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How Low Can We Go? State Unemployment Insurance Programs Exclude Record Numbers of Jobless Workers

March 10, 2015 Comments off

How Low Can We Go? State Unemployment Insurance Programs Exclude Record Numbers of Jobless Workers
Source: Economic Policy Institute

The Great Recession and its aftermath created severe challenges for unemployment insurance (UI) programs in the United States and for jobless workers relying upon them. In this briefing paper, we show that state UI programs are failing their critical goals of income replacement and supporting economic growth. The proportion of jobless workers receiving benefits from state programs, referred to as the UI recipiency rate, fell to 23.1 percent in December 2014—below the pre-Great Recession record low of 25.0 percent in September 1984.

Wage Stagnation in Nine Charts

February 26, 2015 Comments off

Wage Stagnation in Nine Charts
Source: Economic Policy Institute

Our country has suffered from rising income inequality and chronically slow growth in the living standards of low- and moderate-income Americans. This disappointing living-standards growth—which was in fact caused by rising income inequality—preceded the Great Recession and continues to this day. Fortunately, income inequality and middle-class living standards are now squarely on the political agenda. But despite their increasing salience, these issues are too often discussed in abstract terms. Ignored is the easy-to-understand root of rising income inequality, slow living-standards growth, and a host of other key economic challenges: the near stagnation of hourly wage growth for the vast majority of American workers over the past generation. Countering that by generating broad-based wage growth is our core economic policy challenge.

With a group of simple charts, this paper brings the challenge we face into sharp focus, and lends clarity to the steps we must take to meet it.

The Increasingly Unequal States of America: Income Inequality by State, 1917 to 2012

January 27, 2015 Comments off

The Increasingly Unequal States of America: Income Inequality by State, 1917 to 2012
Source: Economic Policy Institute

Economic inequality is, at long last, commanding attention from policymakers, the media, and everyday citizens. There is growing recognition that we need an inclusive economy that works for everyone—not just for those at the top.

While there are plentiful data examining the fortunes of the top 1 percent at the national level, this report uses the latest available data to examine how the top 1 percent in each state have fared over 1917–2012, with an emphasis on trends over 1928–2012 (data for additional percentiles spanning 1917–2012 are available at go.epi.org/topincomes1917to2012). In so doing, this analysis finds that all 50 states have experienced widening income inequality in recent decades.

Teacher Pay Penalty

December 2, 2014 Comments off

Teacher Pay Penalty
Source: Economic Policy Institute

There is an increased emphasis in building a quality teacher workforce but little attention paid to the pay penalty teachers face for working in their profession.

The figure below shows that teachers earn less than other similar non-teacher college-educated workers. Teachers working in the public sector who are represented by a union earn 13.2 percent less than other comparable college graduates. The pay gap is largest for private sector teachers without union representation (-32.1 percent). Separate analyses by gender are also presented given that the overwhelming majority of teachers are women (around 72 percent)—here female teachers were only compared to female non-teacher college-educated workers, and male teachers were only compared to male non-teacher college-educated workers. Compared to female teachers, the teacher pay penalty is worse for male teachers for each of the four teacher groups. In general, teacher pay disadvantages are mitigated if teachers are employed in the public sector—and more so if they have union representation.

Raising the Federal Minimum Wage to $10.10 Would Save Safety Net Programs Billions and Help Ensure Businesses Are Doing Their Fair Share

October 17, 2014 Comments off

Raising the Federal Minimum Wage to $10.10 Would Save Safety Net Programs Billions and Help Ensure Businesses Are Doing Their Fair Share
Source: Economic Policy Institute

More than five years have passed since the federal minimum wage was raised to its current level of $7.25 per hour. Over that time, the value of a minimum-wage income has fallen nearly 10 percent due to rising prices. Yet this decline is small in comparison to the drop in value of the minimum wage over the past four decades. After rising in line with economy-wide productivity in the three decades following its inception in 1938, the federal minimum wage has been raised so inadequately and so infrequently since the late 1960s that today’s minimum-wage workers make roughly 25 percent less in inflation-adjusted terms than their counterparts 45 years ago. Indeed, a full-time, full-year minimum-wage worker with one child is paid so little that income from her paycheck alone leaves her below the federal poverty line.

This failure to adequately raise the wage floor has contributed strongly to the stagnation of wage growth at the bottom of the wage distribution. This wage stagnation has, in turn, been the single greatest impediment to making rapid progress in poverty reduction in recent decades. Indeed, all of the decline in poverty reduction in recent decades can be accounted for by safety net and income-support programs (Bivens et al. 2014). In fact, managers at some of the largest and most profitable corporations in the United States today actively encourage their employees to seek public assistance to supplement meager paychecks (Eidelson 2013). All of this has led many to conclude that American employers are too often dodging their responsibilities as partners in the social contract—the understanding that Americans who work hard should be paid enough to make ends meet. Instead, too many low-wage employers are leaving both taxpayers and, more importantly, low-wage workers themselves to pick up the slack.

Recent protests calling for higher wages at many of these companies have highlighted this widening rift between what businesses are paying and what workers need to survive. Among the protesters’ demands is that employers begin paying workers adequately, instead of relying upon public funds to give their workers a decent standard of living even as corporate profits reach record highs.

This issue brief examines the use of public assistance programs by low-wage workers and assesses how raising the federal minimum wage to $10.10 over three years—as proposed by the Fair Minimum Wage Act of 2014, a bill introduced by Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.)—could affect utilization rates, benefit amounts, and government spending on these programs.

Why America’s Workers Need Faster Wage Growth—And What We Can Do About It

September 10, 2014 Comments off

Why America’s Workers Need Faster Wage Growth—And What We Can Do About It
Source: Economic Policy Institute

The last year has been a poor one for American workers’ wages. Comparing the first half of 2014 with the first half of 2013, real (inflation-adjusted) hourly wages fell for workers in nearly every decile—even for those with a bachelor’s or advanced degree.

Of course, this is not a new story. Comparing the first half of 2014 with the first half of 2007 (the last period of reasonable labor market health before the Great Recession), hourly wages for the vast majority of American workers have been flat or falling. And even since 1979, the vast majority of American workers have seen their hourly wages stagnate or decline—even though decades of consistent gains in economy-wide productivity have provided ample room for wage growth.

The poor performance of American workers’ wages in recent decades—particularly their failure to grow at anywhere near the pace of overall productivity—is the country’s central economic challenge. Indeed, it’s hard to think of a more important economic development in recent decades. It is at the root of the large rise in overall income inequality that has attracted so much attention in recent years. A range of other economic challenges—reducing poverty, increasing mobility, and spurring a more complete recovery from the Great Recession—also rely largely on boosting hourly wage growth for the vast majority.

This paper, hand-in-hand with the overview paper (Bivens et al. 2014) for EPI’s Raising America’s Pay initiative, explains in detail why we need to raise wages in order to achieve real gains in the living standards of the vast majority of Americans. This paper begins by documenting the pronounced rise in income inequality in recent decades and then examines the implications of this rise in inequality for living standards growth for the vast majority. It then examines the link between wage growth and these wider income trends before undertaking a thorough analysis of wage trends since 1979. It concludes with an examination of the policy changes that have helped spur these wage trends by shifting bargaining power from the vast majority of workers to corporations and CEOs. The paper highlights an underappreciated subset of these policies: changes in labor market policies and business practices.

Twenty-Three Years and Still Waiting for Change — Why It’s Time to Give Tipped Workers the Regular Minimum Wage

July 15, 2014 Comments off

Twenty-Three Years and Still Waiting for Change — Why It’s Time to Give Tipped Workers the Regular Minimum Wage
Source: Economic Policy Institute

Last year marked the 75th anniversary of the Fair Labor Standards Act (FLSA), the legislation that established many of the basic labor protections workers enjoy today, such as a 40-hour workweek, overtime protection, and a national minimum wage. There have been periodic amendments to the FLSA over the years, but the 1966 amendments were especially significant. They extended protections to hotel, restaurant, and other service workers who had previously been excluded from the FLSA, but also introduced a new “subminimum wage” for workers who customarily and regularly receive tips. Unlike temporary subminimum wages (such as those for students, youths, and workers in training), the “tip credit” provision afforded to employers uniquely established a permanent sub-wage for tipped workers, under the assumption that these workers’ tips, when added to the sub-wage, would ensure that these workers’ hourly earnings were at least equal to the regular minimum wage. The creation of the tip credit—the difference, paid for by customers’ tips, between the regular minimum wage and the sub-wage for tipped workers—fundamentally changed the practice of tipping. Whereas tips had once been simply a token of gratitude from the served to the server, they became, at least in part, a subsidy from consumers to the employers of tipped workers. In other words, part of the employer wage bill is now paid by customers via their tips.

Today, this two-tiered wage system continues to exist, yet the subsidy to employers provided by customers in restaurants, salons, casinos, and other businesses that employ tipped workers is larger than it has ever been. At the federal level, it currently stands at $5.12 per hour, as employers are required to pay their tipped staff a “tipped minimum wage” of only $2.13 per hour, and the federal regular minimum wage is currently $7.252 Remarkably, the federal tipped minimum wage has been stuck at $2.13 since 1991—a 23-year stretch, over which time inflation has lowered the purchasing power of the federal tipped minimum wage to its lowest point ever.

Proposed federal minimum-wage legislation, the Fair Minimum Wage Act of 2014—also known as the Harkin–Miller bill—would not only increase the federal regular minimum wage to $10.10, but for the first time in decades would also reconnect the subminimum wage for tipped workers back to the regular minimum wage by requiring the former be equal to 70 percent of the latter. This would be a strong step in the right direction; however, we present evidence that tipped workers would be better off still if we simply eliminated the tipped minimum wage, and paid these workers the full regular minimum wage.

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