Category Archives: Compensation

Trump’s tax cuts have so far failed to deliver on one key promise

Source: Pedro Nicolaci da Costa, Business Insider, August 3, 2018

– The Trump tax cuts were pitched as a boon to US workers, with the administration arguing their benefits would trickle-down into rising wages.
– While the tax cuts have meant some Americans are keeping more of their paychecks, no discernible gains in wages have materialized thus far.
– Real average hourly earnings (adjusted for inflation) for all employees on private nonfarm payrolls were totally unchanged in June from one year earlier.

Related:
GDP Is Growing, but Workers’ Wages Aren’t
Source: Michael Madowitz and Seth Hanlon, Center for American Progress, July 26, 2018

President Donald Trump recently said that the U.S. economy is “stronger than ever before” and points to his tax plan as one of the major reasons why.1 But the fact is that workers are not getting ahead in the Trump economy. Official data released in recent weeks have shown that workers’ wages are flat or even slightly down, in real terms, over the last year.2 These data fly in the face of many tax plan boosters who have claimed that the bill’s passage has already been a boon to middle-class workers….

Explaining the Wage Growth Mystery

Source: Adam Ozimek, Regional Financial Review, June 2018
(subscription required)

A wage “mystery” has puzzled economics commentators for several years: If unemployment is so low, why has wage growth not picked up? There is no puzzle when the right measures are used. The problem with how wages are measured is that the most commonly used measure is biased over the business cycle. The problem with how labor slack is measured is that the magnitude and depth of the Great Recession led many workers who could and would work again to exit the labor force entirely. Many workers were no longer being counted as unemployed, making the unemployment rate a poor gauge of labor market slack.

Curbing Stock Buybacks: A Crucial Step to Raising Worker Pay and Reducing Inequality — An Analysis of Three Industries — Restaurant, Retail, and Food Manufacturing

Source: Irene Tung and Katy Milani, National Employment Law Project (NELP) and the Roosevelt Institute, July 2018

From the summary:
In a joint publication of the National Employment Law Project (NELP) and the Roosevelt Institute, Irene Tung and Katy Milani expose the extent of stock buyback spending across the U.S. economy from 2015 to 2017—finding that companies spent almost 60 percent of net profits on buybacks. At a time of growing economic inequality, with millions of workers in low-wage industries struggling to make ends meet, that is money that corporations could instead use to improve worker pay.

This report is a crucial addition to any effort to address today’s high-profit, low-wage economy, in which corporate executives and shareholders extract value from corporations rather than creating a cycle of continuous productivity growth, through which workers, consumers, and the economy at large benefit.

One of the primary strategies used to extract profits up and out of companies is the stock buyback—a practice in which corporations repurchase their own stocks from the open market to artificially drive up share prices. Stock buybacks greatly benefit corporate executives, but they leave companies with fewer resources available to invest in workers, business expansion, and long-term economic growth.

By highlighting three core industries—restaurant, retail, and food manufacturing, in which millions of our nation’s workers struggle to make ends meet in low-wage, economically insecure jobs—Tung and Milani demonstrate how workers, and thus the economy at large, could benefit if CEOs chose to redirect money spent on stock buybacks toward worker compensation.

Key findings from the report include:
– The restaurant industry spent more on stock buybacks than it made in profits, funding buybacks through debt and cash reserves. Buybacks totaled 136.5 percent of net profits.
– Companies in the retail and food manufacturing industries spent 79.2 percent and 58.2 percent, respectively, of their net profits on share buybacks.
– McDonald’s could pay all of its 1.9 million workers almost $4,000 more a year if the company redirected the money it spends on buybacks to workers’ paychecks instead.
– If Starbucks reallocated money from share repurchases to compensation, every worker could get a $7,000 raise.
– With the money currently spent on buybacks, Lowes, CVS, and Home Depot could give each of their workers raises of at least $18,000 a year.

Relate:Are Stock Buybacks Starving the Economy?
Source: Annie Lowrey, The Atlantic, July 31, 2018

A new report finds that big companies could have given their workers thousands of dollars’ worth of raises with the money they spent on their own shares.

The Shifting Supply and Demand of Care Work: The Growing Role of People of Color and Immigrants

Source: Heidi Hartmann, Jeff Hayes, Rebecca Huber, Kelly Rolfes-Haase, Jooyeoun Suh, Institute for Women’s Policy Research, IWPR #C470, June 2018

From the summary:
As the Baby Boom generation matures and current unmet child care needs remain constant, the United States faces a burgeoning crisis in the demand for care workers. The market has slowly but surely begun to adapt, seeing an overall growth of 19 percent in the number of care workers between 2005 and 2015, with most of that growth in adult care. The U.S. Department of Labor suggests that this will only grow further, projecting that the economy will add more than 1.6 million jobs in occupations related to adult care by 2024 (Rolen 2017).

This report analyzes changing demographics and trends in earnings for two occupational groups, child care and adult care workers. Findings from the analysis show that:

—-While Still Largely Female, White, and US-Born, the Care Workforce Is Increasingly Adding More Men, Women of Color, and Foreign Born ….
—-Female Care Workers Are More Educated Than in 2005, Yet Face High Poverty Rates ….
—-Despite Gains in Human Capital and Growing Demand, Wages for Care Workers Are Stagnant or Declining ….

Worker wages drop while companies spend billions to boost stocks

Source: Irina Ivanova, Moneywatch, July 11, 2018

Six months after the Tax Cut and Jobs Act became law, there’s still little evidence that the average job holder is feeling the benefit.

Worker pay in the second quarter dropped nearly one percent below its first-quarter level, according to the PayScale Index, one measure of worker pay. When accounting for inflation, the drop is even steeper. Year-over-year, rising prices have eaten up still-modest pay gains for many workers, with the result that real wages fell 1.4 percent from the prior year, according to PayScale. The drop was broad, with 80 percent of industries and two-thirds of metro areas affected. ….

…. Businesses are spending nearly $700 billion on repurchasing their own stock so far this year, according to research from TrimTabs. Corporations set a record in Q2, announcing $433 billion worth of buybacks — nearly doubling the previous record, which was set in Q1. ….

The Apprenticeship Wage and Participation Gap

Source: Angela Hanks, Annie McGrew, and Daniella Zessoules, Center for American Progress, July 11, 2018

From the introduction:
In recent years, U.S. apprenticeship programs have become popular among politicians, workforce advocates, workers, and employers—and it’s easy to understand why. According to the U.S. Department of Labor (DOL), people who complete an apprenticeship program can expect to earn an average annual income of approximately $60,000—slightly above the 2016 U.S. national median household income.

Yet, too little is known about racial and gender representation in these programs. Apprenticeship—which combines on-the-job training with classroom instruction—tends to be dominated by the building and construction trades. This suggests that these programs, like the construction workforce more broadly, are disproportionately male. Indeed, men make up the overwhelming majority of those who participate in apprenticeship programs in the United States. According to the DOL’s own analysis, women made up less than 7 percent of all apprentices in 2013—even though they made up 47 percent of the labor force during the same year.

The analysis in this issue brief examines apprenticeship programs over the past decade—from fiscal year 2008 through 2017—to observe gaps in participation and wages among women and people of color. In general, it finds that women remain deeply underrepresented in apprenticeship programs and that wages among women and black or African American apprentices are much lower than those of other apprentices. Even though these programs are intended and have the potential to develop the U.S. workforce, increase earnings, and prepare workers for the jobs of the future, their current gender and racial compositions tell a different story; more work must be done to make it a reality.

The new wave of equality legislation: States move to create pay parity by banning inquiries into candidate’s prior salary history

Source: Anne Cherry Barnett, Employment Relations Today, Early View, First published: April 25 2018
(subscription required)

From the abstract:
State‐by‐state survey on current laws prohibiting employers from inquiring into job candidate’s prior salary history.

New Study Confirms That American Workers Are Getting Ripped Off

Source: Eric Levitz, New York Magazine, July 6, 2018

…. Economists have put forward a variety of explanations for the aberrant absence of wage growth in the middle of a recovery: Automation is slowly (but irrevocably) reducing the market-value of most workers’ skills; a lack of innovation has slowed productivity growth to a crawl; well-paid baby-boomers are retiring, and being replaced with millennials who have enough experience to do the boomers’ jobs — but not enough to demand their salaries.

There’s likely some truth to these narratives.

But a new report from the Organization for Economic Cooperation and Development (OECD) offers a more straightforward — and political — explanation: American policymakers have chosen to design an economic system that leaves workers desperate and disempowered, for the sake of directing a higher share of economic growth to bosses and shareholders.

The OECD doesn’t make this argument explicitly. But its report lays waste to the idea that the plight of the American worker can be chalked up to impersonal economic forces, instead of concrete political decisions. If the former were the case, then American laborers wouldn’t be getting a drastically worse deal than their peers in other developed nations. But we are. Here’s a quick rundown of the various ways that American workers are getting ripped off:

American workers are more likely to be poor (by the standards of their nation). ….
We also get fired more often — and with far less notice. ….
Our government does less for us when we’re out of work than just about anyone else’s. ….
Labor’s share of income has been falling faster in the U.S. than almost anywhere else. ….

OECD Employment Outlook 2018

Source: Organisation for Economic Co-operation and Development, July 4, 2018

The 2018 edition of the OECD Employment Outlook reviews labour market trends and prospects in OECD countries. Chapter 1 presents recent labour market developments. Wage growth remains sluggish due to low inflation expectations, weak productivity growth and adverse trends in low-pay jobs. Chapter 2 looks at the decline of the labour share and shows that this is partially related to the emergence of “superstar” firms, which invest massively in capital-intensive technologies. Chapter 3 investigates the role of collective bargaining institutions for labour market performance. Systems that co-ordinate wages across sectors are associated with better employment outcomes, but firm-level adjustments of sector-level agreements are sometimes required to avoid adverse effects on productivity. Chapter 4 examines the role of policy to facilitate the transition towards new jobs of workers who were dismissed for economic reasons, underlying the need of early interventions in the unemployment spell. Chapter 5 analyses jobseekers’ access to unemployment benefits and shows that most jobseekers do not receive unemployment benefits and coverage has often been falling since the Great Recession. Chapter 6 investigates the reason why the gender gap in labour income increases over the working life, stressing the role of the lower professional mobility of women around childbirth.

Related:
Press release

WEBINARS

Collective bargaining
Collective bargaining systems are at a crossroads in many OECD countries. In this webinar, we will assess the role that collective bargaining systems play for employment, wages, working conditions, wage inequality and productivity (chapter 3 of the publication). We will also discuss what policy-makers, unions and employers’ organisations can do to adapt their national bargaining systems to the challenges of a changing world of work.

The decline in wage growth
10 years after the beginning of the crisis, there are finally more people with a job than before. Yet, wage growth remains considerably below pre-crisis trends. In this webinar, we will address factors behind the persistent wage growth slowdown (chapter 1 of the publication). While low inflation and productivity growth explain much of these patterns, the dynamics of low-pay jobs and the wages associated to them also play a significant, but understudied, role.

KEY COUNTRY FINDINGS
United States

The Case For More Labor Unions Is The Most Obvious Case You Can Possibly Imagine
Source: Hamilton Nolan, splinter, July 5, 2018

….The Organization for Economic Cooperation and Development’s new annual Employment Outlook report is a particularly useful tool for gauging how the United States measures up to the rest of the developed world in terms of economic policies and outcomes. In this context, we have a lot of work to do: “The low-income rate in the U.S. [defined as the share of the working-age population living with less than 50% of median household disposable income] is one of the highest in the OECD,” the report says. “The rate in the U.S. is 14.8% compared to an OECD average of 10.6%. The lowest rate is found in the Czech Republic at just 5.8%.”….

Is it great to be a worker in the U.S.? Not compared with the rest of the developed world.
Source: Andrew Van Dam, Washington Post, Wonkblog, July 4, 2018

The U.S. labor market is hot. Unemployment is at 3.8 percent, a level it’s hit only once since the 1960s, and many industries report deep labor shortages. Old theories of what’s wrong with the labor market — such as a lack of people with necessary skills — are dying fast. Earnings are beginning to pick up, and the Federal Reserve envisions a steady regimen of rate hikes.

So why does a large subset of workers continue to feel left behind? We can find some clues in a new 296-page report from the Organization for Economic Cooperation and Development (OECD), a club of advanced and advancing nations that has long been a top source for international economic data and research. Most of the figures are from 2016 or before, but they reflect underlying features of the economies analyzed that continue today.

In particular, the report shows the United States’s unemployed and at-risk workers are getting very little support from the government, and their employed peers are set back by a particularly weak collective-bargaining system…..

The Union Advantage for Women

Source: Elyse Shaw, Julie Anderson, Institute for Women’s Policy Research, C463, February 2018

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.