Daily Digest - April 22: Tax Reform Can Close the Gulf Between CEOs and Workers

Apr 22, 2014Rachel Goldfarb

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Raising Taxes on Corporations that Pay Their CEOs Royally and Treat Their Workers Like Serfs (Robert Reich)

Robert Reich explains a proposed bill in California that would incentivize lower executive pay by tying corporate tax rates to the ratio of CEO pay to typical workers' pay.

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Raising Taxes on Corporations that Pay Their CEOs Royally and Treat Their Workers Like Serfs (Robert Reich)

Robert Reich explains a proposed bill in California that would incentivize lower executive pay by tying corporate tax rates to the ratio of CEO pay to typical workers' pay.

Justice Stevens Suggests Solution for ‘Giant Step in the Wrong Direction’ (NYT)

Adam Liptak speaks with retired Supreme Court Justice John Paul Stevens, who is calling for a constitutional amendment to overturn Citizens United and allow reasonable limits on campaign finance.

  • Roosevelt Take: Roosevelt Institute | Campus Network Student Board of Advisors Chair Jeff Raines explains why McCutcheon v. FEC makes big money's power over politics even worse.

A Chance to Remake the Fed (TAP)

With two open slots on the Federal Reserve, David Dayen suggests that progressives should support regulators who will serve as Main Street's voice on monetary policy.

Union Will Keep Fighting To Organize Volkswagen Workers (ThinkProgress)

While the United Auto Workers have dropped their appeal of the recent failed union election in Chattanooga, TN, Bryce Covert reports that the union plans to continue organizing at that Volkswagen plant.

UConn Graduate Assistants First To Unionize In State (Hartford Courant)

Kathleen Megan reports that the graduate assistants will be represented by the Graduate Employee Union/United Auto Workers. Graduate assistants have organized on over 60 campuses across the country.

‘Jobs vs. the Environment’: How to Counter This Divisive Big Lie (The Nation)

Jeremy Brecher argues that a "Green New Deal" could put people to work rebuilding the country's infrastructure to protect the environment, ending the supposed conflict between environmental movements and labor.

Not Born Rich? Out of Luck (MSNBC)

Chris Hayes interviews Thomas Piketty about his new book, Capital in the 21st Century, and the trends that have led to rising concentration of wealth in the United States and around the world.

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Daily Digest - April 21: In Minimum Wage Fight, Localities May Have Maximum Impact

Apr 21, 2014Rachel Goldfarb

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Minimum Wage Debate Goes Local (San Francisco Chronicle)

Roosevelt Institute Fellow Annette Bernhardt and Ken Jacobs consider why the minimum wage debate has such momentum at a local level. They see this as a return to states and cities being laboratories of policy innovation.

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Minimum Wage Debate Goes Local (San Francisco Chronicle)

Roosevelt Institute Fellow Annette Bernhardt and Ken Jacobs consider why the minimum wage debate has such momentum at a local level. They see this as a return to states and cities being laboratories of policy innovation.

The Link Between One Website and Hate Crimes (Melissa Harris Perry)

In a discussion on domestic terror and hate, Roosevelt Institute Fellow Dorian Warren suggests that the way we live, segregated by race and class, makes it even harder for Americans to embrace difference.

The Biggest Predictor of How Long You’ll Be Unemployed Is When You Lose Your Job (Five Thirty Eight)

Ben Casselman finds that the unemployment rate at the time when a worker loses her job is the strongest indicator of whether she will end up among the long-term unemployed.

  • Roosevelt Take: Roosevelt Institute Fellow Mike Konczal builds on this data to explain why the long-term unemployed aren't necessarily weak employees.

Student Debt Holds Back Many Would-Be Home Buyers (LA Times)

The share of first-time home buyers has dropped. Tim Logan ties that to the vast increase in student loans over the past decade, which hinders would-be buyers from getting mortgages.

How Payday Lenders Prey Upon the Poor — and the Courts Don’t Help (NYT)

Since AT&T Mobility v. Concepcion, which limited class action lawsuits, people trapped in cycles of predatory payday lending have even fewer routes out, writes Emily Bazelon.

Beyond the Laffer Curve — The Case for Confiscatory Taxation (Vox)

Matt Yglesias notes that many of our taxes aim at changing behavior, not increasing revenue. Perhaps higher taxes on inheritances or very big salaries could discourage the economic activity that promotes inequality.

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Daily Digest - April 18: Inequality Was Not an Accident

Apr 18, 2014Rachel Goldfarb

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We Built This Country on Inequality (The Nation)

Mychal Denzel Smith writes that the U.S. economy was built on a foundation of inequality for women and racial minorities, and that we must fight racism and sexism if we hope to close the wealth gap.

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We Built This Country on Inequality (The Nation)

Mychal Denzel Smith writes that the U.S. economy was built on a foundation of inequality for women and racial minorities, and that we must fight racism and sexism if we hope to close the wealth gap.

Oklahoma Governor Signs Law Barring Cities From Raising Minimum Wage (AJAM)

The Oklahoma law also bars cities from requiring paid sick leave or vacation time, reports Amel Ahmed. This seems intended to preempt a push for a state-level minimum wage increase, as in California and Maryland.

Treat Wage Theft as a Criminal Offense (WaPo)

Catherine Rampell asks why the consequences for stealing thousands from workers' paychecks are so much less severe than the consequences of stealing from someone's home.

Obamacare Succeeded for One Simple Reason: It's Horrible to be Uninsured (Vox)

Sarah Kliff says the eight million sign-ups are proof that insured pundits didn't understand how desperate the uninsured and underinsured were to get health insurance.

Antitrust in the New Gilded Age (Robert Reich)

Robert Reich suggests that today's concentrated wealth resembles the Gilded Age, right down to the need to break up too-large corporations. He cites the pending Comcast-Time Warner merger as a troubling example.

New on Next New Deal

Not Just the Long-Term Unemployed: Those Unemployed Zero Weeks Are Struggling to Find Jobs

Roosevelt Institute Fellow Mike Konczal looks at the data on those who move from one employer directly to another, without any unemployment. When even those workers struggle on the job market, wage growth slows.

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What Is Economic Growth Without Shared Prosperity?

Apr 14, 2014Joelle Gamble

It's time for the U.S. to recognize that policies to push economic growth must focus on average Americans, not "job creators."

It's time for the U.S. to recognize that policies to push economic growth must focus on average Americans, not "job creators."

Rampant inequality is putting the future of the American economy in peril. The financial recovery we have experienced the past few years has only led to massive gains for top earners and little to no change for average Americans. Decades of policies that throw more benefits to the top have not “trickled down” to the average household.

But more importantly, our current idea of economic progress is skewed. The wealthy have created this idea that “job creators” are a class of people who can magically restore out economy, ignoring the fact that entrepreneurship and innovation come from all economic statuses.

America needs to shift our economic narrative away from a heavy emphasis on GDP-based growth and toward a model that promotes prosperity for everyone. We need to think about how we generate demand in order to create jobs. This demand comes from average Americans having the ability to engage meaningfully in the economy, with fair wages without discrimination in the workplace. In short: economic progress must involve prosperity for all Americans, not just “job creators.”

Legislative battles at the local, state, and federal levels around equal pay and the minimum wage will prove crucial to changing our conception of what constitutes good economic policy. Victories in these fights represent tangible ways in which the average American worker can better his or her own economic prospects and simultaneously grow the economy.

We are seeing progress now. In January, the city of Seattle began pushing to raise the minimum wage for city workers to $15.00 per hour. Earlier this week, the state of Maryland voted to raise its minimum wage from the federal $7.25 to $10.10 per hour. Meanwhile, President Obama continues his push for federal action.

Meanwhile, in the United States, women make an average of $0.77 for every $1.00 earned by men, but growing movements are pushing the needle in the right direction. The President signed directives to clamp down on gender discrimination by federal agencies and contractors. Americans show strong bipartisan support for paid sick leave and family leave. Municipalities, are pushing through bills to make this support a reality –in New York City, Mayor De Blasio has already expanded the paid sick leave law that was established in 2013.

While the most sustainable and sweeping changes on these fronts may be best achieved at the federal level, many of the real policy battles are playing out in cities and states. This presents a real opportunity to involve a wide swath of Americans in economic justice work in their neighborhoods. If organizers on the ground build power to push a prosperity-centric policy agenda forward through both community building and new technology platforms, we can see a real shift in the narrative of what economic progress looks like in this nation.

Joelle Gamble is the Roosevelt Institute | Campus Network National Field Strategist.

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A Millennial’s Case for Fixing Social Security

Apr 11, 2014Brian Lamberta

Instead of giving up of Social Security, Millennials should push an easy fix for the so-called funding crisis: lifting the earnings cap.

Instead of giving up of Social Security, Millennials should push an easy fix for the so-called funding crisis: lifting the earnings cap.

As a public policy student, I’m used to hearing lively debates and diverse perspectives from my professors, fellows students, and course materials. There is one issue on which they consistently agree: apparently, Social Security cannot work for my generation. Polling data confirms this sentiment. Between half and three-quarters of Millennials do not expect Social Security to exist when we retire. Despite all of the rhetoric and doubts, I know that Social Security can work for Millennials – but it’s crucial that we fix the program.

I learned the importance of Social Security during my summer internship at The Alliance for Retired Americans, which was part of the Roosevelt Institute | Campus Network’s Summer Academy program. I learned that Social Security is the primary source of income for most seniors. The internship also taught me all about the program and its current issues, inside and out.

To give some background, Social Security is the widest reaching public benefit program in the United States. Starting at age 62, almost all Americans are eligible to receive monthly checks based on the amount they or their spouse paid into the program during their working years, with the benefit amount increasing for those who delay taking payments. The benefits of Social Security for retirement must be earned – 12.4% of nearly everyone’s yearly income below an annually adjusted cap is taxed to fund the program. For 2014, the cap is set at $117,000. Any income above $117,000 is completely ignored, so a person earning $1,000,000 will pay a 2.2% tax rate in 2014 and person earning five-figures will pay a 12.4% rate. To put it another way, a millionaire finishes paying her Social Security taxes by mid-February (at the latest) while the average American pays those taxes all year long.

Currently, there is a funding gap, which is often overstated as a “crisis.” Based on the Social Security Administration’s own predictions, only about three-quarters of benefits can be paid after 2033. Poor planning regarding the retirement of the Baby Boomers did not cause this gap. In preparation for the retirement of the Baby Boomers, we amended Social Security during the 1970s and 1980s; their retirement is almost entirely funded. This lapse (“the crisis”) is directly linked to the unintended consequences of reforming the taxable earnings cap in the 1970s.

Since 1975, Congress has linked annual cap increases to the average growth in wages. Post-World War II wage growth has consistently favored higher earners, who already had total incomes above the cap. This led to two disturbing trends, the first of which is shown in this chart, taken directly from the Social Security Administration’s website:

 

 

As seen here, the cap used to reduce taxes for many more Americans, but since the 1970s it's leveled out from reducing taxes for the top 15% to helping just the top 6%, establishing its status as a tool for the mega-rich to avoid paying taxes. Since the wealthiest Americans have benefitted most from wage growth in recent years, the amount of income that is untaxable for Social Security purposes has increased from 10% to 17% since 1975. In essence, the funding gap is a result of an antiquated and poorly calculated tax break that allows the wealthiest Americans to avoid paying their fair share.  

Social Security can remain in perpetuity if we scrap the cap. Historically, regular adjustments have been applied to program to ensure its continued solvency, and this obvious change should be no different.

Millennials: I urge you look more deeply into this issue and better understand the facts as the debate continues. Most of the money that our grandparents use to pay their bills comes from Social Security, so simply letting the program crumble would have disastrous effects. As a generation, we are far less likely to have union-backed pensions and extra money for savings. Fixing Social Security could be more necessary for our generation’s retirement stability than any before us.

Brian Lamberta is an urban studies and public policy student at the CUNY Macaulay Honors College at Hunter College and currently serves as the Northeast Regional Communications Coordinator for the Roosevelt Institute | Campus Network.

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Daily Digest - April 8: Equal Pay Still Isn't a Reality

Apr 8, 2014Rachel Goldfarb

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Why the GOP is Wrong About the Pay Gap (MSNBC)

With President Obama signing executive orders to fight the pay gap on Equal Pay Day, Irin Carmon lays out the shortcomings in the current system for fighting pay discrimination.

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Why the GOP is Wrong About the Pay Gap (MSNBC)

With President Obama signing executive orders to fight the pay gap on Equal Pay Day, Irin Carmon lays out the shortcomings in the current system for fighting pay discrimination.

Cities Advance Their Fight Against Rising Inequality (NYT)

Cities are working to fight inequality locally because they aren't willing to wait on the federal government, writes Annie Lowrey. Seattle, which is debating a $15-an-hour minimum wage, is a prime example.

  • Roosevelt Take: Roosevelt Institute President and CEO Felicia Wong gave the closing remarks at Seattle's Income Inequality Symposium on March 27.

Maryland Set to Increase Its Minimum Wage to $10.10 by 2018 (WaPo)

Jenna Johnson reports on the final agreement on the minimum wage in the Maryland legislature. Maryland is the second state to take President Obama's advice and lead the charge for a $10.10 minimum wage.

Congress May Extend Corporate Tax Breaks But Not Unemployment Benefits (National Priorities Project)

Mattea Kramer points out a case of classic Washington illogic: Congress is preparing to extend corporate tax breaks worth $700 billion, but won't extend unemployment insurance because it would add $10 billion to the deficit.

GOP Grapples With The Unsettling Fear That Obamacare May Succeed (TPM)

Sahil Kapur says the 7 million Americans and potential voters who registered for insurance on the exchanges during open enrollment create a challenge for Republican candidates, whose base still supports repeal.

Yes, Rubio's Antipoverty Plan Would Cut Benefits to Working Parents (TNR)

Danny Vinik writes that it's mathematically impossible for Senator Rubio's plan to increase benefits for childless working adults and remain deficit-neutral, as his office has claimed it will, without reducing benefits to parents.

Workers on the Edge (TAP)

David Bensman looks at the difficulties faced by workers whose employers misclassify them as independent contractors. Employers do this to avoid paying workers' compensation, overtime, and even some taxes.

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Labor Law for All Workers: Empowering Workers to Challenge Corporate Decision Making

Apr 4, 2014Richard Kirsch

This is the sixth and last in a series of posts summarizing a new Roosevelt Institute report by Senior Fellow Richard Kirsch, entitled "The Future of Work in America: Policies to Empower American Workers to Ensure Prosperity for All." The report provides a short history of how the rise and decline of unions and then explores reforms in labor policy to empower American workers to organize unions and rebuild the middle class.  Today’s post outlines possible policy solut

This is the sixth and last in a series of posts summarizing a new Roosevelt Institute report by Senior Fellow Richard Kirsch, entitled "The Future of Work in America: Policies to Empower American Workers to Ensure Prosperity for All." The report provides a short history of how the rise and decline of unions and then explores reforms in labor policy to empower American workers to organize unions and rebuild the middle class.  Today’s post outlines possible policy solutions to several major challenges to organizing workers in today’s economy. Over the next year, the Future of Work project will be exploring many of these ideas in depth. Their inclusion here is to begin surfacing ideas, rather than as final recommendations for reform.

If we are to give American workers the ability to bargain for a fair share of the wealth they create, we need strengthen labor law – as discussed in my last post – and bring in 34 millions workers (one-in-four) who are now excluded from the National Labor Relations Act.  These include domestic workers, farmworkers, front-line workers with minimum supervisory responsibilities, and public employees. The law should also be extended to include many workers now considered “independent contractors, ” even though an employer effectively determines their pay and working conditions. Examples range from truck drivers and cab drivers to adjunct faculty.

Some of the most innovative and effective organizing of low-wage workers is being done by new types of worker organizations. Worker centers and other groups can and often do perform public services, such as job training, occupational safety and health training, monitoring compliance with labor laws and enrolling workers in a variety of public programs. Government funding should be awarded to the worker groups for these services. Public entities could also bargain directly with worker groups, such as those representing home health care workers. And when government directly or indirectly pays for workers – for example home health care workers are funded by Medicare and Medicaid, – it should require that workers have decent wages and benefits, and provide sufficient funding.

We should also imagine broadening the scope of traditional labor law in the United States, to challenge traditional corporate prerogatives in the economy. When corporate growth comes at the expense of workers, it slows down the economy, because workers have less to spend. Corporations hurt communities when they relocate to seek lower paid workforces and lower taxes, or lobby against worker protections. When corporations lobby for lower taxes, they shirk their responsibility to pay for public services – from the roads on which they transport their goods, to the schools that educate their workers – resulting in deteriorating services and higher taxes on individuals and other businesses that do not get tax breaks.

Organized workers can serve as a powerful antidote to the concentration of corporate power. The law should block corporations from transferring jobs from unionized to non-unionized facilities and from making long-term investment decisions that modernize non-union facilities at the expense of union facilities. Under current law, these practices are banned only when the NLRB can prove that the employer was motivated by anti-union bias, a high bar that is difficult to reach.

The law should require unionized employers to recognize the union as the representative of new workers at any new facilities that the employer establishes or acquires. Unionized employers should not be allowed to close their business or specific facilities without first offering them for sale on the market. Bankruptcy courts should not be able to change union contracts without permission from the union.

The scope of subjects over which employers are currently required to bargain with their employees could be expanded to a number of other subjects that impact workers and communities, including the introduction of new products, decisions to invest in new facilities, pricing, and marketing. In that way, the welfare of workers - not just the interests of shareholders and executives – would be considered in business decisions. Strikes could also be allowed over a broader range of corporate policies, including decisions that impact communities and consumers.

Workers could also be given more of a role in corporate decision-making by requiring employers to allow the formation of “works councils,” an organizational form common in European countries. Works councils are established jointly by employers and worker organizations to represent workers in decisions in the workplace, ranging from personnel and management decisions to policies governing working conditions and major investments and locations. The current provisions in the NLRA, which are designed to block the formation of employer-controlled unions, may need to be amended to clarify that works councils may be set up when the workers approve of the councils and are not objectively dominated by the employer. Another measure would require that corporate boards of directors include representatives of unions, who would have full access to all corporate data.

Local, state, and federal governments could leverage public contracts and subsidies to require employers to comply with workers’ rights to organize. For example, they could prohibit employers from running anti-union campaigns and they could require the recognition of card check elections or other forms of establishing majority support. Government could also require that firms that receive public contracts and subsidies meet standards for pay and benefits, as President Obama has done with his recent executive order establishing a $10.10 minimum wage for workers of federal government contractors.

I’ll conclude with an observation about the politics of the variety of purposely-ambitious policy ideas I’ve outlined in the last two posts in this series. Good ideas can play a key role in organizing workers and in the other ways of making change. It is much easier to get where you want to go if you know where you want to go. Good ideas give people hope that there can be a better world and help them see the way forward.

But the power to win these policies will come through organizing people at work and in their communities, through changing culture and the public’s understanding of the importance of organized workers in moving the economy forward. The most important of these will be organizing workers to demand that they receive a fair share of the wealth they help create.

We hope that the ideas and discussion generated by the Future of Work in America will inspire Americans to ensure that every job respects the dignity and value of every worker, as we build an America of broadly shared prosperity.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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Labor Law That Would Support Organizing in Today’s Economy

Apr 3, 2014Richard Kirsch

This is the fifth in a series of posts summarizing a new Roosevelt Institute paper report by Senior Fellow Richard Kirsch, entitled the "The Future of Work in America: Policies to Empower American Workers for and Ensure Prosperity for All." The paper report provides a short history of how the rise and decline of unions and then explores reforms in labor policy to empower American workers to organize unions and rebuild the middle class.

This is the fifth in a series of posts summarizing a new Roosevelt Institute paper report by Senior Fellow Richard Kirsch, entitled the "The Future of Work in America: Policies to Empower American Workers for and Ensure Prosperity for All." The paper report provides a short history of how the rise and decline of unions and then explores reforms in labor policy to empower American workers to organize unions and rebuild the middle class. Today’s post outlines possible policy solutions to several major challenges to organizing workers in today’s economy. Over the next year, the Future of Work project will be exploring many of these ideas in depth. Their inclusion here is to begin surfacing ideas, rather than as final recommendations for reform.

For decades, organized labor has supported federal legislation that aims to correct the imbalances in the NLRANational Labor Relations Act (NLRA), which favor employers and block unionization. The most recent push was for the Employee Free Choice Act (EFCA), which President Obama supported when he ran in 2008. However, in the face of threatened filibuster in the Senate by Republicans and a handful of Democrats, the President never made the issue a priority.

The list of potential reforms to the NLRA is as long as the law’s weaknesses. The top priority inof the EFCA was requiring employers to recognize a union once a majority of workers in the workplace had signed a card supporting the union. Card check elections could be expanded to include mail ballots and confidential on-line ballots as methods for demonstrating support from a majority of workers.

Other potential policies focus on leveling the playing field in union elections. Employers could be required to allow union representatives to have access to workers on the employer’s premises and be given equal time to speak to employees, when equal to the time employers spend campaigning against unionization.

Other reforms would create meaningful disincentives for employers, such as substantial penalties for retaliating against workers, rather than the current virtually meaningless penalty of requiring employers to provide back pay. Employers could also be prohibited from hiring replacement workers during a strike or lockout. Indeed, lockouts could be outlawed altogether.

While the reforms above are aimed at correcting long-established imbalances in labor law, other polices would tackle a big challenge in today’s economy. The nation’s biggest employers, fast-food chains and big box stores, have thousands of locations, each with a relatively small number of workers. Organizing these huge employers could be facilitated by allowing bargaining at multiple worksites. This would give unions the right to define the boundaries of bargaining units, either combining the units that exist within a single corporation or bringing together workers who labor for multiple employers within the same industry.

Another approach would require the creation of multi-employer consortia for the purposes of bargaining, allowing for workers to organize for better wages and working conditions in an entire industry.

Another policy would expand the use of hiring halls to a number of industries, potentially modeled after the construction industry. In construction, union members typically work on short-term jobs for multiple employers. These construction workers are hired through union hiring halls, and they receive health and retirement benefits from a multi-employer insurance fund administered jointly with the union.

To build on this model, employers in other industries could be required to hire workers through hiring halls, run by worker organizations. Employers would be required to pay into a fund run by the worker organizations, which would administer portable benefits - – including health coverage, retirement accounts, and earned sick days, family leave, and vacation - – earned by individual workers through their work with multiple employers,

Another transformational policy would be to end the requirement that a union win majority recognition in a given bargaining, with the responsibility to represent all the workers in that unit. Instead, unions would could be allowed to represent only those workers who choose to join the union. Members-only unions could operate across numerous employers within an industry, within a region or across a supply chain. Repealing exclusive representation would allow members-only unions to collectively bargain for their members and to represent only their members in grievances with their employers. A hybrid system would allow members-only unions to function until such time that a majority of workers vote to establish a union with the responsibility of exclusive representation.

In today’s economy, many workers are employed by companies that are largely or wholly dependent on huge companies that drive national and global supply chains. Labor policies must enable workers to seek decent wages and working conditions from those big companies, even if they do not work for them directly.

Companies like Walmart often contract with warehouse companies that almost exclusively handle Walmart-bound products. Policy changes to hold a dominant employer accountable for the companies that it effectively controls, would make a company like Walmart accountable for the conditions in those warehouses and require them to bargain with the warehouse workers. Similarly, it is common in the garment industry for a major retailer to require garment factories to produce items to the retailer’s specifications. The major company would be held accountable to the workers in those subcontracted garment factories. The dominant employer would be responsible if the controlled company violates labor laws, including labor standards, worker organizing and occupational safety and health protections.

Another approach would be to address the now-common practice of employers misclassifying workers as “independent contractors” in order to reduce compensation costs to employees and to exclude those workers from federal labor law protections. If workers are misclassified, all of the employers up the supply chain could be held legally responsible. Anti-trust and labor law should be changed to remove any barriers to worker organizations reaching agreements with a dominant employer that would apply to other firms in the supply chain.

Restoring the right to organize boycotts or strikes of companies in the supply chain, would be another tool for unions to pressure companies upstream or downstream from the company being organized.

Taken together, these measures would level the playing field for workers who now face a huge economic and legal imbalance as they seek a fair share of the enormous wealth being produced by huge, global employers.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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Daily Digest - April 2: Winning the Fight Against Inequality

Apr 2, 2014Rachel Goldfarb

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5 Facts About Women’s History That Will Keep You Fighting (MTV Act)

Danica Davidson talks to Roosevelt Institute Senior Fellow Ellen Chesler about some of the most incredible accomplishments in women's history and the still-unfinished work of the feminist movement.

Click here to receive the Daily Digest via email.

5 Facts About Women’s History That Will Keep You Fighting (MTV Act)

Danica Davidson talks to Roosevelt Institute Senior Fellow Ellen Chesler about some of the most incredible accomplishments in women's history and the still-unfinished work of the feminist movement.

Paul Ryan’s Budget: Even More Austerity (MSNBC)

Cuts to Medicare and Medicaid will get more attention, but Suzy Khimm points out that Paul Ryan has proposed dramatic cuts to discretionary spending, including Pell grants and other programs targeted at low-income communities.

The Myth of Working Your Way Through College (The Atlantic)

A graduate student at Michigan State University has examined the data, reports Svati Kirsten Narula, and the costs of a year's tuition alone now exceed what a student could make working full-time at minimum wage.

Good News! Janet Yellen Speaks English, Not Fedspeak (The Nation)

William Greider praises the new Federal Reserve chair for her clarity when speaking to the public about the economy. He says she didn't dumb anything down while asserting the Fed's plans to support job creation.

New on Next New Deal

Why Inequality Matters and What Can Be Done About It

In his remarks to the Senate Budget Committee yesterday, Roosevelt Institute Chief Economist Joseph Stiglitz discussed the relationship between policy and inequality, calling on the senators to take action.

The Challenges to Organizing Workers in Today's Economy

In the fourth post in his series on his new report on labor reform, Roosevelt Institute Senior Fellow Richard Kirsch lays out the difficulties facing labor organizing today.

Reducing Flood Risks is Worth the Effort – and the Savings

Melia Ungson, Roosevelt Institute | Campus Network's Senior Fellow for Energy and Environment, writes about the Community Rating System, a program that encourages communities to reduce flood risks in exchange for lower insurance premiums.

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Stiglitz: Why Inequality Matters and What Can Be Done About It

Apr 1, 2014Joseph Stiglitz

Roosevelt Institute Senior Fellow and Chief Economist Joseph Stiglitz will speak before the Senate Budget Committee today on the topic of "Opportunity, Mobility, and Inequality in Today's Economy." His prepared remarks are below. Click here to download all of the statements from the hearing.

Roosevelt Institute Senior Fellow and Chief Economist Joseph Stiglitz will speak before the Senate Budget Committee today on the topic of "Opportunity, Mobility, and Inequality in Today's Economy." His prepared remarks are below. Click here to download all of the statements from the hearing.

It is a great pleasure for me to discuss with you one of the critical issues facing our country, its growing inequality, the effect it is having on our economy, and the policies that we might undertake to alleviate it. America has achieved the distinction of becoming the country with the highest level of income inequality among the advanced countries. While there is no single number that can depict all aspects of society’s inequality, matters have become worse in every dimension: more money goes to the top (more than a fifth of all income goes to the top 1%), more people are in poverty at the bottom, and the middle class—long the core strength of our society—has seen its income stagnate. Median household income, adjusted for inflation, today is lower than it was in 1989, a quarter century ago.[1] An economy in which most citizens see no progress, year after year, is an economy that is failing to perform in the way it should. Indeed, there is a vicious circle: our high inequality is one of the major contributing factors to our weak economy and our low growth.

As disturbing as the data on the growing inequality in income are, those that describe the other dimensions of America’s inequality are even worse: inequalities in wealth are even greater than income, and there are marked inequalities in health, reflected in differences, for instance, in life expectancy. But perhaps the most invidious aspect of US inequality is the inequality of opportunity. America has become the advanced country not only with the highest level of inequality, but is among those with the least equality of opportunity—the statistics show that the American dream is a myth; that the life prospects of a young American are more dependent on the income and education of his parents than in other developed countries. We have betrayed one of our most fundamental values. And the result is that we are wasting our most valuable resource, our human resources: millions of those at the bottom are not able to live up to their potential.

This morning, I want to make eight observations concerning this inequality. The first is that this inequality is largely a result of policies—of what we do and don’t do. The laws of economics are universal: the fact that in some countries there is so much less inequality and so much more equality of opportunity, the fact that in some countries inequality is not increasing—it is actually decreasing—is not because they have different laws of economics. Every aspect of our economic, legal, and social frameworks helps shape our inequality: from our education system and how we finance it, to our health system, to our tax laws, to our laws governing bankruptcy, corporate governance, the functioning of our financial system, to our anti-trust laws. In virtually every domain, we have made decisions that help enrich the top at the expense of the rest.

The second observation is that much of the inequality at the top can’t be justified as “just deserts” for the large contributions that these individuals have made. If we look at those at the top, they are not those who have made the major innovations that have transformed our economy and society; they are not the discoverers of DNA, the laser, the transistor; not the brilliant individuals who made the discoveries without which we would not have had the modern computer. Disproportionately, they are those who have excelled in rent seeking, in wealth appropriation, in figuring out how to get a larger share of the nation’s pie, rather than enhancing the size of that pie. (Such rent seeking activity typically actually results in the size of the economic pie shrinking from what it otherwise would be.) Among the most notable of these are, of course, those in the financial sector, who made their wealth by market manipulation, by engaging in abusive credit card practices, predatory lending, moving money from the bottom and middle of the income pyramid to the top. So too, a monopolist makes his money by contracting output from what it otherwise would be, not by expanding it.

Thirdly, the idea that one shouldn’t worry about inequality because everyone will benefit as money trickles down, has been thoroughly discredited. In some ways, I wish it were true, for if it were, it would mean that the average American would be doing very well today, because we have thrown so much money at the top. But the statistics I gave a few minutes ago shows that it is not true: while the top has been doing very well, the rest has been stagnating.

Fourthly, this recession—while in no small measure caused by the financial sector which itself is responsible for so much of our inequality today—has in turn made inequality so much worse. 95% of the gains since the so-called recovery have gone to the top 1%.

Fifth, it is not the case that our economy needs this inequality to continue to grow. One of the popular misconceptions is that those at the top are the job creators; and giving more money to them will thus create more jobs. America is full of creative entrepreneurial people throughout the income distribution. What creates jobs is demand: when there is demand, America’s firms (especially if we can get our financial system to work in the way it should, providing credit to small and medium-sized enterprises) will create the jobs to satisfy that demand. And unfortunately, given our distorted tax system, for too many at the top, there are incentives to destroy jobs by moving them abroad. This growing inequality is in fact weakening demand—one of the reasons that inequality is bad for economic performance.

Sixth, we pay a high price for this inequality, in terms of our democracy and nature of our society. A divided society is different—it doesn't function as well. Our democracy is undermined, as economic inequality inevitably translates into political inequality. I describe in my book how the outcomes of America’s politics are increasingly better described as the result of a system not of one person one vote but of one dollar one vote. One of the prices we pay for the extremes to which inequality has grown and the nature of inequality in America—both inequality in outcomes and inequalities of opportunities—is that we have a weaker economy. Greater inequality leads to lower growth and more instability. These ideas now have become mainstream: even the IMF has embraced them. We used to think of there being a trade-off: we could achieve more equality, but only at the expense of giving up on overall economic performance. Now we realize that, especially given the extremes of inequality achieved in the US and the manner in which it is generated, greater equality and improved economic performance are complements.

This is especially true if we focus on appropriate measures of growth, focusing not on what is happening on average, or to those at the top, but how the economy is performing for the typical American, reflected for instance in median income. For too many—perhaps even a majority—the American economy has not been delivering. And if our economy is not delivering, it not only hurts our people, it undermines our position of leadership in the world: will other countries want to emulate an economic system in which most individuals’ incomes are simply stagnating?

We pay a price not only in terms of a weak economy today, but lower growth in the future. With nearly one in four American children growing up in poverty,[2] many of whom face a lack of access to adequate nutrition and education, the country’s long-term prospects are being put into jeopardy.

The seventh observation is that the weaknesses in our economy have important budgetary implications. The budget deficits of recent years are a result of our weak economy, not the other way around. If we had more robust growth, our budgetary situation would be far improved. That’s why investments in decreasing inequality and increasing equality of opportunity make sense not only for our economy, but for our budget. When we invest in our children, the asset side of our country’s balance sheet goes up, even more than the liability set: any business would see that its net worth is increased. In the long run, even looking narrowly on the liability side of the balance sheet, it will be improved, as these young people earn higher incomes and contribute more to the tax base.

The final observation I want to make is that the role of policy in creating inequality means there is a glimmer of hope. Policy created the problem, and it can help get us out of it. There are policies that could reduce the extremes of inequality and increase opportunity—enabling our country to live up to the values to which it aspires. There is no magic bullet, but there are a host of policies that would make a difference. In the last chapter of my book, The Price of Inequality, I outline 21 such policies, affecting both the distribution of income before taxes and transfers and after. We need to move more people out of poverty, strengthen the middle class, and curb the excesses at the top. Most of the policies are familiar: more support for education, including pre-school; increasing the minimum wage; strengthening the earned-income tax credit; giving more voice to workers in the workplace, including through unions; more effective enforcement of anti-discrimination laws; better corporate governance, to curb the abuses of CEO pay; better financial sector regulations, to curb not just market manipulation and excessive speculative activity, but also predatory lending and abusive credit card practices; better anti-trust laws, and better enforcement of the laws we have; and a fairer tax system—one that does not reward speculators or those that take advantage of off-shore tax havens with tax rates lower than honest Americans who work for a living. If we are to avoid the creation of a new plutocracy in the country, we have to retain a good system of inheritance and estate taxation, and ensure that it is effectively enforced. We need to make sure that everyone who has the potential to go to college can do so, no matter what the income of his parents—and to do so without undertaking crushing loans. We stand out among advanced countries not only in our level of inequality, but also on how we treat student loans in our bankruptcy loans. A rich person borrowing to buy a yacht can get a fresh start, and have his loans forgiven; not so for a poor student striving to get ahead. The special provisions for capital gains and dividends not only distort the economy, but, with the vast majority of the benefits going to the very top, increase inequality—at the same time that they impose enormous budgetary costs: $2 trillion dollars over the next ten years, according to the CBO.[3] While the elimination of the special provisions for capital gains and dividends is the most obvious reform in the tax code that would improve inequality and raise substantial amounts of revenues, there are many others that I discuss in the attached paper which I would like to submit for the record.

A final point is that we must be careful of how we measure our progress. If we use the wrong metrics, we will strive for the wrong things. Economic growth as measured by GDP is not enough—there is a growing global consensus that GDP does not provide a good measure of overall economic performance. What matters is whether growth is sustainable, and whether most citizens see their living standards rising year after year. This is the central message of the International Commission on the Measurement of Economic Performance and Social Progress, which I chaired. Since the beginning of the new millennium, our economy has clearly not been performing in either of these dimensions. But the problems in our economy have been manifest for longer. As I have emphasized, a key factor underlying America’s economic problems today is its growing inequality and the low level of opportunity.

In the past, when our country reached these extremes of inequality, at the end of the 19th century, in the gilded age, or in the Roaring 20s, it pulled back from the brink. It enacted policies and programs that provided hope that the American dream could return to being a reality.

We are now at one of these pivotal points in history. I hope we once again will make the right decisions. You and your committee, in the budget decisions that you will be making, play a vital role in setting the country in the right direction.


[1] For large segments of the American population, matters are even worse. The inflation adjusted median income of a male worker with only a high school degree has fallen by 47% from 1969 to 2009. For additional data sources and explanation of these trends, see my “Reforming Taxation to Promote Growth and Equity,” forthcoming as a Roosevelt institute working paper, which is submitted along with this written testimony. Inequality is discussed in even greater detail in my 2012 book, The Price of Inequality: How Today’s Divided Society Endangers Our Future, New York: W.W. Norton.

[3] See Congressional Budget Office, 2013, The Distribution of Major Tax Expenditures in the Individual Income Tax System, May, p.31, available at http://cbo.gov/sites/default/files/cbofiles/attachments/TaxExpenditures_One-Column.pdf (accessed March 28, 2014). This figure includes the effects of the “step-up of basis at death” provision, which reduces the taxes that heirs pay on capital gains. Not including this provision, the ten-year budgetary cost of preferential treatment for capital gains and dividends is $1.34 trillion. 

Joseph Stiglitz is a Senior Fellow and Chief Economist for the Roosevelt Institute. He is a Nobel laureate in economics and University Professor at Columbia University.

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