Reports from the Economic Front

by Martin Hart-Landsberg

The Drive for $15

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The drive for $15 continues throughout the country.  Not surprisingly, gains have generated resistance, with opponents raising fears of economic chaos.  The experience of the city of SeaTac, Washington, population just under 28,000 and home of the Seattle-Tacoma airport, helps to illustrate how unfounded those fears are and the importance of labor-community organizing in securing victories.

Late 2013 SeaTac became the first city to pass a $15 an hour minimum wage.  Perhaps even more noteworthy, its law mandated immediate implementation; there was no phase in period.  The measure also included an inflation index, ensuring that the new minimum would maintain its real value.

The victory was a narrow one.  One compromise that may well have tipped the balance is that not all employees in the city are covered.  The beneficiaries are, as explained by a Huffington Post story,

transportation and hospitality workers at large businesses tied to Seattle-Tacoma International Airport, rather than to all private employers within the city. Among those exempted from the law: free-standing restaurants not tied to hotels; unionized hotels that already have a collective bargaining agreement with workers; hotels with fewer than 30 employees or 100 guest rooms; and “park and fly” lots with fewer than 100 parking spaces or 25 employees.

Workers at SeaTac airport were supposed to be covered, but a business coalition, led by Alaska Airlines, argued that because the airport is owned and operated by the Port of Seattle, not the city of SeaTac, it should be exempt.  The issue is still being fought in the courts. Approximately 6500 workers would benefit if the law is upheld.

Regardless, approximately 1,500 workers have already benefited, some 400 of who live in the city.  The Huffington Post article offers this story to highlight the importance of the victory:

When the new law went into effect last year [2013], Sammi Babakrkhil got a whopping 57 percent raise.

A valet attendant and shuttle driver at a parking company called MasterPark, Babakrkhil saw his base wage jump from $9.55 per hour, before tips, up to $15. Having scraped by in America since immigrating from Afghanistan 11 years ago, he suddenly faced the pleasant predicament as his co-workers: What to do with the windfall?

For the overworked father of three, it wasn’t a hard question. Babakrkhil decided to quit his other full-time job driving shuttles at a hotel down the road. Though he’d take home less money overall, the pay hike at MasterPark would allow him to work 40 hours a week instead of a brutal 80 — and to actually spend time with his wife and three young girls.

As for predictions of doom from the business community, the Puget Sound Business Journal reports:

In the run-up to the contentious vote, the owners of some companies bemoaned the impact the proposal would have on their businesses, telling Mia Gregerson – then the deputy mayor of the suburb south of Seattle – that the law would force them out of business. Other opponents said passage would create an implementation nightmare for the city. . . .

“I’m not aware of any business closing because of Prop. 1,” Gregerson said.

City Manager Todd Cutts said he has not heard of any businesses closing due to Prop. 1 either. City Hall has not spent an inordinate amount of time enforcing the law or implementing it for that matter, he said. . . .

Roger McCracken, a representative of one affected business, the airport parking lot MasterPark, which opposed Prop. 1 and contributed $31,890 to the group that tried to defeat it, declined to comment Monday. But on its website, the company posted that it had raised the wages of all employees, resulting in a 63 percent cost of labor increase, or $1.4 million a year. To absorb this, the company added a 99 cent a day surcharge to customer parking fees.

The former manager of another SeaTac business, an upscale hotel called Cedarbrook Lodge, said Prop 1 would “destroy this community.” Cedarbrook undertook a $16 million expansion that added 63 rooms and a spa that started in December 2013.

While the lawsuit blocked implementation of Prop. 1 at the airport, the Port of Seattle Commission this summer voted to mandate increases for some employees to $11.22 an hour in January 2015 and $13 an hour in January 2017, affecting about 3,000 workers.

These workers’ wages, however, could be boosted to $15 an hour depending on how the state Supreme Court rules on an appeal of the judge’s decision that Prop. 1 does not apply to workers at the airport.

Victories like the one in the city of SeaTac are based on organizing.  The following long excerpt from a Labor Notes article provides important insight into some of the organizing challenges faced and overcome:

When organizers from the Service Employees (SEIU) and the Teamsters first began reaching out to airport workers in 2011, we faced a big challenge. The single largest group of low-wage airport workers hailed from Somalia. While their conditions were lousy, they weren’t quite ready to trust us.

In the past, unions weren’t seen as particularly responsive to African workers, especially Muslim workers. For instance, in 2003 Hertz Rent-a-Car had suspended a group of Somali rental car shuttle drivers when they went to pray during Ramadan.

But the workers didn’t get the help they needed from their union, the Teamsters. Instead, an immigrant rights group filed a discrimination complaint on their behalf, got their jobs back, and secured their right to religious expression.

Eight years later, a nearly identical incident erupted. Hertz suspended 34 Somali workers for taking a brief break to go pray.

THE RIGHT TO PRAY

For Muslims daily prayer is obligatory—it’s one of the five pillars of Islam. Ritual prayers last but a few minutes, hardly causing a blip in operations.

After the 2003 suspensions and legal action, Hertz management had agreed to accommodate the workers, treating prayer breaks like smoke or bathroom breaks: just take it and then come back to work. In bargaining with the Teamsters, they agreed that no clock-out was necessary. They even provided a spare room for prayer.

But when workers went to pray on the last Friday in September 2011, the manager told them to clock out. Shuttle driver Zainab Aweis recalled her manager standing with his arms extended, blocking workers who were trying to get into the prayer room. “If you guys pray, you go home,” he declared.

For Aweis, it was an easy choice: she went to pray. “I like the job,” she said. “But if I can’t pray, I don’t see the benefit.” While money mattered, faith was not negotiable.

Again the workers appealed to their union, Teamsters Local 117. Given the anti-Muslim hysteria in this country, Teamsters leaders might just have responded with low-profile activities, like filing a grievance.

But instead, the Teamsters took a stand. They organized a multi-faith pray-in at the Hertz counter and invited the media. Muslims, Christians, and Jews joined union and community activists, praying while holding signs that read, “Respect me, respect my religion.” Union officers and the Hertz shop steward went on national news shows. They brought in lawyers.

Hertz fought back, conceding the workers’ right to pray but insisting on maintaining the suspensions. But union leaders held the line, arguing that the company had violated a principle of collective bargaining. If Hertz wanted to change the break policy, it would have to bargain with union members first.

Essentially the union leaders said that Muslims’ right to pray to Allah isn’t just a Muslim issue. It’s a labor movement issue, because it’s about workers’ right to honor their cultures and traditions—and to have some say over break time.

DOORS BEGAN TO OPEN

You can imagine the negative blowback the Teamsters got—locally, from some of their members, and also in the national blogosphere. But their willingness to take on this fight proved to be a turning point in the relationship between the unions at the airport and the East African community.

After the pray-in, community doors began to open. We were invited to conduct union meetings in the mosques. Imams delivered Friday sermons exhorting people to get civically involved.

Workers warmed up to organizers at the airport, saying, “I heard you were at the mosque,” or “the imam told us about the union.” The airport campaign gained momentum.

When the union organizers and faith leaders both started telling the airport workers, “We are here with you, fight with us,” community leader Mohamed Sheikh Hassan said, it made workers realize “that you can make a change, that you can stand up, that everything’s possible collectively.”

Other airport workers—largely new immigrants—saw what happened at Hertz, and concluded that the union would fight for their broader interests.

Two years later, as the union organizing campaign pivoted to the $15 ballot initiative, we registered more than 900 new voters in SeaTac, almost all new immigrants or the children of immigrants—boosting the voting population in this small city by 9 percent. Probably more than 200 were registered outside Friday prayers.

We won the ballot initiative by 77 votes.

Written by marty

June 14th, 2015 at 9:33 am

Corporate Globalization Drives Down Third World Wages

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Opposition within the United States to approval of a fast track mechanism and its use to ensure passage of new trade agreements has, appropriately enough, focused on the negative consequences of these agreements for U.S. workers.  However, it is important to remember that third world workers also pay a heavy price for contemporary capitalist globalization dynamics.  The experience of workers in the Central American countries of El Salvador, Guatemala, and Hondoras are a case in point.

As a Americas Blog post notes, approximately 350,000 workers are employed in the maquiladora industry in these three countries: 80,000 in El Salvador, 150,729 in Guatemala and 120,000 in Honduras.

The maquiladora industry, is by definition, export oriented, and these workers are largely employed by multinationals such as Fruit of the Loom and Hanes to produce apparel for the U.S. market. In fact, Central America trails only China and Vietnam as an exporter of apparel goods to the the United States.

As the following chart shows, the daily minimum wage for these maquila workers is quite low, averaging only 13 percent of the U.S. federal minimum wage.

MinWageNernTrianglevsUS
Because of the intense competition generated by the logic of corporate globalization the governments in countries like Honduras, Guatemala and El Salvador are continually pressed to offer leading multinational corporations ever lower business costs.  For labor-intensive industries like apparel, that means wages.  As the three following graphs show, national policies in these countries is producing a widening gap between daily minimum wages in the maquiladora sector and in the non-maquila manufacturing sector.

Graph1

 

Graph2

 

Graph3
A study done by the Maquila Solidarity Network highlights the inadequacy of maquiladora minimum wages.   As the following chart shows, the average maquila minimum wage paid in these three countries is only 37 percent of the cost of a basic basket of consumer goods and services (MBCG).

MBCGvsMinWage

New trade agreements designed to further integrate other low wage countries into the corporate structured globalization process will only intensify this national competition for foreign investment, leading to worsening living and working conditions for most workers.

Written by marty

June 9th, 2015 at 10:56 am

MNCs Buy Their Way To The TPP

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It is often said that “money makes the world go round.”  It is certainly true when it comes to passing legislation in Congress.  A case in point: the Senate’s recent approval of the Ryan-Hatch Fast Track bill.

The President and U.S. multinational corporations want Congress to pass the Ryan-Hatch Fast Track bill because they know they need it to ensure passage of the Transpacific Partnership agreement.  The bill not only grandfathers in fast track for the TPP but will set the terms for approval of other similar agreements such as the Trans-Atlantic Trade and Investment Partnership.

In the words of Public Citizen, the Ryan-Hatch Fast Track bill would empower the President to:

  • Unilaterally select U.S. trade agreement partners and initiate new negotiations;
  • Determine the contents of trade agreements and sign and enter into them before Congress votes to accept or reject the terms, regardless of whether a pact meets Congress’ negotiating objectives;
  • Write implementing legislation containing any terms the President unilaterally decides are “necessary or appropriate” that can change wide swathes of existing U.S. law, and then circumvent ordinary committee review and submit the legislation for a vote;
  • Obtain a mandatory vote in both chambers of Congress within 90 days, overriding congressional leaders’ control of House and Senate floor schedules regardless of whether a pact meets Congress’ negotiating objectives;
  • Override normal voting procedures, including a ban on all amendments and limits on debate time regardless of whether a pact meets Congress’ negotiating objectives.

Supporters of the bill tout its special provisions allegedly designed to ensure accountability and transparency.  For example, the bill makes it possible for Congress to strip fast track authority from a trade agreement.  But as Public Citizen explains:

Instead of establishing a new “exit ramp,” the bill literally replicates the same impossible conditions from past Fast Track bills that make the “procedural disapproval” mechanism to remove an agreement from Fast Track unusable. A resolution to do so must be approved by both the Senate Finance and the House Ways and Means committees and then be passed by both chambers within 60 days. The bill’s only new feature in this respect is a new “consultation and compliance” procedure that would only be usable after an agreement was already signed and entered into, at which point changes to the pact could be made only if all other negotiating parties agreed to reopen negotiations and then agreed to the changes (likely after extracting further concessions from the United States). That process would require approval by 60 Senators to take a pact off of Fast Track consideration, even though a simple majority “no” vote in the Senate would have the same effect on an agreement. In contrast, the 1988 Fast Track empowered either the House Ways and Means or the Senate Finance committees to vote by simple majority to remove a pact from Fast Track consideration, with no additional floor votes required. And, such a disapproval action was authorized before a president could sign and enter into a trade agreement.

Another example of the bill’s limitations: it allows congressional viewing of draft texts, something that Obama fought in the case of the TPP, but members of congress would still not be allowed to share what they learned with the press or public. And their congressional staff would need security clearance to view any draft text.

But on to the main point.  Initially it appeared that there was enough opposition among leading Democrats and a few Republicans in the Senate to block passage of the bill.  Then suddenly the opposition disappeared.  A story in the Guardian newspaper explains what happened:

Fast-tracking the TPP, meaning its passage through Congress without having its contents available for debate or amendments, was only possible after lots of corporate money exchanged hands with senators. The US Senate passed Trade Promotion Authority (TPA) – the fast-tracking bill – by a 65-33 margin on 14 May. Last Thursday, the Senate voted 62-38 to bring the debate on TPA to a close.

Those impressive majorities follow months of behind-the-scenes wheeling and dealing by the world’s most well-heeled multinational corporations with just a handful of holdouts. . . .

Two days before the fast-track vote, Obama was a few votes shy of having the filibuster-proof majority he needed. Ron Wyden and seven other Senate Democrats announced they were on the fence on 12 May, distinguishing themselves from the Senate’s 54 Republicans and handful of Democrats as the votes to sway.

  • In just 24 hours, Wyden and five of those Democratic holdouts – Michael Bennet of Colorado, Dianne Feinstein of California, Claire McCaskill of Missouri, Patty Murray of Washington, and Bill Nelson of Florida – caved and voted for fast-track.
  • Bennet, Murray, and Wyden – all running for re-election in 2016 – received $105,900 between the three of them. Bennet, who comes from the more purple state of Colorado, got $53,700 in corporate campaign donations between January and March 2015 . . .
  • Senator Rob Portman of Ohio, who is the former US trade representative, has been one of the loudest proponents of the TPP. (In a comment to the Guardian Portman’s office said: “Senator Portman is not a vocal proponent of TPP – he has said it’s still being negotiated and if and when an agreement is reached he will review it carefully.”) He received $119,700 from 14 different corporations between January and March, most of which comes from donations from Goldman Sachs ($70,600), Pfizer ($15,700), and Procter & Gamble ($12,900). Portman is expected to run against former Ohio governor Ted Strickland in 2016 in one of the most politically competitive states in the country.
  • Seven Republicans who voted “yea” to fast-track and are also running for re-election next year cleaned up between January and March. Senator Johnny Isakson of Georgia received $102,500 in corporate contributions. Senator Roy Blunt of Missouri, best known for proposing a Monsanto-written bill in 2013 that became known as the Monsanto Protection Act, received $77,900 – $13,500 of which came from Monsanto.
  • Arizona senator and former presidential candidate John McCain received $51,700 in the first quarter of 2015. Senator Richard Burr of North Carolina received $60,000 in corporate donations. Eighty-one-year-old senator Chuck Grassley of Iowa, who is running for his seventh Senate term, received $35,000. Senator Tim Scott of South Carolina, who will be running for his first full six-year term in 2016, received $67,500 from pro-TPP corporations.

“It’s a rare thing for members of Congress to go against the money these days,” said Mansur Gidfar, spokesman for the anti-corruption group Represent.Us. “They know exactly which special interests they need to keep happy if they want to fund their reelection campaigns or secure a future job as a lobbyist.

Now we are on to the House where opposition to the bill also exists.  Lots of Representatives are no doubt licking their chops, waiting for the U.S. Business Coalition for the TPP to unlock its vault once again.

 

 

 

Written by marty

May 31st, 2015 at 5:07 am

Oppose Fast Track And The TPP

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It is looking increasing likely that the U.S. Congress is going to approve a Fast Track mechanism which will be used to pass the Transpacific Partnership (TPP) agreement.  This is not good.   What follows is the text of a talk I gave at an April 2015 Oregon AFL-CIO sponsored event on the TPP.

 

I don’t have much time so I am going to try and make my points as quickly but as clearly as I can.

First, globalization is a process that is shaped by power and current globalization dynamics reflect corporate interests.  Sadly, these dynamics have produced a globalization process that is harmful to workers in all the countries involved.

Many U.S. companies have globalized their production because it enables them to lower labor and environmental costs and greatly increase their profits.  Since they no longer need to engage in production in this country they have not used their profits to fund investment or job creation in this country.  Rather they have channeled them into dividends or stock by-backs, both of which enrich their owners and managers.  The consequence for working people is quite different.  The resulting low growth and intensified competition between workers for jobs has left us with weak job creation and employment conditions that are increasingly precarious.

 

Second, the essence of these globalization dynamics is perhaps best revealed through an examination of our various free trade agreements.  These agreements, and the Transpacific Partnership agreement (TPP) is no different, are called free trade agreements because the government believes that we all think free trade is good and so by calling them free trade agreements it hopes we will uncritically support them.

The fact is that these agreements are about far more than trade.  For example, they normally have some 20 chapters, most having nothing to do with trade as we understand it.  The US-Korea agreement had 24 chapters, for example.    The TPP apparently has 29 chapters.  Now, we don’t know precisely what the TPP or the Trans-Atlantic Trade and Investment Partnership, another agreement being pushed by the current government, will include because they are being negotiated primarily in secret.  But we have seen enough agreements signed that we know the US trade negotiator’s play book and there have been enough leaks about the TPP that we can be confident of what many of the chapters will include.

Let me highlight two of its chapters:

We know the TPP has an investment chapter because of a recent leak.  Ostensibly this chapter is supposed to protect foreign investors, defined broadly, from nationalization or expropriation, but it does much more.  For example, the chapter blocks governments from putting performance requirements on foreign investment.  More problematic, it also grants foreign corporations protection from direct or – and here is the kicker – indirect expropriation or nationalization.

So, what is an indirect expropriation or nationalization you might ask?  According to the leaked chapter, one of the factors that might signal an indirect expropriation is “the extent to which the government action interferes with distinct, reasonable investment-backed expectations.”  Another is “the character of the government action.”  This last factor becomes clearer from a reading of the terms of the Investment Chapter in the U.S.-Korea Free Trade Agreement.  There it is stated that one of the factors to be considered in determining whether a foreign investor has suffered an indirect expropriation is “whether the government action imposes a special sacrifice on the particular investor or investment that exceeds what the investor or investment should be expected to endure for the public interest.”

Moreover, the chapter also allows an investor that feels like it has been wronged to sue the offending level of government in a special tribunal, whose judges are primarily corporate lawyers who will earn millions of dollars regardless of who wins.  In fact many of these lawyers actively encourage corporations to sue in one period, making millions representing them, and then sit on a tribunal judging a government in another time period and again making millions.

The number of corporations suing governments under investment chapters, which are in most FTAs, is rising sharply.  Here are a few cases:

  • Philip Morris is suing Uruguay and Australia, because these countries want tobacco products sold in plain packaging with large health warnings. The company is suing Uruguay for $2 billion.
  • Vatterfall, a Swiss company, is suing Germany because the country has decided to decommission nuclear power plants.
  • Lone Star, a U.S. based company, is suing Canada because the province of Quebec has decided to ban fracking.
  • Veolia, a French company, is suing Egypt because the government mandated increase in the minimum wage has reduced the profitability of its waste management operation.

Another leaked chapter, this one designed to protect the intellectual property rights of our large companies, seeks, among other things, to extend the length of patents enjoyed by big drug makers. It does that in several ways.   For example, it protects “evergreening” in which drug companies can obtain patent extensions by making minor changes to their patented formula or by promoting a secondary use for the drug.  It also limits the criteria a product must fulfill in order to be eligible for a patent, thereby making it easier for companies to patent new products.  An earlier version of the chapter—it is not sure where things currently stand—even tried to secure patents for particular methods of performing surgery.

I could go on but you get the idea—these and other chapters are designed to promote corporate power and profits by limiting public policies that might regulate their investment or production decisions.  This freedom would come at our expense and, I would add, the overall health of our economy.

 

Third, what about the trade part.  We hear over and over again from economists how wonderful free trade is for all countries involved.  However, realize that this conclusion is largely based on Ricardo’s theory of comparative advantage, a theory which rested on a few key assumptions.  The most important were: full employment, balanced trade, and a lack of capital mobility.  Now you might think that this theory and its assumptions is just another example of the fantasy world that economists live in, and no one, especially policy-makers, would take its conclusions seriously.  Well, every time you read or hear an economist or government official tell you how much such and such free trade agreement is going to raise GDP or boost trade you can be sure that they got that number from something called a Computable General Equilibrium Model.  And those models, believe it or not, use the very same assumptions.  They have to make those assumptions if their models are to produce numerical estimates.  But think of what that means.  We worry about unemployment, trade deficits, and capital flight.  Economists, the ones that our government relies on, assume those worries away, by assumption.

Even granting them their assumptions, their predictions for gains are still incredibly small.  The most common estimates, using the method noted above, find that the TPP will boost U.S. GDP by 0.38 percent in 2025.  That is a predicted gain of approximately $80 billion, really a rounding error in a $18 trillion economy.  And then remember all the chapters that we know will do us harm.  For example, the extra cost for medical care from extending and promoting patients will clearly swamp predicted benefits from trade.

Nevertheless U.S. officials have been endlessly quoting that the agreement will boost jobs—most often they cite a gain of 650,000 jobs.  However, it is unclear where this number comes from.  The studies themselves do no actual job forecasting.  All they do is predict, subject to the assumptions noted, growth in GDP and exports and imports.

So, where does the administration get its estimate?  No one knows for certain, but here is a good guess:  The model predicts that the TPP will increase exports by $124 billion by 2025.  The Commerce Department estimates that about 5,500 jobs are supported by every $1 billion in exports, so, if you do the math you get an increase of approximately 650,000 jobs.  There is one big problem with this calculation—it leaves out imports.  The model actually predicts an increase of approximately the same dollar value of imports—so there goes the increase in jobs.

In short, we are being lied to—about the nature of this and other agreements.

The fact is that the government doesn’t have the slightest idea of what this agreement will do for our GDP or employment.  What it knows is that it will greatly increase corporate profits and power and that is what it cares most about.  The rest is all salesmanship.

So, the takeaway: these agreements have been harmful—we have the history of past agreements to show us that.  We need to oppose them.  The government knows that the more people know about these agreements the less they will like them so they want to fast track them.  They want a procedure that will allow a simple and quick up or down vote.  Unfortunately many of our politicians depend on corporate funds and so they also want fast track because it allows them to do what they want without drawing too much public heat.  We cannot let that happen.  We need to educate others about what these agreements are really about and we need to pressure Congress not to approve a fast track procedure for approving them.

Things are bad enough in this economy we certainly don’t need to implement agreements that will only worsen them.

Growth Is Not Development: The Chinese Labor Experience

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Growth is not development.  The Chinese labor experience is a good example of this.  In brief, despite record rates of growth, the Chinese economy has failed to generate formal sector jobs.  In fact, there were fewer formal sector urban workers employed in 2010 than in 1990.  All the job growth has been outside the formal sector, which means that a growing percentage of Chinese workers are not covered by the country’s labor law, and their wages, benefits, and working conditions are not captured by official Chinese labor statistics.

From 1979 until 2010, China recorded an average annual GDP growth rate of approximately 10%, a thirty year growth rate unmatched by any other country.  The country’s rate of growth is now slowing, from 10.6% in 2010, to 7.7% in 2012, and 7.4% in 2014.  Of course those are official rates of growth.  According to most analysts, Chinese growth was probably closer to 5% in 2014 and, despite government efforts, likely to continue to slow.

But what about the labor experience?  In “Misleading Chinese Legal and Statistical Categories: Labor, Individual Entities, and Private Enterprises,” a 2013 article published in the journal Modern China, Philip C.C. Huang describes the evolution and application of Chinese labor law, highlighting its relevance for and growth of different categories of labor.  As he explains, Chinese statistical categories recognize four main types of labor activity based on the legal standing of the employing firm: labor by “employee-workers,” labor by workers employed by legally registered “private enterprises,” labor by people in legally registered “individual entities,” and “unregistered” labor.

Only “employee-workers” are considered formal sector workers and covered by the country’s labor law.  The following table, with numbers expressed in units of 10,000, shows that there were almost 128 million urban formal sector workers employed in China in 2010.

Formal sector

Significantly, as the next table illustrates, both the number and percentage of workers employed in the formal urban economy are shrinking.  The number employed in the formal economy in 2010 was less than the number employed in 1990.  As of 2010, only 36.8% of all workers in the urban economy were employed in formal sector jobs.  In short, all the growth in urban employment over recent decades has been in categories not covered by Chinese labor law, which means that those workers are not covered by legally established minimum wage, overtime regulations, and social benefit requirements.

labor trends

Who are the workers employed outside the formal sector?  “Private enterprises” are mainly legally registered small-scale businesses averaging 13-15 people.  As Huang describes: “They are also as a rule not formally incorporated as a limited liability entity with separate ‘legal person’ status and are therefore not considered legal ‘employing units’ that are involved in ‘labor relations’. . . . These small businesses rely mainly on the cheapest labor available, the majority of them on disemployed workers and peasant-workers, who are considered to be only in a casual work relationship with them and for whom they need provide no benefits.”

“Individual entities” include legally registered small scale operations employing one or perhaps two people, usually the owner and a family member or friend.  In the largest cities, these workers are “largely engaged in wholesale and retail trade (mainly of daily necessities and clothing), followed by small and modest eateries and hostels, domestic and other services, and transport work. . . .Regardless, the great majority of the people operating the individual entities come from the ranks of the disemployed urban workers and the migrant peasant-workers.”

“Unregistered” workers are those, as the category name implies, whose work is unregistered and therefore largely illegal or extralegal.  They are primarily “newer and less established peasants-workers working in the lowest levels of the informal economy, as temporary construction workers, janitors, itinerant peddlers or stall keepers, guards standing outside residential compounds and commercial buildings the help in eateries and hostels domestic servants manual transport and loading-unloading workers, and the like, many of whom work in the shadow of the law without permits, truly members of the so-called floating population.”

Unregistered workers “appear in the official state statistical tallies only as the difference between those who have registered with the official state administrative entities and the actual numbers of laborers counted up by the decennial population censuses (which have made every effort to enumerate every person living and working in the cities).”  As we can see from the table above, the number of unregistered urban workers are quickly catching up to the number of formal sector urban workers.

The critical point here is that despite record rates of growth few formal sector jobs have been created in urban areas.  That means that official Chinese labor laws and regulations cover a relatively small and declining share of Chinese urban sector workers.  As a consequence, the great majority of urban workers suffer from conditions far worse than do formal sector workers.

At the same time, things are far from rosy for most formal sector workers.  For example, many companies, especially foreign owned companies, have been actively seeking to weaken formal sector job rights by employing so-called dispatched workers and student interns to avoid paying the wages and benefits mandated by Chinese labor law.  It is therefore not surprising, as recent labor struggles make clear, that even workers in the formal sector have been forced to take direct action to ensure compliance with their country’s labor laws and improve their working conditions.

Written by marty

May 17th, 2015 at 6:15 am

Taxes and Militarism

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Tax day has come and gone.  And there is indeed a lot to complain about: our corporations and the wealthy have successfully minimized their own tax responsibilities, leaving us to support a powerful and profitable military-national-security-industrial complex at the expense of needed public services and social programs.

Let’s start with who pays taxes.  Individuals and corporations pay income taxes to the federal government.  However, as the chart below shows, corporations have been able to take advantage of increasingly lenient income tax laws and a corporate friendly globalization process to significantly lower their tax obligations.  If we add payroll taxes which are paid to support specific programs like Social Security and Medicare, the overall individual contribution is approximately 80% and the corporate share about 11%.

ind_and_corp_tax_line_chart_large

Lower corporate taxes were supposed to unleash the power of the market and make us all better off.  Unfortunately, but not surprisingly, all they have done is boost corporate profits at the public expense.

Of course, income tax burdens are not equally divided among individuals.  In fact, our federal income tax code has become increasingly favorable to higher income earners.  As the next chart shows, the top marginal income tax rate has been dramatically reduced.  The top marginal tax rate was 50 percent in the mid-1980s and even higher in the 1950s.  Currently, the top rate is 39.6 percent; it is paid by individuals making more than $406,750 and couples making more than $457,600.  And then there are tax breaks that disproportionately benefit top income earners.

11economist--folbre2-blog480

The combination of more income going to top earners, lower top marginal tax rates, and specially crafted tax breaks cannot help but reduce federal tax revenues and drive up our federal deficits.

The payment of income taxes is one thing—how the federal government uses the money it receives is another.  As we see next, military related activities absorb a heavy share of federal spending.

tax_dollor,_labels_edited_large

Direct spending on the military accounts for 27 cents of every federal tax dollar spent.  Including spending for veterans benefits and approximately two-thirds of the interest on the federal debt adds another 16.05 cents, which brings the overall military total to 43.05 cents out of every dollar spent.  This is a conservative estimate because it does not include spending on activities that fall under the broader heading of national security such as homeland security and certain “foreign aid” expenditures.  No wonder our infrastructure and social programs are starved for funds.

Federal spending can be divided into non-discretionary and discretionary items.  In the case of the former, spending is mandated by law, such as payment of the national debt.  In the case of the latter, the federal government has discretion in how it spends our tax money.  Looking just at discretionary spending reveals even more clearly the dominant position of the military in our budget priorities.

discretionary-desk

Moreover, political pressure keeps working to push the military share higher.  Both House and Senate budget proposals call for spending some $530 billion on defense in Fiscal Year (FY) 2016.  That is the most that can be spent without triggering automatic spending cuts due to sequestration.  But – happily for the military – there is an exception to the sequestration process.

This exception allows Congress to authorize unlimited spending for current military operations or what is officially known as Overseas Contingency Operations.  House and Senate proposals include more than $90 billion under this heading.  Significantly, there is no similar exception when it comes to spending on non-military, discretionary items.  Apparently our non-military needs don’t rise to the same level of urgency as our military ones.

A few key changes in the tax code and federal spending priorities and a better 2016 tax day is not hard to imagine.

The Rich Rule

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The dominance of the 1% is now widely accepted.  What is often missed is the fact that their dominance was built on a major transformation of the U.S. economy beginning in the early 1980s and that U.S. policy, which helped to usher in that transformation, has largely been committed to reinforcing it.  An NPR Planet Money post includes two charts that vividly highlight this transformation.

The chart below shows trends in the average inflation-adjusted pre-tax income for both the bottom 90% and the top 1% of the U.S. population.  From the early 1940s to the early 1970s, the bottom 90%—the great majority of the population—enjoyed a steady growth in their average real income while the top 1% saw little growth (to their already substantial total).

However, beginning in the early 1980s, thanks to the intensification of globalization, privatization, deregulation, and attacks on unions and social programs, things dramatically changed.  Now it was the top 1% that saw all the income gains.  In fact, as the chart makes clear, the real average income of the bottom 90% has actually been in decline.

Income inequality trend

 

The following chart offers an even more dramatic way to see this change in relative “fortunes.”  Each data point represents the average real pre-tax income of the bottom 90% and the top 1% for the given year.  The vertical greenish line illustrates the fact that between the early 1930s and 1970s only the bottom 90% saw income gains.  The horizontal red line illustrates how beginning in the early 1980s all the income growth went to the top 1%.

 

Inequality by year

 

One take away: no change in policy, no change in income distribution.

Written by marty

April 21st, 2015 at 5:24 am

Posted in Inequality

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The Disappearing State Unemployment System

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Business has failed to create the jobs we need and our public policies are failing to protect those who are unemployed.

As an Economic Policy Institute report explains:

The drop in the official unemployment rate overstates the overall improvements made in the underlying labor market. The United States lost 7.8 million jobs between December 2007 and October 2010 but the working-age population continued to grow over that period. As a result, even with steady job growth in recent years, the current labor market is still short 5.6 million jobs needed to keep up with the growth in potential labor force (see Figure A).

 Jobs

And, as of December 2014, only 23.1 percent of unemployed workers received any state unemployment benefits (see Figure B).  One reason is the nature of many of the recently created jobs: they are short term and low paying; this leaves workers without the work record or earnings necessary to draw benefits.  Another reason:

since 2011 nine states have cut the maximum available number of weeks of regular UI benefit duration [to below the long-accepted norm of 26 weeks] : Arkansas, Florida, Georgia, Illinois, Kansas, Michigan, Missouri, North Carolina, and South Carolina. Except Illinois, all these states made other legislative changes to their programs which may have reduced benefit recipiency.

 Unemployment

Times are not easy even for those lucky enough to receive the benefits they earned:  As the Economic Policy Institute report notes:

Many states pay low benefits. There were 11 states with maximum weekly benefit levels of $350 or less in 2014, meaning that workers earning more than $700 a week (well below the median weekly earnings) do not get half their pre-layoff wages replaced by UI benefits. Average benefits overall were only $315 a week in 2014 with average weekly benefits below poverty levels in the poorly performing states.

Written by marty

April 13th, 2015 at 4:37 am

A Critical Look At Capitalist Globalization

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My latest article, on capitalist globalization, appears in the current issue of the journal Critical Asian Studies.   For a limited time the journal is making it freely available.  Here is the abstract and below it a link to the article itself.

 

From the Claw to the Lion

A Critical Look at Capitalist Globalization

Abstract:

This article argues that capitalist globalization is largely responsible for creating or intensifying many of our most serious economic and social problems. It first describes the forces that drove core country transnational corporations to create a complex system of cross-border production networks. It then maps the resulting new international division of labor, in which Asian countries, especially China, import primary commodities from Latin American and sub-Saharan African countries to produce exports for core countries, especially the United States. In core countries, globalization has led to the destruction of higher paying jobs, financialization of economic activity, and stagnation. While the new international division of labor has boosted third world rates of growth, especially in Asia, it has also left the third world with unbalanced and inequitable economies. Moreover, contradictions in the globalization process point to the spread of core country stagnation to the third world. Capitalist globalization has increased third world dependence on core country consumption while simultaneously undermining core country purchasing power. The article ends by discussing a process and program of transformation that highlights the feasibility of an alternative to global capitalism as well as the organizational capacities and institutional arrangements that must be developed if we are to realize it.

The article can be read or downloaded for free here.

The Media Discovers The TPP

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The corporate nature of the Trans-Pacific Partnership (TPP), a so called free-trade agreement, is becoming more obvious thanks to a recent leak of the investment chapter by Wikileaks.

While the U.S. government likes to promote agreements like the TPP as good because they lower restrictions on trade, the fact is that trade liberalization itself does not automatically improve worker and community well-being.  In fact, most studies show negative consequences.    Even more importantly, pure trade issues play only a small part in these free-trade agreements; they are primarily designed to boost corporate power and profits through multiple chapters, each of which limit public regulation or control over different aspects of corporate decision making.

The investment chapter of the TPP is a case in point.  Here is what the New York Times has to say about the chapter:

The Trans-Pacific Partnership — a cornerstone of Mr. Obama’s remaining economic agenda — would grant broad powers to multinational companies operating in North America, South America and Asia. Under the accord, still under negotiation but nearing completion, companies and investors would be empowered to challenge regulations, rules, government actions and court rulings — federal, state or local — before tribunals organized under the World Bank or the United Nations. . . .

The sensitivity of the issue is reflected in the fact that the cover mandates that the chapter not be declassified until four years after the Trans-Pacific Partnership comes into force or trade negotiations end, should the agreement fail. . . .

 “This is really troubling,” said Senator Charles E. Schumer of New York, the Senate’s No. 3 Democrat. “It seems to indicate that savvy, deep-pocketed foreign conglomerates could challenge a broad range of laws we pass at every level of government, such as made-in-America laws or anti-tobacco laws. I think people on both sides of the aisle will have trouble with this.”. . .

Under the terms of the Pacific trade chapter, foreign investors could demand cash compensation if member nations “expropriate or nationalize a covered investment either directly or indirectly.” Opponents fear “indirect expropriation” will be interpreted broadly, especially by deep-pocketed multinational companies opposing regulatory or legal changes that diminish the value of their investments.

Included in the definition of “indirect expropriation” is government action that “interferes with distinct, reasonable investment-backed expectations,” according to the leaked document.

Critics say the text’s definition of an investment is so broad that it could open enormous avenues of legal challenge. An investment includes “every asset that an investor owns or controls, directly or indirectly, that has the characteristic of an investment,” including “regulatory permits; intellectual property rights; financial instruments such as stocks and derivatives”; construction, management, production, concession, revenue-sharing and other similar contracts; and “licenses, authorizations, permits and similar rights conferred pursuant to domestic law.” . . .

All of those disputes would be adjudicated under rules set by either the International Centre for Settlement of Investment Disputes or the United Nations Commission on International Trade Law. . . .

There are . . . mitigating provisions, but many have catches. For instance, one article states that “nothing in this chapter” should prevent a member country from regulating investment activity for “environmental, health or other regulatory objectives.” But that safety valve says such regulation must be “consistent” with the other strictures of the chapter, a provision even administration officials said rendered the clause more political than legal.

One of the chapter’s annexes states that regulatory actions meant “to protect legitimate public welfare objectives, such as public health, safety and the environment” do not constitute indirect expropriation, “except in rare circumstances.” That final exception could open such regulations to legal second-guessing, critics say.

There are many other chapters in the TPP, most of which are tailored to promote specific corporate interests—for example, there is a chapter that strengthens patent protection and monopoly profits for drug companies—an outcome that flies in the face of liberalization claims.

The corporate bias in these agreements is not surprising given that corporate leaders and lobby groups are the main advisers to the U.S. trade representative.

The media’s recent attention to the TPP’s investment chapter and the growing cries of alarm by politicians is somewhat surprising given that such chapters have been part of all recent trade agreements involving the U.S., for example the Korea-U.S. Free Trade Agreement.

Corporate use of these investment chapters and their associated investor state dispute settlement mechanisms [ISDS] is intensifying as the charts below highlight.

cases

 

Trends

And, since the tribunals that rule on corporate initiated suits against governments are heard by corporate lawyers, it should not be surprising that most rulings go against governments.  In one of the largest, the tribunal agreed with Ecuador that Occidental Oil had violated its contract with the government but still ruled in Occidental’s favor to the tune of $2.4 billion.

Regardless of the reason, it is positive that the terms of the TPP are now sparking outrage.  However, since its investment and other chapters have been regularly included in past agreements with little fanfare or Congressional opposition, we need to recognize that current cries of alarm by politicians are more the result of unexpected public disclosure than real disapproval.

If we want to defend our interests we need to take advantage of the moment and strengthen our opposition to this and other free trade agreements.  But we shouldn’t stop there.  After all corporate dominance of public policy is not limited to international trade and investment agreements.

Written by marty

March 27th, 2015 at 6:12 am