Yes, the Rust Belt demands an answer. But does anyone know what it is?

November 29th, 2016 at 9:37 am

This WaPo piece by James Hohmann makes a strong point that one hears a good deal these days: the Hillary Clinton campaign failed to provide hope that her administration could bring good jobs back to key swing states like Ohio, while the Trump campaign succeeded in hammering that message home.

The piece focuses on a foresightful memo written in May by David Betras, a Democrat operative in Ohio, warning that Ms. Clinton was getting beat on the jobs message:

“More than two decades after its enactment, NAFTA remains a red flag for area voters who rightly or wrongly blame trade for the devastating job losses that took place at Packard Electric, GM, GE, numerous steel companies, as well as the firms that supplied those major employers,” Betras…tried to explain to the Clinton high command. “Thousands of workers in Ohio … continue to qualify for Trade Readjustment Act assistance because their jobs are being shipped overseas.”

“Look, I’m as progressive as anybody, okay? But people in the heartland thought the Democratic Party cared more about where someone else went to the restroom than whether they had a good-paying job,” he complained. “‘Stronger together’ doesn’t get anyone a job.”

“The messages can’t be about ‘job retraining.’ These folks have heard it a million times and, frankly, they think it’s complete and total bulls**t,” he continued.“Talk about policies that will incentivize companies to repatriate manufacturing jobs. Talk about infrastructure … The workers we’re talking about don’t want to run computers; they want to run back hoes, dig ditches (and) sling concrete block. … Somewhere along the line we forgot that not everyone wants to be white collar.”

Like I said, that’s a perfectly smart, defensible rap that in hindsight looks awfully prophetic. But something very big and very important is missing from Betras’ warning and Hohmann’s analysis: neither Democrats nor Republicans really know what to do to help these workers and their communities.

Trump was either devious or smart enough–choose your adjective–to pretend he had/has a solution and to successfully sell a nostalgic vision to these voters. Frankly, I’m not sure many believed him as much as they didn’t see much reason for going with her and figured they’d give him a chance. If he fails to deliver, as I suspect he will, they’ll throw him out when they get the chance.

Hillary Clinton was a lot more fundamentally honest about this issue of bringing the factory jobs back to the swing states in the Rust Belt. Instead, she told a more complicated story about reshaping globalization through better trade deals and investing in advanced manufacturing, and yes, retraining workers. Precisely the stuff Betras correctly said would not resonate.

But as long as we’re being honest, we must admit that neither side has a strong, convincing plan to restore high-value added jobs to the many communities that have lost much of their manufacturing base.

We’re much better, as Democrats, at policies that help the poor. Higher minimum wages and strong work supports like the Earned Income and Child Tax Credits can combine to make what would be a $15,000 job a $30,000 job (e.g., raise the minimum from $7.25 to $12 and add $5K of refundable tax credits; sprinkle liberally [sic] with affordable health care).

But when it comes to pushing back on the impact of globalization–to “repatriating manufacturing jobs” as Betras called for–we’re at much more of a loss.

This must change, and not just for political reasons (though that should be a strong motivator for politicos), but for policy reasons.

The deeply flawed premise through which elites have long operated is that trade is a net plus for everyone as long as the winners compensate the losers. But in the real world, the winners both fail to do so and use their winnings to buy tax and deregulatory policies that further screw the losers.

I’ve studied this problem for years and don’t have anything like a complete answer. I do know that we must start by lowering our economically large, persistent, and distortionary trade deficit, especially to the extent that it is pumped up by other countries manipulating savings and exchange rates. Also, Betras is right about a robust infrastructure program, but that’s a temporary fix.

But I would strongly urge my colleagues in the progressive policy analytic community (and the foundations that support them) to move this problem–the loss of good, middle-class jobs in significant swaths of the nation–to the top of their agendas. We’ve gone too long without an answer to this one, and the consequences are not at all pretty.

If the Trump administration wants to do something useful, should progressives still oppose them?

November 28th, 2016 at 8:18 pm

The question I pose above came out of this piece I posted in today’s WaPo on confusion in the Trump camp about trade deals and trade deficits:

To hear President-elect Trump tell it, ripping up, repealing or renegotiating international trade deals will bring back lost factory jobs and restore the glory days of the American working class. Wilbur Ross, Trump’s nominee to run the Commerce Department, plans to work with his new boss to release America from “the bondage” of “bad trade agreements.”

Conversely, to President Obama, the for-now defunct Trans-Pacific Partnership trade agreement would have boosted America’s growth, raised living, environmental and labor standards in the 11 other signatory countries, and blocked China from dominating the global stage.

They can’t both be right, and the record shows that neither are. Those hoping that American industry will rise again if and when the president-elect whacks deals like the North American or Korea trade deals will be profoundly disappointed. Neither does the failure of the TPP pave the way for the rise of our new Chinese overlords.

The problem with this hyper-elevation of trade deals is that it conflates the deals with the trade. The real problem, as I’ll explain, is the persistent and economically large trade deficits that the United States has run with our trading partners since the mid-1970s, which at this point have little to do with trade deals.

If the Trump administration seriously intends to help the displaced manufacturing workers and communities that were instrumental in the president-elect’s upset victory, it will need to shift its line of attack from trade deals to the trade deficit.

I think it would be good economic policy, and probably good politics–though truth be told, I really have no idea anymore about what’s good politics–to help workers, families, and communities hurt by the downsides of globalization. For years, elites from all sides of the aisle have basically ignored these people’s loss of high value-added work, assuring them that globalization is always and everywhere a force for good, at least as long as the winners win enough such that they can compensate the losers.

Whether or not they do so–i.e., compensate the losers–well, that’s “outside the model.”

If the new administration wants to try to help those displaced workers who were so instrumental in their upset victory–a very, very big if–I’ve got ideas that I believe would work better than ripping up trade deals or imposing 45 percent tariffs.

If they want to run a real infrastructure program, unlike the wasteful privatization scheme they’ve cooked up, progressives with a background in public goods have useful ideas here as well.

Progressives are already shouting loudly, as we should, when the incoming Trump administration puts forth patently lousy ideas, like their big, regressive tax cut or their repeal–and maybe sorta partially replace later–of Obamacare.

But what about if they want to invest in infrastructure or preserve manufacturing jobs or reduce the trade deficit or possibly raise the minimum wage? Should we emulate the Tea Party/McConnell in the Obama years and basically maintain that any wins for a Trump administration, including those that actually help working people, should be opposed on political and ideological grounds?

“Yes” is not a crazy answer. Based on Trump’s campaign, his administration poses an existential threat to inclusive democracy in general and minorities, women, immigrants, and Muslims in particular. There are reasonable people who worry that any successes that accrue to a Trump administration spell danger for their vulnerable enemies.

Then there’s the Bernie Sanders approach: “To the degree that Mr. Trump is serious about pursuing policies that improve the lives of working families in this country, I and other progressives are prepared to work with him. To the degree that he pursues racist, sexist, xenophobic and anti-environment policies, we will vigorously oppose him.”

As I said above and in many other places, I’m a deep skeptic about the extent to which the president elect “…is serious about pursuing policies that improve…” etc. Each day, and these are the early days, cabinet picks and various related antics suggest that, as many of us strongly suspected, all that populist stuff was just for the campaign.

But I will continue to not solely critique but to offer ways to actually accomplish the purported goals of the administration vis-a-vis working people, as I did in the WaPo piece today. If nothing else, people should learn about what an actual pro-worker agenda really looks like.

The injunction against the overtime rule makes zero sense

November 28th, 2016 at 6:00 am

Just days before it was to go into effect on December 1, a federal judge in Texas blocked the Obama Administration’s update in overtime pay from taking effect. The upshot is that millions of workers who should receive time-and-a-half pay when they work over forty hours a week are now at risk of losing that extra income.

The judge’s injunction was based on legal reasoning which, given historical precedent, makes no sense. Essentially, he argued that the Labor Department, which issued the rule, lacks the authority to establish a core component of the Fair Labor Standards Act overtime standard: the salary threshold below which workers must be covered by OT. Since the salary rule has been a central determinant of overtime pay for over 70 years, and was previously updated by various past administrations, the implication of the judge’s logic is that the federal government has been breaking the law for a very long time.

Instead, the court leans heavily on the so-called “duties test,” wherein employers are supposed to classify workers’ eligibility for overtime pay based on the tasks and responsibilities of their job. But this emphasis fails to understand both the importance and the efficiency of the salary test, a point Ross Eisenbrey and I stressed in work that helped lead up to the Obama administration’s rule change. In 1940, the Labor Department underscored this point: “the final and most effective check on the validity of the claim for exemption is the payment of a salary commensurate with the importance supposedly accorded the duties in question.”

Later, in 1958, the department called the salary test “an index of the status that sets off the bona fide executive from the working squad leader, and distinguishes the clerk or subprofessional from one who is performing administrative or professional work.”

Far from being subservient to the complicated duties test, the simple salary test has, as Eisenbrey and I argued in 2014, “become increasingly important over the years as a bright-line indicator of which employees are clearly exempt and which are not. However difficult it might be to judge whether an employee’s primary duty is truly that of an executive or exempt administrative employee, an employee and her employer can easily determine the level of the employee’s pay. The salary level is the clearest, most easily applied test of exemption.”

Unlike the Texas court, those of us who worked on updating the salary threshold did due diligence to set it at a reasonable level. The figure below shows that, by raising the threshold to $913, the revised rule only partly reverses the extent to which inflation has eroded the threshold since the 1950s (for some reason, the judge mistakenly lists both $921 and $913 as the new threshold in his order; only the latter number is correct). The update sets the threshold lower than the 1975 level in today’s dollars, when it was last adequately set to capture most workers whose duties at work fit into the spirit of the FLSA.

 

Sources: DOL, BLS (CPI-RS)

Sources: DOL, BLS (CPI-RS)

In our earlier work, we evaluated the management and supervisory responsibilities of workers by salary level and found that those with such duties consistently earned well above the new threshold, and conversely, those earning below the threshold had largely nonsupervisory responsibilities.

In other words, from its inception, there’s always been a salary test for a simple, sensible, intuitive reason: it’s the best way to determine executive, administrative, and/or professional status for most salaried employees. It prevents employers from evading overtime payments by misclassifying workers who don’t have real managerial responsibilities.

The duties test recognizes that some workers above the threshold, based on what they do on the job, should also get OT. But it was never intended to preclude or preempt the salary test.

Strangely, in a footnote, the judge appears to realize that his attack on the salary threshold implicates every Department of Labor since the OT rule was introduced, and tries to back out of that corner by arguing that his unprecedented view on the salary test refers only to the new rule: “The Court is not making a general statement on the lawfulness of the salary-level test for the EAP exemption. The Court is evaluating only the salary-level test as amended under the Department’s Final Rule.”

Again, this makes no sense. Either the salary test is now and has always been a valid part of the law or it isn’t and it never has been.

The test’s history and purpose clearly suggests that it is core to the purpose of the overtime standard. Millions of workers—men and women who were just about to get paid for working extra hours for which they should have been paid a premium for years now—depend on a higher-level court reversing this nonsensical ruling on appeal.

Who, exactly, did we piss off??!@!%$*!

November 23rd, 2016 at 8:35 am

I count my blessings, which are many and growing, everyday.

But really, WTF is going on these days?!

Trump wins (i.e., the electoral college, not the vote), R’s hold Senate, and now a judge, based on a totally misguided ruling, enjoins the new overtime rule days before it’s supposed to kick in (Dec 1).

And to top it off, my damn oven broke yesterday. I get of course that last bit is nothing relative to the others, but we are having T-giving here. So, if anyone has tips for grilling a turkey breast on a gas grill, please leave them in comments.

If I and my progressive colleagues pissed off some cosmic force, we sincerely apologize. But really, Ms. Force, you’re overdoing it. And that little bit with the oven is just really over the top.