…. It is time for the U.S. to join the rest of the developed world in providing paid parental leave. Politicians on both sides of the aisle are finally starting to recognize that the current system places American parents in an impossible position. None of them would provide what I think is adequate: six months of paid leave per parent. (Six months is the recommendation of the president of the American Academy of Pediatrics as well.) ….
Since it was first announced on June 15, 2012, the Deferred Action for Childhood Arrivals (DACA) policy has provided work authorization as well as temporary relief from deportation to approximately 822,000 undocumented young people across the United States.
From July 16 to August 7, 2018, Tom K. Wong of the University of California, San Diego; United We Dream; the National Immigration Law Center; and the Center for American Progress fielded a national survey to further analyze the experiences of DACA recipients. The study includes 1,050 DACA recipients in 41 states as well as the District of Columbia.
This research, as with previous surveys, shows that DACA recipients are making significant contributions to the economy and their communities. In all, 96 percent of respondents are currently employed or enrolled in school.
….Several years of data, including this 2018 survey, make clear that DACA is having a positive and significant effect on wages. The average hourly wage of respondents increased by 78 percent since receiving DACA, from $10.32 per hour to $18.42 per hour. Among respondents 25 years and older, the average hourly wage increased by 97 percent since receiving DACA. These higher wages are not only important for recipients and their families but also for tax revenues and economic growth at the local, state, and federal levels…..
Source: John G. Kilgour, Compensation & Benefits Review, OnlineFirst, Published August 7, 2018
From the abstract:
With 70% of recent hires being encumbered with student-loan debt, employers and employees have recently become interested in repayment assistance benefits. Since about 2015, 4% of employers and 8% of large employers have adopted such plans. An estimated 20% will have them by 2018. This article examines the background, growth and magnitude of federal and private student loans. It also examines those programs that have been adopted and gleans from them a number of questions that will help in the design and implementation of new programs by employers.
Source: Lori Welding Jones, Employee Relations Law Journal, Vol. 44, No. 1, Summer 2018
On February 6, 2018, the Subcommittee on Primary Health and Retirement Security of the U.S. Senate Committee on Health, Education, Labor and Pensions held a hearing on “Exploring the ‘Gig Economy’ and the Future of Retirement Savings.” Although the title would suggest a focus on gig workers only, some of the testimony addressed the retirement security of a broader group of individuals engaged in alternative work arrangements, i.e., all workers employed other than as common law employees.
Source: Mark E. Bokert and Alan Hahn, Employee Relations Law Journal, Vol. 44, No. 1, Summer 2018
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017 (TCJA), which significantly amends the Internal Revenue Code of 1986 (Code). While the main focus of the TCJA may be on lowering corporate and individual tax rates, the TCJA also includes meaningful changes in the area of employee benefits and executive compensation, including changes to the Patient Protection and Affordable Care Act (ACA), the tax treatment of how public companies and tax-exempt organizations pay their executives, and the tax treatment of various fringe benefits. Among the changes in the benefits and compensation arena, the TCJA effectively repeals the ACA individual mandate by reducing the individual mandate penalty to zero, effective as of January 1, 2019; prohibits public companies from deducting certain performance-based compensation paid to their top executives; and provides that nonprofit organizations are subject to excise taxes for certain compensation packages paid to their highest paid employees.
Some expected changes impacting benefits and compensation never came to fruition. For example, while some earlier drafts of the TCJA included a repeal of Section 409A of the Code and the expansion of Health Savings Accounts (HSAs), the final law does not include any meaningful changes in these areas.
This column provides an overview of some of the changes enacted by the TCJA that impact the employer-employee relationship. Employers will want to work with their legal counsel to understand the nuances of the TCJA to determine whether any of their employee benefits plans or executive compensation arrangements should be amended in light of the TCJA and whether they should consider revising benefit packages offered to their employees.
Source: Yimeng Yin -The Nelson A. Rockefeller Institute of Government, Don Boyd – Center for Policy Research, The Rockefeller College, University at Albany, July 11, 2018, Paper prepared for: Brookings Municipal Finance Conference July 17, 2018
…. Research suggests that the real world differs from these assumptions, in some ways that mean the assumptions may understate risks, and in other ways that mean the assumptions may overstate risks. Investment returns may not be normally distributed and may not be independent over time. Perhaps more important, investment returns and tax revenue may be correlated: a poor economy may cause investment returns to fall short of expectations, and may also cause tax revenue to fall short. The resulting increase in required employer contributions may cause additional fiscal pressure if increases come when tax revenue is low.
We address these issues, focusing on the correlation between tax revenue and the economy, by building a small macroeconomic model that can generate internally consistent stochastic scenarios of growth in real gross domestic product (GDP) and returns from stock and bond investments. ….
Note: This paper will be presented at the 2018 Municipal Finance Conference on July 16 & 17, 2018.
State governments with large unfunded pension liabilities are paying more to borrow from capital markets than are other states, according to Chuck Boyer of the University of Chicago Booth School of Business.
In the paper, “Public pensions, political economy and state government borrowing costs,” to be presented at the 2018 Municipal Finance Conference at Brookings this week, Boyer argues that markets view states with large pension deficits as riskier investments. His evidence suggests that states are already paying for municipal government’s unfunded pension liabilities in the form of higher borrowing costs. He asks two questions: 1) how are state governments’ borrowing costs affected by unfunded pension obligations? and 2) do states with political constraints face higher borrowing costs?
Boyer constructs a panel dataset using each state’s Comprehensive Annual Financial Reports for the period 2005 to 2016. He focuses on balance sheet variables—revenues, expenses, assets, and liabilities—to capture a state’s financial health and credit default swap (CDS) spreads – the premium paid to protect buyers from an issuer defaulting – to measure borrowing cost. The author reasons that CDS reflects market sentiments better than market yields because CDS are more liquid, and because they are standardized, whereas market yields may be affected by additional features of a particular bond.
Public pensions, political economy and state government borrowing costs
Source: Chuck Boyer, University of Chicago Booth School of Business, current draft: July 11, 2018
I find that public pension funding status has a robust and statistically significant relationship with state borrowing costs, as measured by credit default swap spreads. A one standard deviation increase in the net pension liability to GDP ratio is related to an 18 basis point increase in CDS spreads. This effect is most pronounced among states with constitutional protection for pension liabilities, suggesting the markets perceive these legal protections as material. I also find suggestive evidence that states with more powerful unions pay higher borrowing costs. Results are robust to using spreads from the underlying bonds themselves. These findings highlight the fact that states are already paying for potential future pension problems through higher borrowing costs.
Related: presentation slides
When Needed Public Pension Reforms Fail or Appear to Be Legally Impossible, What Then? Are Unbalanced Budgets, Deficits and Government Collapse the Only Answer?
Source: James E. Spiotto, Chapman Strategic Advisors, May 30, 2018
The problem of underfunded public pensions confronts a number of states and local governments in the United States. In the past, numerous public employers in the United States have agreed to pension benefits that now appear challenging to afford given current revenues and the increased cost of providing governmental services. Further, this challenge has been exacerbated by past failures to set aside sufficient moneys to meet the pension benefits obligations incurred to date. All of this is occurring on the heels of the Great Recession of 2007, followed by an anemic recovery, and at a time many states and local governments are faced with an aging infrastructure that must be attended to and increased demands for basic public services (sanitation, water, streets, schools, food inspection, fire department, police, ambulance, health and transportation) that must be met. Because the public pension underfunding problem pits the requirement of meeting pension obligations against the need to provide for essential public services, all citizens have an interest in the fair and equitable solution to the dilemma.
Unfortunately, a just and effective method of resolving unaffordable public pension obligations has been elusive for some public governmental employers and employees. This is due in part to promised pension benefits costs exceeding the government’s ability to pay and the failure to fund promptly the incurred obligations. In some cases, solving the problem has been complicated by the lack of any ability to adjust or modify pension benefits to those that are sustainable and affordable to the fullest extent possible without adversely affecting the funding of essential public services. This paper will provide a review of some legal and practical obstacles that have been making needed pension reform and balancing the budget difficult, if not impossible, and will suggest possible new approaches to the problem that have not yet been tried. …..
Related: presentation slides
From the press release:
….The takeaway? Almost all employees (94%) want their employers to ensure the benefits offered have a meaningful impact on their quality of life, like paying off student loan debt and offering more flexible work arrangements. But before employers attempt a benefits overhaul, they should perhaps focus on better education and communication about their existing benefits. Just under half (48%) of employees report knowing all the perks their employers offer, and only 40 percent say their employers help them understand the benefits that are available…..
Benefits can be an even stronger incentive than salary when considering a job offer, and an unattractive benefits package may drive candidates away.
– Sixty-six percent of workers agree that a strong benefits and perks package is the largest determining factor when considering job offers, and 61 percent would be willing to accept a lower salary if a company offered a great benefits package.
– Forty-two percent of employees say they are considering leaving their current jobs because their benefits packages are inadequate.
– Fifty-five percent have left jobs in the past because they found better benefits or perks elsewhere.
Both benefits and perks matter
When evaluating benefits, quality health insurance reigns supreme. But when it comes to perks, the survey findings indicate that workers want to maximize their time spent at work and appreciate conveniences that help them get the most out of their days.
– When considering a potential employers’ benefits (defined in the study as “standard forms of compensation paid by employers to employees over and above salary”), workers prioritize health insurance (75%), followed by retirement funds and/or pensions (21%).
– Highly rated perks (defined in the study as “workplace-related extras”), that workers want to see more of in the workplace are:
– early Friday releases (33%)
– flexibility and remote working (26%)
– onsite lifestyle amenities, like gyms and dry cleaning (23%)
– unlimited vacation time (22%)
– in-office meal options, like communal snacks or food courts (18%)
– onsite childcare (15%)
When it comes to benefits and perks, one size does not fit all
Age, income level and gender all play a role in the benefits that employees prioritize:
– Forty-one percent of respondents aged 18 to 24 said their current employers do not offer student loan repayment benefits, but wish they did.
– Workers aged 50+ named health insurance as the top benefit they wish their employers offered.
– Nearly a third (28%) of respondents who earn more than $150,000 annually say bonuses are one of the most important perks when considering new employment.
– More women than men want better parental leave policies (women: 22% vs. men: 14%) and onsite childcare (women: 15% vs. men: 6%).
– More men than women would like to see their employers offer life insurance (women: 15% vs. men: 23%).
Source: Benjamin J VanMetre, Daniel Simpson, Rachel Cortez, Alexandra S. Parker, Moody’s, Sector Comment, June 26, 2018
The State of Minnesota (Aa1 stable) approved legislation late last month that will change certain public pension benefits and modestly increase plan contributions by government employers and employees. The changes are credit positive for the state and its local governments because they will reduce unfunded pension liabilities and improve plan funding. Even after the changes, however, local governments across Minnesota, particularly school districts, will continue to face high pension burdens….
From the summary:
Labor unions deserve credit for many of the workplace policies that Americans now take for granted—a 40-hour work week, a minimum wage, pay for overtime, and protections from health and safety hazards—and the labor movement continues to champion state and local policies such as paid sick days and paid family leave, policies that are beneficial to all working women and families. Because hiring, pay, and promotion criteria and decisions are more transparent for union members, gender and racial bias is minimized. Women, and especially women of color, who are either affiliated with a union or whose job is covered by a union contract, earn higher wages and are much more likely to have employer-provided health insurance than women who are not in unions.
Among women working full-time, those in unions have median weekly earnings of $942, compared with $723 for non-union workers, an increase of $219, or 30 percent (Figure 1). For all of the major racial and ethnic groups of women, median earnings are higher when comparing full-time workers in unions with full-time non-union workers. The earnings advantage is largest for Hispanic women. Non-union Hispanic women have the lowest earnings of any racial/ethnic group of women, $565 weekly, but Hispanic women in unions earn $264 more weekly, a 47 percent increase, than those who are not.