Reports from the Economic Front

a blog by Marty Hart-Landsberg

Category Archives: Job Creation

Just Say No To NAFTA

The North American Free Trade Agreement (NAFTA) is unpopular with many working people in the United States, who correctly blame it for encouraging capital flight, job losses, deindustrialization, and wage suppression.   President Trump has triggered the renegotiation of the agreement, which will likely conclude early next year.  Unfortunately, progressives are in danger of missing an important opportunity to build a working class movement for meaningful economic change.  By refusing to openly call for termination of the agreement, they are allowing President Trump to present himself as the defender of the US workers, a status that will likely help him secure the renewal of the treaty and a continuation of destructive globalization dynamics.

The NAFTA debate

According to a recent poll commissioned by Public Citizen:

At a time of great peril for our democracy and deepening public opposition to Donald Trump on many fronts, he wins high marks from voters on handling trade and advocating for American workers: 46 percent approve of his handling of trade agreements with other countries, 51 percent, his ‘putting American workers ahead of the interests of big corporations’ and 60 percent, how he is doing “keeping jobs in the United States.”

This perception of Trump’s advocacy for workers is encouraged by media stories of the strong opposition by leading multinational corporations to several of President Trump’s demands for changes to the existing NAFTA agreement.

The most written about and controversial proposals include:

  • Major modifications to NAFTA’s investor-state dispute settlement system, which allows foreign investors to sue host governments in secret tribunals that trump national laws if these investors believe that government actions threaten their expected profits. The Trump administration proposes to change this system by (1) establishing an “opt-in” provision that would make participation voluntary and (2) ending the ability of private investors to use claims of denial of “minimum standard of treatment” or an “indirect expropriation” as grounds for filing a claim.
  • A tightening of the rules on the origins of car parts. NAFTA rules govern the share of a product that must be sourced within NAFTA member countries to receive the agreement’s low tariff benefits. The Trump administration wants to raise the auto rules of origin to 85 percent from the current 62.5 percent and include steel as one of the products to be included in the calculations.  It has also proposed adding a new US-only content requirement of 50 percent.
  • The introduction of a NAFTA sunset clause that would allow any of the participating countries to terminate the deal after five years, a clause that could well mean a renegotiation of the agreement every five years.

Canadian and Mexican government trade representatives have publicly rejected these proposals.  The US corporate community has called them “poison pills” that could doom the renegotiating process, possibly leading to a termination of the agreement.  The president of the US Chamber of Commerce has said that:

All of these proposals are unnecessary and unacceptable. They have been met with strong opposition from the business and agricultural community, congressional trade leaders, the Canadian and Mexican governments, and even other U.S. agencies. . . . The existential threat to the North American Free Trade Agreement is a threat to our partnership, our shared economic vibrancy, and clearly the security and safety of all three nations.

Corporate lobbyists are hard at work, trying to convince members of Congress to use their influence to get Trump to withdraw these proposals, but so far with little success.  In fact, the Trump administration has pushed back:

In remarks to the news media in mid-October, Robert E. Lighthizer, the United States trade representative, said that businesses should be ready to forego some of the advantages they receive under NAFTA as the United States seeks to negotiate a better deal for workers. In order to win the support of people in both parties, businesses would have to “give up a little bit of candy,” he said.

It is this kind of public back and forth between corporate leaders and the Trump administration that has encouraged many working people to see President Trump as sticking up for their interests.  In broad brush, workers do not trust a dispute resolution settlement system that allows corporations to pursue profits through secret tribunals that stand above national courts.  They also welcome measures that appear likely to force multinational corporations to reverse their past outsourcing of jobs, especially manufacturing jobs, and promote “Buy American” campaigns.  And, they have no problem with periodic reviews of the overall agreement to allow for ongoing corrections that might be needed to improve domestic economic conditions.

The rest of the story

Of course, NAFTA negotiations are not limited to these few contentious issues.  In fact, trade negotiators have made great progress in reaching agreement in many other areas.  However, because of the lack of disagreement between corporations and the Trump administration on the relevant issues, the media has said little about them, leaving the public largely ignorant about the overall pace and scope of the renegotiation process.

Perhaps the main reason that agreement is being reached quickly on many new issues is because many of the Trump administration’s trade proposals closely mirror those previously agreed to by all three NAFTA country governments during the Transpacific Partnership negotiations.  These include “measures to regulate treatment of workers, the environment and state-owned enterprises” as well as “new rules to govern the trade of services, like telecommunications and financial advice, as well as digital goods like music and e-books.”  In short, taken overall, it is clear that the Trump administration remains committed to “modernizing” NAFTA in ways designed to expand the power and profitability of transnational corporations.

A case in point is the proposed change to the existing NAFTA side-agreement on labor rights.  NAFTA currently includes a rather useless side agreement on labor rights.  It only requires the three governments to enforce their own existing labor laws and standards and limits the violations that are subject to sanctions.  For example, sanctions can only be applied—and only after a long period of consultations, investigations, and hearings–to violations of laws pertaining to minimum wages, child labor, and occupational safety and health.  Violations of the right to organize, bargain collectively, and strike are not subject to sanctions.

The labor standards agreement that the US proposes to include in NAFTA is one that it has used in more recent trade agreements and was to be part of the Transpacific Partnership.  It says that “No Party shall fail to effectively enforce its labor laws through a sustained or recurring course of action or inaction in a manner affecting trade or investment between the Parties, after the date of entry into force of this Agreement for that Party.”

This labor agreement is included in the US-Dominican-Central American Free Trade Agreement (DR-CAFTA) and we now have an example of how it works, thanks to a case filed in 2011 by the US against Guatemala.  The panel chosen to hear the case concluded, in June 2017, that the US “did not prove that Guatemala failed to conform to its obligations.”  The reason: the three person panel made its own monetary calculations about whether Guatemalan labor violations were serious enough to affect trade or investment flows between the two countries and decided they were not.

As Sandra Polaski, former Deputy Director-General for Policy of the International Labor Organization, writes:

The panel reached its decision that Guatemala had not breached its obligations under the DR-CAFTA because the violations had not occurred “in a manner affecting trade” between the parties. . . . The panel chose to establish a demanding standard in its interpretation of that phrase, requiring that a complaining country would have to prove that there were cost savings from specific labor rights violations and that the savings were of sufficient scale to confer a material competitive advantage in trade between the parties.  This threshold is unprecedented in any analogous applications: WTO panels have interpreted similar language much more narrowly, as affecting conditions of competition, without requiring demonstration of costs and their effects. Demonstrating changes in costs at this level would require access to sensitive internal company accounts (at a minimum), and the perpetrators of labor violations would likely have hidden them in any case. This standard could not be met without subpoena power, which does not exist under the trade agreements. . . .

The decision is disturbing for multiple reasons: because of the injustice toward the affected Guatemalan workers; because it invalidated the parties’ explicit commitment to broad enforcement of labor rights contained both in the obligatory commitments and the overall stated purposes of the agreement; and because as the first and as of now only arbitration arising from a labor clause (or environmental clause) it set a precedent for future cases.

In short, labor exploitation is likely to continue unchecked under a possible new NAFTA, which can be expected to remain as corporate friendly as the original agreement.

The need for a new progressive strategy of opposition

President Trump has threatened to withdraw the US from NAFTA if the other two countries do not agree to his demands for key NAFTA changes, in particular to the investor-state dispute settlement system and rules on the origins of car parts, the inclusion of a sunset clause, and an end to government procurement restrictions.  While we cannot predict the future, the odds are great that compromises will be reached on these issues, allowing President Trump to present a renegotiated NAFTA as a win for working people.

As Jeff Faux, founder of the Economic Policy Institute, comments:

The erratic and belligerent Trump might, of course, drive US-Mexican relations over a cliff. But he prides himself as a deal-maker, not a deal-breaker. So the most likely outcome is a modestly revised NAFTA that: 1) Trump can boast fulfills his pledge 2) Peña Nieto can use to claim that he stood up to the bullying gringo 3) doesn’t threaten the low-wage strategy for both countries that NAFTA represents.

Revisions might include weakening NAFTA’s dispute settlement courts, raising the minimum required North American content for duty-free goods, and reducing the obstacles to cross-border trade for small businesses on both sides of the border.

Changes like this could marginally improve the agreement, and would be acceptable to the Canadians, who have been told by Trump that he is not going after them. But from the point of view of workers in the American industrial states who voted for Trump, the new NAFTA is likely to be little different from of the old one. The low-wage strategy underlying NAFTA that keeps their jobs drifting south and US and Mexican workers’ pay below their productivity will continue.

But you can bet that Trump will assure them that it is the greatest trade deal the world has ever seen.

Sadly, the progressive movement has pursued the wrong strategy to build the kind of movement we need to oppose the likely NAFTA renewal or take advantage of a possible US withdrawal.  In fact, it has largely allowed President Trump to shape the public discussion around the renegotiations.

To this point, progressive trade groups, labor unions, and Democratic Party politicians have refrained from calling Trump’s bluff and demanding termination of the agreement, despite the fact that this and other so-called free trade agreements are not really reformable in a meaningful pro-worker sense. Instead, they have concentrated on demonstrating the ways that NAFTA has harmed workers, highlighting areas that they think are in most need of revision and offering suggestions for their improvement, and mobilizing their constituencies to press the US trade representative to adopt their desired changes.  Progressive trade groups have generally turned their spotlight on the investor-state dispute resolution system and outsourcing, as have Democratic Party politicians.  Trade unions, for their part, have emphasized outsourcing and labor rights.

Significantly, these are all areas, with the exception of labor rights, where the Trump administration has put forward proposals for change which if realized would go some way to meeting progressive demands.  The result is that the progressive movement appears to be tailing or reinforcing Trump’s claims to represent popular interests.  And, by focusing on targeted issues, the movement does little to educate the population about the ways in which the ongoing negotiations are creating new avenues for corporations to enhance their mobility and profits, especially in services, finance, and e-commerce.

Apparently, leading progressive groups plan to wait until they see the final agreement and then, if they find it unacceptable with regards to their specific areas of concern, call for termination of the agreement.  But this wait and see strategy is destined to fail, not only to build a movement capable of opposing a revised NAFTA agreement, but even more importantly to advance the creation of a working class movement with the political awareness and vision required to push for a progressive transformation of US economic dynamics.

For example, this strategy of creating guidelines for selective changes in the agreement tends to encourage people to see the government as an honest broker that, when offered good ideas, is likely to do the right thing.  It also implies that the agreement itself is not a corporate creation and that a few key changes can make it an acceptable vehicle for advancing “national” interests.  Finally, because agreements like NAFTA are complex and hard to interpret it will be no simple matter for the movement to help its various constituencies truly understand whether a renegotiated NAFTA is better, worse, or essentially unchanged from the original, an outcome that is likely to demobilize rather than energize the population to take action.  Of course, if Trump actually decides to terminate the agreement, the movement will be put in the position of either having to praise Trump or else criticize him for not doing more to save NAFTA, neither outcome being desirable.

There is, in my opinion, a better strategy: engage in popular education to show the ways that trade agreements are a direct extension of decades of domestic policies designed to break unions and roll back wages and working conditions, privatize key social services, reduce regulations and restrictions on corporate activity, slash corporate taxes, and boost multinational corporate power and profitability.  Then, organize the most widespread movement possible, in concert with workers in Mexico and Canada, to demand an end to NAFTA.  Finally, build on that effort, uniting those fighting for a change in domestic policies with those resisting globalization behind a campaign directed at transforming existing relations of power and creating a new, sustainable, egalitarian, and solidaristic economy.

It is not too late to take up the slogan: just say no to NAFTA!

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Tax Cuts: Its All About Capitalism

Powerful corporations and the rich in the United States continue their winning ways.  By narrow margins, both the House of Representatives and Senate have agreed on a budget proposal that calls for an increase in the federal deficit of $1.5 trillion dollars in order to fund a major reform of the US tax system that will make the rich and powerful even more so.

Proposed tax changes

Republicans in each house of Congress still need to work out the specifics of their desired tax reform and then negotiate any differences before they can send the budget to President Trump for his signature.  But, there seems to be general consensus on the following business tax changes:

  • slash the top tax rate on pass-through business income from partnerships and limited liability companies or sole proprietorships from 39.6 percent to 25 percent; most law firms, hedge fund and real-estate companies are pass-through companies in which profits are counted and taxed as the owner’s personal income
  • reduce the corporate income tax from 35 percent down to 20 percent
  • repealing the corporate alternative minimum tax
  • replace the current global profit tax on business with a territorial tax, which means corporations will no longer be required to pay taxes on their foreign earnings.
  • institute a one-time lower tax rate on repatriated corporate profits currently held outside the country.

The Tax Policy Center estimates that these and other less significant changes would give corporate America a $2.6 trillion tax cut over the next decade.

There will also be changes to the personal tax code, although in dollar terms not nearly as large as the likely business tax changes highlighted above.  There seems to be agreement in both the House and Senate on ending the inheritance tax and alternative minimum income tax and reducing the number of individual income tax brackets from seven to three, with tax rates of 12 percent, 25 percent and 35 percent, although some members of congress would like to add a fourth higher bracket for very high-income earners.

The only serious disagreements involve whether to raise funds to offset the huge deficits that will be generated by the business tax cuts by ending federal deductions for state and local government taxes and restricting the yearly contributions taxpayers can make to their tax deferred 401(k) retirement accounts, both changes that would hit middle income earners hard.

The Tax Policy Center estimates that the likely personal income tax changes would be roughly revenue neutral, although as much as two-thirds of the likely personal income tax cuts would go to the top 1 percent of income earners.

No doubt as both houses of congress set to work, public attention will be directed away from both corporate tax cutting, which is the main aim of the tax reform and the primary driver of a growing federal debt, and the various tax give-aways to high income earners, and towards possibly heated congressional debates over the possible loss of personal tax deductions enjoyed by middle income earners.

Business, at least for now, no longer cares about the deficit

It is the business community that is driving this push to slash corporate taxes.  As an article in Bloomberg Businesweek explains:

It was only about five years ago that powerful people in finance loved talking about the horrendous consequences for the U.S. if it didn’t get its finances under control. They warned that the federal debt—and the interest payments—could eventually get high enough to drag down the economy, burden future generations, and even threaten national security. Chief executive officers of five of the biggest U.S. banks joined a campaign called Fix the Debt, signing on with hedge fund billionaires, asset managers, and private equity executives, as well as former lawmakers and others.

It was not long after Trump’s election that everything changed.  From then on, the business community, including most of the leading members of Fix the Debt, embraced tax cuts without concern for the deficit:

Case in point: Goldman Sachs Group Inc. CEO Lloyd Blankfein, a Fix the Debt supporter who in 2012 told CNBC he’d be for higher taxes if they helped mend the fiscal gap. After the election, Blankfein told colleagues in a companywide voicemail that Trump’s proposals, including tax reform, “will be good for growth and, therefore, will be good for our clients and for our firm.”

He wasn’t alone. It’s “about capitalism,” JPMorgan Chase & Co. CEO Jamie Dimon said in February, as he pushed Washington to lower corporate taxes. He suggested that if corporate rates fell, wages would come up. A few weeks earlier, Bank of America Corp. head Brian Moynihan said Trump should focus on cutting taxes. They were part of the antidebt campaign, too.

Dimon is right—it is about capitalism, which means that business leaders have one goal—maximize profits.  And if their desired tax cuts cause deficit problems down the road, well, these business leaders will effortlessly shift their message back to “fix the debt,” which translates into the need to slash critical social programs, all in the name of promoting a healthy capitalism.

Ideological cover

Of course, there is always an attempt to present policies designed to enrich the powerful as beneficial for all.  The argument has to be made and publicized, regardless of who really believes it.  And here it is: Kevin Hassett, the Chair of President Trump’s Council of Economic Advisers, has announced that the corporate tax cuts being discussed could be expected to increase a typical American household’s income by $3000 to $7000 a year.

The argument made by Hassett and the rest of the Council of Economic Advisers is that high corporate taxes force companies to invest overseas and reduce hiring in the United States.  In contrast, lower corporate taxes ill lead corporations to invest and complete for workers, all of whom would be more productive thanks to the investment, thereby driving up growth and worker earnings.

There is, in fact, little support for this notion that tax cuts lead to higher wages.  As the New York Times reports:

Other research has cast doubt on the theory that businesses would pass tax savings on to their workers in the form of higher wages. A 2012 Treasury Department study, which Treasury recently removed from its website, found that less than a fifth of the corporate tax falls on workers. A Congressional Research Service report last month concluded that the effects of corporate taxes fell largely on high-income Americans, not average workers.

So, how did the Hassett and the Council get its result?  Jared Bernstein, a Senior Fellow at the Center on Budget and Policy Priorities, examined the model used.  As he explains:

The interesting economics question is to why the model predicts such an unrealistic result for the US economy? Which of the assumptions most fail to comport with reality? To the extent that we want to train students to be useful practitioners as opposed to proficient, yet unrealistic, modelers, answering those questions would also provide some real educational value-added.

In this case, the model assumes that the US is a small, open economy such that capital inflows instantaneously fund more investment, such investment immediately boost productivity, and the benefits of faster productivity immediately accrue to paychecks. The simple model ignores the extent to which these inflows would raise the trade deficit as well as their impact on revenue losses and higher budget deficits.

The model assumes away imperfect competition, which is relevant today as a) monopolistic concentration is an increasing problem, and b) the one thing economists agree on in this space is that in these cases, the benefits of the corporate cut flows to profits and shareholders, not workers, other than maybe some “rent sharing” with high-end workers.

 

It may well be too late to stop this round of tax giveaways to business and the rich.  But it is not too late to use the moment to help working people develop a clearer picture of how capitalism works and a more critical understanding of the arguments used to defend its interests.  It wont be long before new economic tensions and difficulties present us with another opportunity to resist and hopefully, if we have used this time well, advance a meaningful movement for change.

Budget Wars: The Rich Want More

The rich and powerful keep pushing for more.  And the odds are increasingly good that they will get what they want through the federal budget process now underway. As the Center on Budget and Policy Priorities explains:

Congressional Republicans this fall are poised to launch step one of a likely two-step tax and budget agenda: enacting costly tax cuts now that are heavily skewed toward wealthy households and profitable corporations, then paying for them later through program cuts mostly affecting low- and middle-income families.

The potential gains for those at the top from this first step are enormous.  For example, the Republican plan currently calls for ending the estate tax, slashing the top tax rate on pass-through income from partnerships and limited liability companies from 39.6 percent to 25 percent, lowering the corporate income tax rate from 35 percent down to 20 percent, and repealing the corporate alternative minimum tax.  Republicans are also considering a tax holiday on repatriated multinational corporate profits.

The Tax Policy Center estimates that the Senate tax plan would lower personal income taxes by an average of $722,510 for the top 0.1 percent of income earners compared with just $60 for those in the lowest quintile; as much as two-thirds of personal income tax cuts would go to the top 1 percent.  Corporate America, for its part, would be reward with a $2.6 trillion cut in business taxes over the next decade.

Naturally, President Trump and his family are well positioned to gain from these changes.  Democracy Now reports that the Center for American Progress Action Fund estimates that “President Trump’s family and Trump’s Cabinet members would, combined, reap a $3.5 billion windfall from the proposed repeal of the estate tax alone.” And capping the pass-through income tax rate “would give Trump’s son-in-law, his senior adviser, Jared Kushner, an annual tax cut of up to $17 million.” The Center for American Progress estimates that Trump, based on his 2016 financial disclosures, would enjoy a $23 million tax cut.

As for the second step in two-step agenda, it would work as follows: the Senate’s budget resolution provides a very general outline of federal spending and revenues over the next decade.  It calls for an allowed increase in the budget deficit of $1.5 trillion as well as the achievement of a balanced budget within a decade.  House leaders are hopeful that the House will approve the Senate budget resolution with few if any changes, thereby speeding the path for the House and Senate to quickly agree on the specific tax changes that will drive the budget deficit and then deliver the completed budget to President Trump for his signature before the end of the year.

However, all independent analysts agree that the Republican tax plan will push the deficit far beyond its stated limit of $1.5 trillion.  The table below, based on estimates by the Tax Policy Center, is representative.

It shows that business tax cuts are likely to lead to $2.6 trillion in lost revenue, producing an overall estimate of a $2.4 trillion deficit increase.  What we can expect then, is the return of the “deficit hawks.”  If Republicans succeed in passing their desired tax cuts, and they produce the expected ever growing budget deficits, we can count on these legislators to step forward to sound the alarm and call for massive cuts in social spending, targeting key social programs, especially Medicare and Medicaid, thereby completing the second step.

Not surprisingly, the Republican leadership denies the danger of growing deficits.  It presents its tax plan as a pro-growth plan, one that will generate so much growth that the increased revenue will more than compensate for the tax cuts.  It’s the same old, same old: once we get government off our backs and unleash our private sector, investment will soar, job creation will speed ahead, and incomes will rise for everyone.  The history of the failure of past efforts along these lines is never mentioned.

Of course, it is possible that political differences between the House and Senate will throw a monkey wrench in the budget process, forcing Republicans to accept something much more modest.  But there are powerful political forces pushing for these tax changes and, at least at present, it appears likely that they will be approved.

One of the most important takeaways from what is happening is that those with wealth and power remain committed to get all they can regardless of the social consequences for the great majority.  In other words, they won’t stop on their own.  If we want meaningful improvements in working and living conditions we will have to do more to help build a popular movement, with strong organizational roots, capable of articulating and fighting for its own vision of the future.

The Bipartisan Militarization Of The US Federal Budget

The media likes to frame the limits of political struggle as between the Democratic and Republican parties, as if each side upholds a radically different political vision. However, in a number of key areas, leaders of both parties are happy to unite around an anti-worker agenda.  Support for the military and an aggressive foreign policy is one such area.

On September 18, US senators approved the National Defense Authorization Act (NDAA) of 2018.  Donald Trump had proposed increasing the military budget by $54 billion.  The Senate voted 89-9 to increase it by $37 billion more than Trump sought.  In the words of the New York Times:  “In a rare act of bipartisanship on Capitol Hill, the Senate passed a $700 billion defense policy bill on Monday that sets forth a muscular vision of America as a global power, with a Pentagon budget that far exceeds what President Trump has asked for.”

The NDAA calls for giving $640 billion to the Pentagon for its basic operations and another $60 billion for war operations in other countries, including Iraq, Syria, and Afghanistan.  The House passed its own version of the bill, which included a smaller increase over Trump’s request as well as new initiatives such as the creation of a Space Corps not supported by the Senate.  Thus, the House and Senate need to reconcile their differences before the bill goes to President Trump for his signature.

It is clear that Democratic Party opposition to Trump does not include opposition to US militarism and imperialism. As Ajamu Baraka points out:

Opposition to Trump has been framed in ways that supports the agenda of the Democratic Party—but not the anti-war agenda. Therefore, anti-Trumpism does not include a position against war and U.S. imperialism.

When the Trump administration proposed what many saw as an obscene request for an additional $54 billion in military spending, we witnessed a momentary negative response from some liberal Democrats. The thinking was that this could be highlighted as yet another one of the supposedly demonic moves by the administration and it was added to the talking points for the Democrats. That was until 117 Democrats voted with Republicans in the House—including a majority of the Congressional Black Caucus—to not only accept the administration’s proposal, but to exceed it by $18 billion. By that point, the Democrats went silent on the issue.

It is important to keep in mind that, as William D. Hartung shows, “there are hundreds of billions of dollars in ‘defense’ spending that aren’t even counted in the Pentagon budget.” Hartung goes agency by agency to show the “hidden” spending.  As he notes:

You might think that the most powerful weapons in the U.S. arsenal — nuclear warheads — would be paid for out of the Pentagon budget.   And you would, of course, be wrong.  The cost of researching, developing, maintaining, and “modernizing” the American arsenal of 6,800 nuclear warheads falls to an obscure agency located inside the Department of Energy, the National Nuclear Security Administration, or NNSA. It also works on naval nuclear reactors, pays for the environmental cleanup of nuclear weapons facilities, and funds the nation’s three nuclear weapons laboratories, at a total annual cost of more than $20 billion per year.

Hartung’s grand total, which includes, among other things, the costs of Homeland Security, foreign military aid, intelligence services, the Veterans Administration, and the interest on the debt generated by past spending on the military, is $1.09 Trillion.  In short, our political leaders are far from forthcoming about the true size of our military spending.

Militarization comes home

Opponents of this huge military budget are right to stress how it greatly increases the dangers of war and the harm our military interventions do to people in other countries, but the costs of militarism are also felt by those living in the United States.

For example, ever escalating military budgets fund ever new and more deadly weapons of destruction, and much of the outdated equipment is sold to police departments, contributing to the militarization of our police and the growing use of force on domestic opponents of administration policies, the poor, and communities of color.  As Lisa Wade explains:

In 1996, the federal government passed a law giving the military permission to donate excess equipment to local police departments. Starting in 1998, millions of dollars worth of equipment was transferred each year, as shown in the figure below. Then, after 9/11, there was a huge increase in transfers. In 2014, they amounted to the equivalent of 796.8  million dollars.

Those concerned about police violence worried that police officers in possession of military equipment would be more likely to use violence against civilians, and new research suggests that they’re right.

Political scientist Casey Delehanty and his colleagues compared the number of civilians killed by police with the monetary value of transferred military equipment across 455 counties in four states. Controlling for other factors (e.g., race, poverty, drug use), they found that killings rose along with increasing transfers. In the case of the county that received the largest transfer of military equipment, killings more than doubled.

Militarization squeezes nondefense social spending 

Growing military spending also squeezes spending on vital domestic social services, including housing, health, education, and employment protections, as critical programs and agencies are starved for funds in the name of fiscal responsibility.

The federal budget is made up of nondiscretionary and discretionary spending.  Nondiscretionary spending is mandated by existing legislation, for example, interest payments on the national debt.  Discretionary spending is not, and thus its allocation among programs clearly reveals Congressional priorities.  The biggest divide in the discretionary budget is between defense and nondefense discretionary spending.

The nondefense discretionary budget is, as explained by the Center on Budget and Policy Priorities:

the main budget area that invests in the nation’s future productivity, supporting education, basic research, job training, and infrastructure.  It also supports priorities such as providing housing and child care assistance to low- and moderate-income families, protecting against infectious diseases, enforcing laws that protect workers and consumers, and caring for national parks and other public lands.  A significant share of this funding comes in the form of grants to state and local governments.

As we see below, nondefense discretionary appropriations have fallen dramatically in real terms and could potentially fall to a low of $516 billion if Congress does not waive the sequestration caps established in 2011.

The decline is even more dramatic when measured relative to GDP.  Under the caps and sequestration currently in place, nondefense spending in 2017 equaled 3.2 percent of GDP, just 0.1 percentage point above the lowest percentage on record going back to 1962.  According to the Center on Budget and Policy Priorities, “That percentage will continue to fall if the caps and sequestration remain unchanged, equaling the previous record low of 3.1 percent in 2018 and then continuing to fall (see the figure below).”

Looking ahead

As the next figure shows, the proposed Trump budget would intensify the attack on federal domestic social programs and agencies.

If approved, it “would take nondefense discretionary spending next year to its lowest level in at least six decades as a percentage of the economy and, by 2027, to its lowest on that basis since the Hoover Administration — possibly even earlier.”  Of course, some categories of the proposed nondefense discretionary budget are slated for growth–veterans’ affairs and homeland security–which means that the squeeze on other programs would be worse than the aggregate numbers suggest.

No doubt the Democratic Party will mount a fierce struggle to resist the worst of Trump’s proposed cuts, and they are likely to succeed.  But the important point is that the trend of militarizing our federal budget and society more generally will likely continue, a trend encouraged by past Democratic as well as Republican administrations.

If we are to advance our movement for social change, we need to do a better job of building a strong grassroots movement in opposition to militarism.  Among other things, that requires us to do a better job communicating all the ways in which militarism sets us back, in particular the ways in which militarism promotes racism and social division, globalization and economic decay, and the deterioration of our environment and quality of life, as well as death abroad and at home, all in the interest of corporate profits.  In other words, we have to find more effective ways of drawing together our various struggles for peace, jobs, and justice.

State Conservatives Block City Progressives

Recently, organizers in a number of cities helped to build strong local coalitions which successfully won passage, either though ballot or elected official vote, of measures that improved majority living and working conditions.  Examples include higher minimum wages as well as fair scheduling, paid leave, and improved prevailing wage laws.

Now, conservative forces, organized by groups such as ALEC, are using their influence in state legislatures to pass preemption laws to block this progressive city strategy and, in some cases, roll back past gains. This development is well described by Marni von Wilpert in a recent Economic Policy Institute report titled “City governments are raising standards for working people—and state legislators are lowering them back down.”

Preemption and the rise of the right

Preemption allows a higher level of government to restrict the power of a lower level of government in areas where it believes that lower level government action conflicts, or might conflict, with its own actions. In terms of state politics, state governments can use preemption to restrict the rights of city governments.

A case in point, as described by von Wilpert:

In 2015, the Birmingham City Council passed an ordinance raising the city’s minimum wage to $8.50 effective July 2016 and to $10.10 effective July 2017. At the beginning of the 2016 session, the Alabama state legislature fast-tracked a minimum wage preemption law, which Governor Robert Bentley signed 16 days after the bill was first introduced, nullifying Birmingham’s ordinance and knocking the minimum wage back down to $7.25

At one time, preemption was used by more liberal state governments to keep more conservative city governments from undercutting social standards.  However, as von Wilpert explains, “Now that the Republican Party controls 33 governorships and has majority representation in both chambers of most state legislatures, conservative state legislators have increasingly used preemption laws to strike down local government efforts to increase the quality of life for working people in their municipalities.”

Preemption and minimum wage laws

The federal minimum wage has not been increased since 2009. In 2017, the federal minimum wage of $7.25 was worth 12 percent less, in real terms, than when it was last raised, and is 27 percent below its peak value in 1968.  Working people have therefore pushed hard to get their states and/or localities to take action, and with growing success at the local level.  “Before 2012, only five localities had enacted their own local minimum wage laws, but as of 2017, forty counties and cities have done so.”

But now, as the following figure from the EPI report makes clear, conservative state lawmakers are fighting back, using preemption to restrict local action.  Twenty-five states now have preemption laws denying local governments the right to set their own minimum wages; more than half of these laws were passed beginning in 2013.

Preemption and paid leave

State level right-wing forces have also taken aim at paid leave laws, which generally include the right to paid sick and family medical leave.  There is no federal law guaranteeing workers the right to paid leave, and, as with minimum wage gains, workers have been most successful in winning paid leave at the local level.  However, as we see in the following figure, state legislatures, since 2013, have been busy denying local governments the right to implement their own higher standards.  Twenty states now have preemption laws covering paid leave.

Preemption and fair scheduling

There are currently no federal laws that ensure workers basic fairness and predictability in scheduling.  As von Wilpert describes,

While waiting for the federal government to act, four cities and two states have passed various forms of fair work schedules legislation. But in the last few years, as local governments have begun to innovate in the arena of fair scheduling, state governments have stripped local governments’ abilities to do so—[as we see in the following figure] at least nine states have passed work scheduling preemption laws since 2015.

Preemption and prevailing wage/project labor agreements

Prevailing wage and project labor agreements require private contractors to treat workers fairly, including paying all their workers the prevailing wage, when doing work under government contract.  Such agreements keep private contractors from competing for public work at the expense of their workers.

And, as in the other areas of labor rights discussed above, we see a similar explosion in action by states to restrict the right of their localities to set higher standards for public contracting. At least 12 states now have preemption laws, all but one of which was passed beginning in 2013.

What’s next?

The current right-wing strategy highlighted above greatly reduces what working people can win at the city level in many states.  Of course, there are still many states where local initiatives can bring real improvement and these should obviously continue.  At the same time, it seems clear that the political environment is changing and not for the better in terms of what local efforts can produce.

While far from easy, this means that organizers have little choice but to deepen and extend their work. Among other things, this means pursuing efforts to link local/city coalitions in order to strengthen state level influence.  It also means that more emphasis needs to be put into building organizations as well as alliances of working people around a vision of good jobs for all, a strong and accountable public sector serving human needs, and healthy cities and communities that is to be won through organizing and direct action as well as electoral work.  Above all,  this will require seeking and sharing creative ways to strengthen working class solidarity, which is key if we are to overcome the existing divisions that allow right-wing forces to set the terms of our political choices.

Recession On The Horizon

According to Bloomberg News, analysts at a number of major financial institutions see “mounting evidence” that a recession is not too far away.

In a way, their assessment is not surprising.  The current expansion, which started in June 2009, is now 99 months long, making it the third longest expansion in US history. Only the expansions from March 1991 to March 2001 (120 months) and February 1961 to December 1969 (106 months) are longer.  It is likely that this expansion will pass the 1960s expansion in length but fall short of the record.

Warning signs

The financial analysts cited by Bloomberg News did not base their warnings simply on longevity.  Rather it was the behavior of corporate profits, more specifically their downward trend, that concerned them.  Historically, expansions have come to an end because declining profits cause corporations to slash investment spending, which leads to a decline in employment and eventually consumption, and finally recession.

As the Bloomberg article explains, “The gross value-added of non-financial companies after inflation — a measure of the value of goods after adjusting for the costs of production — is now negative on a year-on-year basis.”  As an analyst for Oxford Economics Ltd. concludes, “The cycle of real corporate profits has turned enough to be a potential source of concern in the next four quarters.”

Real gross corporate value added is a proxy for profits.  Its recent decline, as shown in the figure above, means that corporate profitability is falling over time.  As long as it remained positive (the red line was above zero), corporate profits were continuing to grow, just not as fast as they did in the previous year. However, it has now become negative, which means that total profits are actually falling.  And, as we can see, whenever this happened in the past, a recession soon followed.

The primary reason recessions follow a decline in profits is that investment decisions are very sensitive to changes in profit. A decline in profit tends to produce a much larger decline in investment, leading to recession.  The investment connection to recession is is well illustrated in the following figure, taken from a blog post by the economist Michael Roberts. It shows the change in personal consumption and investment one year before the start of a recession.  As we can see, it is the decline in investment that leads the downturn, and the decline takes place more often than not while consumption is still growing.

The Bloomberg article highlights other studies that come to the same conclusion about the direction of profits and the growing likelihood of recession.  For example, as illustrated below, “The U.S. is in the mature stage of the cycle — 80 percent of completion since the last trough — based on margin patterns going back to the 1950s, according to Societe Generale SA.”

As we can see, the decline in profit margins in the current expansion mirrors the decline during other expansions as they neared their end.  It certainly appears that time is running out for this expansion.

Further evidence comes from the recent reduction in corporate buybacks. As the economist William Lazonick explains:

Buybacks have come to define the “investment” strategies of many of America’s biggest businesses. Figure 1 [below] shows net equity issues of U.S. corporations from 1946 to 2014. Net equity issues are new corporate stock issues minus outstanding stock retired through stock repurchases and M&A activity. Since the mid-1980s, in aggregate, corporations have funded the stock market rather than vice versa (as is conventionally assumed).  Over the decade 2005-2014 net equity issues of nonfinancial corporations averaged minus $399 billion per year.

In other words, corporations have been major players in the stock market, buying and retiring stock in order to drive up stock prices.  The process has, by design, enriched the top end of the income distribution.  It also helped to boost consumption spending, and by extension the expansion.  However, this corporate promotion of stock prices appears to have come to an end.  As a Fortune Magazine article reports:

The great stock buyback boom may be on the wane, undermined by falling company earnings.

U.S. company stock buybacks are down 21% in the first seven months of 2016 compared to the same period a year earlier, according to TrimTabs Investment Research, a fall driven in part by five consecutive quarters of year-over-year earnings declines among S&P 500 stocks.

Buybacks, which cancel shares and thus increase per-share earnings, have played a crucial role in supporting the stock market since the financial crisis, flattering earnings even for companies with static or falling revenues.

They, along with dividends, return cash to shareholders, a process often facilitated by borrowed money.

A decline in market values can thus be expected, adding further downward pressure on economic activity.

Social consequences

The business cycle is an inherent feature of capitalist economies and the US economy has experienced many ups and downs. But expansions and recessions do not balance out, leaving the economy on a stable long-term economic trajectory. Unfortunately, while recent cycles have greatly enriched those at the top, working people have generally experienced deteriorating living and working conditions.  The trend in job creation is one example.

The employment to population ratio is a commonly used measure of employment.  It is calculated by dividing the number of people employed by the total working-age population.  The figure below, from a report by the Chicago Political Economy Group, shows the relative employment or job creation strength of each post-World War II expansion.

As we can see, the November 2001 expansion ended without restoring the pre-recession employment to population ratio. The ratio was 2.48 percent below where it had been prior to the recession’s start.  That means the expansion was not strong enough or structured properly to ensure adequate job creation.  And, despite its length, the current expansion’s employment to population ratio remains nearly 5 percent below that lower starting point.  Moreover, this employment measure doesn’t take into account that a growing share of the jobs created during this expansion are low-paying and precarious.

 

In sum, there are strong reasons to expect a recession within the next year or so.  And it will likely hit an increasingly vulnerable working class hard.  Given trends, where the good times seem to pass most people by and the bad times punish those who gained the least the most, the need for a radical transformation of our economy seems clear.

Americans At Work: Not A Pretty Picture

What is work like for Americans?  The results of the Rand Corporation’s American Working Conditions Survey (AWCS) paint a troubling picture.

As the authors write in their summary:

The AWCS findings indicate that the American workplace is very physically and emotionally taxing, both for workers themselves and their families. Most Americans (two-thirds) frequently work at high speeds or under tight deadlines, and one in four perceives that they have too little time to do their job. More than one-half of Americans report exposure to unpleasant and potentially hazardous working conditions, and nearly one in five American workers are exposed to a hostile or threatening social environment at work.

The authors do note more positive findings.  These include:

that workers appear to have a certain degree of autonomy, most feel confident about their skill set, and many receive social support on the job. Four out of five American workers report that their job met at least one definition of “meaningful” always or most of the time.

The findings

As the Survey’s introductory chapter points out, despite the importance of work to our emotional and physical well-being, social relations, and the development of our capacities to shape our world, little has been published about our experience of work:

Most Americans between the ages of 25 and 71 spend most of their available time in a given day, week, or year working. The characteristics of jobs and workplaces—including wages, hours worked, and benefits, as well as the physical demands and risk of injury, the pace of work, the degree of autonomy, prospects for advancement, and the social work environment, to name a few—are important determinants of American workers’ well-being. Some of these job characteristics also affect workers’ social and family lives. Beyond that, job attributes can affect individual workers’ productivity—and, thus, the well-being of their coworkers, their employer, and the economy at large.

Given the potential importance of working conditions, it is surprising that there is little systematic, representative, and publicly available data about the characteristics of American jobs today.

Here, then, is a more detailed look at some of the Survey’s findings:

The Hazardous Workplace

More specifically, the survey revealed that:

American workers are subject to substantial physical demands in the workplace. One-half of men and one-third of women have a job that involves lifting or moving people or carrying or moving heavy loads one-quarter of the time or more frequently. Forty-six percent of men and 35 percent of women have jobs involving tiring or painful positions one quarter of the time or more. Thirty-eight percent of men and 30 percent of women work in jobs that involve standing all or almost all the time. . . . Overall, these patterns indicate that an overwhelming fraction of Americans engage in intense physical exertion on the job—67 percent of men and 54 percent of women report at least one of the three intense physical demand measures (moving heavy loads or people, tiring or painful positions, and prolonged standing). . . .

In addition to physical demands, more than one-half of American workers (55 percent) are exposed to unpleasant or potentially dangerous working conditions. Sixty two percent of men and 46 percent of women are exposed to vibrations (from hand tools or machinery); loud noise (defined as “Noise so loud that you would have to raise your voice to talk to people”); extreme temperatures (high or low); smoke, fumes, powder, dust, or vapors (including tobacco smoke); or chemical products or infectious materials one-quarter of the time or more at work. The next–most-common exposures for men are noise (39 percent); breathing in smoke, fumes, powder, dust, or vapors (17 percent); and vibrations (9 percent). Overall, results show that an important fraction of Americans report exposure to unpleasant and potentially hazardous working conditions.

The Pressures of Work

The survey found that:

Approximately two-thirds of Americans have jobs that involve working at very high speed at least half the time; the same fraction works to tight deadlines at least half the time. The overlap is high, with 56 percent working in jobs that involve both working at high speed and to tight deadlines half the time or more. There are no significant gender differences in working at high speed or working to tight deadlines

The Long Work Day

According to the survey:

While presence at the work place during business hours is required for most Americans, many take work home. About one-half of American workers do some work in their free time to meet work demands. Approximately one in ten workers report working in their free time “nearly every day” over the last month, two in ten workers report working in their free time “once or twice a week,” and two in ten workers report working in their free time “once or twice a month.”

The Work Environment

The survey found that:

Nearly one in five American workers were subjected to some form of verbal abuse, unwanted sexual attention, threats, or humiliating behavior at work in the past month or to physical violence, bullying or harassment, or sexual harassment at work in the past 12 months. Among men, the most common adverse events were verbal abuse and threats (13 percent in the past month), humiliating behavior (10 percent in the past month), bullying or harassment (9 percent in the past year), physical violence (2 percent in the past year), and unwanted sexual attention (1 percent in the past month). Among women, the most common adverse events were verbal abuse and threats (12.1 percent in the past month), bullying or harassment (11 percent in the past year), humiliating behavior (8 percent in the past month), unwanted sexual attention (5 percent in the past month), and physical violence (1 percent in the past year).

At the same time, it is also true that:

While the workplace is a source of hostile social experiences for an important fraction of American workers, it is a source of supportive social experiences for many others. More than one-half of American workers agreed with the statement “I have very good friends at work,” with women more likely to report having very good friends at work than men (61 and 53 percent, respectively).

 

In sum, the survey’s results make clear that work in the United States is physically and emotionally demanding and dangerous for many workers. And with the government weakening many of the labor and employment regulations designed to protect worker rights and safety, it is likely that workplace conditions will worsen.

Worker organizing and workplace struggles for change need to be encouraged and supported. A recent Pew Research Center survey showed growing support for unions, especially among younger workers.  It is not hard to understand why.

False Promises: Trump And The Revitalization Of The US Economy

President Trump likes to talk up his success in promoting the reindustrialization of the United States and the return of good manufacturing jobs.  But there is little reason to take his talk seriously.

Microsoft closes shop

For example, as reported in a recent article in the Oregonian, Microsoft just decided to close its two year old Wilsonville factory, where it built its giant touch-screen computer, the Surface Hub.  As the article explains :

Just two years ago, Microsoft cast its Wilsonville factory as the harbinger of a new era in American technology manufacturing.

The tech giant stamped, “Manufactured in Portland, OR, USA” on each Surface Hub it made there. It invited The New York Times and Fast Company magazine to tour the plant in 2015, then hired more than 100 people to make the enormous, $22,000 touch-screen computer. . . .

“We looked at the economics of East Asia and electronics manufacturing,” Microsoft vice president Michael Angiulo told Fast Company in a fawning 2015 article that heaped praise on the Surface Hub and Microsoft’s Wilsonville factory.

“When you go through the math, (offshoring) doesn’t pencil out,” Angiulo said. “It favors things that are small and easy to ship, where the development processes and tools are a commodity. The machines that it takes to do that lamination? Those only exist in Wilsonville. There’s one set of them, and we designed them.” . . .

But last week Microsoft summoned its Wilsonville employees to an early-morning meeting and announced it will close the factory and lay off 124 employees – nearly everyone at the site – plus dozens of contract workers. . . .

Even as President Donald Trump heralds “Made in America” week, high-tech manufacturing remains an endangered species across the United States. Oregon has lost more than 14,000 electronics manufacturing jobs since 2001, according to state data, more than a quarter of the total job base.

Microsoft is moving production of its Surface Hub to China, which is where it makes all its other Surface products.  Apparently, the combination of China’s low-cost labor and extensive supplier networks is an unbeatable combination for most high-tech firms.  In fact, the Oregonian article goes on to quote a Yale economist as saying:

“Re-shoring” stories like the tale Microsoft peddled in 2015 are little more than public relations fakery,” [providing] “lip services or window-dressing to please politicians and the general public.”

Foxconn says it is investing

But now we have another bigger and bolder re-shoring story: The Taiwanese multinational Foxconn has announced it will spend $10 billion to build a new factory somewhere in Wisconsin (likely in Paul Ryan’s district), where it will produce flat-panel display screens for televisions and other consumer electronics.

As reported in the press, Foxconn is pledging to create 13,000 jobs in six years—but only 3000 at the start.  In return, the state of Wisconsin is offering the company $3 billion in subsidies.

According to the Trump administration, this is a sign that its efforts to bring back good manufacturing jobs is working.  The Guardian quotes a senior administration official “who said the announcement was ‘meaningful,’ because ‘it [represents] a milestone in bringing back advanced manufacturing, specifically in the electronics sector, to the United States.’”  President Trump followed with “If I didn’t get elected, [Foxconn] definitely would not be spending $10bn.”

However, there are warning signs.  For example, as an article in the Cap Times points out, Foxconn doesn’t always follow through on its promises:

  • Foxconn promised a $30 million factory employing 500 workers in Harrisburg, Pennsylvania, in 2013. The plant was never built, not a single job was created.
  • That same year, the company signed a letter of intent to invest up to $1 billion in Indonesia. Nothing came of it.
  • Foxconn announced it would invest $5 billion and create 50,000 jobs over five years in India as part of an ambitious expansion in 2014. The investment amounted to a small fraction of that, according to The Washington Post’s Todd Frankel.
  • Foxconn committed to a $5 billion investment in Vietnam in 2007, and $10 billion in Brazil in 2011. The company made its first major foray in Vietnam only last year. In Brazil, Foxconn has an iPhone factory, but its investment has fallen far short of promises.
  • Foxconn recently laid off 60,000 workers, more than 50 percent of its workforce at its IPhone 6 factory in Kushan, China, replacing them with robots that Foxconn produces.

In fact, even the Wisconsin Legislative Fiscal Bureau is worried that the state may be overselling the deal, promising billions for very little.  As a Verge article reported:

Wisconsin’s plan to treat Foxconn to $3 billion in tax breaks in exchange for a $10 billion factory is looking less and less like a good deal for the state. In a report issued this week, Wisconsin’s Legislative Fiscal Bureau said that the state wouldn’t break even on its investment until 2043 — and that’s in an absolute best-case scenario.

How many workers Foxconn actually hires, and where Foxconn hires them from, would have a significant impact on when the state’s investment pays off, the report says.

The current analysis assumes that “all of the construction-period and ongoing jobs associated with the project would be filled by Wisconsin residents.” But the report says it’s likely that some positions would go to Illinois residents, because the factory would be located so close to the border. That would lower tax revenue and delay when the state breaks even.

And that’s still assuming that Foxconn actually creates the 13,000 jobs it claimed it might create, at the average wage — just shy of $54,000 — it promised to create them at. In fact, the plant is only expected to start with 3,000 jobs; the 13,000 figure is the maximum potential positions it could eventually offer. If the factory offers closer to 3,000 positions, the report notes, “the break-even point would be well past 2044-45.”

The authors of the report even seem somewhat skeptical of the best-case scenario happening. Foxconn is already investing heavily in automation, and there’s no guarantee it won’t do the same thing in Wisconsin. Nor is there any guarantee that Foxconn will remain such a manufacturing powerhouse. (Its current success relies heavily on the success of the iPhone.)

It is because of concerns like these, that the Milwaukee Journal Sentinel reports that the state’s Senate Majority Leader has said he doesn’t yet have the votes to pass the tax package Governor Scott Walker has promised.

Forget the new trade deals

President Trump has also spoken often about his determination to revisit past trade deals and restructure them in order to strengthen the economy and boost manufacturing employment.  However, it is now clear that the agreement restructuring he has in mind is what he calls “modernization” and that translates into expanding the terms of existing agreements to cover new issues of interest to leading US multinational corporations.

As Inside US Trade explains:

Commerce Secretary Wilbur Ross on Wednesday said “the easiest issues” to be addressed in North American Free Trade Agreement modernization talks “should be” those that were not part of the existing agreement, which entered into force in 1994.

“The easiest ones will be the ones that weren’t contained in the original agreement because that’s new territory; that’s not anybody giving up anything,” Ross said at an event hosted by the Bipartisan Policy Institute on May 31. “And by and large, those should be the easiest issues to get done.”

Ross added that those new issues are important “because one of our objectives will be to try to incorporate in NAFTA kind of basic principles that we would like to have followed in subsequent free-trade agreements, rather than starting each one with a blank sheet of paper.”

Among those issues — which he called “big holes” in the old agreement — he listed the digital economy, services, and financial services. . . .

Ross reiterated the administration’s stance that the “guiding principle is do no harm” in redoing NAFTA, while the second “rule of thumb” is to view concessions made by Mexico and Canada in the Trans-Pacific Partnership negotiations “as sort of a starting point” for NAFTA talks.

Asked whether the administration has set itself up for “unrealistic aspirations” on NAFTA — promising to return to the U.S. jobs that the president has often claimed were lost due to the agreement with Mexico and Canada — Ross cautioned against viewing a retooled deal as a “silver bullet.”

In short, it is foolish and costly to believe the promises made to working people by leading corporations and the Trump administration.  Hopefully, growing numbers of people are getting wise to the game being played, making it easier for us to more effectively organize and advance our own interests.

The Popularity Of Unions Is Growing, Especially Among Younger People

The Pew Research Center recently surveyed Americans about their views of labor unions and corporations.

As the chart below shows, a growing percentage of Americans view both unions and corporations favorably.  The favorable rating for unions, at 60 percent, is near its 2001 high.  The favorable rating for corporations still remains significantly below its 2001 high.

Favorable ratings for corporations are no doubt boosted by the steady drumbeat of media celebrations of corporate leaders as American heroes and “job creators.”  Unions, on the other hand, rarely get positive press.  In fact, they are being attacked across most of the country by state legislators eager to curry corporate favor by passing new laws designed to weaken worker and unions rights.  Thus, it seems likely that their growing popularity is the result of a growing awareness that organized resistance is needed to reverse the decline in majority living and working conditions, and that unions are one of the most important instruments to help organize that resistance.

As we see next, there is broad support for unions.  Dividing the population by age, with the exception of those over 65 years of age, the favorable view of unions is greater than the favorable view of corporations.  The strong support by those 18-29 is especially striking; three out of four have a favorable view of labor unions.  Dividing the population by family income, only those with an income of $75,000 or more view corporations more favorably than unions.

Looking at political party registration shows that “Democrats and Democratic-leaning independents are much more favorable toward labor unions than business corporations, while the inverse is true for Republicans and Republican leaners.”

However, while “There are no significant demographic differences among Democrats in views of labor unions, . . . Republicans are divided along age, educational and ideological lines.”  In particular, as we see below, among Republican and Republican leaners 18 to 49 years of age, the percent with a favorable view of unions is far greater than the percent with an unfavorable view.

In sum, the Pew survey points to the growth of an increasingly fertile environment for the rebirth of a strong union movement, especially among younger people.

Race and Ethnicity Discrimination in the US Labor Market

The US labor market, much like US society, is marked by discrimination.  The following charts, taken from two Economic Policy Institute blog posts, highlight some of the labor market consequences of racial and ethnic discrimination.

The following chart makes clear that Blacks suffer far higher rates of unemployment than do Whites, at all levels of educational achievement.  In fact, the Black unemployment rate for those with a BA and higher was identical to the White unemployment rate for those with some college but no degree, both at 3.7 percent in June 2017.  The chart also shows the general rise in unemployment since 2000.

The next chart illustrates how unemployment and underemployment rates differ by age and race/ethnicity.    The underemployment rate, officially known as the U-6 rate by the Bureau of Labor Statistics, “includes not only unemployed workers but also those who are working part time because they can’t find full-time work (i.e., part time for economic reasons) and those who are marginally attached to the labor force.”

As we can see, while all young workers suffer high levels of unemployment and underemployment, the rates for Black youth (more than 1 in 4 underemployed) and Hispanic youth (approximately 1 in 5 underemployed) are significantly higher than for White youth.

These racial/ethnic differences mean that our general push for more and better jobs must be accompanied by policies designed to overcome the discriminatory and segmented nature of the US labor market.