With the election of Joe Biden, the nomination of Boston mayor Marty Walsh, to be Secretary of Labor, and Biden’s ability to make appointments to the National Labor Relations Board (NLRB), workers in the US may be on the verge of achieving some sizable economic gains.
To be successful, Biden will need to focus on workers who are employed, and on those who are unemployed. Workers who are employed have radically different needs from those who are not, and even among the unemployed, there is no one policy that will benefit all.
Today, labor’s share of earned income has fallen from a high of 65 percent in 1947 to a low of 57 percent in 2017. This drop partially reflects the fact that 42 percent of workers make less than $15 per hour, and that the US has the lowest minimum wage relative to the median wage of any developed country.
The federal minimum wage in 1963 was $1.25, in today’s dollars that would equal $9.24. Today, the federal minimum is $7.25. Thus, in real terms, workers today work for $1.99 per hour less than they did in 1963. If we had indexed the minimum wage to inflation in 1963, it would by $16.28 today, by contrast if we phase in an increase in the minimum wage to $15 per hour by 2025, inflation (over the next four years) will reduce its value to only $13.62, with further declines expected unless the wage is indexed to inflation.
While an indexed minimum wage would be one way to boost worker incomes, it’s not the only way. In 2016, the Obama Department of Labor updated the overtime salary threshold from $23,660 to $47,476, but this update was ultimately blocked in the courts. Instead of defending the 2016 rule, which would have strengthened overtime protections for 12.5 million workers, the Trump administration proceeded with their own proposed rule resulting in 8.2 million workers who would have benefitted from the 2016 rule being left behind. The new Secretary of Labor should push the overtime salary threshold closer to the Obama level, but what is more important, the threshold figure should be indexed to inflation so that its real value doesn’t decline as prices rise over time.
Hopefully, the Biden administration will increase its appropriations to the Department of Labor so it can adequately fulfill its mission which is to protect workers. The department’s Wage and Hour Division is responsible for administering and enforcing laws related to wage theft which was estimated to be $15 billion in 2019, of which only $308 million was recovered. New leadership at the NLRB could protect worker organizing efforts, where employers are charged with violating federal law in 41 percent of all union election campaigns. And one out of five union election campaigns involves a charge that a worker was illegally fired for union activity.
In addition to employed workers, the Biden administration needs to expand assistance to workers who are unemployed or out of the labor force. Unemployment insurance which used to cover 70 percent of unemployed workers, now only covers about 30 of workers laid off. By 2017, labor market participation rates had fallen to 62 percent, from their previous high or 67 percent. Most of the decline was by males, over the age of 16 but under the age of 35, many of whom had given up looking due to their lack of compatible training.
As early as 1970 it was argued that our competitive advantage was eroding and that education and training would be needed to maintain a competitive work force, the advice was ignored by Nixon. Unlike Nixon, the Kennedy administration was more receptive to the idea retraining. Kennedy’s Trade Adjustment Assistance (TAA) offered workers 65 percent of their wages for sixty-five weeks, and help workers relocate if necessary. Critics called it a form of socialism and as a result it was woefully underfunded.
The Biden administration should mimic European nations and offer tax credits to corporations to firms whose workers will be displaced by automation or foreign trade. Denmark, as a percent of GDP, spends twenty times what the US does on training, France ten times as much, Germany five times as much. In Germany 60 percent of students are in apprenticeship programs funded by the government, in the US it is 5 percent.
Training assistance programs in the US must focus on outcomes and not training per se. Foreign trade while beneficial, does carry one significant cost, employment losses in firms faced with significant import competition. For our retraining efforts to be successful, TAA must be taken seriously and funded accordingly and two year colleges need to be vocationally oriented, not pale versions of four year colleges.