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ECONOMIC POLICIES, ANALYSIS, AND RESOURCES

The Economic and Trade Policy Domain tracks and reports on policies that deal with budget, taxation, and finance issues. The domain tracks policies emanating from the White House, Congress, the Department of Commerce and the Department of Treasury.

Latest Economic and Trade Policy Posts

The Crisis in Worker Wages

Brief #82—Economics
By Rosalind Gottfried
Fair wages, universal healthcare, paid parental leave, paid sick leave, paid annual leave.  These should be the minimal components of employment.  It is not rocket science. These things are attainable and would help both the employer and the employee. 

read more

The Crisis in Worker Wages

Brief #82—Economics
By Rosalind Gottfried
Fair wages, universal healthcare, paid parental leave, paid sick leave, paid annual leave.  These should be the minimal components of employment.  It is not rocket science. These things are attainable and would help both the employer and the employee.

read more

The Potential Benefits of a Guaranteed Minimum Income

Brief #80—Economics
ByRosalind Gottfried
The idea of a minimum guaranteed income (MGI) dates back to Thomas  Paine and the 18th century and has been promoted by such diverse people as Martin Luther King, Jr, President Nixon, economist Milton Friedman, and recent presidential candidate Andrew Yang. Nancy Pelosi has suggested that such a program should exist, at least till the end of the current pandemic, and two thirds of the House Democratic Caucus agrees. 

read more

Is the CARES Act Effective?

Brief #79—Economics
By Rosalind Gottfried
The effectiveness of the late March 2.3 trillion dollar Coronavirus Aid, Relief, and Economic Security (CARES), Act remains hotly debated.  It is the most comprehensive act of government support since the depression, and its cost is similar to expenditures characterizing wartime. 

read more
What Is the Significance of the 32.9% Second Quarter GDP Drop?

What Is the Significance of the 32.9% Second Quarter GDP Drop?

Rosalind Gottfried

Economics

August 2, 2020

Policy

The headline 32.9% drop in the Gross Domestic Product (GDP) for the second quarter is stunning, but what does it actually signify?  A Dow Jones survey had predicted a drop of 34.7%.  The GDP represents all the purchases made in the US plus the net exports, government spending, and investments made in the period discussed.  This figure actually indicates what the annual figure would be if the same rate occurred for the entire year.  If this really reflects the annual rate, it will be far worse than the worst year of the depression which was a 12.9% drop in 1932.

The second quarter represents activities from April through June.  The actual figure for the second quarter, compared to the same quarter last year, is 9.5%.  The largest quarterly drop was 10% in 1958.  How does this translate in behavioral terms?  Overall personal consumption, the largest chunk of the GDP, was down 10%.  In contrast, expenditures for the unemployed population rose by 10%.  This is likely attributable to the generous benefits subsidized by the $600 weekly payment provided by the federal government.  Low income workers likely could make purchases of essential goods they had put off for lack of funds.  Spending for healthcare, clothing, footwear was down as was inventory investment for motor vehicle dealerships, equipment, and personal housing.  Prices for domestic purchases fell 1.5% and for personal care expenditures 1.9%, indicating some deflation. Exports were down by 9.4% and offset by increases in imports of 10%.

The last week of July saw 1.4 million filings for new unemployment claims.  New claims filed by gig and self-employed workers were at 830,000 for the same week.  This continued an upward trend for the past two weeks, down from 15 weeks previously where the claims had decreased after the initial virus swelling.  Nevertheless, claims numbered over one million for the past 19 weeks.  Research indicates a spreading pessimism as 47% of the unemployed expect their jobs to be permanently lost while in April 78% expected to return to their jobs.  Unemployment for women, particularly women of color, is really at risk partially due to the types of jobs they have had and also as a consequence of lack of childcare.

Stocks fell in response to the data though the tech industry has had explosive growth.  Facebook, for example, reports an 11% uptake in revenue compared to the same quarter in 2019.  They report a profit increase of 98%.  Three billion people use one of its apps regularly and 2.47 billion do so daily.  This use data is an increase of 12% from a year ago and likely reflects the greater dependence on tech due to the sheltering in place mandates. June saw a grass roots campaign Stop the Hate for Profit to pressure advertisers to pull back ads to protest hate speech on the sites.  Sources admitted that Facebook did see an impact in their July figures as a consequence of the campaign.  Zuckerberg, chief executive of Facebook, pledged to maintain his free speech policies in spite of the campaign.

Analysis

Most of the trends seen in the second quarter represent the dramatic impact of a full quarter of viral repercussions.  There was some mitigation in the reopening that occurred in June, much of which has been drawn back.  It is notable that spending went up only for the unemployed which has been attributed to the government payouts and unemployment aid.  These have not yet been renewed and Federal Covid-19  unemployment benefits  ended July 31st. The consequences of a failure to provide another stimulus package are imagined to be dire.  In order to divert the worst possible economic fallout another stimulus should be imminent and generous.  There should be more cash transfers to all low and moderate income; sustained generous federal aid for the unemployed; rent assistance; an eviction moratorium; subsidies for childcare and healthcare; and aid for schools and communities.  With appropriate planning the worst economic fallout can be averted.  The successes in the government programs of the European Union can be used as guides.

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Resistance Resources

Can the US Afford Not to Become a Nicer, Kinder Society?

Can the US Afford Not to Become a Nicer, Kinder Society?

Summary

Many feel work to be a citizen’s right as well as a personal source of income and satisfaction.  Recently US unemployment has been as high as 14.7% though some experts estimate it actually may be as high as 20%.  Labor force participation has fallen to 60.2%.  Job loss is not an equal opportunity trend.  It is well documented that low wage workers are suffering greater losses than professionally employed persons.  It also is undisputed that people of color, especially Latinos and African Americans have been hard hit by the pandemic as have women. Predictions regarding when the labor force will regain its pre-pandemic levels are fluid and growing worse with the recent virus  resurgence and the mandated school closings.  The future shape of work in American is going to change, possibly in good and bad ways.

The potential benefits for those who telecommute are enticing.  Greater flexibility in the workday; reduced or nonexistent commutes; less work associated costs such as clothes, gas, and meals; and cheaper rents/mortgages are among the most apparent.  Companies will benefit as well, saving up to $11,000 per employee expenses.  More people working remotely and at-home can have a detrimental effect on other sectors of society as these changes will cause concomitant losses in restaurant serves, retail, flying, personal services, and housecleaning.

For low wage workers the pandemic-induced economic downturn is likely to lead to fewer job opportunities and stagnant or decreased wages a pattern that has been prevalent for the past forty years.  Loss of jobs to automation, already a fear of the previous decade or more, may be accelerated.

But, perhaps the greatest economic  impact will be felt among the cohort of students who are attending high school in the era of the pandemic.It is predicted that the “at risk” populations of students of color and among low income students will suffer the greatest deprivations as a consequence to distance learning; they will lose more in educational advancement and will be more likely to drop out of schooling.  This will not only greatly impact their personal incomes but will have a significant impact on the overall economy.

McKinsey & Company has estimated that if students do not attend classes until January 2021, students with poor online instruction will loses an average of 7-11 months of skill development and those who receive no instruction will lose 12-14 months.  Those with adequate instruction will lag behind by 3-4 months compared to in-class instruction.  If classrooms are not reconvened for the spring term, the situation will be even worse.  Estimates suggest, for example, that 60% of low income students regularly log on to online instruction compared to 90% of high income students and some states have no mandated online coursework.   This will surely exacerbate current achievement gaps.  It is suggested that these achievement gaps will cost individuals the equivalent of a year’s salary over their lifetime. The cost to the economy will be about 110 billion dollars annually for the working years of the current cohort of students in high school.

In additional to lost wages, educational attainment is correlated with better health; reduced crime; decreases in incarceration; greater family stability; and increased political participation.  Addressing these deficiencies in a growing group of the population has not yet been defined in monetary terms but  we cannot afford to ignore these trends.

Policy

There are many suggestions of ways to ameliorate these issues.  For education, policy-makers need to  spend more money and create enrichment programs for students; provide greater opportunities for support, tutors, quiet workspaces; assure the necessary educational “infrastructure,” with satisfactory computers, internet access, study areas, desks, lighting, and good chairs.  Provide real skills learning and training for teachers  and mental health support for students, families, and instructors.  The federal government needs to step up to the plate and support these measures because the strain on states will make them unable to fully address these needs.

For employment, there are also many solutions, for example a living wage, daycare, adequate sick leave, family leave, and some safety measures will have real impacts.  For furloughed or unemployed workers, skills training for labor force re-entry should be a priority.

Congress must act quickly in a number of ways.  There should be a second, generous CARES act continuing unemployment aid for all including those usually ineligible; health insurance and healthcare for those who are newly or chronically uninsured; and paid sick leave and family leave with return employment. Essential societal needs, largely unaddressed in the first aid package, while profitable industries were receiving emergency aid, must be attended to.  These would include support for childcare; school and after school care; support for bargaining units for laborers; and interest free lending to support  infrastructure grsowth and job creation.  The resources are available; the will to garner them needs to be exercised over increasingly divisive bipartisan bickering.

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Resistance Resources

Can Women Afford to Work?

Can Women Afford to Work?

Rosalind Gottfried

Economics

July 13, 2020

Policy

There are more women working today than not though the peak year of labor force for women was 2000 (59.9%) down to 57.9% in January 2020.  At the turn of the century, with the upward trend in women’s labor force participation, many commentators thought women would soon surpass the rate of working men.  This did not occur and the 21st century has seen a slowdown in labor force engagement especially among women 25-54 years old, the prime span for work.  Other wealthy, and not so wealthy nations, experiencing an upward trend at the turn of the century continued to do so.  The US was alone in reversing this trend which was seen in as diverse nations as Japan, Latvia, and Poland.  Speculation regarding the uniqueness of the decrease in women’s participation in the labor force seems to directly lead to  the lack of  family friendly policies such as the absence of any guaranteed parental leave; the scarcity of paid sick leave; and perhaps most especially the failure to provide and national policy or access to quality, affordable daycare.

The average cost of US daycare ranges from $195 a week for in home daycare to $580 a week for nanny care.  These are national averages; the average expense in areas with a high cost of living can be greater.  Seventy one percent of families report spending 10% of their annual income on childcare.  It is no wonder that only 32% of women polled in 2012 stated that full time work is ideal.  There are not enough hours in the day to do it all and not enough dollars to pay for it all.  Much of the responsibility for childcare, and perhaps the desire to stay home, still lies with women even as some of the norms are changing.  On the average, men still make more than women so often it is more financially feasible for  women to take time off from the labor force.  Perhaps this will change with the growing attention to equitable wages for women and men, both within fields and across them.

In the absence of government subsidized daycare, as seen in all other Western countries, some companies have stepped up to offer daycare either on-site or with a partnered entity.  Traditionally companies have shied away from daycare seeing childcare as a personal responsibility and fearing the expense of creating a center and covering liability.  Research into companies offering childcare shows long term benefits in several areas.  With childcare available at work, absenteeism goes down; maternity leave is shortened; worker turnover decreases; morale increases; and productivity increases leading ultimately to financial gains in the companies.  One exception might be in the cost of daycare if not enough employees require its use.  There is also less anxiety among parents who get to visit with their children during the work day; spend travel time with the children; and are close by in case of emergency.  One weakness for parents is the issue of how to care for younger school age kids who require supervision outside of school hours.  Other benefits can be seen in the increases in women who can work in management, due to less time off and more support at work, and tax credits for the companies.  The glaring question is why is the US so reluctant to travel the path of most other nations and support working parents with subsidized, quality daycare?

Analysis

Abundant research points to the value of supporting children from disadvantaged backgrounds in the first five years.  The research shows that such support enhances high school graduation rates, college attendance, and adult income.  Yet there is no national policy supporting education in the early childhood and preschool years despite evidence that every dollar spent can save as much as $7.30 down the line.  Benefits do not accrue just to individuals.  It is estimated that if the US had family friendly policies characteristic of other industrialized countries, women’s participation in the labor force would increase by 7% and the economy would see gains of 5%.

As if the childcare situation is not bad enough, as many working parents know, the era of the coronavirus has exacerbated many of the weaknesses in the system.  Many daycares have been shuttered and a significant number may not reopen.  It has been suggested that this is more likely to occur with Black owned businesses and those catering to the low income groups.  Parents who will need to return to work will have no place to put their children.  For some parents who have been paying to maintain their children’s space, the reopening of the facilities may not actually occur or the environment may not be aligned with safety measures recommended for hygiene and social distancing making the choice to work more precarious.

There is a ray of hope in that Congress is considering several bills to address issues in daycare.  Some states are stepping up. Illinois is offering state supported childcare to all essential workers in the areas of human services, healthcare, government and infrastructure regardless of income.  Maybe more will follow suit.

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Resistance Resources

The Crisis in Worker Wages

The Crisis in Worker Wages

July 8, 2020

Policy

Fair wages, universal healthcare, paid parental leave, paid sick leave, paid annual leave.  These should be the minimal components of employment.  It is not rocket science. These things are attainable and would help both the employer and the employee.

A much quoted study, several years ago, showed that 40% of people in the US could not readily cover a $400 emergency expense.  Americans are strapped for cash.  Is the economy bad?  Prior to the Covid-19 virus, the economy was thriving in the sense that corporations were turning high profits and paying little corporate tax while providing a very low minimum wage to their workers.  Most workers’ wages were falling and/or stagnant when controlling for inflation.  Increasingly, American workers were not participating in the elevated profits and productivity of the American economy.

In terms of wages, it has been shown that many low wage workers were depending on government subsidies for healthcare and/or food while their employers lined their pockets.  The current stimulus, adopted to support the laid off workers, contains weekly payments of $600 provided by the federal government through July.  This can be added to the state payments the worker is receiving, which vary by state but are less than the full wages.  A recent NY Times article showed that for some workers this resulted in an average hourly wage of $21, more money than the $12 many workers averaged.  Fully 68% of those receiving unemployment benefits were making more than they did when they were working.

Analysis

The article’s authors point out that states mandate that a recipient of unemployment benefits must take a job offered that is comparable to their former job even if they will get less income than they are getting while unemployed.  The authors suggest the recipients should be able to turn down such jobs in favor of finding one equal to their unemployment payments.  They suggest this could result in workers negotiating for higher wages rather than the recent data which shows that wages for returning workers are decreasing.  They further suggest that the federal government make up the gap between a job’s wages and a $21 an hour wage representing a fair wage guarantee.  This would be one tactic to take.  Other suggestions would see the employer paying a fairer wage, at its own expense, and research shows this could be done without a dramatic decline in profit.  Only a very few small businesses would have to cut employees, or reduce hours, if the minimum wage was increased.  An additional source of revenue for  workers could come from a subsidy achieved by raising corporate taxes which currently are at all-time low.  Finally, unionization significantly aids the well-being of employees and it stands at an all-time low.  The current rate is 6.2% in the private sphere and 33.6% in the public sector.  The corona virus has driven the country to the edge of indecency with its meager wages and poor or nonexistent benefits.  To create greater economic equity, as well as quality of life,  politicians must address the deterioration of the measures which provide for the public good.  A thriving working and middle class is widely held to be beneficial for consumers and corporations and yet the nation is moving further from this reality.  Home ownership is good for business and is also on the decline, particularly among discriminated groups.  Creating a working  middle class which is economically viable is imperative to secure a thriving economy benefitting the increasing part of the population which lives on the edge.  Many economists, social scientists, and progressive writers support this view.  In addition, such job “benefits” as universal healthcare, paid parental and sick leave, annual leave, daycare subsidies, and tax relief must be made workers’ rights.  It seems only “fair.”

Learn More

Resistance Resources

The Crisis in Worker Wages

The Crisis in Worker Wages

Policy

Fair wages, universal healthcare, paid parental leave, paid sick leave, paid annual leave.  These should be the minimal components of employment.  It is not rocket science. These things are attainable and would help both the employer and the employee.

A much quoted study, several years ago, showed that 40% of people in the US could not readily cover a $400 emergency expense.  Americans are strapped for cash.  Is the economy bad?  Prior to the Covid-19 virus, the economy was thriving in the sense that corporations were turning high profits and paying little corporate tax while providing a very low minimum wage to their workers.  Most workers’ wages were falling and/or stagnant when controlling for inflation.  Increasingly, American workers were not participating in the elevated profits and productivity of the American economy.

In terms of wages, it has been shown that many low wage workers were depending on government subsidies for healthcare and/or food while their employers lined their pockets.  The current stimulus, adopted to support the laid off workers, contains weekly payments of $600 provided by the federal government through July.  This can be added to the state payments the worker is receiving, which vary by state but are less than the full wages.  A recent NY Times article showed that for some workers this resulted in an average hourly wage of $21, more money than the $12 many workers averaged.  Fully 68% of those receiving unemployment benefits were making more than they did when they were working.

Analysis

The article’s authors point out that states mandate that a recipient of unemployment benefits must take a job offered that is comparable to their former job even if they will get less income than they are getting while unemployed.  The authors suggest the recipients should be able to turn down such jobs in favor of finding one equal to their unemployment payments.  They suggest this could result in workers negotiating for higher wages rather than the recent data which shows that wages for returning workers are decreasing.  They further suggest that the federal government make up the gap between a job’s wages and a $21 an hour wage representing a fair wage guarantee.  This would be one tactic to take.  Other suggestions would see the employer paying a fairer wage, at its own expense, and research shows this could be done without a dramatic decline in profit.  Only a very few small businesses would have to cut employees, or reduce hours, if the minimum wage was increased.  An additional source of revenue for  workers could come from a subsidy achieved by raising corporate taxes which currently are at all-time low.  Finally, unionization significantly aids the well-being of employees and it stands at an all-time low.  The current rate is 6.2% in the private sphere and 33.6% in the public sector.  The corona virus has driven the country to the edge of indecency with its meager wages and poor or nonexistent benefits.  To create greater economic equity, as well as quality of life,  politicians must address the deterioration of the measures which provide for the public good.  A thriving working and middle class is widely held to be beneficial for consumers and corporations and yet the nation is moving further from this reality.  Home ownership is good for business and is also on the decline, particularly among discriminated groups.  Creating a working  middle class which is economically viable is imperative to secure a thriving economy benefitting the increasing part of the population which lives on the edge.  Many economists, social scientists, and progressive writers support this view.  In addition, such job “benefits” as universal healthcare, paid parental and sick leave, annual leave, daycare subsidies, and tax relief must be made workers’ rights.  It seems only “fair.”

Learn More

Resistance Resources

The Potential Benefits of a Guaranteed Minimum Income

The Potential Benefits of a Guaranteed Minimum Income

Policy

The idea of a minimum guaranteed income (MGI) dates back to Thomas  Paine and the 18th century and has been promoted by such diverse people as Martin Luther King, Jr, President Nixon, economist Milton Friedman, and recent presidential candidate Andrew Yang. Nancy Pelosi has suggested that such a program should exist, at least till the end of the current pandemic, and two thirds of the House Democratic Caucus agrees.  The idea of the payment, also called a Basic Income Grant, is that all Americans should achieve a certain level of financial stability and it proposes monthly payments to individuals and families could accomplish this.  The manner in which the program would be run has been the subject of serious debate.  Some proponents want a payment to all Americans with a tax structure in which the payment would be paid back to the government if a certain income level was attained.  Others suggest that it should be income qualified;  some suggesting it should only be paid to those under the poverty line while others suggest it can be a subsidy to people or families earning considerably more (100,000 for individuals and higher for families).

Supporters of the MGI suggest that it would have multiple benefits:  It eliminates extreme poverty; reduces government bureaucracy; subsidizes wages so that people can do work they want, regardless of the wages; it can help young couples start a family; pay for persons caretaking relatives; increase mental health by reducing stress; improve the economy by stabilizing it, especially in times of contraction; increase high school graduation; and compensate for jobs lost to automation (the single largest threat to jobs).  Opponents object saying that it is a disincentive to work; is a “handout” to the poor; will cause inflation; will not eliminate poverty; and could provide payments to all draining funds from the poor.  So far, in places where such programs have been tried, no negative effects have been reported.

Analysis

Finland instituted monthly payments to 2000 randomly selected persons, 25-58 years of age, in 2017-18; no one was allowed to opt out.  Payments were not means tested and there were no conditions imposed. In comparison to a large control group, the group receiving the payments worked more days than the control group and reported better financial security, mental health, and cognitive function.  Employment increased for families with children and for non-Finnish speakers.

In 2013 Switzerland had an unconditional basic income in its election and it was not supported, people feared negative outcomes.  In the 1970s a village in Canada instituted a GMI and positive impacts were reported.  Families received the equivalent of $16,000. Some of the grant was lost with wages but not dollar for dollar. Village families increased their long term savings; teenage boys stayed in school (instead of working to augment family income); women took longer maternity leaves; overall well-being improved with less hospitalizations, especially for mental health; small businesses were improved upon; children saw dentists; and more flexibility in work and caring for family was reported.

Some cities such as Stockton and Santa Monica CA have experimented with GMI and some Silicon valley philanthropists are promoting the idea, particularly as  a response to the increases in unemployment due to automation.

Stockton is a city with a diverse population and an average household income of about $46,000.  Participants in the GMI were drawn randomly from volunteers whose household income was under the city’s average.  No one spent money on frivolous purchases.  Money was used for emergences like car repairs and healthcare; 40% went to food, 25% to sales and merchandise, 12% to utilities.  The study was accomplished eight months into the 18 months of the project.  No research has yet been published on the whole experiment.

The recent crisis in the economy instigated by the corona virus not only has brought discussion of the GMI to the forefront, it has caused the illumination of the many areas of inequality in the US from housing, to healthcare, to income, to access to emergency resources.   There is some reason to be optimistic that a Democratic president will attend to these disparities.

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Resistance Resources

Is the CARES Act Effective?

Is the CARES Act Effective?

Policy

The effectiveness of the late March 2.3 trillion dollar Coronavirus Aid, Relief, and Economic Security (CARES), Act remains hotly debated.  It is the most comprehensive act of government support since the depression, and its cost is similar to expenditures characterizing wartime.  Many critics feel it did not go far enough in helping individuals and it actually missed the mark for propping up the most vulnerable businesses. Although voted unanimously in the House, some Republicans criticized the bill for recalling controversial government programs of the New Deal era.  Politicians moved in favor of the bill with the realization that something needed to be done quickly to help the unemployed and affected businesses.

On the individual level measures were taken regarding compensation for lost wages that were more generous than in usual circumstances.  These allowed gig workers and self-employed persons, typically ineligible for unemployment insurance, to collect at least half of their states compensation and 16 weeks of an additional weekly benefit of $600 at federal expense. Other laid off, or furloughed, workers also are eligible for the additional federal employment monies.  For lower wage workers, this income would amount to full replacement value of wages.  Some gig and self-employed workers, however, were excluded from the payments and so have no income.

The CARES Act also provided for cash payments to households of up to $1200 for individuals and $500 dollar per child.  These payments were based on income reported to the IRS but also excluded some of the most needy who did not file income taxes in 2019.  An estimated 30 million seniors, disabled, and veterans did not file taxes and are ineligible for cash payments unless they file, and free tax preparation aid was temporarily discontinued so it will be difficult for many to do so.  Another estimated 92 million did not file with direct deposit and consequently will not receive payment for months.  Some workers received no aid, such as low paid workers in healthcare and delivery who retained essential employment, though a quarter of whom make less than the federal poverty level.  While these programs are a step in the right direction they are time limited, rather than based on the ability of a person to return to full employment.  Additionally, some criticized the failure to provide more help to higher paid unemployed workers.  These two programs account for 550 million dollars of the CARES budget.

Another 350 billion dollars was allotted to a small business loan/forgiveness program. This program has perhaps suffered the most criticism.  Small businesses account for 44% of the Gross Domestic Product (GDP) and 49% of the private sector.  The money ran out in days and favored larger companies leaving many businesses with unfunded applications. Many of the unsupported were businesses with women or minority owners or in rural areas.    In order to qualify for loan forgiveness, the company has to spend 75% of its loan on payroll per SBA orders but the CARES act did not have that provision.  This put owners in a quandary, if they used 75% for payroll they could qualify for loan forgiveness but they were likely to be delinquent on rent, utilities, or paying vendors.  The CARES act distribution lacked oversight, opting for spending in the “pubic interest,” and lacking in any guidelines for specific rules. A small business, defined as having less than 500 employees, often did not receive aid while large corporations such as Ruth’s Hospitality Group and Shake Shack did (Shake Shack eventually returned their loan money).  These companies had tens of millions of dollars in annual profits.  The Act was criticized for securing shareholders’ interests over the financial and physical well-being of labor.  These programs also ran out of money, in days, and there were no provisions for automatic extensions or continued aid.  A second round of small business loans was better at hitting small businesses and provided for smaller grants to more businesses.  In this round, 61% who applied received loans.

Analysis

Some of the programs in the CARES act certainly have made a positive initial impact both for businesses and individuals but each program is limited by money and/or time.  Consequently, the  economic despair, brought on by the pandemic,  will be long lasting. In early June new legislation expanded the initial CARES act for small businesses.  There are three new programs.  One is called the Economic Injury Disaster Loan Assistance (EIDL) which lends money to small businesses and nonprofits with low interest rates and no forgiveness.  Another offers an extended Payroll Protection Program which gives varying amounts depending on several factors and has a 1% interest rate. Under specific circumstances, these loans can be forgiven if the money is utilized within 24 weeks of the loan’s origination.  Finally, there is the Main Street Lending Program which has three different levels of support based on the size of the company that can be as large as 15,000 employees with as much as five billion dollars in revenue.  Eligible companies must be able to meet their obligations for 90 days without facing bankruptcy.  These programs will address some of the deficiencies in the original CARES program. However the Main Street Lending Program has no oversight, and concern has been expressed that funds will be used to reward political allies of the administration.

For direct assistance to the individual, beyond short term relief from student debt obligations and mortgage loan relief, there is not much.  (Healthcare provisions in the CARES act are not addressed in this article and also are short term).  If the country is to reaffirm its ideals regarding the quality of life, there will need to be some long term programs to change the safety net for individuals and households and a different approach to small businesses focused on the long term health of companies considering the new economic and social realities.

Learn More

https://www.cnbc.com/2020/05/09/coronavirus-ppp-may-have-left-minority-business-owners-behind.html

https://www.epi.org/blog/despite-some-good-provisions-the-cares-act-has-glaring-flaws-and-falls-short-of-fully-protecting-workers-during-the-coronavirus-crisis/

https://www.forbes.com/sites/kathrynjudge/2020/04/20/the-design-flaw-at-the-heart-of-the-cares-act/#752bef26bede

https://thehill.com/opinion/white-house/493458-where-the-cares-act-went-wrong

https://www.tapinto.net/sections/government/articles/exclusive-rep-tom-malinowski-disappointed-by-the-failure-of-the-cares-act-to-help-small-businesses-55

https://rsmus.com/economics/coronavirus-resource-center/cares-act-expands-access-to-loans-for-small-and-midsize-business.html

Resistance Resources

https://www.fhfa.gov/Homeownersbuyer/MortgageAssistance/Pages/Coronavirus-Assistance-Information.aspxC 

A government website with housing assistance information. 

The Gig Economy Looks Bleak

The Gig Economy Looks Bleak

June 11, 2020

Policy

In recent years gig workers, acting as independent contractors, entered the gig economy as a means to supplement income, promote flexibility, and even be a secure alternative to regular employment.  Employers took advantage of the cheap available labor.  The workers pay the price in multiple ways and the early potential of the gig option has been dissipating even before the fallout from the Covid-19.

For many workers the pandemic has meant the end of employment, or at least a significant reduction in wages and/or hours.  Its benefits, if they exist, have been limited to a very select few.  Under usual circumstances,  gig workers typically lacked job security; guaranteed minimum hours or wages; health insurance; sick leave; or any other benefits associated with regular employment. With the contracted economy, the demand for many of their services has fallen and the competition for the remaining ones has grown steeper.

Since the shelter in place mandate, 68% of gig workers have had no income; 89% are looking for new sources of income; 50% have no job; 25% have decreased hours; and only 23% have any savings.  Fully 70% of gig workers surveyed felt that their company, and the government, did not satisfactorily support them.  Many platforms catering to freelancers, or gig workers, have seen an upsurge in applications for work along with a decreased demand.  Less travel means decreased demand for ride share services such as Lyft and Uber. Even those where the need has remained stable have experienced a drop in wages and hours.  Instacart, a SF based food delivery service, reportedly added 300,000 jobs while jobs in babysitting, housesitting, and cleaning have fallen by 36%.  Instacart asserts that its shoppers are earning 60% more due to gaining double the tips and maintaining the same average of batches.  But other platforms are not reporting similar gains.  Amazon Flex has shown a decrease in average hours from 28-32 hours a week to 18-20 hours.

Freelancers in professional occupations such as design, development, animation, and technology also have experienced a downturn.  Workers in these areas report decreased pay and contracts that are labor intensive so that the pay does not extend to the actual time needed to perform the tasks.  One worker described the situation as “a race to the bottom.”  Platforms such as Fiverr, Upwork, Clickworker, and Amazon’s Mechanical Turk have sustained significant increases in demand along with depressed wages.  These trends predate the advent of the virus, with some reporting average hourly wages as low as $2-$6.50 an hour in 2017.  The severity of the exploitation seems likely to worsen.  Many companies are contemplating long term remote work, a situation likely to lead to more free lancing, which enhances corporate  profit and capitalizes on the availability of a global workforce.  The World Bank reported, for the first time since 1998, an increase in global poverty hinting at the backslide to come.

Policy

Gig workers, as independent contractors, typically have not been eligible for unemployment, employer health insurance, or sick time.  The CARES stimulus has created a new world in that self-employed and freelance workers became eligible for 39 weeks of state unemployment payments in addition to federally funded $600 a week supplements for 16 weeks.  Unfortunately  this program is unlikely to be sustained without further Congressional and Executive interventions.

Government regulation of labor practices in the freelance world needs to be addressed.  For example, “bots”are programs automated by algorithms which grab new jobs and affix them to new platforms that require subscriptions to access the jobs.  Instacart shippers pay a fee to get the Bot job apps making it harder for other seekers to apply.  Instacart denies this allegation and has stated that any person found to be utilizing these apps will be “deactivated,” a term eerily inhumane, as is the current market policies.  The need for protective legislation is indicated and has been passed in California.

In January, California enacted legislation, known as AB5 or the gig economy bill, mandating that gig workers are entitled to the benefits of employees.  They established this based on a 2004 case of a delivery driver who sued his company, Dynamex, when it forced the drivers to become independent contractors.  The current legislation is based on the findings in that case that a person qualifies as an independent contractor if s/he is exempt from company control or direction; works in non-mainstream aspects of the business; and is already performing similar work in situations independent of that company. These standards do not seem to accrue to gig workers affected by the litigation.

The California legislature has pledged 20 million dollars to enforce the mandate.  CA truckers were immediately granted an exception to the legislation and companies like Uber, Lyft, Doordash, Postmates, and Instacart have raised over 110 million dollars to support a ballot initiative exempting them from the new law.   They estimate the cost to them of bill’s implementation will 20-30% more than utilizing their casual workforce.  With the distraction of the pandemic, little has been established with regard to the future of AB5 though it certainly points to the need for new government labor regulations and to the reform of elements of the safety net.  What is being done temporarily for workers and businesses, through the CARES act, can be seen as a template for more permanent legal change.

 

Learn More

https://time.com/5836868/gig-economy-coronavirus/

https://www.washingtonpost.com/business/2020/01/14/can-california-reign-techs-gig-platforms-primer-bold-state-law-that-will-try/

https://www.cnbc.com/2020/03/30/cares-act-will-be-an-economic-lifeline-for-gig-workers-freelancers.html

https://www.weforum.org/agenda/2020/04/gig-workers-hardest-hit-coronavirus-pandemic/

Resistance Resources

https://gigworkersrising.org/get-informed/covid19-resources/  Information for gig workers and consumers

African Americans Suffer Deprivation in all Economic Arenas

African Americans Suffer Deprivation in all Economic Arenas

June 2, 2020

Policy

In every measure contributing to well-being African Americans experience significant deprivations.  African American poverty was 20.8% in 2018, compared to 11.8% of the general population.  African American wages are still depressed, compared to white wages, even as the education gap has closed significantly.  Ninety percent of African American in young adulthood (25-29) now has a high school diploma and the portion with college degrees has doubled since 1968 to 2018 though it still represents only half as many degrees (22.8%) as in the white population (42.1%) of the same age.

African American workers bring home 82.5 cents to the dollar white workers receive, even when education level is controlled for.  African American workers experience 2.5 times the poverty of white workers.  Black and Latino workers represent 44.1% of the workers who would benefit from a federal minimum wage of fifteen dollars.  African Americans are twice as likely as white workers to be unemployed.  When household income is considered, African Americans accrue 40% less than average white households.

The starkest disparity, however, can be seen in wealth where the average African American family is worth only 10% of the wealth held by white families.  Average African American wealth has actually decreased from 1983-2016.  Moreover, the African American family is more likely to depend on that small asset for basic needs in retirement; children’s college education; down payments for a home; and crises arising from unemployment or illness.  College debt is higher among African Americans averaging $26,000 for men and $30,000 for women.

Wealth is a measure which speaks to intergenerational well-being since often a young couple buys a first home with help from their parents.  Owning a home speaks volumes regarding quality of life since neighborhoods where more people own their home tend to have better schools, recreation, services, and safety.  When African Americans buy homes, even in the middle class, they are steered to less affluent areas than their white counterparts.  Additionally, African Americans are twice as likely to be turned down for mortgages and are given no reason in 52% of these denials. African Americans are 105% more likely to be charged a higher interest rate and greater fees.

Lending gaps have contracted very little in fifty years and costs not at all.  In the fifty years from 1968-2018, the portion of home ownership among the African American population has remained stagnant and is currently 30% less than among white families. A HUD study of renters revealed that African Americans suffered barriers to “favorable” neighborhoods in that they were shown fewer units, charged higher rents, and denied leases when compared to whites.   As a result, they are more likely to live in areas of concentrated poverty and in areas with less educational resources; less job opportunities; and fewer services.  African Americans, as a result of wage and job discrimination, are more likely to become homeless representing 40% of that population and comprising only 13% of the US population.  Discrimination against ex-convicts also contributes to homelessness and unemployment due to laws limiting access to public housing and other programs.  The rate of incarceration of African Americans tripled between 1968-2018.

Various measures of quality of life show an equally dismal condition.  African Americans are twice as likely as white households to experience food insecurity, meaning that they have to reduce their intake and/or change their eating patterns.  African Americans are more likely to be in food deserts where access to fresh produce is limited and there is a dependence on convenient stores and small grocery stores equal higher prices.

The areas of health insurance, health care, and mental health also reveal the stark realities of African American life today.  Not only are African Americans more likely to be uninsured and under insured, they also pay more for their health insurance.  Almost ten percent are uninsured and 18% of adults are underinsured. Even more significant is the cost of insurance.  The average white family pays about 11% of their income on health insurance premiums; copays; deductibles, and pharmacy items whereas the average African American household spends 20% of the household income solely on premiums.  African Americans are highly likely to be concentrated in the states that did not buy into federal Medicaid expansion. This program allows for Medicaid to be extended to those making a little more than the official federal poverty level.  These states include seven southern states, Texas, Oklahoma, Missouri, and Kansas.  The residents who do not gain Medicaid coverage because they make too much do not make enough to qualify for tax credits to gain subsidies and so they are the segment which is likely to fall through the cracks, remaining uninsured.

Due to all of the above-mentioned circumstances, the African American community suffers more avoidable illness; greater maternal and child mortality; pregnancy complications; lack any consistent or quality care; depends on emergency rooms for non-emergency conditions; and often just goes without treatment.  The latter situation is even more pronounced in areas of mental health and substance abuse. It is no wonder that the death rates are greater, and the longevity less, among this group.

Analysis

Racism begins with the history of slavery; it persists in state sanctioned policies today.  Slave labor is estimated as corresponding to 14 trillion dollars in unpaid work.  But unpaid, poorly remunerated labor of African American extends through reconstruction to the New Deal, where the population was restricted to occupational segregation sanctioned by government programs. The Freedman’s Bureau encouraged former slaves to remain with the families they worked for in agricultural and domestic labor.  The newly freed citizens could be fined if they sought work outside these areas.  Laws were passed to prohibit ads for better jobs in distant locales and recruiters could not provide any financial assistance.

With the New Deal institutionalized disparities in jobs and wages again was supported by legislation.  Innovations of the Fair labor Standards Act of 1938 initiated a 40-hour work week, overtime, child labor laws, and a minimum wage.   African Americans were excluded from jobs with better working conditions, benefit, and collective bargaining.  The jobs they inhabited, in agriculture and domestic work were excluded from the legislation where there was no minimum wage, set work week, benefits or oversight.  By the mid twentieth century, when agricultural jobs were contracting and domestic labor was becoming mechanized, unfair lending practices in the Department of Agriculture, lynching, discriminatory lending, and the KKK drove African Americans north and west seeking better opportunities.  Once resettled, many of the newly migrated workers were subjected to de facto segregation in low wage domestic and service work even if they escaped the Jim Crow mandates of their southern origins.

Laws integrating this discrimination into the institutional structure are seen in such areas as tipped servers’ minimum wages which can be as low as $2.13.  Only seven sates mandate that serving staff must be paid the federal minimum wage guaranteed to other workers.  “Right to work” laws, which establish that nonunion workers benefiting from union contracts cannot have a portion of union dues deducted, exist in eight of the ten states with the highest portions of African American workers.  Agencies like the Equal Economic Opportunity Commission, which are supposed to ensure fairness in the workplace, are severely underfunded and can investigate a fraction of received complaints.  Agencies which advocate for fair treatment and support of workers have been underfunded.

The stress of poverty on the body and community cannot be underestimated.  It affects everything from health, to family life, to community standards.  One sure fix is to put more money into protective government agencies and make them accountable for their mandates.  Another policy, pointed out by experts in the field, suggests that all the tax money that has been used to increase policing efforts should be shifted to create better social programs addressing labor conditions and the safety net.  Massive re-evaluation of jobs, and their value, would likely result in increased wages but nothing really can replace incorporating a living wage, healthcare for all (unattached to employment), and decent costs for housing, education, and daycare/preschool.

Another more controversial remedy refers to reparations for slavery.  Many African American leaders suggest that funds be made available to African American communities to be used for programs they develop to support the progress of their communities as they see fit.  That seems like an overdue step in acknowledging the hundreds of years of systemic exploitation.

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Resistance Resources

The Future is Green

The Future is Green

Policy

Green jobs are the future in spite of heavy layoffs during this period of labor market contraction.  Clean energy lost well over a half a million jobs since the virus hit the economy.  This figure corresponds to 17% of industry jobs.  In the state of California, where the loss was the most dramatic, 105,000 workers lost their jobs. Three years of job growth were eradicated in a month.  These were in the areas of solar roof installation; wind turbine technicians; factory work building electric cars; and work in Energy Star appliances and high efficiency air conditioning.  The Bureau of Labor Statistics projects solar installers and wind turbine technicians to be the fastest g rowing jobs in the next two years.  Clean energy, with a workforce of 3.4 million, represents three times the workers of the fossil fuel industry.  In spite of this disparity, as part of his response to the pandemic, Trump pledged to bolster the oil and gas industry by providing funds to insure future jobs.  He made no similar announcement regarding clean air or renewable energy; he completely ignored the issue of climate control.

In contrast, there have been a wide range of economists, environmental advocates and policy makers who promote clean energy job as the essential economic sector of the future, both in response to employment and to the impending climate crisis.  California governor Newsom convened a Business and Jobs Recovery task force and twenty states jumped on board urging clean air job creation.  One in three jobs in construction utilizes non-fossil fuel electricity while fossil fuel related construction jobs represent only 13% of jobs.  The New Green Deal, a program initiated by representative Alexandria Ocasio-Cortez and Senator Ed Markey, supports federal jobs which support the transition to clean energy by promoting renewable energy projects; clean up at coal mines; increased mass transit construction; and other projects lowering the emissions of toxins.

Analysis

The New Green Deal can emulate the Works Progress Administration which put so many people to work in the depression in government funded jobs.  FDR failed to renew that program because his advisors said that if he did so he would be unlikely to ever rescind it.  But in today’s pandemic economy the importance of public jobs is highlighted.  These jobs should be government work on green projects and other needed infrastructure work. They should pay a living wage and have benefits and health insurance (unless healthcare gets separated from employment).  In the meantime, many policy experts are touting the Universal Basic Income (or guaranteed income) to help sustain citizens, and the economy, until employment can be revived.  Not only is this beneficial to the economic sustenance of the society, it also speaks to the mental health of citizens.  Unemployment has been shown to be correlated to suicide.  Suicide is on the rise and, in some areas the so-called “deaths of despair” outnumber deaths from the virus.

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