI President Lawrence Mishel, previews data from the forthcoming book “The State of Working America, 12th Edition.”

The share of the workforce represented by unions declined from 26.7 percent to 13.1 percent from 1973 to 2011. The decline in union representation has lowered wages for middle-class workers both directly, as fewer benefit from a union wage advantage, and indirectly, as unions have less of an ability to set labor standards for all workers in occupations and industries. From 1973 to 2007, the direct impact of declining unionization accounted for 20.2 percent of the growth of overall male wage inequality, and the indirect impact accounted for 13.7 percent, for a total of 33.9 percent, or roughly one-third. For women, declining unionization’s direct impact accounted for 9.2 percent of the growth of wage inequality, and the indirect impact explained 11.2 percent, for a total of 20.4 percent, or roughly one-fifth. Declining unionization has hurt male workers more than female workers because men were more likely to have been represented by unions when unions were strong.

The decline of unions was also the primary driver of the growing wage gap between white- and blue-collar male workers and a significant factor in the growing wage gap between college- and high-school-educated male workers from 1978 to 2011. The white-collar/blue-collar wage gap grew 10.1 percentage points between 1978 and 2011, and the lessened effect of unionism accounted for 76.1 percent of the increase. The college/high-school wage gap grew 23.9 percentage points between 1978 and 2011, and the lessened effect of unionism accounted for 21.2 percent of the increase.

“Unions reduce wage inequalities because they raise wages more at the bottom and in the middle of the wage scale than at the top,” said Mishel. “It is unsurprising that efforts to weaken unions have exacerbated both wage inequality and the divergence between overall productivity and the compensation of the typical worker.”

The union wage advantage—the percentage-higher wage earned by those covered by a collective bargaining contract—is currently 13.6 percent overall. Male workers have a union wage premium of 17.3 percent, and women have a union wage premium of 9.1 percent. Hispanic and African-American workers have union wage premiums of 23.1 percent and 17.3 percent, respectively, while the white union wage premium is 10.9 percent. A union wage premium exists in every dimension of the compensation package—unionized workers are 28.2 percent more likely to be covered by employer-provided health insurance and 53.9 percent more likely to have employer-provided pensions than nonunionized workers, and unionized workers receive 14.3 percent more paid time off.

EPI will release “The State of Working America, 12th Edition” to the media on September 4, embargoed until September 11. The authors of the book—Mishel, Josh Bivens, Elise Gould and Heidi Shierholz—will hold a press call on September 11. Reporters who wish to receive access to the electronic version of the book or who would like more information about the call should contact news@epi.org.

The Pay For Middle Class Workers Far Below Their Expected Productivity

Middle class workers have been struggling to get ahead for many years now.  That feeling you have that you never seem to get ahead.  Well now there is proof that you are not wrong and that you are not alone.

In the beginning of the industrial revolution, workers were paid poorly and worked in unhealthy conditions.  As the workers began to unionize the workers began to see a significate rise in pay.  While industry continued to evolve, workers became more productive and efficient, while wages continued to grew.  The union movement seem to reach its peak in the early part of the 1970’s.   This is where we begin to see the split between workers wages and their productivity.

Growth of real hourly compensation for production/nonsupervisory workers and productivity, 1948–2011

http://www.epi.org/files/2012/ib330-figureA.png

As you can clearly see the wages of the workers have been essentially flat since 1975.  This is the same time that unions reached their peak. Since then the percentage of the workforce that is unionized has continued to decline.  Now union workers compromise only 13% of the overall American workforce. Is it a coincidence that workers pay has been flat since the number of union workers has gone down?

I will end with a quote from the Economic Policy Institute:

Reestablishing the link between productivity and pay of the typical worker is an essential component of any effort to provide shared prosperity and, in fact, may be necessary for obtaining robust growth without relying on asset bubbles and increased household debt. It is hard to see how reestablishing a link between productivity and pay can occur without restoring decent and improved labor standards, restoring the minimum wage to a level corresponding to half the average wage (as it was in the late 1960s), and making real the ability of workers to obtain and practice collective bargaining.

U.S. economic boom of 1950s followed greatest sustained union expansion in American history.

A cross post from our friends at IUOE Local 49.

U.S. economic boom of 1950s followed greatest sustained union expansion in American history.

It is no accident that the prosperity and consumer boom of the 1950s – a period of unprecedented middle class expansion, broad business growth, increased home ownership, rising consumer spending, and the shared expectation that a college education was within the reach of everyone and that the lives of our children would be better than our own – followed the greatest sustained expansion of unionization in American history.

The notion that greater unionization is harmful to an economic recovery is misguided. Unions, as institutions, and the members that form them are economically rational and do not pursue demands that force firms out of business…
…If anything, unions are more important in a recession. As was stated in a statement signed by forty prominent economists and released on February 25th of 2011, “The current recession will further weaken the ability of workers to bargain individually. More than ever, workers will need to act together.”
Unions reduce income inequality not just within the organized company or government unit (by reducing differentials between low-paid and high-paid employees) but also by reducing inequality as certain employers increase compensation to discourage unionization while other nonunion employers move closer to union standards in industries/jobs with union representation to compete for the best workers — all of which helps the working class.
Testimony on the substantial body of research evidence demonstrating the importance of unions to restoring a solid middle class was given to the Senate Committee on Health, Education, Labor and Pensions  by Dr. Paula B. Voos, a professor in the School of Management and Labor Relations at Rutgers University, and an EPI research associate.
Rosie the RiveterThe most important reason to improve the ability of employees to organize into unions cited by Dr. Paula Voos is that such membership is a fundamental right in democratic societies, related to freedom of association and the right of all human beings to band together to improve their lives.
Dr. Voos said, “For that reason alone, I would urge you to pass legislation to make real in the U.S. once again the promise of the National Labor Relations Act. Section 1 of that Act puts federal law behind “the practice and procedure of collective bargaining and …the exercise by workers of the full freedom of association, self-organization, and designation of representatives of their own choosing.
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