Union Membership, 2014

The Bureau of Labor Statistics released its estimates of union membership and union coverage for 2014 this morning. Last year, the share of U.S. workers who were members of a union fell 0.2 percentage points to 11.1 percent, continuing a decades-long decline in unionization in the United States.

My CEPR colleague, Cherrie Bucknor, and I (with the help of Nick Buffie) have written a quick analysis that attempts to put these latest developments into longer-term context.

You can read the full story here, but two points are worth highlighting. First, since the mid-2000s, workers in manufacturing are actually less likely to be in a union than the average worker is.

union-byte-2015-01-fig1

Second, the union membership rate in the public sector –where employer opposition tends to be much lower than in the private sector– is relatively high and has changed little over the last thirty years. By contrast, in the private sector, where labor law and strong employer opposition make it difficult for workers to join unions, membership has been much lower and falling steadily .

union-byte-2015-01-fig2UPDATE 01/24/15: The Wall Street Journal‘s Melanie Trottman cited our research in her coverage in today’s print edition (behind a paywall).

Raising or Scrapping Social Security Payroll Tax Cap

On New Year’s Day, the cap on the Social Security payroll tax increased to $118,500 per year (up from $117,000 in 2014). Workers pay Social Security tax until their annual earnings reach the cap and then pay no additional Social Security tax after that (until the following year, when the clock restarts).

One way to increase revenues available to Social Security would be to raise or eliminate the cap. In a report out today, my CEPR colleagues, Nicole Woo, Cherrie Bucknor, and I use data from the American Community Survey (ACS) to estimate how many workers would be affected if we raised the cap to $250,000, $400,000, or just eliminated the cap altogether.

According to our analysis of the ACS data, about 6.1 percent of all workers have earnings from work in excess of the new cap; about 1.5 percent earn more than $250,000 per year; and about 0.7 percent are above $400,000.

The report includes tables with breakdowns by race, gender, age, and state.

Minimum Wage Q&A

The Inter Press Service news agency has published an interview with me by journalist Peter Costantini focusing on the minimum wage. There’s a longer version here and a shorter version in English here and in Spanish here.

My favorite part is the title, which is a cleaned-up version of something I said in the course of the interview: “The Economy Needs to Serve Us and Not the Other Way Around.”

A Tougher Road to Employment

On Christmas Day, the New York Times ran a great story on the “tougher road to employment” for black recent college graduates. The piece featured research by my colleague Janelle Jones and me, which originally appeared as a CEPR report (pdf) back in May.

Of course, I liked that the piece used our numbers (in 2013, the unemployment rate for black recent college graduates was more than double the unemployment rate for white recent grads, for example), but I also liked the implicit framing of the numbers. Black college graduates are a group that have “done everything right” –finished high school, finished college, entered the labor market– and yet are much more likely than their white counterparts to be unemployed or to be in a job that doesn’t require a college degree. (And, yes, our numbers show that this also holds true for black graduates with degrees in STEM –science, technology, engineering, and math.)

For me, the most insightful part of the story were the paragraphs focusing on remarks by Duke economist, Sandy Darity:

“I would never say to anyone they shouldn’t get a college education,” said William A. Darity Jr., an economist at Duke University. “There’s no doubt that having a college education improves the relative situation of any black American compared with any other black American.”

“But it does not significantly reduce racial disparity,” he added. “We’ve got to do something else to really have an effect on that.”

In fact, the unemployment rate in 2013 was lower among whites who never finished high school (9.7 percent) than it was for blacks with some college education (10.5 percent).

Black graduates are suffering from a version of last hired, first fired, Mr. Darity said. The effects of discrimination are blunted when the work force is expanding, but in harder times minorities are much more vulnerable, he said.

Does the OECD Think That the South Should Rise Again?

A post at Wonkblog earlier this month noted that a recent analysis by the Organization for Economic Cooperation and Development (OECD) of regional well-being across its member countries found that the U.S. South was “the worst place to live in the United States.” The OECD –as diplomatic as it is– did not say this in so many words, but Wonkblog reporter Roberto Ferdman pulled together the OECD’s state-level data for the United States and it would be hard to arrive at any other conclusion.

For each of the 50 states and the District of Columbia, the chart below gives the OECD’s overall well-being score, which consolidates the organization’s nine separate measures, reflecting health, jobs, safety, environment, access to services, civic engagement, housing, education, and income. Possible scores ranges from a low of zero to a perfect score of 90. In the United States, the lowest recorded score was 50.7 for Mississippi and the highest was New Hampshire at 77.6.

As Wonkblog highlighted, the chart shows a heavy concentration of southern states at the bottom –and the complete absence of southern states at the top. Ferdman writes: “The South, which performed the worst of any region in the country, is home to eight of the poorest performing states. Only Virginia was in the top 25. And just barely — it placed 22nd.” A similar pattern holds in the nine subcomponents of the OECD’s overall index.

Chart of OECD well-being index by US state

A few days later, Wonkblog ran a defense of the South –and of the OECD– written by Carol Guthrie, an OECD official in Washington, who also happens to be a die-hard daughter of the South. Guthrie emphasized that the OECD’s measures are “objective” and can’t capture the many subjective reasons that southerners love the South. The OECD, she said, was simply listing a set of “criteria that underpin economic as well as physical well-being, including things that make our regions more or less competitive and able to provide vibrant quality of life.” Quoting the OECD’s Secretary General Angel Gurria, Guthrie wrote that these indicators can be used to “offer a new way to gauge what policies work and can empower a community to act to achieve higher well-being for its citizens.”

So, what happens if we take up Guthrie and Gurria’s suggestion to use the well-being measures “to gauge what policies work”? Well, the most striking feature of the Wonkblog chart and of the OECD’s regional data more generally is how at odds the performance of the South is with long-standing policy preferences at the OECD. The South is almost certainly the region of the world that has most embraced in principle and has most embodied in practice the policies promoted by the OECD. Relative to the rest of the rich world, the states of the South have among the stingiest unemployment benefit systems, the least unionized workforces, the lowest minimum wages, the smallest public sectors, the weakest employment protection laws, and the lowest taxes. By standard OECD analysis, the South ought to be a workers’ paradise. But, based on the indicators that Guthrie decribes as “cold, hard facts” for “policymakers and citizens looking to bring about change,” the South performs disastrously.

To be fair, in recent years, the OECD has softened its stance on some of these issues, such as the minimum wage. And the OECD has long been a champion of increased investment in education, where the South also does poorly relative to the rest of the United States.

But, is it too much to hope that the OECD would use these new regional data to rethink their policy recommendations? At least when it comes to the United States?

(This post originally appeared on the CEPR blog.)

“Wage Inequality: A Story of Policy Choices”

The September 2014 issue of New Labor Forum includes an article (paywalled) by Larry Mishel (President of the Economic Policy Institute), Heidi Shierholz (until recently an economist at EPI, now Chief Economist at the Department of Labor), and me offering our explanation for the rise in wage inequality since the end of the 1970s.

From the introduction:

The mainstream of the economics profession offers one over-riding explanation for the rise in inequality: workers who have the skills needed for new technologies have done well, while those lacking those skills have fallen farther and farther behind. …We take a different view. We believe that it is possible to explain the entire rise of economic inequality since the late 1970s as the outcome of an array of economic policies that had the easy-to-predict effect of widening the gap between the top 1 percent and the rest.

Over each of the last three decades, macroeconomic policy (fiscal, exchange rate, monetary policies), trade agreements, deregulation of the financial sector, the legal environment governing unionization, the minimum wage, industry deregulation (in airlines, trucking, inter-state busing, and elsewhere), the privatization of state and local government functions, and other policies have had different effects on different kinds of workers, helping some and hurting others. … Together, we argue, these policies can explain changes in wage trends for workers—both men and women—across the wage distribution.

Beyond Secular Stagnation

Cover of Dissent, Summer 2014The new issue of Dissent has a special section, organized by SEIU Chief Economist Mark Levinson and me, on alternatives to economic stagnation. As Mark and I write in an introduction: “The special section seeks to provide a fuller, progressive answer to the question of how we should respond to stagnation. One common theme of the essays … is that ‘recovery’ from the economic crisis is not enough.”

The section features pieces by Dean Baker (CEPR) and Jared Bernstein (CBPP) on the importance of full employment; Heather Boushey (Washington Center for Equitable Growth) on the economics and politics of work-life balance policies; Amy Hanauer (Policy Matters Ohio) on progressive economic policy innovation at the state and local level; Alan Aja (Brooklyn College), Daniel Bustillo (Columbia University), William Darity, Jr. (Duke University), and Darrick Hamilton (The New School) on how to build a “race-fair” America; and Jennifer Taub (Vermont Law School) on how to fix our broken financial system.

#WorkingFamilies Summit

Cover of "Women, Working Families, and Unions"In advance of next Monday’s “White House Summit on Working Families,” CEPR released a report this morning that looks at the role that unions can play in improving work-life balance, particularly for women.

My colleagues, Janelle Jones and Nicole Woo, and I start from the observation that the typical woman spends far more time in paid work now than she did three or four decades ago, but women still do the large majority of unpaid child-care, elder-care, and routine housework. We then document that women in unions not only earn more and are more likely to have health and retirement benefits, but they are also much more likely to have a host of family-friendly benefits including paid sick days, paid vacations, and paid family and medical leave.

Given that one-in-nine women workers in the United States is in a union and women now make up just under half of all union workers, unions can play an important role in updating labor-market institutions to fit 21st century realities.

Why Don’t More People Go To College?

At the Upshot today, David Leonhardt asks if college is “worth it” and answers with a resounding “clearly,” citing data he obtained from the Economic Policy Institute. Leonhardt’s answer, however, raises a bigger question, which he leaves unexamined: if college is such a good investment, why aren’t more people making it?

The data he presents show a big increase between 1979 and 2013 in the earnings of college graduates relative to high school graduates (the top line in the chart below). The gap, which has always been large, grew steadily for more than 20 years from the end of the 1970s into the early 2000s before slowing down in the 2000s. Leonhardt makes much of the uptick in the last couple of years, which puts the returns to college at an all-time high, but the growth in the college premium has clearly decelerated somewhat since about 2002, even with the finishing flourish in the chart.

Financial return to a college degree, 1973-2013
Source: New York Times.

The chart, however, also poses a serious puzzle. Leonhardt concludes that: “from almost any individual’s perspective, college is a no-brainer.” If that is true, then, in a well-functioning market, we would expect that this extraordinary increase in the payoff to college would have led to a large increase in the supply of college graduates. In fact, as economists have documented for several decades now, the supply of college graduates decelerated at about the same time that the return to college started to increased. The share of college graduates in the workforce continued to grow after the early 1980s, but at a slower, not a faster, pace than it had in the 1960s and 1970s.

Unless we think that the main reason young people aren’t going to college is because they don’t know that the average return to a college degree is very high (and always has been), then the much more interesting question is why it is that more young people aren’t going to college? Given the size of the returns to college –Leonhardt cites numbers from MIT economist David Autor that suggest that the present discounted value of college is roughly $500,000– the barriers must be substantial.

I’ll offer two quick reasons why college may be, in practice, less of a “no-brainer.”

First, as Heather Boushey and I (and, more recently, MIT economist Frank Levy and colleagues) have argued, not everyone who goes to college receives the average financial return. A non-trivial portion of college graduates earn less than the average otherwise comparable high school graduate. (In the current issue of Science, which the Upshot piece refers to, David Autor makes this same point: “Although the average college graduate earns substantially more than the average high school graduate, the least successful college graduates may earn substantially less than the median among high school graduates, and the most successful high school graduates may earn substantially more than the median among college graduates.”) At least some high school graduates on the fence about college might realistically expect –because of their grades, test scores, health situation, work responsibilities, or family obligations– that they will find themselves with a below-average pay-off to college.

Second, as Heather and I also argued (and as Ben Casselman notes in a post today at 538), the big financial returns to college depend heavily on finishing your degree, but more than 40 percent of those who start college for the first time don’t finish within six years. Those who don’t finish have little to weigh against their lost earnings, lost years of labor-market experience, direct outlays in tuition and fees, as well as any student debt they might have acquired. Again, from the point of view of a young high school graduate considering college, knowing that there is a 40 percent chance that you will start, but won’t finish is pretty discouraging –again, especially if you have reasons to believe that you might more be more likely to be in the 40 percent than in the 60 percent. (Autor also makes this point in Science: “for students who acquire substantial student debt but do not complete the college degree, it is far from certain that college will prove a good investment.”).

That I can identify, Leonhardt mentions only one reason that we don’t have more college graduates and does so only in passing. He quotes Autor as saying “we have too few people who are prepared for college.” But, if this is the main barrier to increasing the share of workers with a college degree, then we are in more trouble than Leonhardt seems to think. If we have not prepared enough young people to do college work, then we can hardly expect that these unprepared young people will finish college even if they start or that they will receive the high average returns earned by current graduates.

I may be wrong about why young people aren’t going to college in bigger numbers, and almost certainly there are other factors at play, but knowing why the young aren’t going to college in much greater numbers is a far more important question than knowing whether college is “worth it” “on average” and “all-else equal” for the people who have already gone.

(This post originally appeared on the CEPR blog. Updated to correct authorship of Benson, Esteva, and Levy paper.)

Cheese Eating Jobs Machine

On his blog today, Paul Krugman has a nice shout-out to a report that Dean Baker and I wrote for CEPR way back in 2006.

In that eight-year-old report, Dean and I made the point that, despite widespread crowing about the US “jobs machine,” 25-to-54 year olds (what economists sometimes call “prime-age” workers) were more likely to have a job in France than in the United States.

Today, Krugman posts an eye-popping chart documenting that the gap between the United States and France has grown to a chasm:

Employment rates 25-54 year olds, US and France, 2000-2013

Source: Paul Krugman, 2014.

The French employment advantage among the “prime-age” population is much bigger now than in it was before the Great Recession.

The same chart also shows that the gap between the two countries is narrowing slowly. US employment rates are creeping up. And French employment rates are falling steadily –dragged down by the weight of Europe’s deeply misguided commitment to economic austerity.