Welcome to the Working Class

As the financial industry celebrates its recovery from the Great Recession with huge bonuses, attention has turned increasingly to jobs.  But that’s not a new concern: over the past three decades first the working class and then the middle class faced unemployment caused by economic restructuring and globalization.  Back in the 70s and 80s, when working-class people were losing thousands of blue collar manufacturing jobs that paid middle-class wages, many economists brushed the problem aside, insisting that new forms of work would soon replace disappearing blue-collar jobs.  Industrial workers and their unions knew better 30 years ago.  They’ve long warned that economic restructuring, globalization, and unfair trade laws would result in the loss of the middle class.  Today we’re learning that they were right.

With the jobless recovery of the early 2000s and the ongoing unemployment crisis of today’s recession, the middle class is discovering that sociologists Richard Sennett and Jonathan Cobb were accurate when they suggested that what it means to be middle class is to be just one job away from poverty.  In Fear of Falling, Barbara Ehrenreich explored the impact of this decline on individual consciousness.  But it is only within the last decade that people who thought they were safely middle class have come to understand the episodic, anxiety-ridden, contingent, low-wage-and-benefit life of many in the working class.

And that experience seems likely to become permanent reality for many.  Unlike in past business cycles, the middle class has not been able to recover so far, despite increases in productivity and stock prices. In “America Without a Middle Class,” Elizabeth Warren documents how the de facto unemployment rate, credit debt, “underwater” mortgages, increased use of food stamps, personal bankruptcies, and the loss of pensions and health care have all dramatically increased.  Middle-class households have depleted their savings and are increasingly accruing debt to pay for college, health care, and other expenses.

The situation continues to worsen.  The latest monthly Bureau of Labor Statistics Employment Report shows an additional 85,000 jobs lost. As the U.S. population grows, the need for jobs increases.  The economy would need 100,000 new jobs just to keep up. In other words, the net effect puts us 185,000 jobs behind where we need to be to stay even with current misery.  To make matters worse, 600,000 gave up looking for work and so were not even counted in the official unemployment rate.  Over the last decade, the data shows no net creation of new jobs.

Some experts believe that the decline in jobs will only continue. For example, Alexandra Levit predicts significant losses in a number of key industries between 2008 and 2018:  semiconductor manufacturing(33.7%), motor vehicle parts manufacturing (18.6%), printing and related jobs (16%), apparel manufacturing (57%), newspaper publishers (24,8%), mining support jobs (76,000 or 23,2%), and the postal service (13%). Corporations are moving many of these jobs offshore or replacing them with technology rather than paying middle class wages and benefits. The economists are right that new jobs are being created in place of these.  But as Jack Metzgar discussed last week, most of the new jobs offer even lower wages and benefits and require less education.

Since private sector jobs cannot or will not be replaced in significant numbers, working people will have to rely on government spending to fill the gap.  The first Obama stimulus, while important (see The Stimulus at Work), has clearly proven insufficient. The limits of this approach can be seen in California, Illinois, and New York.  No wonder business leaders like Warren Buffet, economists like Paul Krugman, and others are calling for second stimulus directed more at creating new jobs.

While many approaches have been offered, the Economic Policy Institute has outlined a simple plan to create jobs and stem the unemployment crisis. It contains five major themes: strengthening the social safety net (including unemployment compensation, COBRA health coverage, and nutrition assistance); providing additional fiscal relief to state and local governments; making renewed investments in infrastructure including transportation and schools; supporting direct creation of public service jobs; and establishing a new tax credit to employers who create new jobs.

No doubt, we need stronger government leadership in creating the jobs that will expand the so-called recovery from the financial sector to the jobs sector.  But making real, lasting change requires something more:  a reexamination of the neoliberal ideology that has been responsible for current economic crisis that is moving so many from the middle class to the working class.  As a recent Special Report in The American Prospect suggests, nothing short of an complete overhaul involving industrial, trade, and foreign policy will do, especially involving the revival of American manufacturing.

Why manufacturing? As Richard McCormack has found, the loss of a single manufacturing job in a single large manufacturing plant, such as the GM Moraine Assembly in Dayton, can result in the loss of 15 additional jobs in the local community and through supply chains – job losses that affect both working- and middle-class workers.  But it’s not just that lost manufacturing jobs have wide-ranging effects.  It’s also that manufacturing jobs, unlike the low-wage service jobs Metzgar wrote about last week, are more likely to pay a liveable wage and provide decent benefits.  Manufacturing jobs can be good working-class jobs, working-class jobs that can in turn help rebuild the middle class.

With a new stimulus package and a revitalized manufacturing sector, the Great Recession may – like the Great Depression before – provide the ideological stimulus to create a more humane economy that is supportive of the working class.  We need such a shift now, especially as the working class increasingly includes thousands who once thought they were solidly middle class.

John Russo

America’s Low-Wage Future

British historian E.H. Carr once said something to the effect that while no serious scholar makes up the facts, they all choose which facts “to put on stage.”  The problem of cultural bias is that there are way too many facts to give them all their proper due, and in choosing what we think is most significant among them, we are guided by our own focus and general sense of significance – that is, by our values, our hopes and fears, and our everyday sense of how the world works.

Every two years the Bureau of Labor Statistics (BLS) makes detailed projections of how many jobs there will be in which occupations ten years from now.  The latest one came out late last year, and among a dizzying array of facts and figures, here’s what they headlined in italics at the top of their report:

Professional and related occupations and service occupations are expected to create more new jobs than all other occupational groups from 2008 to 2018; in addition, growth will be faster among occupations for which postsecondary education is the most significant form of education or training. . . . .

This was duly reported by The New York Times under the headline “Where the Jobs Will Be,” with the same emphasis on “professional and related occupations” and “postsecondary education.”   The message is that our society is going to need many more college graduates than it has now, which is true.  The impression most often left, however, is that we are rapidly becoming a society of “professionals” and “knowledge workers,” and that the key to our future is making sure that almost everybody gets a college education.  This impression is not only false, but spectacularly so.

Disguised in the text, but present in the BLS tables is another set of facts: Only 21% of jobs now require a bachelor’s degree, and despite faster growth among these credentialed occupations, that isn’t going to change much.  By 2018, according to the BLS, only 22% of jobs will require a bachelor’s degree or more.  Of the 51 million “job openings due to [both] growth and replacement needs” in the next ten years, fewer than 12 million will require a bachelor’s degree.

At the heart of what the BLS and The New York Times choose to put on stage is a confusion between the fastest growing jobs and the jobs with the largest job growth.  Though the BLS tables report both the fast and the large in detail, the headline and the text emphasizes speed over size.  For example, the fastest growing occupation in the next ten years will be biomedical engineers; these jobs will increase by a whopping 72% from 16,000 to nearly 28,000, a net increase of 12,000 jobs.  Meanwhile, retail salespersons will see job growth of a meager 8.4%, but since there are now more than 4 million of them, that’s an increase of 375,000 jobs.

A second confusion involves the word “service,” which in other contexts is used to indicate all work that does not involve making or building things, as in “service economy.”  This usage conjures images of doctors, lawyers, teachers, and management consultants – all of them growing occupations and highly paid.  But that’s not what the BLS means by “service occupations.”  The BLS service jobs with the largest projected growth are home health and personal aides; food service workers (including fast food); nursing aides; landscaping and groundskeeping workers; medical assistants; security guards, and child care workers – all of them already very large and all of them paying “low” or “very low” wages.

Of the 30 fastest growing occupations, 14 require at least a bachelor’s degree and another five will require an associate’s degree; all 19 of these fast-growing jobs pay “very high” or “high” wages by BLS standards.  That is good news.  But among the 30 with the largest growth, only seven require a bachelor’s and one more requires an associate’s.  And, unlike the fast, of the top 30 for size, the majority of new jobs are either “low wage” or “very low wage.”   Here’s my tabulation of the largest 30 by how well they pay:

Top 30 occupations with largest projected job growth, 2008-2018

2008 median annual earnings

by quartiles (# of occupations)

# of new jobs projected % of top

30 jobs

Very High:

$51,540 & above  (7)




$32,390 to $51,530  (8)




$21,590 to $32,380  (9)



Very Low:

Less than $21,590 (6)



These top 30 occupations account for about one half of the net new jobs the BLS projects, and other data show that the wage composition of these 30 is not unrepresentative of the job structure as a whole, now and in 2018.  If these were the facts the BLS chose to put on stage, the headline might be: Majority of American workers projected to remain poorly paid and in need of a living wage.

We might then realize that we cannot close the widening gap between the earnings of high school graduates and college graduates simply by producing more college graduates.  There simply are not and will not be enough jobs requiring a college education. With a different set of facts on stage, we would understand that we need to do something to increase the majority’s wages and incomes directly.

What’s more, as a nation we know how to do this because we’ve done it before, in the three decades after World War II.  Though each has its limits, we need some combination of greater unionization, steadily improving minimum wage laws, and enhancements in the social wage, now called “work supports.”  Democrats, for all their other faults, have committed to advancing on all three of these fronts, and in the last three years have advanced a little on each of them.  College professors (called “postsecondary teachers” and #10 on the BLS largest list) could lend a hand simply by putting some of these “other” facts on our stages.  The BLS largest list is a richly complex document that reveals contradictory tendencies in what some 150 million of us do and will do to earn a living.   My arrangement of that list by educational requirements and pay simplifies it some by separating out those countertendencies.  No facts are made up, but by reorganizing the stage, the same facts make a decidedly different impression.

Jack Metzgar

Jobs, Ideology, and Policy: Putting Workers First

During the 1980s recession, as steel mills closed and auto plants began downsizing around the country, neoconservative economists insisted that the jobs lost to deindustrialization would soon be replaced by new jobs.  In Youngstown then, we knew better.  And as we wrote seven years ago in Steeltown U.S.A., Youngstown’s story in the late 70s and early 80s has not only persisted here, where unemployment is among the highest in the state and the poverty rate hovers around 30%, but has become America’s story today.

Youngstown learned then how real economic shifts could be exacerbated by ideology: the idea that businesses and investments matter more than ordinary human beings and the notion that we should just get used to economic patterns that create long-term hardship for those with the least power and resources.  Youngstown learned more than 30 years ago how damaging such ideas can be.  Once again, the rest of America is learning that lesson today.

The gap between the Wall Street recovery and the continuing jobs recession was highlighted by Friday’s jobs summit.  Communities around the country understand that we are in another jobless recovery that leaves hundreds of thousands of American families vulnerable.  While markets have stabilized for the moment and investors are feeling more confident, the economy isn’t improving for most Americans.

So is the current situation just like the earlier recession? No. It is worse. As Peter Edelman and Barbara Ehrenreich note in Sunday’s Washington Post, the current economic crisis reveals the glaring problems left behind by the welfare reform of the 1990s, a policy change that reflected the long-standing assumption that poverty is a “voluntary condition” and that every able-bodied adult should simply find a job – “even when there are obviously no jobs available.”  When we removed the safety net because of conservative and neoliberal worries about “fostering dependency,” we created the economic conditions that left 17.1 million Americans living in extreme poverty in 2008 – and no doubt even more today. As we learned last year, we’re willing to bail out corporations but not working people.

The current recession is also worse because it isn’t just a matter of jobs.  It’s a matter of ideology.  Blaming the victim and normalizing long-term economic struggle were part of the discourse at the jobs summit, during which Jan Hatzius, chief domestic economist at Goldman Sachs, acknowledged that unemployment will likely remain high for a long time.  She suggested that we may just have to get used to it.  Why?  Because those who have been unemployed for a long time are losing their skills and their work habits.  No doubt, long-term unemployment affects people, but the idea that unemployment will last a long time because workers won’t be prepared to return to work represents the most absurd, cruel version of blaming the victim.

On the other hand, Hatzius is not wrong that we’re in for long-term unemployment and underemployment– problems which are far worse than the official unemployment rate suggests. No doubt, business takes the cautious path during economic downturns, often by adding hours to workers’ schedules rather than by hiring additional workers. But as we learned in Youngstown, the reality is that those jobs may never come back as businesses, especially manufacturers, continue to disinvest in the United States.

At the same time, as we have argued before, we’re also witnessing long-term shifts in the nature of the jobs available.  Promises about a new “creative worker” economy or green jobs that will someday provide some former steelworkers and autoworkers with new versions of manufacturing jobs fall short when we remember the latest predictions of the Bureau of Labor Statistics:  that the job categories predicted to grow most over the next few decades involve primarily low-wage, low-education service positions.  Many of these jobs pay less than $21,000 a year.  That means that poverty is going to be a long-term problem for American workers.

What we need, in other words, is not a single jobs summit. We need long-range policy planning aimed at creating a better system of supports for the working poor and unemployed.  We need to recognize that as much as education matters, it won’t necessarily overcome long-term employment trends and growing income inequality.  We need economic policies that focus on the poor and working class and that treat them with respect, rather than blame.

Too often, economic theory has provided a distraction from the real struggles of real people.  Jan Hatzuis and her colleagues might do well to stop worrying about the work habits of the unemployed and start learning about what it’s like to lose a job after you spent years doing everything right, about the indignities associated with applying for government aid as you struggle to survive job loss, about how limitations of K-12 education, urban transportation, limited access to fair banking, overcrowded housing, persistent hunger, and lack of health care make finding a steady job that pays enough to support a family incredibly difficult.   A little moral education might help as well.

We need to stop thinking about the current crisis as a temporary recession, and we certainly have to stop talking about the economic crisis as part of an inevitable shift we can’t do anything about.  We have to recognize and act on the situation as what it is: a moral crisis.

The Obama administration must take the problem as a moral imperative, acknowledge that the private sector simply won’t solve the problem on its own, and like Franklin Delano Roosevelt, create a jobs-centered stimulus that is environmentally sound, improves the national infrastructure, and provides an economic foundation for working Americans and rebuilding the American economy.

The economy isn’t a game, with winners and losers who deserve what they get, because the players don’t occupy a fair playing field and the rules are biased.  Inequality has long been and is becoming more deeply engrained in the American system.  We cannot continue to view long-term high unemployment rates, minimal public supports for the poor, and a permanent and increasing gap between rich and poor as normal much less acceptable.  We can do better.  “Yes, we can.”  And we must.

John Russo and Sherry Linkon

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Fixing the Foreclosure Problem

One of the sad legacies of the housing and mortgage securitization bubble and the subsequent collapse of the economy over the past two years is the virtual devastation of working-class neighborhoods throughout the United States.  Thousands of homes sit vacant and deteriorating after foreclosure or are listed for sale at a price half or less than their value just 18 months ago.

Foreclosures aren’t hitting just the working class, but The New York Times reports that workers in the manufacturing and distribution sectors were keeping up mortgage payments until they found themselves unemployed and unable to pay for their homes, complicating efforts to stem foreclosures.

Even as the Treasury Department appears poised today to announce efforts to force more banks to modify loans, increasing evidence suggests that the federal government’s efforts are floundering.

Rather than focusing their efforts on the complicated Homeowner Affordable Modification Program (HAMP), or on bailing out banks in the hope that they will loan more money to homeowners and small businesses, federal policymakers can accomplish more  for those facing foreclosure, not to mention their neighbors and American taxpayers, by making relatively modest changes to the business practices of the Federal Housing Administration and HUD.

The story of an Ohio worker and homeowner illustrates how the federal government is missing easy opportunities to play a meaningful role in reducing the impact of the foreclosure crisis and the recession on real people.

In 2007, Bob was employed by DHL as a driver earning over $20 per hour. He bought a modest house in a middle-class suburb of Cleveland for a fair market price of $90,000 to live in with his son.  When DHL shut down its U.S. operations in 2008, Bob, along with thousands of others nationally, was laid off.

Meanwhile, back on Bob’s street, for sale signs proliferated and one of six homes in his community is in foreclosure.  As a result, the market value of Bob’s home has dropped to less than half of what he paid for it.

Bob and his son were able to survive on his unemployment benefits but couldn’t pay the monthly mortgage.  Bob recently took a job with FedEx paying less than half of what he earned at DHL and less than his unemployment benefits, because he simply couldn’t stand “not working any more.”

His mortgage, which was insured by the FHA, is being foreclosed. With the costs of foreclosure and 18 months of late fees included, the lender claims to be owed $120,000 on a house optimistically worth $50,000.

Bob requested that his foreclosure case be sent to mediation, and he provided the lender with extensive documentation of his income and expenses and the current value of his home during the course of those negotiations. The loan servicer has refused to agree to a modification of the terms that makes any sense to Bob. They are completely unwilling to consider any modification that reduces the principal balance at all, let alone bring the figure anywhere close to the current value of the home.

Bob does not qualify for the H.A.M.P program, the centerpiece of the Obama Administration’s effort to assist homeowners in default and foreclosure, because his loan (like the loans of most people in foreclosure) is more than one year behind. That program actually pays cash to lenders and mortgage services who agree to modify loans.

During the course of the negotiations it became increasingly clear that the lender or loan servicers have no incentive to enter into any kind of meaningful modification.


Because after foreclosure, FHA stands ready to pay the lender 100 percent of its loss on the loan, including the cost of foreclosure. If the lender were to agree to modify the loan, it would be paid far less.

Here is the outrage. If the lender proceeds to foreclosure, Bob and his son will be thrown out of their home and the lender will be made whole at the cost to FHA — and ultimately the taxpayers — of $80,000 or more.

This scenario is repeating itself in mortgage foreclosure cases throughout the country, putting the solvency of the FHA at risk while throwing thousands of working people out of their homes. The New York Times recently reported that FHA itself might be in need of an infusion of cash.

If FHA were included in the negotiation and would agree to pay lenders some amount –say half of what they are likely to lose, $40,000 — to allow the principal to be reduced, Bob could refinance at competitive interest rates and stay in his home, the federal Ggvernment and ultimately the taxpayers would save $40,000, and the lender would have an interest-paying borrower (who can afford the lower payment) and earn profits from the interest.

Everybody wins under this scenario.

Another problem that could be fixed by a more realistic approach by HUD and the FHA was detailed in a recent Cleveland Plain Dealer Story about problems created by HUD’s failure to demolish or fix homes they own (mostly as a result of FHA insured foreclosures) in greater Cleveland.  Dilapidated houses drive down housing values for entire neighborhoods.  Making it tougher for guys like Bob to sell or refinance their homes and making community problems worse. Local communities are struggling to maintain housing stock in aging neighborhoods, and HUD’s failure as a homeowner has devastating effects on entire communities.

The Federal Government has a chance to raise the bar for responsible homeownership, yet instead they appear to be lowering it. HUD should be a model community citizen, collaborating with local housing officials on neighborhood wide efforts to improve home values.  The agency should hire local consultants or even contract with local governments and empower them to make quick and honest assessments of the likelihood of selling any particular piece of real estate with an eye toward the best community use for the property.  For houses that will not realistically sell in a reasonable timeframe, HUD should require that the houses be demolished within 30 days.

Increasing evidence suggests that the new programs being created by Congress and the Obama administration are not having a significant impact on the foreclosure problem. Only 1711 homeowners nationally had completed a modification by September 1, 2009 under the HAMP Program.

Bob’s story suggests that a better approach may be to find ways to make the existing machinery of the federal government’s mortgage programs work in the interests of homeowners and taxpayers.

Marc Dann

Marc Dann is a Cleveland lawyer who represents homeowners in foreclosure.

Bending the Cost Curve on Health Care

After a summer of “lying Muslim, socialist Hitler” vitriol, a recent Pew Research Center poll shows that two-thirds of Americans think President Obama is “a strong leader” who is “trustworthy” and is “someone who cares about people like me.”  Though the President does not score as high on general approval or for his “handling of health care reform” (and for good reason), his character numbers are a major asset as we finally get into the substance of what kind of health care we are going to have in this country.

On the substance of reform, the details are devilishly complex not only because several variations are still being debated in Congress, but also because the economics of health care are actually just a little less complicated than brain science.  Fortunately, as public debate moves toward real issues of substance, we are all likely to go rapidly up a learning curve on something that is as morally and economically important to us as individuals as it is for us as a nation.

For example, after this summer’s now thoroughly debunked charge that Obama was proposing “government death panels,” there should be more interest in a study that will be published this December in The American Journal of Public Health.  The study calculates that each year about 45,000 Americans die because they lack health insurance coverage.  As lead author Dr. Andrew Wilper explains:

The uninsured have a higher risk of death when compared to the privately  insured, even after taking into account socioeconomics, health behaviors and           baseline health. We doctors have many new ways to prevent deaths from     hypertension, diabetes and heart disease – but only if patients can get into our        offices and afford their medications.

45,000 of what the study calls “excess deaths” (meaning people died unnecessarily) is a small percentage of all U.S. deaths in a year, but think of it this way:  It’s five times the number of American deaths caused by the terrorist attack on 9-11 and the subsequent wars in Afghanistan and Iraq over the past eight years.  Or, it’s equivalent to four towns the size of Wasilla, Alaska.  Even in the best of systems, accidents happen, mistakes are made, but about 45,000 Americans die needlessly every year because we choose as a nation to make access to health care a lottery game.

Likewise, though eyes glaze over when the President talks about “bending the cost curve on health care,” recent news coverage of the Kaiser Family Foundation’s annual report on health care costs helps illustrate why that bending is so important.   The average annual cost for family coverage more than doubled from about $6,000 to $13,500 in the past ten years, and it’s projected to nearly double to $24,000 in the next ten.  Employers typically pay about 73 percent of the total cost – which will be about $17,500 by 2019, or an increase of $7,700 a year over what they are paying now.  If this were a tax increase, conservative Republicans would call it a Giant Job Killer that will undermine economic growth, but though it appears as an increase in labor costs on employer balance sheets, these increases have exactly the same effect as tax increases would – fewer jobs, slower economic growth, and in this case, fewer employers providing health insurance for their workers.  Likewise, those workers who still have jobs with health insurance in 2019 will see their premiums increase from $3,500 a year now to more than $6,000 a year then.  This is what will happen if nothing is done.

“Bending the cost curve” is not about government budgets.  It’s about reducing the rate of increase of both health insurance and health delivery costs.  By 2019, according to Kaiser, the average worker will be paying at least $500 a month for family coverage, versus about $300 now.  If Obamacare can “bend the cost curve,” it will not mean that average insurance costs will actually go down, but that they would increase to only, say, $400 a month – $100 a month more than now, but a savings of $100 a month from what will happen if nothing is done.

What’s more, under Obamacare tens of millions of families will have some part of their premiums paid by federal government tax credits – 100 percent for families earning less than $29,000 and smaller percentages for families earning as much as $88,000.  When you add it all up, most working-class families should eventually see a real increase in their disposable incomes.

These tax credit subsidies need to be paid for, however, and that’s why the debate on health reform may initiate a sensible discussion about increasing taxes.  As I’ve documented in my last three blogs, progressive think tanks are finally starting to do the math on how to raise taxes on the top 5 percent of taxpayers.   The leading progressive outfit on this topic, Citizens for Tax Justice (CTJ), recently did a Review and Comparison of Six Progressive Options to Finance Health Care Reform.  CTJ provides three “moderate” options, which together would produce about $70 billion a year, more than enough to pay for the health insurance tax credits and all other aspects of Obamacare.  The increased taxes would fall almost exclusively on the top 1 percent of taxpayers whose average annual income is $1.5 million, and it would cost those folks an average of $45,000 a piece.  The next 4 percent from the top, with average incomes of about $280,000, would see their taxes increase by about $700 a year.

If I made $1.5 million a year, I’d be glad to pay an extra $45,000 in taxes just to live in a country where nobody died because they lacked health insurance.  But I’d also probably be economically savvy enough to know that a substantial increase in working-class incomes is good for business and that the President is right when he claims that the future of our economy is riding on bending that cost curve.

Jack Metzgar

Stop Stealing from Workers

Late last year I sat in the office of an Ohio County Prosecutor and provided her and the County Sherriff thick notebooks documenting a systematic theft of workers’ wages by a local construction contractor by means of misclassification under Ohio Prevailing Wage Law and systematic underpayment. The theft was compounded by the fact that company officials signed false verifications of compliance with state prevailing wage laws under penalty of perjury.   To add insult to injury, the job on which the wage theft took place was being paid for with tax dollars from that same county.

I asked the Prosecutor what would happen if a local construction contractor had brought evidence that one of their workers, perhaps a bookkeeper, had fraudulently written herself tens of thousands of dollars in checks from funds belonging to the company and then lied about the theft on government mandated reports signed under penalty of perjury. The Prosecutor, Sherriff, and their assistants and deputies all assured me that the culprit would be prosecuted to the fullest extent of the law.

I smiled, certain that  these law enforcement officials, ethical office holders, and civil servants would be as anxious to arrest and prosecute the owners of the construction company for stealing wages from their employees and lying about it under penalty of perjury as they would be to prosecute that bookkeeper.

I couldn’t have been more wrong.

They flatly refused to treat the wage theft as a criminal offense.  Instead, the company’s conduct was treated as a “mistake,” blamed on failure to understand the law.

Enforcement was left to the Ohio Department of Commerce, which could only require the company to pay back wages.  While more than $40,000 was ordered to be paid to the 9 employees and a 100 percent civil penalty assessed, the company owners were spared the life changing consequences of a criminal prosecution.

My experience was put into disturbing context by Kim Bobo’s new book, Wage Theft in America: Why Millions of Working Americans Are Not Getting Paid—and What We Can Do about It (New York: The New Press, 2009) .  Bobo documents a wage theft crime wave across the United States. The victims range from illegal immigrants who fear deportation if they report violations to skilled construction workers who are forced to kick back parts of their paycheck on government projects, and includes childcare and home healthcare workers, sales clerks, and many others.  Bobo makes a compelling case that wage theft is far more pervasive than most of us understand or would like to admit.

Bobo draws her analysis primarily from her experience in running Interfaith Worker Justice Center in Chicago and cases handled by other worker centers throughout the country, and  a recent study of over 4000 low wage workers dramatically verified Bobo’s conclusions.  The study, “Broken Laws: Unprotected Workers,” makes stunning discoveries of the rampant nature of wage theft in America. Here are a few of the conclusions:

  • 26 % of respondents had been paid less than the minimum wage in the previous workweek.
  • 25% of the respondents had worked more than 40 hours in the previous week but a  whopping 76% of them were not paid overtime.
  • 70% of workers who arrived early or stayed late at their employer’s request were not paid for the extra time.
  • 69 % of workers entitled to meal breaks didn’t get them.

Wages are stolen from tens if not hundreds of thousands of American workers every day.  If employers were stealing from customers in such a systematic way, law enforcement at all levels would be forming task forces and putting thousands in jail.

Why should theft of wages from American workers be different?  Bobo suggests that most instances of wage theft can be traced to old-fashioned greed.  Greed is sometimes dressed up with rational sounding names like “pressure from competitors in low wage countries” or “innovative” compensation schemes.  But at the end of the day employers steal from those who work for them in order to make more money.

Bobo correctly points out that wage theft is also driven by the greed of consumers who demand low prices.   That demand leads some companies to indirectly encourage wage theft.    Bobo quotes the Congressional Testimony of MIT Professor Thomas Kochan, regarding the poster child for wage theft in America: “Wal-Mart executives have established corporate policies that are ethical and appear to conform to legal requirements. However Wal-Mart has also established financial and business objectives that managers find difficult to achieve without circumventing those rules.”  This is a scenario not unique to Wal-Mart. Despite ethical, legal policies, many companies repeatedly steal from their employees in order to reduce labor costs.

But perhaps the biggest factor is the lack of consequences.  Wage thieves are only rarely caught, and those who are face almost no legal, financial, or societal consequences.  Often the worst penalty for a wage theft is being forced to pay workers what they should have been paid to begin with and then only for the period of time allowed under the statute of limitations (often as little as two years).   Weak enforcement of relatively weak laws is as much to blame for the widespread practice of wage theft as employer or consumer greed.

Wage Theft in America proposes a variety of potential solutions to the problem.  Bobo’s proposals range from creating more worker centers to dramatically beefing up the enforcement capacity of Federal and State Wage and Hour Enforcement Agencies to policies that increase the number of workers represented by labor unions.  While her proposals would work, much of what she suggests would require legislation and appropriations that are politically unattainable even with Democratic control of all three branches of the federal government. (See the recent collapse of card check provision of the Employee Free Choice Act, if you have any doubt about this).

However, some less controversial and inexpensive strategies can help.   Congress needs to simplify economic protection laws and make it easier for employees to report wage theft offenses.  In particular, workers need reliable protection against retaliation for reporting violations.  Workers currently risk of termination or other workplace punishment if they report wage theft.

But ending wage theft may not require new laws.  Instead, government agencies should simply enforce existing regulations.  It won’t take many well-publicized arrests to persuade employers to stop cheating workers.

Making that happen will require political pressure.  Activists, religious organizations, and labor unions need to reignite the kind of moral outrage that brought about our current labor laws almost a century ago.  Rooting discussions of wage theft in religion can help.  Bobo argues that religious teachings from the Old Testament to the Quran demand that workers receive their fair day’s pay.  Because of this, religious organizations can be fertile ground for generating moral outrage against those who exploit the least among us.

Labor Unions and political activists should educate elected prosecutors and sheriffs about wage theft and how it undermines local citizens and the community.  And they should pressure law enforcement officials to do their jobs.  Local business communities should also support such efforts, since cheating competitors have an unfair advantage over ethical businesses that follow the law.  And since Bobo’s book demonstrates that companies with labor unions are less likely to commit wage fraud than their competitors, union leaders should engage their counterparts across the bargaining table to join in efforts to encourage more serious enforcement.

Unions and their lawyers can devote resources to investigating and documenting wage theft, providing overburdened state and federal officials the evidence they need to bring cases.  Efforts by construction unions to promote “fair contracting” have forced non-union competitors to comply with prevailing wage laws. Organized labor should embrace these efforts as tools to strengthen unionized competitors in every industry and for organizing more companies in the future.  Such efforts also show management and potential members the added value that having a union can bring to a company and its workers.

Wage Theft in America frames the debate as about not just the value of labor unions in the workplace, but also the value of workers themselves.  Reframing wage and hour violations as crime, reclaiming the moral high ground, and refusing to tolerate wage theft not only discourages cheating of workers but also reminds companies that operate ethically, as most do, that wage theft cuts into their bottom lines.  Such changes in the public debate would certainly have changed the outcome of my efforts to prosecute the cheating contractor in Ohio.

Marc Dann is a lawyer in Cleveland who represents labor unions and workers seeking fair wages and contracting practices and has been a community affiliate of the Center for Working-Class Studies for four years .

Taxing Only the Rich CAN Pay for Everything

It’s time for everybody who wants to say anything about “Obamacare” and taxes to tell the rest of us their income class.  I live in one of the 13.5 million households with a six-figure income between $100,000 and $200,000.  I could afford to give back the annual $2,500 tax cut George Bush gave me in 2001 and 2003, but our current president has pledged that he won’t allow my taxes to increase by a single dime.

I thought this was foolish and unfair when candidate Obama promised it, but now I understand why he put himself in this trick box.  My income class serves as a sort of buffer zone to protect the working class from being attacked with taxes on their health insurance and soda pop.  The only way to ever have a discussion about what to do about our rapidly growing income inequality is to leave us, the vast majority of middle-class professionals, harmless.

In the first week of August, the national punditry declared with something like unanimity that, as the New York Times headlined, “Obama’s Pledge to Tax Only the Rich Can’t Pay for Everything, Analysts Say.”  Unanimity among cable news pundits is bad for business, so their agreement on this is particularly striking.  And this leads me to ask: Do the pundits and the “analysts” they cite really not know the numbers or are they consciously or semi-consciously trying to avoid an increase in their taxes?  It would help to know whether they are “rich” by President Obama’s standard – above $200,000 for individuals, $250,000 for families.

One of the few national pundits who routinely admits he’s “a rich guy” is Bill O’Reilly of Fox News, but with a $10 million-a-year salary (not counting his book sales and speaking fees), he’s more like the super-rich – as is Charlie Gibson of ABC News.  I’m wondering what Bill Bennett, Campbell Brown, David Gergen, Gloria Borger, and all the other talking heads who play such an important role in shaping national debates make these days.

And do they have assistants who actually check out what their “analysts” tell them?  I don’t.  I’m a humanities professor who cannot now and never has been able to do algebra, but I use the Statistical Abstract of the United States in teaching numeracy in undergraduate critical-thinking courses.  Table 470 provides interesting information on Adjusted Gross Income (AGI) and taxes by income-class.  An Internal Revenue Service spreadsheet gives more detailed AGI information on taxpayers in 2007.  AGI is income after certain tax deductions(Wikipedia nicely explains what is and is not included). Using these sources, here’s what I learned in about two hours earlier this week.

Of the 143 million U.S. taxpayers (individuals and households), about 4.5 million have AGIs of more than $200,000 a year.  Though only 3% of all taxpayers, this group claims 32% of all AGI – or $2.8 trillion.  They already pay about $600 billion in federal income tax, or about 22% of their incomes.  If this group paid a graduated average of 35% instead, that would add $400 billion to federal revenues every year.  This would leave them with about $1.8 trillion after taxes, which is roughly what two-thirds of all taxpayers (with AGIs of less than $50,000) have before they pay taxes.

All that is being asked of the rich so far is an increase of $97 billion a year — $43 billion by reverting to the pre-Bush top two marginal tax rates, and $54 billion in surtaxes on incomes over $280,000 to pay for health care.  Both these tax increases directly redistribute income from the rich to the working class.  The $43 billion a year is slated to permanently pay for Obama’s Making-Work-Pay tax credit (introduced but not paid for in the two-year stimulus package).  The $54 billion is mostly slated to help low-income workers pay for health insurance.

More will be needed for long-term government investment in green jobs, infrastructure, and education, all of which (along with health care reform) should lead to stronger, more sustained economic growth, which will do more than any other single thing to bring down government deficits and to increase working-class (and middle-class) incomes.  Taxing the rich can provide all that’s needed for even the most ambitious programs proposed so far. The rich are not an inexhaustible source of government tax revenue, but they have a lot to give before the “middle class” will need to be tapped.

That’s the theory, and it deserves to be debated, but it’s hard to believe that the pundits don’t know that there has been a radical redistribution of income from the working class to the rich over the past quarter century.  So in the interests of “transparency” (a middle-class professional term for fessing up), all commentary on paying for Obamacare should include full disclosure of whether the commentator is rich – possibly as a tagline at the bottom of the screen.

What’s more, since the proposed surtax on the rich is especially easy to figure, rich commentators should tell us how much the surtax will cost them.  For example, as currently proposed, Bill O’Reilly will pay an additional $500,000 in income taxes and Charlie Gibson, an extra $380,000.  It would be good to know how lesser pundits would fare, too, as this might help explain why they keep suggesting that President Obama must break his promise not to increase middle-class taxes.

The President won’t break that promise because he is in a trick box of his own crafting.  And there are many analysts out there – all of whom can do algebra and most of whom make less than $200,000 — who would be glad to help reporters and pundits dig into the facts on income and taxes, if they should ever want to.

Jack Metzgar