Category Archives: Labor Policy

Wage Gap vs. Earnings Gap

Source: CNN Money

Source: CNN Money

There are multiple pieces online from prominent publications dispelling the “myth” of the wage gap. Articles from Forbes, The Atlantic, and the Wall Street Journal discuss the wage gap as though it’s a dubious statistic and suggest that men and women’s pay are ostensibly equal for equal work.

If they are to be believed, then it’s only taken 53 years since the passing of the Equal Pay Act to reach a point of income parity. But this premise is false, and the true state of affairs is that the wage gap is painfully real. The reality is that women’s median income for full-time positions is $40,742 while full-time jobs for men earn them a median income of $51,212. The wage gap between men and women currently sits at women earning 79.5 cents to every $1.00 earned by men.

The good news is that the wage gap has steadily decreased since 1960. While 79.5 percent is better than 56 percent, any gap at all is still unsatisfactory. But what explains this difference? Continue reading

A Higher Minimum Wage: Not Actually a Bad Policy

Wage Pic

Raising the minimum wage will do more good than harm. Income inequality is at historic highs, and the minimum wage is worth less now than 40 years ago—a typical earner makes less than poverty level. Economists split hairs over particulars, but on the whole, an increase will boost low-wage workers’ fortunes, without large negative effects on employment. A higher wage floor will put many hard-working Americans on better footing.

I started thinking about this issue a few weeks ago, when I stumbled on a street demonstration in my home city of St. Paul, MN (see the picture). It was the day after Black Friday and protesters had just marched through the parking lots of Walmart and Target. I was waiting for a bus. They were calling for a higher minimum wage. I decided to look into it.

The federal minimum wage is $7.25 per hour. Many localities set wages above this rate. Washington D.C. just approved upping theirs to $11.50. Sea Tac, a suburb of Seattle, now has a $15 wage floor. New York State, California, and New Jersey recently upped their minimums. Congress has raised the federal minimum wage 29 times since its inception in 1938 (at 25 cents!), most recently in 2007.

Earlier this year two Democrats introduced the Fair Minimum Wage Act in Congress. It aims to raise the minimum wage to $10.10 by 2015. President Obama supports the measure, but Republicans in Congress do not. In general, a large majority of Americans favor raising the minimum wage; businesses are split.

Two-thirds of minimum wage earners are adults, and one in four is raising children. Even with full-time hours, a minimum wage salary pays only $15,080 per year, one-third less than the poverty level. The current minimum wage is worth less now than in the 1960’s.

If intuition tells you that amount is not enough to live on, you’re right. Taxpayers pick up the slack. For example, half of all fast food employees receive some kind of public assistance, $7 billion in total per year.

An increase to $10.10 would affect many who make above the current minimum. The Economic Policy Institute, a left-leaning think tank, estimates that 17 million workers—about one fifth the hourly workforce—would receive pay increases with the new law.

Really smart economists are divided over the effects of an increased minimum wage. A higher wage floor increases incomes, which stimulates spending, and may even drive employment. But it may also force companies to decrease personnel to account for higher labor costs.

Many business leaders feel strongly that a wage floor will hurt workers. “Arbitrarily raising the cost of labor would increase, not reduce, the unemployment rate among young, less-skilled workers,” Bruce Josten of the U.S. Chamber of Commerce said in a statement. James McNerney Jr., the CEO of Boeing, even hinted that higher labor costs could force companies to relocate, even though research suggests that most outsourced jobs are high-paying.

Microeconomics 101 teaches that as the price of labor rises, the demand for labor will decrease. No one really disagrees with this. However, studies have shown that in practice, an increase in the minimum wage improves the fortunes of low-wage workers without massive layoffs. Unlike other anti-poverty policies, this one adds nothing to the federal budget. It may even shift some of the burden back to private companies (remember that $7 billion for fast food workers?).

The United States is in a period of vast income inequality. Jared Bernstein of the non-partisan Center on Budget and Policy Priorities argues that the minimum wage “sets an important labor standard: the government will compensate for the sever lack of bargaining clout among our lowest-wage workers by setting a floor below which we won’t allow their wages to fall.”

Yes, we as a society need to have a broader conversation about our inequities, but as its name implies, a fair minimum wage should be the least we do for the most vulnerable in our society.

 

“Binders Full of Women” Are Still Earning Less Than Men

By Sonia Sekhar

 

Former Governor Romney’s awkward “binders full of women” comment in response to a question on pay equity for women during the presidential town hall event at Hofstra University instantly became the subject of mockery, especially on the internet.  The public’s ridiculous response to Governor Romney’s comment is an apt representation of an equally, if not more ridiculous, reality for most working women.  The gaping disparities between working men and women are very real, and the problem will only continue to grow as the share of women in the workforce grows.

 

A new report by the American Association of University Women (AAUW) finds that one year after graduation, women working full-time jobs earn less than their male counterparts.  In fact, they only tend to earn 82 cents of every dollar earned by men.  While it’s no revelation that there’s unequal pay between men and women, this study is interesting because it looks at a time in women’s lives when the typical arguments for unequal pay cannot be applied.

 

Unlike studies that look at pay differences between men and women mid-career, this one looks at differences one year out of college, so explanations such as family responsibilities don’t usually apply.  The study acknowledges that there are statistically significant differences in the number of women versus men in fields such as engineering, but even among those higher paying occupations women tend to be paid less.  What’s more, when a number of differences including, major and hours worked per week are controlled, women still tend to make less than men.

 

To be clear, the second half of the twentieth century brought dramatic progress in the area of equal pay, but the stagnation over the past decade should be cause for worry.  The main reason experts provide to explain the wage-gap is women’s life choices.  For example, more women may work part-time so they can spend more time with their children, or go into fields that generally don’t pay as much as the fields men go into.  However, the AAUW study controls for most of these factors and there still remains an difference.

 

As the literature validating unequal pay between men and women continues to pile up the next logical question must be: what do we do about it?  Should the government intervene?  Or should women simply be more aggressive when they negotiate their pay?  The AAUW says that the latter is not enough, and that employers and the government need to play a more active role in rectifying these disparities.  But the million-dollar question is what might that policy look like?

 

Some advocacy organizations have suggested policies, including those that would increase investment in child-care and greater mentorship and occupational support for women entering the workforce.  These might be a good start, but seem small like a small response to a big problem.

 

Heightened awareness of equal pay may have just been the result of Governor Romney’s gaffe, but the data and literature suggest that we will continue on our current path unless we do something about it.

 

Injecting Economics Into The Immigration Debate

By: Mariel Beasley

 

On August 15th, approximately 1 million people, who were brought into the United States illegally as children, can apply to receive a two-year work permit. Although there are some similarities, this is not a federal DREAM act, as proposed in 2010, which provides a path to citizenship for youth born after June 15, 1981 and arrived the United States before their 16th birthday. In mainstream media, the Act and the Directive have been primarily framed as opportunities and an issue of morality; there has been little economic analysis of the Directive and the impact of legally including up to 1 million people in the workforce.

Unemployment still sits at 8.3% across the country; however, this may be a well-timed boost to the economy. A study by the North American Integration and Development Center out of UCLA estimates that beneficiaries of the federal DREAM Act would generate over $3 trillion over 40 years. The study doesn’t even take into account additional contributions to social security or tax revenue in their economic analysis and still finds a significant positive economic impact. It’s reasonable to assume that the Directive will mimic at least some of these benefits. Additionally, a study from the University of Alabama, published earlier this year, finds that the costs of Alabama’s stringent immigration law far outweigh the benefits. They found that the strict regulations have actually eliminated over 70,000 jobs in the local economy, decreased Alabama’s GDP by up to 6% and cost the treasury up to $260 million in tax revenue.

These two studies suggest that integration legislation, rather than punitive legislation, is more likely to reduce state deficits. If pro-DREAMers are able to add economics to the debate, using the President’s Directive as a test drive, they may be able to garner enough bi-partisan support to pass federal legislation.

Can American Factories Compete?

Images via William Hook using a Creative Commons license

 

By Eric Nakano, Staff Editor

In moving its iPhone production overseas to China, Apple executives cited not just the lower costs of production but also the flexibility Chinese factories provide. One Apple executive recalled how Apple’s redesign of its iPhone screen forced a revamp of the phone’s production. The new screens arrived at the factory around midnight and the factory got its workers out of bed to work a 12 hour shift in order to ensure timely delivery of the new phones. From a customer service and bottom line perspective, having this kind of flexibility enables companies to stay a step ahead of the competition and meet demand for their products in a fiercely competitive global economy.

But is rousing a low wage factory worker out of bed after a full day’s work so that a consumer can get delivery of his iPhone on time ethically right? What does this mean for factories around the world? Must they impose similar burdens on their employees in order to remain “competitive”? Should international standards be developed to prevent a race to the bottom? Are these questions being discussed in the ethics courses of our nation’s business schools and debated in the board rooms of Fortune 500 companies? As wealth and income inequality widen, they should be.

Making Job Corps Work in the 21st Century

 

Image via jobcorps.gov

By Jeff Bartelli, Staff Editor

Job Corps is a federally funded program administered by the Department of Labor that offers academic and vocational training to people between the ages of 16 and 24. The professional fields that a young person can receive training in at Job Corps range from accounting to urban forestry. However, the majority of Job Corps students will end up in a construction trade such as plumbing or carpentry.

Many students leave Job Corps with valuable skills that they are eager to use. However, there isn’t much demand for masons and electricians anymore. Job Corps should be adjusting its programs to train young job seekers in cutting edge fields in order to meet the demands of the market. For example, Job Corps needs to enact policies that will offer its students careers in the green sector. The United States has a growing need for people who can install the energy systems of the 21st century, such as solar panels and wind turbines.  Job Corps has the opportunity to offer underprivileged people the resources to fill those jobs. That is why Job Corps, and the Department of Labor, must shift their policy emphasis from providing training in construction jobs of yesterday to the green sector jobs of today.