Category Archives: Compensation

How CBO Estimates the Effects of the Affordable Care Act on the Labor Market

Source: Edward Harris, Shannon Mok, Congressional Budget Office, Working Paper Series, Working Paper 2015-09, December 2015

From the abstract:
The Affordable Care Act (ACA) will make the labor supply, measured as the total compensation paid to workers, 0.86 percent smaller in 2025 than it would have been in the absence of that law, the Congressional Budget Office estimates. Three quarters of that decline will occur because of health insurance expansions, which raise effective tax rates on earnings from labor—for instance, by phasing out health insurance subsidies as people’s income rises—and thus reduce the amount of labor that workers choose to supply. The labor force is projected to be about 2 million full-time-equivalent workers smaller in 2025 under the ACA than it would have been otherwise. Those estimates were based mainly on CBO’s calculations of the effects of the law’s major components on marginal and average tax rates and on the agency’sanalysis of research about the change in the labor supply resulting from a change in tax rates. For components of the law that were difficult to express in terms of changes in tax rates, CBO based its estimates on a review of the available literature about similar policy changes.

Turnover among Community Mental Health Workers in Ohio

Source: Ashley M. Bukach, Farida K. Ejaz, Nicole Dawson, Robert J. Gitter, Administration and Policy in Mental Health and Mental Health Services Research, First online: 11 December 2015
(subscription required)

From the abstract:
This study examined turnover of community mental health workers in 42 randomly selected mental health agencies in Ohio. The turnover rate in 2011 was 26 %. A regression analysis indicated that agencies with lower turnover offered higher maximum pay and were smaller in size, while those offering career advancement opportunities, such as career ladder programs, had higher turnover. The findings suggest that improving wages for workers is likely to reduce turnover. It is also possible that smaller agencies have lower turnover due to stronger relationships with workers and/or more successful hiring practices. Furthermore, turnover that occurs as a result of career advancement could have positive effects and should be examined separate from other types of turnover in the future.

Benefits, retirement and savings make up larger percentage of government employee compensation

Source: U.S. Department of Labor, Bureau of Labor Statistics, The Economics Daily, December 16, 2015

Over the last 10 years, state and local government employer costs for employee benefits have increased as a share of total compensation. This can be mostly attributed to increases in retirement and savings, specifically defined benefit plans. Retirement and savings as a share of total compensation increased from 6.6 percent in March 2005 to 10.4 percent in September 2015.

Walking the Line: Navigating Market and Gift Economies of Care in a Consumer-Directed Home-Based Care Program for Older Adults

Source: Jacqueline M. Torres, Kathryn G. Kietzman, and Steven P. Wallace, Milbank Quarterly, Vol. 93, No. 4, December 2015

From the abstract:
Paid caregivers of low-income older adults navigate their role at what Hochschild calls the “market frontier”: the fuzzy line between the “world of the market,” in which services are exchanged for monetary compensation, and the “world of the gift,” in which caregiving is uncompensated and motivated by emotional attachment. We examine how political and economic forces, including the reduction of long-term services and supports, shape the practice of “walking the line” among caregivers of older adults.
Findings: Related and nonrelated caregivers are often expected to “gift” hours of care above and beyond what is compensated by formal services. Cuts in formal services and lapses in pay push caregivers to further “walk the line” between market and gift economies of care. Both related and nonrelated caregivers who choose to stay on and provide more care without pay often face adverse economic and health consequences. Some, including related caregivers, opt out of caregiving altogether. While some consumers expect that caregivers would be willing to “walk the line” in order to meet their needs, most expressed sympathy for them and tried to alter their schedules or go without care in order to limit the caregivers’ burden.
Conclusions: Given economic and health constraints, caregivers cannot always compensate for cuts in formal supports by providing uncompensated time and resources. Similarly, low-income older adults are not competitive in the caregiving marketplace and, given the inadequacy of compensated hours, often depend on unpaid care. Policies that restrict formal long-term services and supports thus leave the needs of both caregivers and consumers unmet.

Nursing Home Jobs That Pay

Source: Stephen Herzenberg, Keystone Research Center, November 2015

From the press release:
Despite generating $407 million in profit in 2014, up from $370 million the year before, Pennsylvania’s nursing home industry employs nearly 15,000 workers who must rely on public assistance to make ends meet, a new study by the Keystone Research Center found. This number represents nearly one in six nursing home workers. Fifty-two percent of Pennsylvania nursing home workers surveyed said they cannot support their families on the wages they earn.

Nursing Home Jobs That Pay, released today, updates an earlier KRC report from April on the industry and reveals the full extent of public subsidy – estimated to cost taxpayers $118 million a year – that nursing homes receive because their low-wage employees must depend on the Supplemental Nutritional Assistance Program, Medicaid, or both. The report finds that raising nursing home starting wages to $15 per hour would put more than $300 million in the family budgets of low-wage workers and estimates how much of this income increase, as well as the boost in state and local tax revenue, would go to each of Pennsylvania’s 67 counties.
Related:
Summary

Wisconsin, Unions, and the Middle Class

Source: Brendan Duke and Alex Rowell, Center for American Progress, November 10, 2015

Since 2005, real median household income has fallen 7.9 percent in Wisconsin—a far sharper decline than what has been seen across the border in Minnesota or nationwide. The biggest reason why middle-class incomes have not grown in recent years is that wages in the state have remained stagnant; the Wisconsin median wage has grown by a scant 12 cents since 2005.

Economists point to several reasons for stagnant wages nationally, including globalization and increased automation. But there is a growing consensus that the decline of labor unions has been a key contributor to slow middle class wage growth and inequality over the last 40 years. Studies estimate that as much as 30 percent of the increase in wage inequality among male workers over roughly the same period is the result of declining unionization…..

Rating State Government Payroll Cards: Thumbs Up for Cash Access; Thumbs Down on Overdraft Fees

Source: Lauren Saunders, National Consumer Law Center, November 2015

Employers are increasingly eliminating paper paychecks and using payroll cards to pay workers who do not have direct deposit. In 2015, more employees are expected to receive payroll cards than paychecks. Payroll cards can be a safer, faster, more convenient, and cheaper way to receive wages than a paper paycheck. However, payroll cards that are loaded with fees can chip away at thin wages.

This report surveys the payroll cards used by state governments to pay their own employees. Nineteen states currently have active payroll card programs. Each of these states uses payroll cards appropriately: as a second choice pay method, with the vast majority of employees paid by direct deposit. Direct deposit into an account of the employee’s own choosing should always be the first choice for how to receive pay.

The fees that state employees can incur on their payroll cards vary considerably state to state. We were unable to determine the average amount of fees that state employees actually pay because not a single state asks the card issuer to provide that data. This “don’t ask, don’t tell” policy is unacceptable. The data is easily available, and states should know if a payroll card is causing low wage workers to lose their pay to fees. Judging by the fee schedules, however, we made an attempt at assessing how easy it is for workers to avoid fees.

Every state payroll card is capable of being used for free if the worker is careful. Every card allows workers to withdraw their entire wages at least once per pay period at a bank teller window, gives the worker at least one free ATM withdrawal per deposit, charges no fees for purchases, and permits some free customer service calls. But some state payroll cards make it hard to avoid fees with normal usage…

Laws Enabling Public-Sector Collective Bargaining Have Not Led to Excessive Public-Sector Pay

Source: Jeffrey Keefe, Economic Policy Institute (EPI), Briefing Paper #409, October 16, 2015

From the summary:
Unlike many other countries, when the United States enacted its private-sector labor law, the National Labor Relations Act, in 1935, it did not include public employees within the same or similar framework for collective bargaining. Not until the late 1950s and 1960s did state and local governments grapple with a labor law to govern their rapidly growing public-sector labor forces. No state or local government chose to transplant the private-sector model of collective bargaining; instead they adopted some parts of it, chose to create no bargaining framework at all, or prohibited collective bargaining. This paper describes the rapid growth of labor laws that have enabled public-sector collective bargaining, and examines the effects of various labor law frameworks on public employee wages.
• Only 2 percent of the state and local public-sector workforce in 1960 had the right to bargain collectively. By 2010, that share had grown to 63 percent.
• While early on, many policymakers were concerned about the right to strike, a number of states did eventually extend the right to strike to more than 20 percent of public employees; however, all of these employees are in non–public safety positions. Thus the right to strike has not had catastrophic results in terms of threats to public safety or welfare.
• The right to strike has also not led to massive wage increases: Employees covered by the right to strike earn about 2 percent to 5 percent more than those without it.
• Public safety employees are effectively covered by binding interest arbitration, which has prevented strikes and has resulted in cost-effective and widely accepted settlements by the participants.
• This research finds no wage effect for public employees covered by collective bargaining attributable to binding interest arbitration when compared with mediation.
• Fact-finding, the most widely employed final dispute-resolution procedure, tends to favor the public employer, resulting in significantly lower wages for public employees, in the range of 2 percent to 5 percent less than other dispute resolution procedures.

Union security provisions, which require employees to contribute to the financial support of the union that has the exclusive right to represent them with respect to terms and conditions of employment, vary by state, locality, and various occupations.
• Dues checkoff, which is widespread in the public sector, has a small positive effect on wages, ranging from 0 percent to 3 percent; however, we suspect it has a major effect on union membership.
• Open-shop laws, which prohibit union security agreements, are associated with significantly lower public-employee wages, with estimates ranging from -4 percent to -11 percent, compared with no policy on union security.
• Agency-shop provisions, which require the payment only of a fee narrowly tailored to support a union’s collective bargaining activities, its contract enforcement, and employee grievance processing, are associated with significantly higher wages, ranging from 2 percent to 7 percent for public employees.

In summary, it is difficult to conclude that the relatively small wage effects of collective bargaining have led to serious distortions in the democratic process. Collective bargaining has resulted in higher public-employee wages in the range of 5 percent to 8 percent. There is some indication that collective bargaining has offset employer monopsony power in the public sector (Keefe 2015; Lewin, Kochan, and Keefe 2012), thus not producing excessive or distorted public-employee compensation, and has promoted internal equity (Keefe 2015, forthcoming).
Related:
Press release

Fining McWalmart: Charging Employers for the Social Costs of Poverty Wages

Source: Erica Smiley, New Labor Forum, Vol. 24 no. 3, Fall 2015
(subscription required)

From the abstract:
… The “low-wage employer fee” is actually any strategy that attempts to win back the resources workers lose when large, low-wage corporations transfer their costs to the public while continuing to increase their own profits…. Once such a fee is implemented, low-wage employers can either negotiate directly with workers over wages and conditions of the industry or they can pay the low-wage employer fee that workers will appropriately allocate to subsidize the community’s assumed costs of low-wage work. How they pay the fee, and how often, would be set based on the local context—either in a lump sum or in intervals throughout the year. The hope is that it ultimately expands workers’ ability to collectively define industry standards—either directly with employers or around them via smartly crafted state interventions. ….

TSR, Executive Compensation, and Firm Performance

Source: Hassan Enayati, Kevin Hallock, and Linda Barrington, Cornell University, A Brief Prepared by the Institute for Compensation Studies ILR School, September 29, 2015

– Particularly since the recent recession, the general public and policy makers have been interested in aligning the incentives of executives with the incentives of shareholders.
– Embedding Total Shareholder Return (TSR) target metrics into top executive compensation plans have been described as a simple and direct tool to align incentives.
– Despite the increased popularity of such TSR plans, the empirical evidence supporting the expansion of this compensation strategy is limited.
– This brief aims to shed light on whether the inclusion of TSR measures in long-term incentive plans result in improved firm performance.
Related:
Paying CEOs fat bonuses for stock performance doesn’t work — Cornell study
Source: Lawrence Lewitin, Yahoo Finance, October 2, 2015