Labor Day isn’t simply a time to fire up the grill and enjoy one last weekend of summer. It’s a day to think about the challenges facing American workers. And, these days, that means there’s a lot to think about.
The economy is recovering, and unemployment, according to estimates that the federal government released on Friday, is falling. It’s now down to 5.1 percent, which is lower than at any time since 2008. But the employment-to-population ratio, the economic measure many economists prefer, still hasn’t returned to its pre-recession levels. Wages aren’t rising that quickly, either.
Put it all together and you have a workforce that is doing better than it was, but not as well as it could be -- particularly for those households struggling with child care, medical bills or other costly necessities.
It doesn’t have to be this way. If lawmakers want to help workers, they have options. Here's a quick rundown of five steps they could take -- each with drawbacks and trade-offs, for sure, but also strong merits:
Raise the minimum wage. The simplest case for a higher minimum wage is that its value has fallen, relative to productivity. You can see it in the graph below, from the Center on Economic Policy Research. The wage and productivity rise in tandem through the late 1960s. Then they diverge and, today, the minimum wage is actually lower in real terms than it was back then.
The usual counter-argument to raising the minimum wage is that it would reduce employment. And it's surely possible to raise the wage high enough that it would truly mean a significant loss of jobs. Economists will be watching data from cities like Seattle, which recently raised its minimum wage to $15 per hour, to see if anything like that happens.
But the case for more modest wage increases is less ambiguous. A large body of research has shown that raising the wage doesn’t have large effects on employment, for reasons that economist and New York Times columnist Paul Krugman explained a few weeks ago:
The market for labor isn’t like the market for, say, wheat, because workers are people. And because they’re people, there are important benefits, even to the employer, from paying them more: better morale, lower turnover, increased productivity. These benefits largely offset the direct effect of higher labor costs, so that raising the minimum wage needn’t cost jobs after all.
Provide paid family leave. In pretty much every developed country, every worker has the right for an extended paid leave in order to deal with a serious medical problem, to take care of a newborn, or to take care of a sick family member. The exception is the U.S.
The only protection the federal government offers workers is up to 12 weeks of unpaid leave -- and not everybody has access to that. The protection applies only to firms with fewer than 50 employees. If two parents work for the same company, they must share the allotted time between them.
How big an outlier is the U.S.? Take a look:
Large companies frequently offer the benefit, and the list of companies doing so is growing. But according to a recent White House report, just 39 percent of workers say they have access to paid leave for newborns.
One of the best arguments for paid family leave is public health. Studies have shown that when parents have more time at home with newborns, those newborns end up healthier. Paid family leave, properly structured, can also bolster gender equality (since the job of caregiving still falls disproportionately on women) and even boost productivity.
“Paid leave allows more families to fully contribute to our nation’s economic growth and actually boosts household income by enabling parents, especially mothers, to sustain their careers while caring for their kids and elderly parents,” Heather Boushey, president at the Center for Equitable Growth, noted earlier this year.
One argument against mandatory paid leave is that it’s expensive for the firms that don't provide it now. But advocates argue, plausibly, that the price isn’t that high, particularly since more generous leave policies can attract better workers and improve retention. Besides, firms don't have to bear the financial burden independently. California financed a paid leave law through a payroll tax.
Stop the assault on unions and start allowing “card check.” Union membership in the U.S. is at historic lows. The wealthy are getting a disproportionate share of the nation’s income. There’s a reason these things have happened simultaneously. Unions, whatever their failings, give workers more leverage to demand higher wages.
“There’s little point in even discussing how to solve the inequality problem if you won’t consider ways the government could help rebuild — really, stop suppressing — unions," Timothy Noah, author of The Great Divergence and now an editor at Politico, observed a few years ago. "If you graph a line charting the decline in union membership and then superimpose another line charting the decline in middle-class income share, the lines will be nearly identical. That is not a coincidence.”
So how do you boost union membership? There’s no single, easy answer. But one big step would be to make organizing easier. U.S. firms are famously hostile to unions, and U.S. labor law famously lets them get away with it. Implementing a card-check system -- in effect, allowing workers to vote for a union by petition, before getting formal ratification through a vote -- is one way of addressing that. Canada has the same system and, not surprisingly, union membership there remains much higher than in the U.S.
The best argument against card check is that it would work -- that, if union organizing were easier, more people would belong to unions. Critics, particularly but not exclusively on the political right, say unions impede innovation, are prone to corruption and ultimately hurt workers more than they help. Labor supporters argue that unions can co-exist with a thriving economy, as they long have overseas, and that they are ultimately a net benefit to workers.
Bring the Affordable Care Act’s Medicaid expansion to the whole country. Medicaid is the government health insurance program for low-income people. It’s been around since 1966, but most states restricted eligibility pretty narrowly until 2014, when the Affordable Care Act offered states a deal: Make the program available to all households where income is below or just above the poverty line, and the feds would pick up most of the cost. As of today, 30 states plus the District of Columbia have said yes.
That means 20 states haven’t. Among them are Florida, Georgia and Texas. If just those three states embraced the expansion, more than 2 million people would become eligible for coverage. And while some of them would be unemployed, about half are in families with at least one part-time or full-time worker. The problem -- again, most acute in low-wage industries like fast-food -- is that these jobs frequently don’t provide health insurance.
Insuring these people through Medicaid costs money, even if it comes primarily from the federal government rather than the states. And Medicaid is an imperfect program: Beneficiaries can struggle to find specialists willing to see them, since the program pays doctors very little. But studies have shown unambiguously that people on Medicaid get critical economic protection. Research also suggests, albeit less conclusively, that people on Medicaid end up healthier than if they had no insurance at all.
Expand the EITC to childless workers. One of the most successful programs to fight poverty is the Earned Income Tax Credit, which basically acts as a wage booster. If you work, but your income is low, then the government will give you some extra money. In other words, it turns low-paying jobs into not-so-low paying jobs.
One of the program’s shortcomings is that it does very little for childless workers. The formula is complicated, but for a single childless adult with an annual income right around the poverty line, the value of the tax credit works out to a little more than $200 a year. A parent of one child with household income around the poverty line would get more than $3,000.
Reducing the credit's eligibility age to 21 and raising the maximum value of the credit could provide relief to millions of low wage workers -- in ways that could benefit the rest of society, too. For example, it could boost employment by making low-wage jobs more attractive.
The main trade-off to a higher EITC is that the money comes out of the federal treasury. An increase would likely cost between $5 and $10 billion dollars a year, depending on the details of the proposal. But the EITC has a bipartisan pedigree, going back to the days of Ronald Reagan, and in recent years at least some Republicans have endorsed calls for its expansion -- in part, perhaps, because it's a tax cut.
As Robert Greenstein, president of the Center on Budget and Policy Priorities, has noted, “When you look at these young workers or middle-aged workers who are single individuals, if they’re paid low wages, they’re the one group whom the federal government today literally taxes into poverty or deeper into poverty. That should be something that both parties can say, that’s not a good idea. And both parties want to encourage these people to work more, and the Earned Income Credit does that.”