Utopian Union Fantasy: What If Every California Worker Made What City of Irvine Workers Make?

This is a guest post written by Ed Ring, editor of UnionWatch, a project of the California Public Policy Center. Ed Ring asks What If Every Worker Made What City of Irvine Workers Make?

Everything that follows is from Ed Ring.

“Jennifer Muir, a spokeswoman for the Orange County Employees’ Association, which represents more than 18,000 public employees in Orange County, said the California Public Policy Center’s study was a politically motivated attack on public employees and unions. Aside from promoting the center’s anti-public employee union agenda, Muir said, the reports are misleading and shift focus away from the discussions that matter most. Union leaders have long urged for people to consider the possibility that private-industry employees are being undercompensated and should receive retirement benefits and health coverage.”
 
Orange County Register, April 19, 2013

The study Muir refers to, entitled “Irvine, California – City Employee Compensation Analysis,” was published on April 8th, 2013, by our parent organization, the California Public Policy Center. To call this study “a politically motivated attack on public employees and unions,” as Muir alleges, is itself a distraction. It’s easy, and necessary, to impugn the motives behind information when the information itself is so embarrassing.

As noted, Muir went on to accuse the study of “shifting focus away from the discussions that matter most… that private-industry employees are being undercompensated.”

Let’s recap some of the facts regarding Irvine’s city employee compensation, drawing both from the CPPC study (which itself used payroll data provided by the City of Irvine), as well as from the Orange County Employee Retirement Systems 2011 Annual Report:

• The average City of Irvine employee receives direct pay of $ 95,751 per year, and when the cost of employer paid benefits is included, this average goes up to $ 143,691 per year (Source: CPPC Study, Table 1.



 


• The average participant in the Orange County Employee Retirement system who worked 25-30 years and retired last year collects a pension of $ 70,920 per year. If they worked 30 years or more, like virtually every private sector worker, that average goes up to $ 81,192 per year (Source: OCERS Annual Report, page 109.

Now let’s suppose that private industry employees are indeed being undercompensated. What are the economic implications of paying them a proper living wage à la Irvine – and every other unionized public sector job in California? Here are some facts:

• In 2010 there were 8.3 million residents in California over the age of 55, which is the age by which a public employee may reasonably be assumed to have logged 30 years – assuming they completed their education by age 25 and entered the workforce for a full career in public service (source: U.S. Census Bureau.



 


• Also In 2010, the GDP of California – its entire economic output – was $ 1.9 trillion (source: LA Times).This means that if everyone over the age of 55 in California got a pension of $ 70,000 per year, it would cost $ 581 billion per year, 31% of California’s entire economic output. Ms. Muir is invited to explain exactly how we’re going to accomplish this.



 


• Using the same census data, in 2010 there were 15.8 million people between the ages of 25 and 55. Assume that two-thirds of these people work full-time, and the other one-third are unemployed spouses, stay-at-home parents, or are otherwise supported by a working partner. If every one of these 10.5 million people collected total compensation of $ 140,000 per year, this would cost $ 1.47 trillion per year, or 77% of California’s entire economic output.

So according to this utopian vision, if everyone could just receive the same compensation packages as the average full-time worker for the City of Irvine, it would consume 108% of California’s entire economic output.

There’s a bit more to this, however. In the real world, wages and salaries fluctuate between around 44% and 54% of GDP (source: TelltaleChart.org).

We may argue over what share of GDP legitimately belongs to workers vs. corporations – bearing in mind that corporate profits are an absolute necessity for a public sector pension plan to have any hope of remaining solvent, and these profits are also necessary to invest in equipment and conduct R&D if we are to have any hope of remaining an economically viable nation – but let’s use an unprecedentedly generous proportion.

Let’s assume that 60% of California’s GDP is comprised of wages, benefits, and pension payments.
To complete this thought, we’re now going to have to indulge in some basic algebra (T=trillion), one of those nasty tools of analysis that never plays well in a 30 second TV commercial, but nonetheless is an ideal tool to express cold quantitative reality, rather than utopian union fantasies:

[ .58T (pensions) + 1.47T (wages) ] / .6 (40% for corp. profits) = GDP of 3.48T

Isn’t that terrific? All we have to do is wave a wand and instantly, we’ll nearly double California’s GDP from $ 1.9 trillion per year to 3.5 trillion per year. Nobody will be “undercompensated” any more! Then we can afford to implement this compelling vision of social justice – total compensation of $ 140,000 per year for every full-time worker, then after 30 years, a pension of $ 70,000 per year. It should be easy. Perhaps new legislation is called for.

End Guest Post

Ed and I frequently trade guest posts on subjects related to unions wages, pensions, and the precarious state of California’s economy.

If you are interested in such matters, you may wish to Subscribe to UnionWatch.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

Utopian Union Fantasy: What If Every California Worker Made What City of Irvine Workers Make?

Utopian Union Fantasy: What If Every California Worker Made What City of Irvine Workers Make?

This is a guest post written by Ed Ring, editor of UnionWatch, a project of the California Public Policy Center. Ed Ring asks What If Every Worker Made What City of Irvine Workers Make?

Everything that follows is from Ed Ring.

“Jennifer Muir, a spokeswoman for the Orange County Employees’ Association, which represents more than 18,000 public employees in Orange County, said the California Public Policy Center’s study was a politically motivated attack on public employees and unions. Aside from promoting the center’s anti-public employee union agenda, Muir said, the reports are misleading and shift focus away from the discussions that matter most. Union leaders have long urged for people to consider the possibility that private-industry employees are being undercompensated and should receive retirement benefits and health coverage.”
 
Orange County Register, April 19, 2013

The study Muir refers to, entitled “Irvine, California – City Employee Compensation Analysis,” was published on April 8th, 2013, by our parent organization, the California Public Policy Center. To call this study “a politically motivated attack on public employees and unions,” as Muir alleges, is itself a distraction. It’s easy, and necessary, to impugn the motives behind information when the information itself is so embarrassing.

As noted, Muir went on to accuse the study of “shifting focus away from the discussions that matter most… that private-industry employees are being undercompensated.”

Let’s recap some of the facts regarding Irvine’s city employee compensation, drawing both from the CPPC study (which itself used payroll data provided by the City of Irvine), as well as from the Orange County Employee Retirement Systems 2011 Annual Report:

• The average City of Irvine employee receives direct pay of $ 95,751 per year, and when the cost of employer paid benefits is included, this average goes up to $ 143,691 per year (Source: CPPC Study, Table 1.



 


• The average participant in the Orange County Employee Retirement system who worked 25-30 years and retired last year collects a pension of $ 70,920 per year. If they worked 30 years or more, like virtually every private sector worker, that average goes up to $ 81,192 per year (Source: OCERS Annual Report, page 109.

Now let’s suppose that private industry employees are indeed being undercompensated. What are the economic implications of paying them a proper living wage à la Irvine – and every other unionized public sector job in California? Here are some facts:

• In 2010 there were 8.3 million residents in California over the age of 55, which is the age by which a public employee may reasonably be assumed to have logged 30 years – assuming they completed their education by age 25 and entered the workforce for a full career in public service (source: U.S. Census Bureau.



 


• Also In 2010, the GDP of California – its entire economic output – was $ 1.9 trillion (source: LA Times).This means that if everyone over the age of 55 in California got a pension of $ 70,000 per year, it would cost $ 581 billion per year, 31% of California’s entire economic output. Ms. Muir is invited to explain exactly how we’re going to accomplish this.



 


• Using the same census data, in 2010 there were 15.8 million people between the ages of 25 and 55. Assume that two-thirds of these people work full-time, and the other one-third are unemployed spouses, stay-at-home parents, or are otherwise supported by a working partner. If every one of these 10.5 million people collected total compensation of $ 140,000 per year, this would cost $ 1.47 trillion per year, or 77% of California’s entire economic output.

So according to this utopian vision, if everyone could just receive the same compensation packages as the average full-time worker for the City of Irvine, it would consume 108% of California’s entire economic output.

There’s a bit more to this, however. In the real world, wages and salaries fluctuate between around 44% and 54% of GDP (source: TelltaleChart.org).

We may argue over what share of GDP legitimately belongs to workers vs. corporations – bearing in mind that corporate profits are an absolute necessity for a public sector pension plan to have any hope of remaining solvent, and these profits are also necessary to invest in equipment and conduct R&D if we are to have any hope of remaining an economically viable nation – but let’s use an unprecedentedly generous proportion.

Let’s assume that 60% of California’s GDP is comprised of wages, benefits, and pension payments.
To complete this thought, we’re now going to have to indulge in some basic algebra (T=trillion), one of those nasty tools of analysis that never plays well in a 30 second TV commercial, but nonetheless is an ideal tool to express cold quantitative reality, rather than utopian union fantasies:

[ .58T (pensions) + 1.47T (wages) ] / .6 (40% for corp. profits) = GDP of 3.48T

Isn’t that terrific? All we have to do is wave a wand and instantly, we’ll nearly double California’s GDP from $ 1.9 trillion per year to 3.5 trillion per year. Nobody will be “undercompensated” any more! Then we can afford to implement this compelling vision of social justice – total compensation of $ 140,000 per year for every full-time worker, then after 30 years, a pension of $ 70,000 per year. It should be easy. Perhaps new legislation is called for.

End Guest Post

Ed and I frequently trade guest posts on subjects related to unions wages, pensions, and the precarious state of California’s economy.

If you are interested in such matters, you may wish to Subscribe to UnionWatch.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

Utopian Union Fantasy: What If Every California Worker Made What City of Irvine Workers Make?

Portugal Considers Paying Workers in T-Bills to Circumvent Court Ruling that Austerity Measure are Unconstitutional

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Last week, ahead of a ruling by the Portuguese Constitutional Court on whether or not the austerity measures it approved were legal, Portugal’s PSI stock market took a dive.

PSI Stock Index

On March 25 the index was at 6023. It closed at 5637 on April 5 a decline of 6.4%

Court Rejects Budget

On April 5, Portugal constitutional court rejects budget articles

Portugal’s Constitutional Court has ruled several key articles of the 2013 state budget unconstitutional.

It rejected four out of nine contested austerity measures from the budget.

It will deprive the state of some 1.5bn euros (£1.3bn) in savings the government had said were necessary to meet the terms of a eurozone bailout.

The court rejected a measure to scrap summer holiday bonuses for public sector workers and pensioners, as well as cuts to unemployment and sickness benefits.

Prime Minister Pedro Passos Coelho did not react to the decision immediately but called an extraordinary cabinet meeting for Saturday.

For most Portuguese workers, the annual tax rises are equivalent to more than a month’s wages. The standard income tax rate is rising from 24.5% to 28.5%.

The savings are Portugal’s toughest in living memory, aimed at meeting the terms of a 78bn-euro (£64bn) bailout.

Portugal Considers Paying Workers in T-Bills

One might think the Portuguese government would have gotten the message or at least the spirit of the message but one would be wrong.

The Wall Street Journal reports Portugal Mulls Paying Workers in T-Bills as a means to circumvent the court ruling.

The Portuguese government is considering a plan to pay public workers and pensioners one month of their salary in treasury bills rather than cash after a high court ruled out wage cuts, a person familiar with the situation said Sunday.

The Portuguese government warned Saturday that the court’s decision will put into question the country’s ability to fulfill its €78 billion ($ 101 billion) international bailout program.

Specifically, the court rejected plans to cut one of the 14 paychecks that public workers usually get each year and to slash 6.4% from pensions for retirees.

By paying one month of salary in T-bills to public workers and pensioners, the government would save an estimated €1.1 billion in expenses, narrowing the budget gap significantly

Plan “C” Coming Up

The idea that paying workers in T-Bills (debt) can fulfill austerity agreements is of course preposterous. I highly doubt Brussels will go along with this scheme, and if so Portugal will soon be back at the drawing board. Plan “C” is coming up.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com 

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

Portugal Considers Paying Workers in T-Bills to Circumvent Court Ruling that Austerity Measure are Unconstitutional

What Immigration Reform Could Mean for American Workers, and Why the AFL-CIO Is Embracing It

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Their agreement on is very preliminary and hasn’t yet even been blessed by the so-called Gang of Eight senators working on immigration reform, but the mere fact that AFL-CIO President Richard Trumka and Chamber of Commerce President Thomas J. Donohue agreed on anything is remarkable.

The question is whether it’s a good deal for American workers. It is, and I’ll explain why in a moment.

Under the agreement (arrived at last weekend) a limited number of temporary visas would be issued to foreign workers in low-skilled occupations, who could thereafter petition to become American citizens.

The agreement is an important step toward a comprehensive immigration reform package to be introduced in the Senate later this month. Disagreement over allowing in low-skilled workers helped derail immigration reform in 2007.

The unions don’t want foreign workers to take jobs away from Americans or depress American wages, while business groups obviously want the lowest-priced workers they can get their hands on.

So they’ve compromised on a maximum (no more than 20,000 visas in the first year, gradually increasing to no more than 200,000 in the fifth and subsequent years), with the actual number in any year depending on labor market conditions, as determined by the government. Priority would be given to occupations where American workers were in short supply.

The foreign workers would have to receive wages at least as high as the typical (“prevailing”) American wage in that occupation, or as high as the prospective employer pays his American workers with similar experience — whichever is higher.

The unions hope these safeguards will prevent American workers from losing ground to foreign guest-workers.

But employers hope the guest-worker program will also prevent low-wage Americans from getting a raise. As soon as any increase in demand might begin to push their wages higher, employers can claim a “labor shortage” — allowing in more guest workers, who will cause wages to drop back down again.

So why would the AFL-CIO agree to any new visas at all?

Presumably because some 11 million undocumented workers are already here, doing much of this work. The only way these undocumented workers can ever become organized — and not undercut attempts to unionize legal workers — is if the undocumented workers also become legal.

Remember, we’re talking about low-wage work that U.S. employers can’t do abroad – fast-food cooks and servers, waiters, hotel cleaners, hospital orderlies, gardeners, custodians, cashiers, and the like. (Construction jobs were exempted from the agreement because the building trades are already well-organized and saw more risk than gain from guest-workers.)

They’re the fastest-growing job categories in America, and also the lowest-paying. According to new data out last Friday from the Bureau of Labor Statistics, seven of the ten largest occupations in America now pay less than $ 30,000 a year.

A full-time food prep worker — the third most-common job in the U.S. — earned $ 18,720 last year. Cashiers and waiters pocketed less than $ 21,000.

The trend is in the wrong direction — toward even more of these jobs, and lower pay. And that’s not because of undocumented workers. It’s because of structural changes in the economy that have shipped high-wage manufacturing jobs abroad and replaced other semi-skilled work with computers and robots. If you don’t have the right education and connections, you’re on a downward escalator.

The real median wage of Americans is already 8 percent below what it was in 2000. The median pay of jobs created during this recovery is less than the median of the jobs lost in the downturn.

One way to reverse this trend is enable these workers to join together in unions, and demand better pay and working conditions. And one strategy for accomplishing this is for the unions to embrace immigration reform, and organize like mad.

This is the next frontier for organized labor. Immigration reform is part of its long-term strategy.

ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers “Aftershock” and “The Work of Nations.” His latest is an e-book, “Beyond Outrage,” now available in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.

Follow Robert Reich on Twitter: www.twitter.com/RBReich

Robert Reich

What Immigration Reform Could Mean for American Workers, and Why the AFL-CIO Is Embracing It

What Immigration Reform Could Mean for American Workers, and Why the AFL-CIO Is Embracing It

Tweet

Their agreement on is very preliminary and hasn’t yet even been blessed by the so-called Gang of Eight senators working on immigration reform, but the mere fact that AFL-CIO President Richard Trumka and Chamber of Commerce President Thomas J. Donohue agreed on anything is remarkable.

The question is whether it’s a good deal for American workers. It is, and I’ll explain why in a moment.

Under the agreement (arrived at last weekend) a limited number of temporary visas would be issued to foreign workers in low-skilled occupations, who could thereafter petition to become American citizens.

The agreement is an important step toward a comprehensive immigration reform package to be introduced in the Senate later this month. Disagreement over allowing in low-skilled workers helped derail immigration reform in 2007.

The unions don’t want foreign workers to take jobs away from Americans or depress American wages, while business groups obviously want the lowest-priced workers they can get their hands on.

So they’ve compromised on a maximum (no more than 20,000 visas in the first year, gradually increasing to no more than 200,000 in the fifth and subsequent years), with the actual number in any year depending on labor market conditions, as determined by the government. Priority would be given to occupations where American workers were in short supply.

The foreign workers would have to receive wages at least as high as the typical (“prevailing”) American wage in that occupation, or as high as the prospective employer pays his American workers with similar experience — whichever is higher.

The unions hope these safeguards will prevent American workers from losing ground to foreign guest-workers.

But employers hope the guest-worker program will also prevent low-wage Americans from getting a raise. As soon as any increase in demand might begin to push their wages higher, employers can claim a “labor shortage” — allowing in more guest workers, who will cause wages to drop back down again.

So why would the AFL-CIO agree to any new visas at all?

Presumably because some 11 million undocumented workers are already here, doing much of this work. The only way these undocumented workers can ever become organized — and not undercut attempts to unionize legal workers — is if the undocumented workers also become legal.

Remember, we’re talking about low-wage work that U.S. employers can’t do abroad – fast-food cooks and servers, waiters, hotel cleaners, hospital orderlies, gardeners, custodians, cashiers, and the like. (Construction jobs were exempted from the agreement because the building trades are already well-organized and saw more risk than gain from guest-workers.)

They’re the fastest-growing job categories in America, and also the lowest-paying. According to new data out last Friday from the Bureau of Labor Statistics, seven of the ten largest occupations in America now pay less than $ 30,000 a year.

A full-time food prep worker — the third most-common job in the U.S. — earned $ 18,720 last year. Cashiers and waiters pocketed less than $ 21,000.

The trend is in the wrong direction — toward even more of these jobs, and lower pay. And that’s not because of undocumented workers. It’s because of structural changes in the economy that have shipped high-wage manufacturing jobs abroad and replaced other semi-skilled work with computers and robots. If you don’t have the right education and connections, you’re on a downward escalator.

The real median wage of Americans is already 8 percent below what it was in 2000. The median pay of jobs created during this recovery is less than the median of the jobs lost in the downturn.

One way to reverse this trend is enable these workers to join together in unions, and demand better pay and working conditions. And one strategy for accomplishing this is for the unions to embrace immigration reform, and organize like mad.

This is the next frontier for organized labor. Immigration reform is part of its long-term strategy.

ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers “Aftershock” and “The Work of Nations.” His latest is an e-book, “Beyond Outrage,” now available in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.

Follow Robert Reich on Twitter: www.twitter.com/RBReich

Robert Reich

What Immigration Reform Could Mean for American Workers, and Why the AFL-CIO Is Embracing It

What Immigration Reform Could Mean for American Workers, and Why the AFL-CIO Is Embracing It

Tweet

Their agreement on is very preliminary and hasn’t yet even been blessed by the so-called Gang of Eight senators working on immigration reform, but the mere fact that AFL-CIO President Richard Trumka and Chamber of Commerce President Thomas J. Donohue agreed on anything is remarkable.

The question is whether it’s a good deal for American workers. It is, and I’ll explain why in a moment.

Under the agreement (arrived at last weekend) a limited number of temporary visas would be issued to foreign workers in low-skilled occupations, who could thereafter petition to become American citizens.

The agreement is an important step toward a comprehensive immigration reform package to be introduced in the Senate later this month. Disagreement over allowing in low-skilled workers helped derail immigration reform in 2007.

The unions don’t want foreign workers to take jobs away from Americans or depress American wages, while business groups obviously want the lowest-priced workers they can get their hands on.

So they’ve compromised on a maximum (no more than 20,000 visas in the first year, gradually increasing to no more than 200,000 in the fifth and subsequent years), with the actual number in any year depending on labor market conditions, as determined by the government. Priority would be given to occupations where American workers were in short supply.

The foreign workers would have to receive wages at least as high as the typical (“prevailing”) American wage in that occupation, or as high as the prospective employer pays his American workers with similar experience — whichever is higher.

The unions hope these safeguards will prevent American workers from losing ground to foreign guest-workers.

But employers hope the guest-worker program will also prevent low-wage Americans from getting a raise. As soon as any increase in demand might begin to push their wages higher, employers can claim a “labor shortage” — allowing in more guest workers, who will cause wages to drop back down again.

So why would the AFL-CIO agree to any new visas at all?

Presumably because some 11 million undocumented workers are already here, doing much of this work. The only way these undocumented workers can ever become organized — and not undercut attempts to unionize legal workers — is if the undocumented workers also become legal.

Remember, we’re talking about low-wage work that U.S. employers can’t do abroad – fast-food cooks and servers, waiters, hotel cleaners, hospital orderlies, gardeners, custodians, cashiers, and the like. (Construction jobs were exempted from the agreement because the building trades are already well-organized and saw more risk than gain from guest-workers.)

They’re the fastest-growing job categories in America, and also the lowest-paying. According to new data out last Friday from the Bureau of Labor Statistics, seven of the ten largest occupations in America now pay less than $ 30,000 a year.

A full-time food prep worker — the third most-common job in the U.S. — earned $ 18,720 last year. Cashiers and waiters pocketed less than $ 21,000.

The trend is in the wrong direction — toward even more of these jobs, and lower pay. And that’s not because of undocumented workers. It’s because of structural changes in the economy that have shipped high-wage manufacturing jobs abroad and replaced other semi-skilled work with computers and robots. If you don’t have the right education and connections, you’re on a downward escalator.

The real median wage of Americans is already 8 percent below what it was in 2000. The median pay of jobs created during this recovery is less than the median of the jobs lost in the downturn.

One way to reverse this trend is enable these workers to join together in unions, and demand better pay and working conditions. And one strategy for accomplishing this is for the unions to embrace immigration reform, and organize like mad.

This is the next frontier for organized labor. Immigration reform is part of its long-term strategy.

ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers “Aftershock” and “The Work of Nations.” His latest is an e-book, “Beyond Outrage,” now available in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.

Follow Robert Reich on Twitter: www.twitter.com/RBReich

Robert Reich

What Immigration Reform Could Mean for American Workers, and Why the AFL-CIO Is Embracing It

What Immigration Reform Could Mean for American Workers, and Why the AFL-CIO Is Embracing It

Tweet

Their agreement on is very preliminary and hasn’t yet even been blessed by the so-called Gang of Eight senators working on immigration reform, but the mere fact that AFL-CIO President Richard Trumka and Chamber of Commerce President Thomas J. Donohue agreed on anything is remarkable.

The question is whether it’s a good deal for American workers. It is, and I’ll explain why in a moment.

Under the agreement (arrived at last weekend) a limited number of temporary visas would be issued to foreign workers in low-skilled occupations, who could thereafter petition to become American citizens.

The agreement is an important step toward a comprehensive immigration reform package to be introduced in the Senate later this month. Disagreement over allowing in low-skilled workers helped derail immigration reform in 2007.

The unions don’t want foreign workers to take jobs away from Americans or depress American wages, while business groups obviously want the lowest-priced workers they can get their hands on.

So they’ve compromised on a maximum (no more than 20,000 visas in the first year, gradually increasing to no more than 200,000 in the fifth and subsequent years), with the actual number in any year depending on labor market conditions, as determined by the government. Priority would be given to occupations where American workers were in short supply.

The foreign workers would have to receive wages at least as high as the typical (“prevailing”) American wage in that occupation, or as high as the prospective employer pays his American workers with similar experience — whichever is higher.

The unions hope these safeguards will prevent American workers from losing ground to foreign guest-workers.

But employers hope the guest-worker program will also prevent low-wage Americans from getting a raise. As soon as any increase in demand might begin to push their wages higher, employers can claim a “labor shortage” — allowing in more guest workers, who will cause wages to drop back down again.

So why would the AFL-CIO agree to any new visas at all?

Presumably because some 11 million undocumented workers are already here, doing much of this work. The only way these undocumented workers can ever become organized — and not undercut attempts to unionize legal workers — is if the undocumented workers also become legal.

Remember, we’re talking about low-wage work that U.S. employers can’t do abroad – fast-food cooks and servers, waiters, hotel cleaners, hospital orderlies, gardeners, custodians, cashiers, and the like. (Construction jobs were exempted from the agreement because the building trades are already well-organized and saw more risk than gain from guest-workers.)

They’re the fastest-growing job categories in America, and also the lowest-paying. According to new data out last Friday from the Bureau of Labor Statistics, seven of the ten largest occupations in America now pay less than $ 30,000 a year.

A full-time food prep worker — the third most-common job in the U.S. — earned $ 18,720 last year. Cashiers and waiters pocketed less than $ 21,000.

The trend is in the wrong direction — toward even more of these jobs, and lower pay. And that’s not because of undocumented workers. It’s because of structural changes in the economy that have shipped high-wage manufacturing jobs abroad and replaced other semi-skilled work with computers and robots. If you don’t have the right education and connections, you’re on a downward escalator.

The real median wage of Americans is already 8 percent below what it was in 2000. The median pay of jobs created during this recovery is less than the median of the jobs lost in the downturn.

One way to reverse this trend is enable these workers to join together in unions, and demand better pay and working conditions. And one strategy for accomplishing this is for the unions to embrace immigration reform, and organize like mad.

This is the next frontier for organized labor. Immigration reform is part of its long-term strategy.

ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers “Aftershock” and “The Work of Nations.” His latest is an e-book, “Beyond Outrage,” now available in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.

Follow Robert Reich on Twitter: www.twitter.com/RBReich

Robert Reich

What Immigration Reform Could Mean for American Workers, and Why the AFL-CIO Is Embracing It

Guest Post: The Knowledge Economy"s Two Classes of Workers

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Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The knowledge economy has important implications for both workers and organizations.

 

Setting aside that our economy is by and large organized to benefit a State-financial Elite and the technocrat Caste that serves them, let"s consider the two classes of worker in what Peter Drucker labeled the Knowledge Economy in his 1993 book Post-Capitalist Society.

 

At the risk of simplifying Drucker"s nuanced account, here is a precis:

 

The Marxist class division of labor vs. capitalist/management no longer adequately describes the new economy, as knowledge workers own "the means of production" which is first and foremost knowledge. Corporations and government offer an organization within which workers can apply their knowledge (i.e. the means of production in a knowledge economy).

 

Since the new economy is no longer characterized by capital vs. labor, it is a post-capitalist economy.

 

Knowledge workers are a minority of the workforce; the majority are service workers, either skilled or low-skilled.

 

Economist Robert B. Reich divides the workforce into similar categories: "symbolic analysts" (knowledge workers) and two classes of service workers: "routine producers" and "in-person servers."

 

Since the service workers own and leverage less capital (knowledge), their ability to create surplus value and thereby demand high wages is intrinsically lower than the knowledge workers.

 

This creates a structural tension, as society has to establish a way to maintain the wages of the service workers in an economy where the value and income they can generate by their labor is capped.

 

Let"s be clear about one thing: it is misplaced nostalgia to pine for the "good old days" of high-paying but soul-deadening factory jobs. Fully 40 years ago, workers were already rebelling against the yoke of rigid machine-driven production: 1970-1972: General Motors, the Lordstown struggle and the real crisis in production:

 

The other root cause of our present difficulties with the workforce might be termed a general lowering of employees" frustration tolerance.Many employees, particularly the younger ones, are increasingly reluctant to put up with factory conditions. Despite the significant improvements we"ve made in the physical environment of our plants. Because they are unfamiliar with the harsh economic facts of earlier years, they have little regard for the consequences if they take a day or two off.

For many, the traditional motivations of job security, money rewards, and opportunity for personal advancement are proving insufficient.

Large numbers of those we hire find factory life so distasteful they quit after only brief exposure to it. The general increase in real wage levels in our economy has afforded more alternatives for satisfying economic needs.

There is also, again especially among the younger employees, a growing reluctance to accept a strict authoritarian shop discipline. This is not just a shop phenomenon, rather is a manifestation in our shops of a trend we see all about us among today"s youth.

More money, time and effort than ever before must now be expended in recruiting and acclimatising our quality control programs have been put to severe tests; large numbers of employees remain unmoved by all attempts to motivate them; and order in the plants is being maintained with rising difficulty.

That this is not simply a bosses" problem was expressed by youthful Gary Bryner, President of the Lordstown local of the UAW (July 25, 1972):

 

There are symptoms of the alienated worker in our plant– the absentee rate, as you said, has gone continually higher. Turnover rate is enormous. The use of alcohol and drugs is becoming a bigger and bigger problem. So has apathy within our union movement towards union leaders and towards the Government … (The worker) has become alienated to the point where he casts off the leadership of his union, his Government… He is disassociated with the whole establishment.

Here"s the key quote from this excellent historical essay:

 

Modern capitalism can, by and large, cope with the traditional type of economic problem, for instance those dealt with by Marx, it can continue to develop production. It is in difficulties, however, when confronted with a massive resistance to its values, priorities and whole pattern of authority.

 

In the traditional labor vs. capital framework, we expect the resistance to come from labor; in the knowledge economy, that resistance is arising from those who own and control the means of production, the knowledge workers themselves.

 

This has important implications for corporations, non-profit organizations and government alike. In Drucker"s view, "Every organization has to build in organized abandonment of everything it does. Increasingly, organizations will have to plan abandonment rather than try to prolong the life of a successful policy, practice or product."

 

In other words, creative destruction is the necessary result of constant, purposeful innovation. Any organization which fails to do so will become obsolete. The same can be said of those providing the knowledge capital to the organizations, the knowledge workers.

 

One consequence that none dare speak is the absolute reduction of any functional need for layers of management, or anything resembling traditional management.The Internet is a tool for eliminating management, along with generally needless/useless meetings and the other sources of unproductive friction in modern corporate and government organizations.

The Management-free Organization:

 

Management exists to minimize the problems created by its own hiring mistakes.Valve says the secret of their management-free environment is hiring good people. That sounds right to me. We don"t have any weak contributors in our start-up so we have never felt a need for management.
One of the interesting aspects of better global communications, better access to information, and better mobility is that collectively it reduces the risk of making hiring mistakes. When employers were limited to hiring people who lived nearby, and the only information at their disposal was lie-filled resumes, every growing company would necessarily absorb a lot of losers. But now that entrepreneurs can hire the best people from anywhere in the world, we have for the first time in human history the ability to create teams so capable they require no management structure. That"s new.

I think the manager-free model only works for a business that has high margins and depends more on creating hits than cutting costs. The videogame business fits that model, as do many Internet businesses. And in both cases entrepreneurs can hire from anywhere in the world.

So here"s my summary: Management only exists to compensate for its own poor hiring decisions. The Internet makes it easier to locate and then work with capable partners. Therefore, the need for management will shrink – at least for some types of businesses – because entrepreneurs have the tools to make fewer hiring mistakes in the first place.

Management won"t entirely go away, but as technology makes it easier to form competent teams without at least one disruptive or worthless worker in the group, the need for management will continue to decline.

Even organizations based on rigid command hierarchies such as the U.S. military are finding that decentralized command decisions based on proximity to information flow, field intelligence and detailed knowledge of local assets trump sclerotic centralized command structures in getting demonstrable results.

 

If this is true in sprawling bureaucracies, it is certainly true in smaller organizations.

This is the economy that every worker has to understand if they want to navigate it to their own benefit. Every enterprise and organization that wants the most productive workers has to understand that their task is not "managing labor," it is offering workers of all levels opportunities to be effective and to contribute.

 

In my view, each worker is an enterprise, and the less time, energy and money wasted on management and friction, the more time and energy there will be for wealth creation or value creation, and as a result, more money available for wages.

 

For more on this topic, please read The Ten Best Employers To Work For (March 28, 2013).

Via correspondent Rui N.P.: America: A Nation of Permanent Freelancers and Temps.

Zero Hedge

Guest Post: The Knowledge Economy"s Two Classes of Workers

Why There"s a Bull Market for Stocks and a Bear Market for Workers

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Today the Dow Jones Industrial Average rose above 14,270 — completely erasing its 54 percent loss between 2007 and 2009.

The stock market is basically back to where it was in 2000, while corporate earnings have doubled since then.

Yet the real median wage is now 8 percent below what it was in 2000, and unemployment remains sky-high.

Why is the stock market doing so well, while most Americans are doing so poorly? Four reasons:

First, productivity gains. Corporations have been investing in technology rather than their workers. They get tax credits and deductions for such investments; they get no such tax benefits for improving the skills of their employees. As a result, corporations can now do more with fewer people on their payrolls. That means higher profits.

Second, high unemployment itself. Joblessness all but eliminates the bargaining power of most workers — allowing corporations to keep wages low. Public policies that might otherwise reduce unemployment — a new WPA or CCC to hire the long-term unemployed, major investments in the nation’s crumbling infrastructure — have been rejected in favor of austerity economics. This also means higher profits, at least in the short run.

Third, globalization. Big American-based corporations have been expanding and hiring around the globe where markets are growing fastest — even while the U.S. market is lackluster. Tax policies and trade policies have encouraged them.

Finally, the Fed’s easy-money policies. They’ve pushed investors into the stock market because bond yields are so low. On Tuesday, the yield on the 10-year U.S. Treasury note was just 1.9 percent.

All of this spells widening inequality in America, because the people who invest the most in the stock market have high incomes. Those who rely most on wages have lower incomes.

Corporate profits are claiming a larger share of national income than at any time in 60 years, while the portion of total income going to employees is near its lowest since 1966.

As my colleague Immanuel Saez recently found, all the economic gains between 2009 and 2011 (the last year for which data were available) went to the richest 1 percent of Americans. The bottom 99 percent has continued to lose ground.

The sequestration is likely to make all this worse, since it will slow the U.S. economy and keep unemployment higher than otherwise.

It will also hurt the most vulnerable. Some $ 1.9 billion in low-income rental subsidies are being eliminated, affecting 125,000 people. Cuts to the Department of Agriculture will eliminate rental assistance for another 10,000 low-income rural people. Meanwhile, 100,000 formerly homeless people are likely to be removed from their current emergency shelters.

More than 3.8 million Americans receiving long-term unemployment benefits will have their monthly payments reduced by as much as 9.4 percent, and lose an average of $ 400 in benefits over their period of joblessness.

The Department of Education’s Title I program, which helps schools serving more than a million disadvantaged students, will be cut $ 715 million, and $ 400 million will be cut from Head Start, the preschool program for poor children. And major cuts will be made in the Special Supplemental Nutrition Program for Women, Infants, and Children, which provides nutrition assistance and education.

Rarely before in American history have public policies so radically helped the most fortunate among us, so cruelly harmed the least fortunate, and exposed so many average working Americans to such widespread insecurity.

ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers “Aftershock” and “The Work of Nations.” His latest is an e-book, “Beyond Outrage,” now available in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.

Follow Robert Reich on Twitter: www.twitter.com/RBReich

Robert Reich

Why There"s a Bull Market for Stocks and a Bear Market for Workers

How H-1B Visas Are Screwing Tech Workers

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A few years ago, the pharmaceutical giant Pfizer informed hundreds of tech workers at its Connecticut R&D facilities that they’d soon be laid off. Before getting their final paychecks, however, they’d need to train their replacements: guest workers from India who’d come to the United States on H-1B visas. “It’s a very, very stressful work environment,” one soon-to-be-axed worker told Connecticut’s The Day newspaper. “I haven’t been able to sleep in weeks.”

Established in 1990, the federal H-1B visa program allows employers to import up to 65,000 foreign workers each year to fill jobs that require “highly specialized knowledge.” The Senate’s bipartisan Immigration Innovation Act of 2013, or “I-Squared Act,” would increase that cap to as many as 300,000 foreign workers. “The smartest, hardest-working, most talented people on this planet, we should want them to come here,” Sen. Marco Rubio, (R-Fla.) said upon introducing the bill last month. “I, for one, have no fear that this country is going to be overrun by Ph.D.s.”

To be sure, America’s tech economy has long depended on foreign-born workers. “Immigrants have founded 40 percent of companies in the tech sector that were financed by venture capital and went on to become public in the U.S., among them Yahoo, eBay, Intel, and Google,” writes Laszlo Bock, Google’s senior VP of “people operations,” which, along with other tech giants such as HP and Microsoft, strongly supports a big increase in H-1B visas. “In 2012, these companies employed roughly 560,000 workers and generated $ 63 billion in sales.”

Continue Reading »

Politics | Mother Jones

How H-1B Visas Are Screwing Tech Workers

How H-1B Visas Are Screwing Tech Workers

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A few years ago, the pharmaceutical giant Pfizer informed hundreds of tech workers at its Connecticut R&D facilities that they’d soon be laid off. Before getting their final paychecks, however, they’d need to train their replacements: guest workers from India who’d come to the United States on H-1B visas. “It’s a very, very stressful work environment,” one soon-to-be-axed worker told Connecticut’s The Day newspaper. “I haven’t been able to sleep in weeks.”

Established in 1990, the federal H-1B visa program allows employers to import up to 65,000 foreign workers each year to fill jobs that require “highly specialized knowledge.” The Senate’s bipartisan Immigration Innovation Act of 2013, or “I-Squared Act,” would increase that cap to as many as 300,000 foreign workers. “The smartest, hardest-working, most talented people on this planet, we should want them to come here,” Sen. Marco Rubio, (R-Fla.) said upon introducing the bill last month. “I, for one, have no fear that this country is going to be overrun by Ph.D.s.”

To be sure, America’s tech economy has long depended on foreign-born workers. “Immigrants have founded 40 percent of companies in the tech sector that were financed by venture capital and went on to become public in the U.S., among them Yahoo, eBay, Intel, and Google,” writes Laszlo Bock, Google’s senior VP of “people operations,” which, along with other tech giants such as HP and Microsoft, strongly supports a big increase in H-1B visas. “In 2012, these companies employed roughly 560,000 workers and generated $ 63 billion in sales.”

Continue Reading »

Politics | Mother Jones

How H-1B Visas Are Screwing Tech Workers

How H-1B Visas Are Screwing Tech Workers

Tweet

A few years ago, the pharmaceutical giant Pfizer informed hundreds of tech workers at its Connecticut R&D facilities that they’d soon be laid off. Before getting their final paychecks, however, they’d need to train their replacements: guest workers from India who’d come to the United States on H-1B visas. “It’s a very, very stressful work environment,” one soon-to-be-axed worker told Connecticut’s The Day newspaper. “I haven’t been able to sleep in weeks.”

Established in 1990, the federal H-1B visa program allows employers to import up to 65,000 foreign workers each year to fill jobs that require “highly specialized knowledge.” The Senate’s bipartisan Immigration Innovation Act of 2013, or “I-Squared Act,” would increase that cap to as many as 300,000 foreign workers. “The smartest, hardest-working, most talented people on this planet, we should want them to come here,” Sen. Marco Rubio, (R-Fla.) said upon introducing the bill last month. “I, for one, have no fear that this country is going to be overrun by Ph.D.s.”

To be sure, America’s tech economy has long depended on foreign-born workers. “Immigrants have founded 40 percent of companies in the tech sector that were financed by venture capital and went on to become public in the U.S., among them Yahoo, eBay, Intel, and Google,” writes Laszlo Bock, Google’s senior VP of “people operations,” which, along with other tech giants such as HP and Microsoft, strongly supports a big increase in H-1B visas. “In 2012, these companies employed roughly 560,000 workers and generated $ 63 billion in sales.”

Continue Reading »

Politics | Mother Jones

How H-1B Visas Are Screwing Tech Workers