- Pennsylvania Among 'Terrible 10' Most Regressive Tax States
- February 4 Non-Partisan Training: HOW TO RUN FOR ELECTION BOARD IN 2013: HOW TO RUN FOR COMMITTEEPERSON IN 2014
- Republican Governors Opt-In to Medicaid Expansion
- The Reports of Unions' Death Are Greatly Exaggerated
- Ask Allyson Schwartz to run for Governor
- Mind the gap: Opting Out of Medicaid Expansion Leaves Low-income Families Behind
- Jan. 14 Workshop:HOW TO RUN FOR ELECTION BOARD IN 2013; HOW TO RUN FOR COMMITTEEPERSON IN 2014
- Seth Williams on Guns, Jasmine Rivera on School Closures @PFC Meetup Wednesday
- PA Revenue Strong Midway Through Year; Tax Cut Could Have Big Impact
- What to Make of the Fiscal Cliff Deal?
By Mark Price, Third and State
The Pennsylvania Department of Labor and Industry released new data for March on Pennsylvania's employment situation. According to the household survey, the unemployment rate edged down slightly to 7.5%, and the survey of employers showed healthy growth in nonfarm payrolls of 7,800 jobs.
As always, caution should be exercised in interpreting a month change in employment statistics.
In terms of levels, there were big gains in Leisure and Hospitality (7,000), Trade Transportation and Utilities (4,000) and Manufacturing (2,100). We will not have full information until the fall whether the job losses in the public sector will put a drag on employment growth in 2012, but the March data shows we are off to an uncomfortable start, with 2,500 jobs lost.
Over the last several months, Pennsylvania nonfarm payroll counts have been particularly volatile, showing big one-month gains and losses thanks to a combination of unusually warm weather and some technical issues. On average over the last six months, Pennsylvania has added just under 6,000 jobs a month. We need about 10,000 jobs a month to move back to full employment by March 2015 (three years from now).
While unemployment remains high today and for the foreseeable future, the distance between CEO pay and the pay of the typical worker reached an all time high in 2011.
By Stephen Herzenberg, Third and State
I've got an idea: let's employ low-wage, low-skill, and sometime out-of-state workers on small and medium-sized state-funded construction projects, with no benefit to taxpayers and negative impacts on local economies.
Sound like a stupid idea? That's because it is.
Here's the backdrop: Pennsylvania's prevailing wage law requires that workers on state-funded construction projects be paid a wage in line with what most other workers in their trade are paid within a certain geographical area.
Research in peer-refereed academic publications shows that the law could be called the quality construction law because it helps ensure the use of skilled workers on state projects. Where prevailing wage laws exist, training investment, worker experience, wages, benefits, and safety levels are all higher than where these laws do not exist.
Overall construction costs are the same with or without prevailing wage laws. The prevailing wage law, however, makes it impossible for contractors that employ low-wage, out-of-state workers to win bids on state projects: it ensures that jobs go to local workers, who spend their money at local businesses.
More middle-class jobs, stronger local economies, higher quality construction, no cost to taxpayers: what's not to like?
Unfortunately, some members of the Pennsylvania Legislature seem unwilling to leave well enough alone. Through House Bill 1329, these lawmakers want to make the prevailing wage law to apply to less state-funded construction work. How so? By exempting projects of less than $185,000 from prevailing wage standards. Currently, the law applies to all state-funded projects of $25,000 or higher.
In the first two posts of this series, I explained why the numbers being tossed around by advocates of repealing prevailing wage don’t add up. I explained that the claims of cost-savings are not based on any actual experience and that they represent the result of laughable hypothetical, or “what if,” calculations.
This leads to the most important point that the Pennsylvania School Boards Association, the Pennsylvania State Association of Boroughs, the Harrisburg Patriot-News Editorial Board and others keep missing: we can do much better than a hypothetical when assessing the impact of prevailing wage laws.
There is a body of research that examines construction costs (and other construction outcomes, like safety, training investment, wages, benefits, etc.) in states with and without prevailing wage laws as well as in states that eliminated prevailing wage laws. We don’t have to conjecture what “might” happen: we can look at what did happen. The preponderance of the evidence shows that prevailing wage laws do not raise construction costs.
Back in the late 1990s, Pennsylvania actually ran this real-world experiment itself — we lowered our prevailing wage levels, particularly in rural areas. That means we can look at what happened to construction costs. What happened is the same thing that has happened in other places — lower prevailing wages did not translate into lower construction costs.
The overwhelming weight of evidence based on the actual cost of public construction projects shows that prevailing wage laws do not raise costs. Therefore, advocates of repealing the law in Pennsylvania ignore this evidence. Instead of “evidence-based policy,” we have “lack-of-evidence-based policy.” Go figure.
Repeal advocates use a hypothetical calculation that makes assumptions about cost, rather than empirically examining the relationship between higher wages and total construction costs. (As discussed here, even these hypothetical cost estimates don’t make sense once you apply real world data to how much labor costs represent of total construction cost.)
Another key ingredient in the hypothetical calculations used by proponents of repeal is the claim made most recently by the Pennsylvania State Association of Boroughs (PSAB) that “the prevailing wage is 30 percent to 60 percent higher than the average wage for the same occupation.”
Part One of a Three-part Series on Prevailing Wage by Mark Price and originally published at Third and State.
Prevailing wage laws have long operated nationally and in states as a check against the tendency of the construction industry to degenerate into destructive wage and price competition. Such competition can drive skilled and experienced workers from the industry, reduce productivity and quality, and lead to poverty-level jobs, all without saving construction customers any money.
In an exhaustive review of the research on the impact of prevailing wages on contracting costs, Nooshin Mahalia concluded:
At this point in the evolution of the literature on the effect of prevailing wage regulations on government contract costs, the weight of the evidence is strongly on the side that there is no adverse impact. Almost all of the studies that have found otherwise use hypothetical models that fail to empirically address the question at hand. Moreover, the studies that have incorporated the full benefits of higher wages in public construction suggest that there are, in fact, substantial, calculable, positive benefits of prevailing wage laws.
Although the weight of evidence suggests prevailing wage laws do not raise costs, advocates for repealing the law in Pennsylvania continue to repeat some version of the following:
Third and State celebrated its one-year anniversary this week. We launched on February 1, 2011, and 350 posts later we're still going strong.
We couldn't do it without our readers, so we thought it would be fun to take a look back at what posts you liked the most. And so we bring you a countdown of the top 10 most viewed blog posts at Third and State.
10. Governor Corbett Unveils 2011-12 Budget Proposal, March 9, 2011:
By taking direct aim at schools and higher education, the Governor’s plan disregards a fundamental principle of economic growth — businesses locate and expand in states with an educated workforce and academic centers of innovation.
There is a better choice. Lawmakers can choose to take a more balanced approach that makes targeted cuts, improves accountability and raises revenue.
9. 2011-12 State Budget Highlights, June 28, 2011:
State legislative leaders and Governor Tom Corbett agreed on a 2011-12 state budget deal this week, and on Tuesday, the state Senate approved it on a 30-20 party-line vote. The bill heads to the House of Representatives next. ...
The biggest cuts, in both dollars and percentages, are in education programs, including PreK-12 and higher education.
8. Marcellus Shale, Unemployment and Industrial Diversity, August 3, 2011:
The Central Pennsylvania Business Journal this week published the list of the highest-paid 10 executives in the region in 2010. Nine of these executives are men. The tenth was Mary F. Sammons, the former Chairman and CEO of Rite Aid.
Some of the salary information in The Business Journal is not new. (See, for example, the CEO pay list in Table A1, starting on page 21 of The State of Working Pennsylvania 2011.) What is new is that The Business Journal also published these executives’ pay in 2009, allowing us to look at the change in pay from 2009 to 2010 for a group of Pennsylvania executives. (Earlier, we only had information on change in executive pay from 2009 to 2010 for U.S. CEOs.)
Here’s what we found. The dollar increase in pay for these executives ranged from $2.55 million for Michael Lockhart of Armstrong World Industries to less than a million dollars (about $900,000) for Neil Shah, the President and COO of Hersha Hospitality Trust. The average increase was $1.64 million.
The percent increase in pay ranged from a mere 14% for Peter Carlino, Chairman and CEO of Penn National Gaming Incorporated, to nearly 100% for John Standley, the current President and CEO of Rite Aid.
Catherine Rampell of The New York Times has posted results from a UK think tank tracking trends in overall economic growth and median pay from 2000 to 2007 in 10 countries. As Rampell explains:
A higher ratio means that the pace of growth for median pay was close to the pace of growth for output per capita. A low ratio means that median pay grew much more slowly than did the economy as a whole.
Of the 10 countries analyzed, Finland showed the closest relationship between the living standards of the typical worker and improvements in the overall economy.
The United States was on the lower end. From 2000 to 2007, median pay increased at a quarter of the pace of output per capita. In other words, the typical American worker did not share much in the country’s growing wealth even when the economy was good.
Below I reproduce the figure Rampell posted but with Pennsylvania data added in. When the economy was strongest here in Pennsylvania, wages for the typical Pennsylvania worker grew at a quarter of the pace of output per capita in the state. When it comes to trends in inequality, Pennsylvania is America.
What is good for the financial sector is good for the 99% 1%.
- Paul Krugman, The New York Times — Losing Their Immunity:
For the financialization of America wasn’t dictated by the invisible hand of the market. What caused the financial industry to grow much faster than the rest of the economy starting around 1980 was a series of deliberate policy choices, in particular a process of deregulation that continued right up to the eve of the 2008 crisis. Not coincidentally, the era of an ever-growing financial industry was also an era of ever-growing inequality of income and wealth. Wall Street made a large direct contribution to economic polarization, because soaring incomes in finance accounted for a significant fraction of the rising share of the top 1 percent (and the top 0.1 percent, which accounts for most of the top 1 percent’s gains) in the nation’s income. More broadly, the same political forces that promoted financial deregulation fostered overall inequality in a variety of ways, undermining organized labor, doing away with the 'outrage constraint' that used to limit executive paychecks, and more.
The Pittsburgh Post-Gazette reviews employment law in Pennsylvania and notes that there are two sets of rules, the rules for the rest of us (we are employed at will and rarely get a severance) and the rules for top executives.
The economic news this morning makes you feel like you are watching Major Kong (from the movie Dr. Strangelove — the picture on the left) ride the bomb like a mechanical bull to our mutual total economic destruction. But our economic situation is more similar to that of Otto (played by Kevin Kline in A Fish Called Wanda — on the right). At first we are amused with the idea of being run down by a steamroller moving 2 miles per hour. But then we realize that we have stepped in wet cement and are thus destined to be run down by the U.S. Senate a one-eyed man with ketchup stains round his nostrils.
In short, our problem is a lack of aggregate demand and the solution is well within our grasp, but our politics are paralyzed and millions are destined to be run down by years of needless misery.
National poverty rate hit 15.1% last year, the highest level since 1993
As the recession took its toll last year, more Americans fell into poverty, saw their incomes decline and joined the ranks of the uninsured, according to new data from the U.S. Census Bureau.
The Census Bureau released the results of its annual Current Population Survey today in a new report — the first to include a full year of data from the Great Recession.
During 2010, the poverty rate increased to 15.1%, the highest level since 1993, with a record-breaking 46.2 million American adults and children living in poverty. Median household income also declined, and the number of individuals without health insurance increased again, now approaching 50 million.
Public programs continued to play an important role in blunting the full force of the economic downturn. An estimated 3.2 million Americans were kept out of poverty through unemployment insurance coverage, while public health programs such as Medicaid and the State Children's Health Insurance Program (SCHIP) helped to fill the gap as employment-based coverage declined once again.
The Economic Policy Institute has a new report out documenting — surprise, surprise — that jobs in Pennsylvania state and local government aren’t the way to get rich.
The report, authored by Rutgers University labor and employment relations Professor Jeffrey Keefe, shows that Pennsylvania public-sector workers make the same or slightly less in wages plus benefits than comparable Pennsylvania private-sector workers. The more-generous benefits of public-sector workers are balanced by lower wages and salaries.
We weren’t very surprised by this result. We had made similar observations earlier this year.
At the Keystone Research Center, we have been chronicling for years the forces that are putting a tighter and tighter squeeze on middle-class Pennsylvanians.
Last week, we released a new report in partnership with the national policy center Demos that takes the temperature of the state's middle class in the wake of the Great Recession. I'm sorry to say, once again, the patient is not well.
The state's annual unemployment rate is the highest it has been in nearly three decades and the cost of going to college is on the rise.
According to the report, times are particularly tough for Pennsylvania's young people, with state budget cuts to 18% of public university funding and a 7.5% tuition hike in Pennsylvania's State System of Higher Education. Pennsylvania's young people already bear the seventh highest rate of student debt in the nation — at approximately $28,000 on average.
When the economy is hit by a sudden drop in demand, employers typically react by cutting employment or hours of work — sometimes both.
In a recent paper, John Schmitt of the Center for Economic and Policy Research reviews the experiences of Denmark and Germany in the Great Recession and finds that, while both countries experienced a comparable decline in their economies, the outcomes for employment were very different.
German employers absorbed the decline in demand entirely with reductions in employee hours of work. As a result, unemployment actually fell over the course of the Great Recession, even as Germany’s Gross Domestic Product (GDP) declined.
The German approach is partly attributable to negotiations with unions; union coverage in Germany is 63%. But German employers also took this path because of a program called “short work,” a version of what we know in the U.S. as Shared Work.
Under these programs, an employer facing a decline in demand can cut hours of work rather than jobs. Employees who take a pay cut because they are working fewer hours have their pay supplemented with unemployment insurance benefits.
Employers get the benefit of having workers available when demand returns, which saves them training and hiring costs. Workers get unemployment benefits, while keeping their job and their skills and maintaining ties to the workforce.
In Denmark, employers reacted to the Great Recession in much the same way as they have in the U.S.: they cut mostly jobs.
This week, we blogged about oppressive regimes and income inequality, what the top CEOs are making these days and calls this week for state lawmakers to grow the revenue pie.
IN CASE YOU MISSED IT: