Candidate Obama Vs. President Obama On Trade

Aug 4, 2011Zaid Jilani

question-mark-150What happened to the candidate in sympathy with human rights advocates and labor unions?

question-mark-150What happened to the candidate in sympathy with human rights advocates and labor unions?

President Barack Obama recently stood before the nation and addressed the dismal jobs report that showed unemployment was now hovering around 9.2 percent. As a part of his address, he called on Congress to "advance trade agreements [with South Korea, Panama, and Colombia] that will help businesses sell more American-made goods and services to Asia and South America, supporting thousands of jobs here at home."

Astute observers will note that Obama said these agreements would support thousands of jobs in the U.S. -- not that it would create them -- which is the traditional political parlance for supporting a policy. One reason the Obama administration has used this rhetoric around the trade agreements is because there is very little data to show that these three agreements will actually create a net surplus of jobs in the United States. In fact, the Economic Policy Institute estimated in 2010 that the Korean and Colombian trade agreements will result in 214,000 jobs lost in the United States.

What's interesting about the Obama administration (joined nearly at the hip by conservative business groups like the U.S. Chamber of Commerce and congressional Republicans) taking these positions on trade is they represent a significant departure from what candidate Obama campaigned on.

While it's true that candidate Obama never endorsed a complete about-face on U.S. trade policy -- the only candidate in the Democratic primary who did so was Rep. Dennis Kucinich (D-OH), who advocated for ending the North American Free Trade Agreement (NAFTA) and returning to bilateral trade -- he did engage in serious critiques and indicated that he would oppose the legacy of neoliberal trade policies.

While campaigning in the key battleground state of Ohio, Obama repeatedly called for reforming NAFTA, claiming that it cost the country up to a million jobs. By the spring of 2009, Obama's trade representative Ron Kirk openly admitted that the administration will not seek to renegotiate any part of NAFTA.

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But Obama's about-face on NAFTA isn't the only trade flip-flop the president has had. While on the campaign trail in April of 2008, then-Senator Obama said he would oppose a new free trade agreement with Colombia "because the violence against unions [there] would make a mockery of the very labor protections that we have insisted be included in these kinds of agreements."

While the administration is now busy downplaying concerns of human rights and labor advocates about the situation in Colombia, it's important to note that the levels of violence in the country now are actually no different than where they were when Obama made that statement. According to data from the International Trade Union Confederation's (ITUC) Annual Survey of Violations of Trade Union Rights, Colombia in 2010 had 49 assassinations of labor officials -- more than the rest of the world combined. That's a major jump over 2007, when ITUC numbers show that there were only  37 assassinations, and 2008, when there were also 49 assassinations.

One has to wonder if Obama would not think that these continued high levels of violence would not make a "mockery" of any labor protections that would be included in an upcoming Colombia trade deal.

Candidate Obama certainly did not promise to upend U.S. trade policies in ways that many Americans sympathetic to the global labor and human rights movements would want -- which would involve a more direct repudiation of the NAFTA and WTO trade regime models. Yet he was a sharp critic of unfair trade agreements and expressed sympathy towards human rights concerns. Candidate Obama appears to have vanished and President Obama appears to have more sympathy with the views of the U.S. Chamber of Commerce and congressional Republicans than human rights advocates and labor unions.

*Note: According to the latest news, the trade deals discussed in this piece may go up for a vote around September.

Zaid Jilani is a Reporter-Blogger for ThinkProgress and The Progress Report at the Center for American Progress Action Fund.

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Women Lost in the Debt Ceiling Deal

Aug 3, 2011Bryce Covert

Although the deal averts a painful default, many of the cuts will fall on the backs of struggling women.

The debt ceiling debate has finally come to a close. We are clearly all better off in a country that doesn't default on its debt because of self constraints and intense partisan bickering.

Although the deal averts a painful default, many of the cuts will fall on the backs of struggling women.

The debt ceiling debate has finally come to a close. We are clearly all better off in a country that doesn't default on its debt because of self constraints and intense partisan bickering.

But the deal that was struck and signed into law by President Obama that averted the default will have painful repercussions for many of the less well off and vulnerable. It calls for $2.4 trillion in spending cuts over the next 10 years, as well the creation of a bipartisan Congressional committee that will be charged with proposing another $1.5 trillion in deficit reduction. This is in exchange for a two-step increase in the debt ceiling, averting the chaos of a US default. These cuts will harm many groups, but there are a number of ways they'll hurt women specifically.

The first, immediate $1 trillion in cuts come from capping discretionary spending, with more than half non-defense -- i.e. mostly shielding the Pentagon. The White House has said these caps "will put us on track to reduce non-defense discretionary spending to its lowest level since Dwight Eisenhower was President" in the 1950s. But what falls under "non-defense discretionary spending"? While the category sounds amorphous, it funds real programs that women rely on. As the National Women's Law Center puts it,

The discretionary portion of the federal budget requires annual appropriations to fund programs that help women protect their health, obtain quality child care and higher education, and help them meet their basic needs during difficult times and as they age -- including Head Start, child care, K-12 education, family planning and other women's health services, domestic violence prevention, job training, Pell grants, and services for the elderly.

Specifically, some of the largest portions of this spending directly affect women. Education is the largest (16.3%), and cuts to this funding mean teacher layoffs among other things. The category that includes child care and education and nutrition assistance is quite substantial at 7.6%, hitting women who rely on subsidies as they struggle to raise their children.

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The next level of cuts will come from the so-called "super-committee" that will propose another $1.5 trillion in reductions over ten years. Those recommendations could very well include further cuts to discretionary programs, as well as cuts to entitlements and revenue increases. Beyond being hit by cuts to discretionary spending, women will get smacked by scaling back entitlement programs. They rely heavily on these programs: in 2007, they were about 70% of the elderly and 80% of younger adults who relied on Medicaid; they make up more than half of those with Medicare; and for nearly three in ten women 65 and older who receive Social Security, it's their only source of income.

And women will get hit one more way: in the trickle down effects from the deal. It doesn't call for immediate cuts to the federal workforce, but as government agencies and programs have to cope with smaller budgets, they may have to turn to furloughs or layoffs. On top of this, mayors and governors are anticipating far less aid from the federal government to help them cope with budgets ravaged by falling tax revenues and rising output for unemployment and other benefits caused by high unemployment. Their tight budgets have already lead to huge layoffs in public sector workers. Women make up over half of the public workforce -- and have lost 343,000 public-sector jobs, accounting for 70 percent of the cuts between June 2009 and June 2011. This is a big factor in why women are losing jobs during the recovery while men are making gains (even if they're small). Further shrinking government budgets will ensure women lose more jobs.

Overall, the country is better for a deal that averted a government default. In that scenario, everyone would have been hit by higher interest rates at the very least. But the deal itself hurts women at a time when everyone is already suffering.

Bryce Covert is Assistant Editor at New Deal 2.0.

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'Horrible Bosses': How the Job Crisis Affects You

Jul 29, 2011Adam Gluck


A Roosevelt Institute summer intern goes for a summer flick and gets a lesson in how high unemployment sucks for everyone -- except a few at the top.


A Roosevelt Institute summer intern goes for a summer flick and gets a lesson in how high unemployment sucks for everyone -- except a few at the top.

"This movie is a critique of capitalism!" were the words I had to hold back from saying to my libertarian friend.  But I didn't. Few people want to hear that sort of thing while watching a comedy. But, it is.  Really.  Horrible Bosses demonstrates why high unemployment affects all of us, even if we are lucky enough to have jobs.

That high unemployment is advantageous to capitalists and disadvantageous to the regular worker is an argument that Karl Marx made over a hundred years ago.  Before that, Adam Smith argued for the necessity of unemployment in a capitalist system. He made the case that high unemployment helps businesses because they can get more from workers for less, whereas low unemployment helps workers as it allows for them to argue for better pay (something to think about when one hears the argument that pro-business is pro-jobs).

Today, this debate is still alive.  However, it has grown more technical.  Much of the discussion centers around whether joblessness is 'natural' or 'structural' and how much is caused by the policy choices we make. The Roosevelt Institute's Arjun Jayadev and Mike Konczal have shown that today's high unemployment is not structural at all, as conservatives would have it, but a result of low aggregate demand.

Horrible Bosses draws its humor out of the reality of how high unemployment affects even the average employed worker.  The premise: three friends each have bosses who treat them horribly.  One boss is a controlling alpha male, the other is a sexual predator, and the last is the coke-addicted privileged son of the former, awesome, company owner.  So, why don't they quit?  In a hilarious scene, they ask themselves that question.  Then the awful reality sinks in. They run into a friend who graduated from Yale and went into Lehman Brothers -- only to lose his job in the economic crisis.  Unable to find a job for two years, he is living with his mother, and will do "anything for money" (and that 'anything' is not very dignified).

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The friends realize they are stuck with their bosses. So they decide to try to kill them.  Hilarity ensues.

The part that really got me thinking was one particular series of events where the alpha male boss tricks one of the characters into expecting a promotion. The boss kept him overtime.  Doesn't let him see his dying grandma.  Makes him work throughout the weekend. But in the end, he gives the promotion to himself. As a "token of generosity in these hard economic times", he only takes 85% of the salary that comes with the position.  When the character protests that he has been strung along, his boss responds, "Did you see how much harder you worked?"

It's all very funny. But you realize something: that really sucks.  And it is totally plausible.

Statistics suggest that this sort of thing is happening right now.  Productivity is up, by a lot.  It rose 6% from the first quarter of 2009 to 2010.  This is the highest productivity leap since 2002 (another recession), when unemployment jumped to an 8 year high.  Keep in mind that productivity increased from 2000 by 38 percent total. Which means that this last six percent increase represents a larger increase in productivity than during the 2000s. To be fair, this fact alone doesn't demonstrate that workers are being made to work harder. It could represent technological advances, for example.

But let's add a few more statistics.  McKinsey, one of the world's top consulting firms, notes that productivity has increased the most where jobs have been reduced the most.  And small business workers are working harder for less money.  Furthermore, a third of Americans want to quit their jobs up ten percent from 2005.  Altogether, 50% of employees are unhappy with their job.  And, 70% of millenials, people just out of college who are often worked the hardest in new positions, want to change their jobs, but feel they can't because of the economy.

Because of high unemployment, many more people suffer than just the jobless.  If you think this is just a "radical progressive position," think again.  As noted earlier, it is something agreed upon by both Adam Smith and Karl Marx -- two radically different thinkers.  If unemployment is high, employers can work their workers harder.  They know that employees are essentially trapped in their jobs. So for the ruthless employer, there is no economic incentive to decrease unemployment. They can get more and more labor out of their workers and pay them the same, or even less.

So remember this, even if you find work, you could get a horrible boss. And unless you are exceptionally talented, you are replaceable.  There are literally millions of people just waiting to take your position. You are trapped, with no means to save yourself from a bad situation.  If that makes you uncomfortable, it should.  It is the definition of exploitation.

Horrible Bosses is a hilarious movie.  It received a 93% approval rating from audiences on one website I looked at before decided to watch it. But for anyone who has studied comedy, you know that humor often derives from what is not only truthful, but tragic.

Adam Gluck is a rising Sophomore at The University of Chicago and the communications intern at The Roosevelt Institute.

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Higher Profits and Lower Wages are No Mistake

Jul 27, 2011Bryce Covert

Businesses have found ways to squeeze workers and boost the bottom line.

This week's credit check: Profit margins for the S&P 500 have increased by 1.3% from 2000-2007. 53% of workers recently reported taking on new roles, while only 7% got a bonus or a raise.

Businesses have found ways to squeeze workers and boost the bottom line.

This week's credit check: Profit margins for the S&P 500 have increased by 1.3% from 2000-2007. 53% of workers recently reported taking on new roles, while only 7% got a bonus or a raise.

I recently pointed out that the so-called recovery is mostly a corporate recovery, while the average American is actually faring worse in terms of income. It turns out that this is no accident. Corporate profits are up, in many cases, because wages are down.

In its July 11 edition of its Eyes On The Market investor report, JP Morgan reports that profit margins for the S&P 500 have increased by 1.3% from 2000-2007. This is a level "not seen in decades." How has this amazing feat been accomplished? The report puts it plainly: "reductions in wages and benefits explain the majority of the net improvement in margins." And as Zaid Jilani notes at ThinkProgress, "[T]he JP Morgan report explains this behavior taking place between 2000 and 2007, meaning that it began long before the Great Recession." He also points out that this section ends with the statement, "US labor compensation is now at a 50-year low relative to both company sales and US GDP." USA! USA!

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Another way companies are squeezing workers to boost profits? The Great American Speedup. Catherine Rampell reports in the NYTimes that hours worked have outpaced household income for traditional families. So even though median wages for two-parent families have grown 23% since 1975, the hours they worked over the course of a year have grown by 26%. This is part of the trend Mother Jones spotted just this month: Americans overall are working harder without getting more pay. The article reports, "Americans now put in an average of 122 more hours per year than Brits, and 378 hours (nearly 10 weeks!) more than Germans." Meanwhile, the Wall Street Journal picked up on a recent Spherion Staffing survey that showed workers taking on more tasks during the recession without anything in return. In the survey, 53% of workers reported taking on new roles, while only 7% said they got a bonus or a raise. Even if this practice began before the recession, the dismal job market isn't giving workers any leverage to protest when companies drop more work into their laps with no compensation.

It comes as no shock, then, that the IMF's annual assessment of the US economy highlighted how difficult the recovery has been for consumers. On the one hand, it notes, "Financial conditions have improved, particularly for large firms that face favorable bond financing terms... On the bright side, exports and the performance of businesses and the financial sector have improved significantly." But on the other, "Housing and labor markets have been the weakest links," and "the current recovery has been held back by significant adverse feedback loops between housing, consumption, and employment." In other words, Wall Street's humming along while consumers struggle through.

Despite all of these odds, Americans are trying desperately to get away from credit card debt. Although credit cards have acted as a safety net for families with stagnating wages, in the wake of the credit bubble burst we're paying more toward our bills than new purchases. A new report out today from TransUnion finds that consumers have spent $72 billion more from 2009-2010 on paying down their credit card debt than buying stuff. Compare that to the fact that between 2004 and 2008, we were spending $2.1 billion more on purchases than on bill payments. This is good news, but these efforts are going to be for naught if wages and employment don't rise. With income barely coming in, consumers will have no where to turn but debt.

Bryce Covert is Assistant Editor at New Deal 2.0.

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Hamptons Institute Experts Weigh In On Jobs, Debt, and China

Jul 26, 2011

Byron Wien, Jared Bernstein, and Zachary Karabell take on America's three greatest economic challenges.

Last week, the Roosevelt Institute teamed up with Guild Hall to present the third installment of the Hamptons Institute, a symposium that brings political, economic, and cultural thought leaders together to let the intellectual sparks fly. VVH's Byron Wien hosted a panel featuring Jared Bernstein, CBPP Senior Fellow and former White House economist, and Zachary Karabell, President of River Twice, who took on three of America's biggest economic challenges: our protracted unemployment crisis, growing debt, and complex relationship with China.

idea-100Byron Wien, Jared Bernstein, and Zachary Karabell take on America's three greatest economic challenges.

Last week, the Roosevelt Institute teamed up with Guild Hall to present the third installment of the Hamptons Institute, a symposium that brings political, economic, and cultural thought leaders together to let the intellectual sparks fly. VVH's Byron Wien hosted a panel featuring Jared Bernstein, CBPP Senior Fellow and former White House economist, and Zachary Karabell, President of River Twice, who took on three of America's biggest economic challenges: our protracted unemployment crisis, growing debt, and complex relationship with China.

Bernstein argues that the American economy is haunted by under-priced risk, bad fiscal policy, and China's mercantilist strategy of currency manipulation, all of which has led to an over-leveraged public and private sector. "When job growth is weak, and the benefits of growth are poorly distributed, it's very difficult for most families to get ahead." Karabell contends that "we don't have a debt crisis. We're having a crisis over debt." He also believes that current unemployment levels are more structural than cyclical, and that China's role in driving the global economy, despite disrupting the old order, "has been a source of stability and vibrancy, including for the domestic American economy." Watch the full debate in the video above.

For more on the Hamptons Institute, check out ND2.0 Editor Lynn Parramore's report on the summer's finest festival of ideas.

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Four Steps for Smart Scheduling: A Giant Leap for Working Families

Jul 25, 2011Joan Williams

workers-200Last Monday, unions and employers came together to make work-life balance a reality for hourly workers.

workers-200Last Monday, unions and employers came together to make work-life balance a reality for hourly workers.

The common assumption is that workplace flexibility is impractical for hourly workers. Not so: On Monday, models emerged to offer workplace flexibility in three contexts where it might seem impossible: health care, restaurants and small business.

Jennifer Piallat, owner of Zazie Restaurant in San Francisco, is busy inventing a new model of the restaurant business. The classic model gives servers unstable schedules that change from day to day and week to week. There are good reasons for this: much of servers' compensation comes from tips, and a "bad" shift (Monday night) can yield $50 in tips, whereas a "good" one (Saturday night) can yield $300 in tips. So the instinct is to shift people in and out of the more lucrative shifts by having them work different days on different weeks.

But that doesn't fit with many workers' lives. Low-income families are more likely than other families to be tag teaming, where Mom works one shift and Dad works a different shift. That means that, if Dad's schedule is unstable (or vice versa), Mom may be unable to show up for her shift-and may lose her job. Low-income families also are much more likely than other Americans to be caring for an elder 30 or more hours a week, and much more likely to be caring for ill relatives-that's often one reason these families are poor.

So Piallat sets up a permanent, long-term schedule that gives each server some high-tip and some low-tip shifts. That's the first step for employers of hourly workers. Virtually any job can be restructured to achieve a more stable schedule.

A related issue was addressed by Connie Leyva, President, California Labor Federation & UFCW Local 1428, who represents grocery and drug store employees. Her union negotiated more notice of weekly schedules, requiring that schedules for the following week be posted by Friday at noon. "It doesn't seem like a big deal. It's a huge deal," she noted.

Leyva's union also negotiated a contract that guarantees four hours of work once employees report to the workplace. This addresses one of the big problems with just-in-time schedules -- often, workers show up on a slow day only to be sent home for lack of customers.

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Creating a dependable schedule is only the first step. The second step is to set up a formal system for handling schedule changes. At Zazie, Piallat puts up a big Office Depot calendar. If you can't make your 9 a.m. shift, you just write your name by that shift; the first person who signs their name by yours gets the shift.

The third step is to address the issue of overtime. Netsy Firestein of the Labor Project on Working Families, who sat on the labor panel at the conference, reported that some unions have negotiated contracts in which employers rely on voluntary instead of mandatory overtime. My report Improving Work-Life Fit in Hourly Jobs found two additional tools for scheduling overtime that accommodate the reality of employees' lives. One is to separate the workforce into four groups, and assign each group one week a month for which they need to be available for overtime. (Piallat of Zazie commented she was going to adopt this system.) Another is to give employees vouchers that allow them either to bid for overtime, or to avoid overtime.

The final step is to offer hourly workers short periods of time off work. A key issue is allowing employees to take time off in two- or four-hour segments. This is vital for low-wage workers who cannot afford to attend a school conference or doctor's appointment if they need to take an entire vacation day in order to do so.

Marianne Giordano, President of OPEIU Local 30 and labor rep on Kaiser's labor-management partnership, reported that Kaiser Permanente -- a hotbed of best practices thanks to its labor-management partnership -- has already instituted this policy successfully. Giordano described a call center that had once had extraordinarily high turnover and low morale. "There has been a complete turnaround," she reported, as a result of workplace flexibility initiatives. "If it can be done in a call center, it can be done anywhere."

Barbara Grimm, Senior Vice President at the Kaiser Office of Labor Management Partnership, reported marked success with self-scheduling, and noted the importance of cross-training. Kaiser actually offers business training to workers to give them the tools they need to help work with managers to deliver the best possible patient care. "The person who is doing the job knows best how to do it," said Grimm. "Teams come up with their own staffing solutions. It usually works better that way. They can come up with better solutions in terms of work satisfaction, patient satisfaction and affordability."

If flexibility is impossible in any industry, it would seem to be the moving industry. But it isn't, reported Lori Tubaya of Johnson Moving & Storage. Jim Johnson, the company owner, heard me speak in 1995, and went home and offered telecommuting for everyone in the company. "That not only changed my has benefited five generations of my family," said Tubaya. She discussed the near-zero turnover at her company among employees in charge of collections-typically a high-turnover job. The company also offers flexibility to the movers themselves. She told the story of one mover who was a divorced father with custody of a child. He kept arriving late. "Instead of making excuses, saying the bus was late, he could just tell us he needed to come in later so he could drop his child off from school," Lori said.

Bottom line: if these employers can improve the work-life balance for movers, health care workers and retail and restaurant staff, this can be done anywhere, in any job.

Joan Williams is the author of Reshaping the Work-Family Debate.

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The Trade Deficit is the Most Important Deficit

Jul 25, 2011Jon Rynn

deficit-100Closing the budget gap will require a progressive industrial policy, not regressive spending cuts.

deficit-100Closing the budget gap will require a progressive industrial policy, not regressive spending cuts.

Between 1962 and 2009, the cumulative trade deficit of the United States almost exactly equaled the cumulative Federal budget deficit: 7,426 billion for the budget deficit, a couple of billion less for the trade deficit. That is, when you add up all the deficit numbers for those 28 years, both the trade deficits and the budget deficits have generated the same amount of red ink. The Republican House members, in particular, use fear-mongering to convince the public that the federal budget deficit is going to destroy the economy. But what about the trade deficit?

As Marshall Auerback and others have been arguing, focusing on cutting the federal budget deficit during an economic downturn can harm the economy, putting people out of work, for one thing. Our government discovered this in 1937, when a push to balance the budget led to a mini-Depression. But tanking the economy is exactly what is being discussed in Washington; every alternative on the table involves cutting spending, which will cut jobs, which will lead to even less revenues for the government, bigger deficits, and even more job losses.

We need to narrow the federal budget deficit by growing the economy, which generates wealth, part of which is then used for more revenue for the government. Narrowing the budget deficit by slashing spending will actually increase the deficit. In addition, a default on the debt, if it sent the dollar into a tailspin, would make the trade deficit much worse because we would have to pay much more for all of our imported goods, and thus, the standard of living for most Americans would go down.

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Closing the trade deficit, on the other hand, would actually create millions of jobs. In 2007, for instance, the trade deficit – that is, the difference between the goods and services we sell to the world, and the goods and services we buy – was about 700 billion dollars, according to the Economic Report of the President (Table B-24). The deficit in goods was about 800 billion. In 2007, there were 13.9 million people working in the manufacturing sector, down from 16.5 million in 2001, according to the Bureau for Labor Statistics (we are now at 11.5 million). Since the gross output of the manufacturing sector in 2007 was about $5 trillion (that is, including all the services, etc. that go into the price of manufactured goods), that means that the US could have increased manufacturing employment by about 1/6th (800 billion into 5 trillion), or about 2.25 million workers, had it made all the goods that were imported. According to the Economic Policy Institute, for each manufacturing job, the economy creates almost three more. So eliminating the trade deficit could have reduced the unemployment rate by almost 10 million – or, as of June 2011, about 70% of the 14 million officially unemployed workers in the United States.

We can close the trade deficit by engaging in a serious industrial policy, one which will pull the manufacturing sector back up by rebuilding the infrastructure to prevent the worst of global warming and wean us away from oil, as I have argued. If, for instance, the government guarantees a 20 year infrastructure rebuilding program, that might help to convince the banks and corporations that it is prudent to invest the 2 trillion dollars that they are currently sitting on. They would know that they had a market for the output of their investments, and they would be assured that American workers would have the purchasing power to buy their output.

There has been a long-running argument that federal budget deficits contribute to trade deficits, but trade deficits expanded in the 1990s when the federal budget went into surplus. I would argue that the trade deficit is caused by the decline of manufacturing in the United States, which has a variety of causes, and is only marginally affected by the increased demand caused by a budget deficit. In any case, by creating millions of jobs in the long-term, a program of job creation would lead to a lower budget deficit, in the long-term.

To put it simply, rebuilding the manufacturing sector could lift us out of the Great Recession. On the other hand, focusing on cutting the federal budget deficit at this stage will lead us to the Lesser Depression, as Paul Krugman calls it. Hopefully this news will arrive in DC soon, or we will be in big trouble.

Jon Rynn is the author of the book Manufacturing Green Prosperity: The power to rebuild the American middle class, available from Praeger Press. He holds a Ph.D. in political science and is a Visiting Scholar at the CUNY Institute for Urban Systems.

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FDR's Championing of Labor Unions Key to Prosperous Post-War Economy

Jul 22, 2011David B. Woolner

Under Roosevelt's leadership, union membership and the size of the American economy grew hand-in-hand.

"It is now beyond partisan controversy that it is a fundamental individual right of a worker to associate himself with other workers and to bargain collectively with his employer." FDR --Address at San Diego Exposition, October 2, 1935

Under Roosevelt's leadership, union membership and the size of the American economy grew hand-in-hand.

"It is now beyond partisan controversy that it is a fundamental individual right of a worker to associate himself with other workers and to bargain collectively with his employer." FDR --Address at San Diego Exposition, October 2, 1935

Just over three quarters of a century ago, Franklin D. Roosevelt signed one of the most important -- though frequently overlooked -- pieces of the reform legislation to come out of the New Deal: the National Labor Relations Act. More often referred to as the Wagner Act, after its champion, Senator Robert Wagner of New York, this landmark bill established the National Labor Relations Board, an independent, quasi-judicial government agency that played a critical role in the remarkable expansion of union membership that took place during the Roosevelt era.

Prior to the passage of the Wagner Act, and thanks in part to the anti-union climate of the 1920s, union membership in the United States had declined precipitously. At the onset of the Great Depression, for example, membership in the American Federation of Labor had fallen from a high of five million in 1919 to less than 3 million in 1933. Seeking to expand workers rights as part of his administration's efforts to launch the New Deal, FDR created a weaker NLRB as part of the 1934 National Recovery Administration. But the 1934 agency proved largely ineffective and in 1935 FDR endorsed Senator Wagner's efforts to make the NLRB permanent and more powerful. The new law declared a whole series of coercive management practices to be illegal, and gave private sector workers the right to form unions and to engage in collective bargaining. It also gave the NLRB the right to determine bargaining unit jurisdictions, oversee union elections and certify the results as legally binding. The law also insisted that management had a duty to bargain with a properly certified union, though of course it did not compel the union to agree with the union demands.

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As with many other pieces of New Deal legislation, the establishment of the NLRB was bitterly attacked by employers as a measure that would ruin the US economy. But such fear mongering proved completely unfounded. Over the next ten years both union membership and the size of the US economy would grow hand in hand, so that by 1945 the ranks of unionized worker had reached a record 35 percent of the non-agricultural workforce, while wages had increased by 65 percent, unemployment had fallen to less than one percent, and the US economy exploded to meet the demands of the Second World War.

Moreover, the labor legislation of the New Deal helped form the basis of a long period of post-war prosperity that vastly expanded the size and wealth of the American middle class. Yet sadly, the right of American workers to form unions and engage in collective bargaining -- and hence protect their job security and wages -- is once again under attack. The recent attempt by conservative Republicans in the House of Representatives to challenge the NLRB authority to act through the introduction of such bills as the Protecting Jobs from Government Interference Act is but one example of this ongoing attempt to weaken the NLRB's authority and with it the power of unions to fight against unfair labor practices. In 1935, in the wake of the Wagner Bill, FDR asserted that the "fundamental...right of a worker to associate himself with other workers and to bargain collectively with his employer" was "now beyond partisan controversy." Based on the recent activities of this Congress, and the strong anti-union movement among conservatives in states like Wisconsin and New Jersey it would appear that he was sadly mistaken.

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute.

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Dorian Warren on Why We All Need a Strong Labor Movement

Jul 18, 2011Bryce Covert

dorian-warrenI got the chance to talk with Roosevelt Institute Fellow Dorian Warren, who just publis

dorian-warrenI got the chance to talk with Roosevelt Institute Fellow Dorian Warren, who just published new research on workplace anti-union campaigns. We discussed his surprising findings about illegal employer intimidation tactics, the labor movement's biggest weaknesses, and why comprehensive labor reform would amount to some of the best economic stimulus we could find.

Bryce Covert: You recently published new research on workplace intimidation tactics against union organizing. Can you explain the important findings that came out of your work?

Dorian Warren: As background, let me start by saying that we already know what happens when workers try to organize into a union: employers routinely violate the law. They use a range of legal and illegal tactics. The most egregious one is firing workers who are seen as union leaders or union influencers, and that happens in about 34% of union election campaigns. A number of other illegal tactics include threatening workers, threatening to close the plant, threatening to close the shop, illegal pay raises, that kind of stuff.

The other thing to note is that usually when workers file a petition with the National Labor Relations Board for an election, the wait from the date they file a petition to when the election is scheduled is really long. Throughout all that time, employers engage in anti-union campaigns, again using these legal and illegal tactics. So the National Labor Relations Board proposed a rule change to potentially decrease the number of days between when workers file a petition and form election and when the election is scheduled and held.

The research that I did with my coauthor Kate Bronfenbrenner was to look at the timing of when employer campaigns start through the election and what difference the proposed rule change would make. What we found was that the employer campaign starts very early. It definitely starts once workers start filing a petition for election, it continues constantly, and the number of tactics they use are multiple. So every single day before an election the employer campaign is constant, the tactics are cumulative, and it's unrelenting.

But the surprising finding is that employer campaigns start even before workers petition. So let's say Target or WalMart hires new employees and as part of the orientation it gives them an anti-union video to watch. From day one that's basically an employer anti-union campaign. Then it's constantly probing and trying to find out if there's any talk of unionization. The employer knows that workers are talking about potentially wanting a union, and they start doing things way before workers even file a petition to ask for an election. The longer employers can delay an election, the more time they have to harass and intimidate workers. But our research shows that from before the workers file a petition to when they file a petition, leading all the way up to an election and even after the election if they win the election, the employer's still using these tactics to intimidate and harass workers.

BC: What are the details of the NLRB rule change proposal and what are its implications?

DW: The proposal is to streamline the NLRB election process, which is very clunky. There are lots of delays and it takes a long time for workers to actually get an election. It would also prevent employers from attempting to delay. Workers usually file for election, the election date is set, but then close to the election date the employer files a claim with the National Labor Relations Board, usually falsely accusing the union of some kind of unfair practice or tactic, which then the Board has to investigate. So they delay the election. Then after the investigation, which usually finds nothing wrong, the election is rescheduled, and then that starts all over again. This rule would say there will be no delays. There will be an investigation after the election as opposed to postponing elections to investigate these delays, so-called infractions, either by employers or the union. The idea would be obviously that these changes would give workers a better chance to unionize free of intimidation and coercion.

Assuming this rule change goes through, it would make it potentially easier for workers to organize because they wouldn't be subject to the employer campaign for as long and therefore would probably end up winning more union elections. It will make organizing easier in a climate where employers are absolutely hostile by default and break the law because the penalties aren't that strong.

Employers are going crazy about this. The Chamber of Commerce is going crazy about this proposed rule change because they know that this would make it easier for unions to organize.

BC: If the rule goes through, does it address what you identified in your research? What goes unaddressed?

DW: The only thing that would address what we found in our research would be comprehensive labor reform. But obviously the political possibility for that is zero. This rule change would help address what we find, but it's not going to eliminate the employer campaign. Employers are still going to violate the law and fire people and threaten people. They'll just have a shorter time to do it, so hopefully it won't have as much impact on workers as it does now. This rule change does nothing about our big finding that employers already violate the law before workers even file for a petition. Those practices are still going to happen and employers are still going to be spying on workers, essentially, to see if there's any talk of a union and then go into action immediately when they hear it.

It's a systemic problem. There's really nothing that would change it. There are no quick fixes in terms of what the National Labor Relations Board can do. They really need legislative change to alter the incentive structure against employers violating the law.

BC: Are there other short-term things that can be done right now short of comprehensive reform?

DW: After this I'm not sure what's left. There was another rule change that another federal agency did issue. The National Labor Relations Board covers all private sector workers except transportation workers. Railroad and airline workers are covered by the Railway Labor Act. If you're an airline worker and you want a union, the election goes to the National Mediation Board, not the NLRB. Last year, with two pro-labor Obama appointees, the National Mediation Board made a rule change for their election rules. In political elections, basically whoever gets the majority of the vote wins, and the same with the NLRB union elections. The Railway Labor Act was always different. It said that a majority of all workers was what it took to win unionization. So if people didn't show up to vote you were kind of screwed. Basically if someone didn't show up that was a no vote. The rule change was to make it similar to the National Labor Relations Board and our basic election rules for political campaigns -- just a majority of who shows up. They issued that rule change last year and again business groups went crazy. One of the implications of that is probably thousands of flight attendants at a couple of airlines, something like forty or fifty thousand flight attendants, are going to have elections to decide whether they want to join a union or not.

But after that I'm not sure what else the Board can do. They're already trying to speed up the processing of cases when employers or unions, but really employers, violate the law. There has to be an investigation and there's a trial to see if the employer violated the law, and then there's a ruling. There are hundreds if not thousands of cases and there's always a backlog because Republicans are trying to defund the Board and compromise its work.

After this latest rule change that's pretty much it. That's all they can really do.

BC: Ignoring politically impossibility, what would a modern-day Wagner Act to update labor laws look like?

DW: The first thing is there'd be no occupational exclusions. We should have a national campaign right now to take out the occupational exclusions of the Wagner Act. We know the history of why they're in there in the first place. It's unacceptable that they're still in. No worker should be denied protection or the fundamental right to freedom of association.

The second thing would be really, really strong penalties for violations of the law. Ideally it would match the whole system of employment law, including all the anti-discrimination laws like sex discrimination, race discrimination, age, disability. For instance, if employers fire a worker for union activity, the only penalty is that they have to hire the worker back and they have to post a sign in the workplace saying they won't do it again and potentially pay the worker back pay. That's not a strong incentive against violating the law. Unlike, say, anti-discrimination law, where you can sue for punitive damages, which works as a stronger sanction against employers for violating the law. Even raising the penalties so that you create strong incentives for employers to actually obey the law would be important. The potential for class action lawsuits when employers violate workers rights, the potential for triple or even hundred times back pay if they fire workers, really huge fines, punitive sanctions for violating any workers rights -- that would be, I think, ideal in any kind of twenty first century Wagner Act.

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BC: To play devil's advocate, many say that pro-labor reforms in a recession will hamper businesses from creating jobs. What do you say to that?

DW: In the preamble to the National Labor Relations Act, the justification is to level the playing field so that workers can bargain for higher wages with employers, which would then help the economy and help get us get out of the Depression because it would fundamentally give workers consumption power. They'd buy more goods and services, which would create more jobs, which would help the economy. It's economic stimulus, essentially.

I would say the same thing is true now. The problem has been that with wage stagnation for forty years, people had to take on debt to keep up with inflation and to buy basic things because they weren't getting raises. If we were to pass a new Wagner Act today that gave workers the right to organize free of intimidation, they could bargain for higher wages with employers, who have record profits, and that would help to stimulate the economy again. First, it would help people get out of underwater mortgages, and second, it would help people be able to buy more stuff. Especially in an economy that's 70% based on consumption, actually giving workers more bargaining power is a form of stimulus.

BC: Following that logic, with all the backward movement against labor -- what happened in Wisconsin, the Supreme Court decision on WalMart -- is there an anti-stimulus effect from these attacks?

DW: Part of that process of downward mobility has been the loss of pensions and economic security for private sector workers, especially with declining unionization, which is only 7% in the private sector down from almost a third in the 1940s. The aim of these attacks on public sector workers is to put them in the same boat as private sector workers -- strip them of pensions, strip them of the ability to bargain for higher wages. In that sense I do think there is a huge effect on the economy because with higher unemployment and as people lose their bargaining power they're not going to be able to purchase more stuff. Also, as people lose their pensions I can't even imagine what that's going to do in terms of pushing older people into the workforce longer at the same time that there's probably going to be an increase in age discrimination.

For all those reasons, I think the attacks are very dangerous. It's basically figuring out a way to eliminate the middle class, which is just absurd to me, and to fundamentally destroy the labor movement, because the public sector is now the strongest part of the labor movement. A majority of unions are public sector workers for the first time in history. They're not in the private sector. And think about teachers and the attacks on teacher's unions: one in four union members in this country is a teacher. It's mind-blowing actually. It's also a political attack and an explicit attempt to weaken the strongest base of the Democratic Party.

BC: In your view, what can the labor movement focus on right now to help the tide flow in the other direction?

DW: The labor movement's big Achilles' heel is the fact that it never organized the South. That's important for two reasons. It's important for labor's strength because the South is a whole different economy. Because it was a non-union economy, it actually ended up destroying the manufacturing sector and the labor movement. The auto industry essentially moved to different states to get out of UAW contracts.

The second implication is political. Because labor has a huge influence on how workers vote, it's not coincidental that the South is pretty Republican and pretty right-wing. If you're a white working class man there's basically a twenty-point gap between whether or not you'll vote Democrat or Republican and it's all based on union membership. So if you're a white working class man and you're in a union, you're much more likely to vote Democrat than Republican -- it's the union difference. If you're a white working class woman you're already a little bit more likely to vote Democratic, but you're much more likely if you're a member of a union.

There has to be some really transformative strategy and real commitment, even if it's just targeting three key states for instance, for labor to organize the South. It would help make the labor movement stronger but also change the politics of the country, frankly. Labor's been the core base of the Democratic Party since the New Deal. It seems extraordinarily short sighted that the party is looking at the destruction of its base and just standing by like a deer in headlights, and in some cases aiding and abetting the attack on labor.

BC: Many saw what happened in Wisconsin as a sign of the labor movement's reinvigoration. Do you have hope for the future of the movement?

DW: I have a different take on Wisconsin. Yes it was great that people mobilized, but I would stop short of what others have called it -- a victory of some kind. I'm not very hopeful at all, even of Wisconsin. That was a moment. And we lost, frankly. And we're losing in more than a dozen states around the country. Wisconsin's either a sign of reinvigoration or a sign of the last gasp. I think people over-interpreted it. I want to be more sober about it and say okay, where do we go form here, what's the strategy? It's a defensive fight. We're the ones trying to defend fundamental rights. We lost. Now what do we do? What's our vision? First we have to get those rights back. And it's not like things were great before. What's our vision for revitalizing workers' rights broadly? Unless there are some serious breakthrough strategies that labor, that workers, can come up with, I think the labor movement has about five years to figure out how to stay alive. Otherwise it's all over.

There is a bit of good news. Last week there were recall elections in Wisconsin and all the anti-labor incumbents were defeated. That suggests that there is some sustainability and some momentum from what happened in February. That's hopeful. But we haven't seen the efforts of people to mobilize in Wisconsin in any other place. In Ohio, in New Jersey, in New Hampshire, in Michigan, Oklahoma, all across the country, there are these basically same bills, but there hasn't been the same kind of mobilization that was shown in Wisconsin. Something more has to happen on a large scale. I don't see it yet.

BC: You just described a very bleak picture. What's the difference between now and FDR's time, when there was a huge movement for labor rights in the midst of a depression?

DW: A couple of things. One key point was the 1934 sit-down strike of autoworkers. That helped to spark a movement to unionize industrial workers, whether in auto or steel or rubber or textiles. But that was five years into the Great Depression. I don't think we're at a point where workers overall feel like the existing system is discredited. Maybe we're getting there as these quarterly reports keep coming out on corporate profits and CEO salaries. I think we're getting there. It can't happen fast enough.

The second factor I think is that there was a real fight in the labor movement around a new model. The old craft model of unions that worked for the building trades, for instance, was not adequate for the new industrial economy. There had to be some other model of unionism, so industrial unionism was created in the 30s to match the new kinds of work and the new kinds of employers. I think we need a similar kind of breakthrough strategy now. What kind of unionism do we need for the current moment, for the current economy? We've been toiling at the edges. The labor movement has been trying different strategies incrementally, but there hasn't been a new model of unionism that can recruit people by the thousands, if not hundreds of thousands.

Third is frankly a question of presidential leadership. The 1933 National Industrial Recovery Act was the first time that workers were given the right to organize. Then it got declared unconstitutional, and then the response was the Wagner Act. But in both cases there were posters and signs that union organizers would walk around with and on them was FDR saying ‘the president wants you to join a union.' There was a sense that now the law is on your side, the president's on your side, it is your fundamental right to do this. I think we're absolutely lacking that today. There's no sense that the law is on the workers' side, there's no sense that the president is on workers' side.

There's this new effort, Caring Across Generations, to organize workers from early daycare workers to home health workers who work with seniors. It's promising. There's an effort to organize WalMart, there's an effort to organize warehouse workers who are actually part of a crucial supply chain to WalMart and other big box stores. That looks promising. There are efforts by restaurant workers, carwash workers. So there are all these pieces that are definitely promising. I think the big question is a question of scale. Can they scale up fast enough to really make an impact sooner than later, or have an impact sooner than later? That's what I'm worried about.

*For more on the Wagner Act, see Roosevelt Institute Senior Fellow Thomas Ferguson discuss its history and relevance to contemporary struggles at last year's panel at the FDR Library at Hyde Park, NY: "1935 and the Enduring New Deal" (click on video for Sept. 26, 2010).

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Sky-High Executive Compensation Kills Jobs, Innovation, & Prosperity

Jul 14, 2011William Lazonick

money-and-greed-150In the latest installment of his series “Breaking Through the Jobless Recovery,” economist William Lazonick explores how excessive executive pay weakens our economy.

money-and-greed-150In the latest installment of his series “Breaking Through the Jobless Recovery,” economist William Lazonick explores how excessive executive pay weakens our economy.

Focusing on shareholder return is a very bad way for companies to govern the allocation of their resources. Public shareholders simply trade outstanding stock, but taxpayers and workers make risky investments in the innovation process and should be able to lay claim to a fair share of the returns. Yet since the 1980s, top executives of major US business corporations have invoked the flawed obsession with maximizing shareholder value to justify the exclusion of taxpayers and workers from sharing profits. Instead, they have been intent on increasing not only cash dividends -- the traditional way of distributing value to shareholders -- but also stock buybacks, which are used to manipulate their company's stock price. So shareholder return has become the measure of success of the publicly traded corporation.

This kind of financialized corporate behavior contributes to both the government deficit, as corporations look for every opportunity to avoid paying taxes, and income inequality, as corporations favor payouts to shareholders over investment in innovation and job creation. Ultimately, by neglecting investment in the productive capabilities of the labor force, the corporate pursuit of shareholder return undermines the ability of a rich country like the United States to maintain its standard of living.

So why do they do it?

All you have to do is look at how US corporate executives are paid. According to AFL-CIO Executive Paywatch, the ratio of the average pay of CEOs of 200 large US corporations to the pay of the average full-time US worker was 42:1 in 1980, 107:1 in 1990, 525:1 in 2000, and 343:1 in 2010. Over the past two decades, gains from exercising stock options have been by far the most important component in the outsized pay of top corporate executives. The average annual compensation in 2009 dollars of the 100 highest paid corporate executives named in company proxy statements was $20.6 million in 1992-1995, of which 63% came from exercising options; $77.8 million in 1998-2001, with 79% from options; and $61.8 million in 2004-2007, with 73% from options. For the top 500 in executive pay, average annual real compensation increased from $9.0 million in 1992-1995 with 51% from options to $29.5 million in 1998-2001 with 72% from options to $27.2 million in 2004-2007 with 60% from options (see my paper, "The Explosion of Executive Pay and the Erosion of American Prosperity").

But doesn't stock-based compensation of executives reflect the real productivity gains of their companies, translated into higher stock prices? Answer: no.  Most of the gains from exercising stock options are the result of stock-price speculation and manipulation. The price yields on S&P 500 stocks averaged 13% per annum in the 1980s, and 15% per annum in the 1990s, rates of increase that far outstripped productivity growth in even the most dynamic sectors of the US economy. Especially in the Internet boom of the last half of the 1990s, stock-market speculation drove up stock prices -- and executive pay. In the 2000s, however, stock-price yields averaged minus 2% per annum, with considerable volatility. A massive manipulation of stock prices through stock buybacks pushed the S&P 500 Index even higher in 2007 than it had been at the zenith of the speculative boom in 2000 -- again to the great benefit of the stock-based pay packages of the corporate executives who made these resource-allocation decisions.

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The problem is that in the United States, the practice has been to grant executives stock options that are unindexed to the productive performance of their company. If the stock price soars as a result of speculation, such as it did in the late 1990s, then executive pay explodes. If the stock price is manipulated through a multiplication of stock buybacks, as occurred especially in 2003-2007, executive pay rises as well.  With a system that permits top corporate executives to be rewarded by stock-market speculation and manipulation, what need do they have for innovation and job creation?

The "Say-on-Pay" provision of the Dodd-Frank, sanctioned by the Securities and Exchange Commission in January 2011, has given public shareholders the right to express their opinion to corporate management on issues related to executive compensation.  According to a report from Institutional Shareholder Services, during Say-on-Pay's first months in operation, stock-market investors endorsed over 90% of company board executive pay proposals. In my view, the impact of "Say-on-Pay" will be to encourage corporate boards and executives to disgorge even more cash flow to shareholders, with all its negative effects on the health of the US economy.

A case in point that I have analyzed in an article in The Globalist is an agreement on the conditions that, under Say-on-Pay, General Electric (GE) shareholders placed on the stock options of GE CEO Jeffrey Immelt. One of the conditions is that Immelt only gets to exercise some of his options if, over the next four years, GE generates at least $55 billion in cash from operations from its industrial businesses, as distinct from its financial arm, GE Capital Services. This provision creates the impression that GE's shareholders want Immelt to invest in real productive assets. Indeed, upon being named chair of President Obama's Council on Jobs and Competitiveness, Immelt declared that "there is nothing inevitable about America 's declining manufacturing competitiveness if we work together to reverse it."

Really? Over the past four years GE generated almost $73 billion in cash from its industrial operations.  In effect, therefore, armed with Say-on-Pay, GE's shareholders are willing to reward CEO Immelt if he oversees a 25% reduction in GE's industrial businesses. So much for working together to reverse the nation's declining manufacturing competitiveness.

The only effective counter to the explosion of executive pay and the erosion of American prosperity will be a social movement of people, as taxpayers and workers. It's time to demand that US business corporations be governed according to the principles of innovative enterprise, and not by the anti-innovation principle of maximizing shareholder value.

William Lazonick is director of the UMass Center for Industrial Competitiveness and president of The Academic-Industry Research Network. His book, Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States (Upjohn Institute 2009) was awarded the 2010 Schumpeter Prize.

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