“A Diabolical Chicken-And-Egg Conundrum”: Fear Is Why Workers In Red States Vote Against Their Economic Self-Interest
Last week’s massive spill of the toxic chemical MCHM into West Virginia’s Elk River illustrates another benefit to the business class of high unemployment, economic insecurity, and a safety-net shot through with holes. Not only are employees eager to accept whatever job they can get. They are also also unwilling to demand healthy and safe environments.
The spill was the region’s third major chemical accident in five years, coming after two investigations by the federal Chemical Safety Board in the Kanawha Valley, also known as “Chemical Valley,” and repeated recommendations from federal regulators and environmental advocates that the state embrace tougher rules to better safeguard chemicals.
No action was ever taken. State and local officials turned a deaf ear. The storage tank that leaked, owned by Freedom Industries, hadn’t been inspected for decades.
But nobody complained.
Not even now, with the toxins moving down river toward Cincinnati, can the residents of Charleston and the surrounding area be sure their drinking water is safe — partly because the government’s calculation for safe levels is based on a single study by the manufacturer of the toxic chemical, which was never published, and partly because the West Virginia American Water Company, which supplies the drinking water, is a for-profit corporation that may not want to highlight any lingering danger.
So why wasn’t more done to prevent this, and why isn’t there more of any outcry even now?
The answer isn’t hard to find. As Maya Nye, president of People Concerned About Chemical Safety, a citizen’s group formed after a 2008 explosion and fire killed workers at West Virginia’s Bayer CropScience plant in the state, explained to the New York Times: “We are so desperate for jobs in West Virginia we don’t want to do anything that pushes industry out.”
Exactly.
I often heard the same refrain when I headed the U.S. Department of Labor. When we sought to impose a large fine on the Bridgestone-Firestone Tire Company for flagrantly disregarding workplace safety rules and causing workers at one of its plants in Oklahoma to be maimed and killed, for example, the community was solidly behind us — that is, until Bridgestone-Firestone threatened to close the plant if we didn’t back down.
The threat was enough to ignite a storm of opposition to the proposed penalty from the very workers and families we were trying to protect. (We didn’t back down and Bridgestone-Firestone didn’t carry out its threat, but the political fallout was intense.)
For years political scientists have wondered why so many working class and poor citizens of so-called “red” states vote against their economic self-interest. The usual explanation is that, for these voters, economic issues are trumped by social and cultural issues like guns, abortion, and race.
I’m not so sure. The wages of production workers have been dropping for thirty years, adjusted for inflation, and their economic security has disappeared. Companies can and do shut down, sometimes literally overnight. A smaller share of working-age Americans hold jobs today than at any time in more than three decades.
People are so desperate for jobs they don’t want to rock the boat. They don’t want rules and regulations enforced that might cost them their livelihoods. For them, a job is precious — sometimes even more precious than a safe workplace or safe drinking water.
This is especially true in poorer regions of the country like West Virginia and through much of the South and rural America — so-called “red” states where the old working class has been voting Republican. Guns, abortion, and race are part of the explanation. But don’t overlook economic anxieties that translate into a willingness to vote for whatever it is that industry wants.
This may explain why Republican officials who have been casting their votes against unions, against expanding Medicaid, against raising the minimum wage, against extended unemployment insurance, and against jobs bills that would put people to work, continue to be elected and re-elected. They obviously have the support of corporate patrons who want to keep unemployment high and workers insecure because a pliant working class helps their bottom lines. But they also, paradoxically, get the votes of many workers who are clinging so desperately to their jobs that they’re afraid of change and too cowed to make a ruckus.
The best bulwark against corporate irresponsibility is a strong and growing middle class. But in order to summon the political will to achieve it, we have to overcome the timidity that flows from economic desperation. It’s a diabolical chicken-and-egg conundrum at a the core of American politics today.
By: Robert Reich, The Robert Reich Blog, January 15, 2014
“Delusional Pro-Poverty Agenda”: This Is Why The GOP Should Be Afraid Of The Minimum Wage In 2014
Illinois businessman Bruce Rauner, a top candidate for the Republican nomination for governor, demonstrated this week why Democrats are eager to use the minimum wage as a political cudgel in the 2014 midterm elections.
On Tuesday, Rauner suggested reducing the state’s $8.25-per-hour minimum wage to the national level, a $1-per-hour reduction.
“I will advocate moving the Illinois minimum wage back to the national minimum wage. I think we’ve got to be competitive here in Illinois,” Rauner told Illinois Radio WGBZ.
Rauner’s stance sharply contrasts that of Governor Pat Quinn (D), who has said that he wants to raise the minimum wage to $10 per hour. But it’s not particularly controversial in the context of the Republican primary. After all, each of his rivals for the nomination — Kirk Dillard, Dan Rutherford and Bill Brady — oppose raising the wage. Still, throughout the rest of the state, the idea of cutting the already insufficient minimum wage sparked instant outrage.
As The Chicago Sun-Times reports, the backlash to Rauner’s plan was swift and severe.
“In my 26 years in the Legislature, I’ve seen many candidates roll out anti-poverty plans, but Bruce Rauner is the only candidate to roll out a pro-poverty plan,” Democratic state representative Lou Lang said.
“He’s delusional if he thinks that the General Assembly would bow to his class warfare on low-income workers. He needs to have his delusion shaken up,” Lang added. “He needs to come to grips with the fact that the era of robber barons is over, and impoverishing workers is no longer an economic growth strategy.”
Quinn spokeswoman Brooke Anderson similarly blasted Rauner, insisting that “instead of alleviating poverty, this cruel and backwards proposal would take thousands of dollars from working people who are doing some of the hardest, most difficult jobs in our society.”
And Chicago labor leader Karen Lewis took even more direct aim at Rauner, who made a fortune in private equity, charging, “It is ironic that billionaire Rauner, who reported $53 million in earnings last year, or $7.36 per second, is calling for a reduction in the state’s minimum wage.
“While he sits back and ponders where to take his next exotic vacation or which mansion to lay his head, others are trying to survive in a climate of foreclosures, rising medical costs, and the shuttering of neighborhood schools,” she added. “Instead of pledging a war on poverty he is vowing to advance a war on poor and working-class people.”
The heated response to Rauner’s proposal was stunningly successful; within days, he was apparently scared away from it.
“I made a mistake. I was flippant and I was quick,” Rauner told the Chicago Tribune on Wednesday. “I should have said, ‘Tie the Illinois minimum wage to the national wage and, in that context, with other changes in being pro-business, I support raising the national minimum wage.’ I’m OK with that.”
Rauner expanded on his new position — that after cutting the minimum wage, we should raise it — in a Tribune op-ed on Thursday, writing, “Raising the national minimum wage would raise the level in Illinois and in our neighboring states, eliminating our competitive disadvantage. I support that.”
It’s not hard to understand how Rauner went from advocating a minimum-wage cut to advocating a raise in just a few days. Polls have consistently found that Illinois voters overwhelmingly favor raising the minimum wage to $10 per hour (a recent survey from left-leaning Public Policy Polling pegged support at 58 percent). It is a very difficult political environment to be running against a measure that could lift millions out of poverty.
Increasing the minimum wage isn’t just popular in Illinois; it has broad national appeal as well. So it’s not surprising that Democrats are planning to use the issue as a centerpiece of their 2014 campaigns. And if other Republicans mirror Rauner’s apparent fear of being attacked on the issue, their strategy could prove very successful.
By: Henry Decker, The National Memo, January 9, 2014
“Right-Wing Unemployment Myths Debunked”: When You Look At The Data, It’s Just Not There
Surprising many supporters, a three-month unemployment extension bill survived an initial Senate test Tuesday, with six Republicans joining 37 Democrats in voting to let the bill proceed to debate. But GOP members in both chambers have suggested they’ll withhold or withdraw their support unless Democrats offer up conservative concessions – be they parallel budget cuts, deregulation measures, new requirements for the unemployed or an Obamacare mandate delay. Others have argued that unemployed people would be better off without unemployment benefits.
In a Sunday CNN interview, Wisconsin governor and potential presidential contender Scott Walker argued that “the federal government doesn’t require a lot” of the unemployed, and urged that rather than “just putting a check out,” Congress tie unemployment extension to tightened eligibility requirements.
“Making them jump through more hoops will definitely increase administrative costs, but it’s not going to generate more jobs,” Economic Policy Institute economist Heidi Shierholz countered in a Tuesday interview with Salon. “Unless he’s looking at it as a jobs program to hire more public sector workers.”
Shierholz, a former University of Toronto professor now at the progressive Economic Policy Institute, panned several of the right’s other diagnoses and prognoses for the unemployed. A condensed and edited version of our conversation follows.
Some of the same Republican senators whose votes were necessary for unemployment extension to move forward Tuesday are implying they could still vote against final cloture if it isn’t offset with cuts. Is insisting on budget cuts to “offset” the cost of unemployment extension good policy?
It isn’t in this context. And I say that sort of carefully. Because if we were at full employment, and the economy was humming along, and fully utilizing all its potential, then if you’re going to spend a big chunk of money, you might want to think about offsetting it, because the economy doesn’t need any more demand.
We are so far away from that situation that this is exactly the kind of time where you do not have to worry about trying to do offsets like that.
It’s not a bug of the UI system, it’s a feature that it actually costs money. Because at a time like this, when the labor market is so weak, the economy is so weak, and we know that the overwhelming factor behind that weakness is just weak demand, we’re operating way below our potential. People don’t have the income, so they’re not spending. Businesses aren’t investing as much as they would if we were in a strong labor market. Weak demand for goods and services means businesses don’t have to ramp up hiring, they don’t have to ramp up to meet the demand, because demand isn’t there.
So the fact that you’re spending this money on UI, you’re getting money into the economy, is actually exactly what we want to do at a time like this. So trying to sort of bend over backwards to offset it actually just undermines one of the key features of extending UI, which is that it increases economic activity at a time when the economy desperately needs it.
Scott Walker told CNN that “one of the biggest challenges people have who are either unemployed or underemployed is many of them don’t have the skills in advanced manufacturing, in healthcare and I.T. where many of those job openings are.” What’s your assessment of that claim?
You hear that claim made a lot: that the reason we have this weak unemployment, or high long-term unemployment, is that workers don’t have the right skills for the jobs that are available.
I think because you hear this anecdote a lot, there’s been a ton of research done on it — a ton. And economists have dug in, and looked at the data from all sides. The overwhelming consensus: People who aren’t just relying on anecdotes, but who are actually digging in and looking for any sign of a skills-mismatch in the data, don’t find it. The divide on who finds this is more those who are relying on anecdotes versus those who have looked at the data, not right-leaning or left-leaning. Because of those who have looked at the data, you just don’t find evidence that the problem right now is due to workers not having the right skills.
If it were due to workers not having the right skills you would have to see some evidence in some meaningfully sized group of workers of actually tight labor markets relative to 2007. [But] unemployment rates are higher now relative to before the recession started across every education group, across every gender, across every age group, across all racial and ethnic categories, in all major occupations, and all major industries.
If we were seeing tight labor markets, you’d see wages being bid up for the workers who can’t be found, people poaching from other companies. And that you also don’t find. You actually find basically no group that is even seeing wage growth keep pace with overall productivity growth. In any group meaningfully sized enough to be actually driving anything, you don’t see any sign of wages being driven up. Same story with hours.
You’re not seeing any sectors of meaningful size where there’s more job openings than people actually looking for those jobs.
You hear anecdotes a lot about people saying, “I just can’t find the workers that I need.” This may be some interesting sort of psychological stuff about the echo chamber of how those things get so much play at a time like this. When you look at the data, it’s just not there.
One of the senators who voted against proceeding with the unemployment bill, Jeff Sessions of Alabama, said, “First and foremost, unemployment insurance is treating the symptoms of the problem. It’s an aspirin for a fever, but the fever has been raging for weeks now.” Is that a revealing analogy in any way?
It’s treating the symptoms and it helps actually be part of the cure.
They actually are a lifeline to the people that were most hurt by the downturn — people who lost their jobs through no fault of their own, and have not been able to find another one in the period of weakest labor market we’ve seen in 70 years. The fact of the matter is that the labor market is still extraordinarily weak. It’s way weaker by far than at any time we’ve ever allowed extensions to expire.
So it definitely is part of dealing with the symptoms. And then it is absolutely part of the cure: You get money in the hands of the long-term unemployed.
Those are people who are almost by definition cash-strapped. They are going to spend that money. It goes straight into the economy and generates demand for goods and services, which generates demand for workers. So it helps strengthen the recovery.
You put out an estimate that not extending unemployment benefits would cost 310,000 jobs this year. How?
Around $25 billion would be spent if the extensions were continued [for a year]. Some spending is actually more stimulative to the economy, and it has everything to do with how fast and how completely that money goes into raising and creating demand. So unemployment benefits are consistently the second most efficient way that a government can spend money — either through direct spending or through tax cuts to support an economy, to generate economic activity. The only thing that consistently comes in ahead is food stamps.
You have that [unemployment] money spent on rent and groceries and clothes. So you increase demand for goods and services. Then there’s the fiscal multiplier. Then from there, that’s where you get the total amount of economic activity generated — the boost to GDP. And then from there, there’s a direct walk to jobs created.
It’s a rough measure. But that’s an idea of the scope.
Scott Walker also argued that instead of “just putting a check out,” the government should require more from people on unemployment, in terms of entering job training and looking more often for work. What do you make of that argument?
We do know that it’s already keeping people in the labor market, looking for work. There’s good evidence that receiving benefits actually keeps people looking for work.
A helpful bit of information, to know if the reason people are long-term unemployed is because they’re not looking hard enough, is the following: You’d want to know if our long-term unemployment situation is somehow weird, if it’s unexpected, if there’s something going on with our long-term unemployed, like they’re not looking as hard as they should, or they’re not being as flexible as they should. Like, is there something about these benefits that’s keeping them from doing those things? And that you don’t find.
So there’s a paper by Jesse Rothstein that looks very carefully at today’s long-term unemployment situation in the historical context. And he found that what we’re experiencing now is exactly what you would expect given three things: given how deep the period of economic weakness has been; how long it’s been as bad as it’s been; and then a little bit of this longer-term trend in long-term unemployment share. Which has to do with declining incidences of temporary layoff and stuff like that — but that’s not a big component.
We’re not seeing something abnormal right now in the long-term unemployment situation, except for an incredibly abnormally weak labor market that’s been incredibly abnormally weak for a very long time. Once you have that, then what’s going on with long-term unemployment is exactly what you would expect.
So it’s not like, “if we just get them to look harder, they’re going to find jobs.” The real problem, why we have this long-term unemployment crisis, is that the labor market has been so weak for so long.
So making them jump through more hoops will definitely increase administrative costs, but it’s not going to generate more jobs. Unless he’s looking at it as a jobs program to hire more public sector workers to deal with more administration. But I don’t think that was probably his angle. The real problem right now is weak demand for workers, and this won’t touch that.
The reason we have elevated unemployment is not that workers don’t have the right skills for the jobs that are available. It’s just that we don’t have jobs available. It’s not like training can never help an individual, but that’s not why we have high unemployment right now.
By: Josh Eidelson, Salon, January 8, 2014
“America’s Rich Hit The Jackpot”: The Year of the Great Redistribution
One of the worst epithets that can be leveled at a politician these days is to call him a “redistributionist.” Yet 2013 marked one of the biggest redistributions in recent American history. It was a redistribution upward, from average working people to the owners of America.
The stock market ended 2013 at an all-time high — giving stockholders their biggest annual gain in almost two decades. Most Americans didn’t share in those gains, however, because most people haven’t been able to save enough to invest in the stock market. More than two-thirds of Americans live from paycheck to paycheck.
Even if you include the value of IRA’s, most shares of stock are owned by the very wealthy. The richest 1 percent of Americans owns 35 percent of the value of American-owned shares. The richest 10 percent owns over 80 percent. So in the bull market of 2013, America’s rich hit the jackpot.
What does this have to do with redistribution? Some might argue the stock market is just a giant casino. Since it’s owned mostly by the wealthy, a rise in stock prices simply reflects a transfer of wealth from some of the rich (who cashed in their shares too early) to others of the rich (who bought shares early enough and held on to them long enough to reap the big gains).
But this neglects the fact that stock prices track corporate profits. The relationship isn’t exact, and price-earnings ratios move up and down in the short term. Yet over the slightly longer term, share prices do correlate with profits. And 2013 was a banner year for profits.
Where did those profits come from? Here’s where redistribution comes in. American corporations didn’t make most of their money from increased sales (although their foreign sales did increase). They made their big bucks mostly by reducing their costs — especially their biggest single cost: wages.
They push wages down because most workers no longer have any bargaining power when it comes to determining pay. The continuing high rate of unemployment — including a record number of long-term jobless, and a large number who have given up looking for work altogether — has allowed employers to set the terms.
For years, the bargaining power of American workers has also been eroding due to ever-more efficient means of outsourcing abroad, new computer software that can replace almost any routine job, and an ongoing shift of full-time to part-time and contract work. And unions have been decimated. In the 1950s, over a third of private-sector workers were members of labor unions. Now, fewer than 7 percent are unionized.
All this helps explain why corporate profits have been increasing throughout this recovery (they grew over 18 percent in 2013 alone) while wages have been dropping. Corporate earnings now represent the largest share of the gross domestic product — and wages the smallest share of GDP — than at any time since records have been kept.
Hence, the Great Redistribution.
Some might say this doesn’t really amount to a “redistribution” as we normally define that term, because government isn’t redistributing anything. By this view, the declining wages, higher profits, and the surging bull market simply reflect the workings of the free market.
But this overlooks the fact that government sets the rules of the game. Federal and state budgets have been cut, for example — thereby reducing overall demand and keeping unemployment higher than otherwise. Congress has repeatedly rejected tax incentives designed to encourage more hiring. States have adopted “right-to-work” laws that undercut unions. And so on.
If all this weren’t enough, the tax system is rigged in favor of the owners of wealth, and against people whose income comes from wages. Wealth is taxed at a lower rate than labor.
Capital gains, dividends, and debt all get favorable treatment in the tax code – which is why Mitt Romney, Warren Buffet, and other billionaires and multimillionaires continue to pay around 12 percent of their income in taxes each year, while most of the rest of us pay at least twice that rate.
Among the biggest winners are top executives and Wall Street traders whose year-end bonuses are tied to the stock market, and hedge-fund and private-equity managers whose special “carried interest” tax loophole allows their income to be treated as capital gains. The wild bull market of 2013 has given them all fabulous after-tax windfalls.
America has been redistributing upward for some time – after all, “trickle-down” economics turned out to be trickle up — but we outdid ourselves in 2013. At a time of record inequality and decreasing mobility, America conducted a Great Redistribution upward.
By: Robert Reich, The Robert Reich Blog, January 4, 2014
“Worsening Inequality”: 900 Rich People Won’t Pay Into Social Security For The Rest Of The Year
While almost all working Americans will pay into Social Security through their paychecks throughout the year, the 900 wealthiest people in the country won’t. That’s because the highest-earning 0.0001 percent of the U.S. — many of them corporate CEOs — made $117,000 in the first two days of the year, which is the maximum annual income that is subject to Social Security taxes under federal law.
It’s tough to say for certain who will be a part of this group in 2014, since the most recent available data on Americans’ earnings is from 2012. In that year, 894 individuals nationwide made enough to qualify for membership in this club, according to the Los Angeles Times. Economist Teresa Ghilarducci came up with the calculation, and points out that Forbes data on top earners enables analysts and the public to see some of the members of this group. There were nearly 70 corporate CEOs who made enough to qualify in 2012, including the top officers at companies like Philip Morris, NewsCorp, Starbucks, ComCast, and Pfizer.
They get to live the year free from Social Security taxes because the law says that only the first $117,000 earned in a year can be taxed to fund the retirement program that kept more than 15 million people out of poverty in 2011. Democrats have pushed to raise the cap in recent years from $106,800 in 2009 to the current level. Eliminating the cap entirely could make the program solvent for the next 75 years without cutting a dime from anyone’s benefits — and doing so wouldn’t touch the earnings of 94.2 percent of all American workers.
Despite that option, most of the debates around Social Security in recent years have focused on cutting the program rather than increasing its revenue stream. Yet Americans are facing a retirement crisis. Companies’ shifts from pensions to investment plans for retirees has undermined the financial security of working people while enriching the financial services industry and worsening inequality. For non-white workers who are far less likely to have access to even those paltry 401(k) plans, the picture is even bleaker. Overall more than half of all Americans are projected to see a steep drop in their standard of living upon retirement. There is a $6.6 trillion gap between what working Americans have saved and what they ought to have saved to retire well.
In the face of all of this, Sen. Elizabeth Warren (D-MA) and others have proposed increasing Social Security benefits rather than cutting them.
By: Alan Pyke, Think Progress, January 3, 2014
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