Wages at the Mid and Lower Levels Making Slight Gains–Part 1

We are reprinting this article from the September 5 Los Angeles Times because it represents an excellent summation of just where we are today in terms of wages. However, we do not share writer Jim Puzzanghera’s optimism about what it represents. Wages at the lower and mid level pay scales still remain drastically short of where they should be after the Great Recession and probably never will catch up enough to reduce the growing disparity between top and bottom unless the next administration takes robust measures to tax the wealthy.

For millions of Americans, a reminder of the economic damage of the Great Recession has arrived every week or two for years — in their paychecks.

Painfully slow wage growth has plagued the recovery, with many workers seeing few if any raises as they struggle to make ends meet. But there are signs that has started to change.

The falling unemployment rate has led to more competition for workers, spurring solid gains in average hourly earnings in recent months.

Those pressures, amplified by laws providing significant minimum-wage hikes in California, New York and elsewhere, also are triggering changes for the workers who need raises the most. Beginning last year, large companies such as Wal-Mart, Starbucks, McDonald’s and JPMorgan Chase increased what they pay their lowest-level employees.

“A pay increase is the right thing to do,” JPMorgan Chase Chief Executive Jamie Dimon said recently in announcing raises that would bring the hourly pay of bank tellers, customer service representatives and other employees to at least $12 an hour in three years, from the current $10.15.

“Wages for many Americans have gone nowhere for too long,” he wrote in a New York Times opinion article.

The same message has emanated from the presidential campaigns of Republicans and Democrats as stagnating incomes have fueled voter frustration about the economy.

When adjusted for inflation, median annual household incomes declined to $53,657 in 2014, the most recent year for which government data are available, from $57,724 in 2000.

“Household incomes are more than $4,000 lower than their levels in the year 2000,” Republican nominee Donald Trump said at a rally in Virginia last month. “Think of it … you’re making $4,000 less now than you did 16, 17 years ago.”

Wage growth already was taking a hit this century for several reasons. One factor is the loss of bargaining power caused by a drop in the share of private-sector unionized workers; another is the decline in higher-paying manufacturing jobs as companies moved more factories abroad.

As a result, the share of money flowing into households from wages began falling sharply compared with capital income from interest and dividends, according to a study last year by the Federal Reserve Bank of Philadelphia.

The 2008 financial crisis and the worst economic downturn since the Great Depression amplified those changes, further stifling overall wage growth.

But after two years of strong job growth, job openings are near record levels. That’s forced employers to hike pay to attract new workers and retain existing ones, economists said.

Average hourly earnings increased 2.4% for the 12 months ended Aug. 31.

Annual wage gains have been consistently in that range since last fall — they actually reached a seven-year high of 2.7% year-over-year in July — an improvement from the tepid 2% level during much the first six years of the recovery.

We are presenting this article by  Jim Puzzanghera in three parts because of its length. Parts 2 and 3 will appear subsequently

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The Injustice of Court Costs on the Poor, Part 2

We reproduce in its entirety an article in the editorial section of today’s New York Times since it is a follow-up of a previous article we blogged about a young black man, Dequan Jackson, who at thirteen, for rough-housing in his school corridor, was placed on probation for over a year because he couldn’t pay his fines (see September 1 posting). The victimization of poor people in this country over the money they don’t have has to cease.

05mon3web-master768Dequan Jackson

It takes a lot these days to surprise anyone with the irrationalities of the American criminal justice system, rife as it is with harsh and counterproductive practices that do little or nothing to improve lives or keep the public safe.

But a new report, published by the Juvenile Law Center, shocks nonetheless. It illustrates the destructive results of charging court fees and fines to juveniles, many of whom come from impoverished families.

Courts impose costs on defendants in all 50 states and the District of Columbia to cover all sorts of expenses — day-to-day courtroom operations, drug and mental-health tests, even public defenders, who exist solely to represent people who can’t afford a lawyer. These charges, which mount quickly, are disruptive enough for lower-income adults who are trying to get their lives back on track. They can be an even heavier burden on juveniles, one million of whom find themselves in court each year.

When these young people or their families fail to pay, they may end up behind bars, be forced to return to court over and over again, or have their driver’s licenses suspended, making it harder for them to go to school or work. Families that are already struggling to get by may have to decide between paying the courts or buying food and clothing.

Absurdly, 11 states even charge to expunge a juvenile record, which is a major obstacle to a young person’s ability to get into college, land a job or find a place to live.

In general, the report found, these burdens — many ostensibly aimed at deterring crime — have the opposite effect: By saddling young people with piles of debt they cannot pay, they increase the likelihood that juveniles will wind up in trouble with the law again. And like so much else about the criminal justice system, these costs fall most heavily on poor and nonwhite juveniles.

As one of the report’s authors put it, “Asking people to pay what they don’t have doesn’t help anyone.”

A recent study in Alameda County, Calif., found that juveniles in its justice system were charged, on average, about $2,000, or two months’ salary for a single parent earning the federal minimum wage. Yet after the county paid the costs associated with collecting those fees, it netted almost no revenue.

To their credit, Alameda County officials saw the folly of a system that harmed a lot of people and produced no discernible public benefit. Last March, the county Board of Supervisors put an immediate moratorium on all administrative court fees in juvenile cases. Counties across the country would be wise to follow suit.

 

Tax Cuts for the Wealthy–A Bad Idea

We reproduce this letter from today’s New York Times because it was written by Felicia Wong of the Roosevelt Institute whom you will recall we featured in an August 5 blog entitled “Could Hillary Clinton Become the Champion of the 99 Percent?”

And because it forcefully makes the point that only by increasing taxes on the rich of this country will we ever achieve equitable wealth distribution, full employment and a healthy economy.

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Felicia Wong of the Roosevelt Institute

David Malpass, one of Donald Trump’s economic advisers, claims that Donald Trump’s tax cuts for the wealthy and corporations would “create a flood of new business investments and jobs.”

Voters should not be fooled into believing that this is a new idea: It’s the same old failed “trickle-down” economics.

Experts project that Mr. Trump’s plan would cost nearly $10 trillion over the next decade, but we can already see how misguided it is.

Since the late 1970s, these kinds of tax cuts have led to economic failure, including four significant downturns, and increased inequality, concentrating our limited growth at the top.

We know we can do better if we rewrite the rules of our economy. As Joseph Stiglitz, chief economist for the Roosevelt Institute and a Nobel laureate, has shown, targeted tax increases would reduce gains at the top without harming growth.

This would allow us to raise wages, create jobs and invest in our future.

FELICIA WONG

President and Chief Executive

Roosevelt Institute

New York

The Idle Army: America’s Unworking Men

We have reproduced here a significant half of an editorial in today’s Wall Street Journal by Nicholas Eberstadt, a political economist at the American Enterprise Institute in Washington, D.C., as we also deplore the withdrawal of large numbers of able-bodied men and women from the working force in  the U.S.

However, isn’t Mr. Eberstadt looking at the crisis through the wrong end of the telescope? He seems to be implying that they have withdrawn of their own volition, either out of laziness, lack of ambition or preferring to remain on the dole, when the fact is, in our opinion, it is the rejection and discouragement they have met from American business, which clearly prefers cheaper foreign labor or robotic machinery over them and has made no effort to retrain them with the new, necessary skills, that has finally turned them off with a sense of hopelessness. 

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Labor Day is an appropriate moment to reflect on a quiet catastrophe: the collapse, over two generations, of work for American men. During the past half-century, work rates for U.S. males spiraled relentlessly downward. America is now home to a vast army of jobless men who are no longer even looking for work—roughly seven million of them age 25 to 54, the traditional prime of working life. . .

Or look at the fraction of American men age 20 and older without paid work. In the past 50 years it rose to 32% from 19%, and not mainly because of population aging. For prime working-age men, the jobless rate jumped to 15% from 6%. Most of the postwar surge involved voluntary departure from the labor force.

Until roughly the outbreak of World War II, working-age American men fell into basically two categories: either holding a paid job or unemployed. There was no “third way” for able-bodied males. Today there is one: neither working nor seeking work—that is, men who are outside the labor force altogether. Unlike in the past, the U.S. is now evidently rich enough to carry them, after a fashion. The no-work life hardly consigns these men to destitution. . .

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Who are America’s new cadre of prime-age male unworkers? They tend to be: 1) less educated; 2) never married; 3) native born; and 4) African-American. But those categories intersect in interesting ways. Black married men are more likely to be in the workforce than unmarried whites. Immigrants are more likely to be working or job-hunting than native-born Americans, regardless of ethnicity. High-school dropouts from abroad are as likely to be working or looking for work as native-born college grads. . .

Clearly big changes in the U.S. economy, including the decline of manufacturing and the Big Slowdown since the start of the century, have played a role.

What we might call “sociological” factors are evident, not least the tremendous rise in unworking men who draw from government disability and means-tested benefit programs. . . Declining labor-force participation and falling work rates have contributed to slower economic growth and widening gaps in income and wealth. . . Unworking men have increased poverty in the U.S., not least among the great many children whose fathers are without jobs. . .

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There are the social effects, too. The male retreat from the labor force has exacerbated family breakdown, promoted welfare dependence and recast “disability” into a viable alternative lifestyle. Among these men the death of work seems to mean also the death of civic engagement, community participation and voluntary association. . .

Imagine how different America would be today if another roughly 10 million men held paying jobs. It is imperative for the future health of the country to make a determined and sustained effort to bring these detached men back—into the workplace, into their families, into civil society.

We concur. These are our sentiments exactly. But, how to achieve this?

Since in our opinion it is the huge disparity in wealth and income in our country between those at the top and those at the bottom that is responsible for driving out of the work force millions of ready workers and not vice-versa, as Mr Eberstadt implies, is it not up to the capitalists who have created these “unemployables” to make the first move in welcoming them back?

 

 

The Injustice of Court Costs on the Poor

The legal system is unfairly weighted against the poor who, unable to pay even what, for you or me, would be meager court costs for minor offenses, become enmeshed in retribution far beyond what they deserve.

The story of Dequan Jackson comes from an article by Erik Ekholm in today’s New York Times.

31juvenile-master768Dequan Jackson, 16, at his home in Jacksonville, Fla. (Charlotte Kesl for The New York Times)

JACKSONVILLE, Fla. — When Dequan Jackson had his only brush with the law, at 13, he tried to do everything right.

Charged with battery for banging into a teacher while horsing around in a hallway, he pleaded guilty with the promise that after one year of successful probation, the conviction would be reduced to a misdemeanor.

He worked 40 hours in a food bank. He met with an anger management counselor. He kept to an 8 p.m. curfew except when returning from football practice or church.

And he kept out of trouble.

But Dequan and his mother, who is struggling to raise two sons here on wisps of income, were unable to meet one final condition: payment of $200 in court and public defender fees. For that reason alone, his probation was extended for what turned out to be 14 more months, until they pulled together the money at a time when they had trouble finding quarters for the laundromat.

And for Dequan and his family, it got worse. Duval County, where they live, charges a dollar per day for probation supervision, so that meter kept on ticking. On a recent evening in their sparse apartment, in a rough public housing complex here, his mother, Shenna Jackson, displayed their unpaid bill from the Florida Department of Juvenile Justice’s Cost of Care Recovery Unit: $868.

“You feel like you’re drowning and you’re trying to get some air, but people are just pouring more water into the pool,” is how Dequan, now a 16-year-old honor student and star linebacker at Robert E. Lee High School, described his despair over what, for this family, is a crushing financial burden.

If they cannot pay fees, impoverished offenders may, like Dequan, spend extra months and years on probation. In some cases, they may even be incarcerated longer because they cannot pay the daily fee for a GPS ankle bracelet.

One 13-year-old in Arkansas who could not pay several hundred dollars in fines for truancy, the report found, spent three months in detention instead.

In another practice that deepens inequities, about 20 states charge fees to have juvenile records expunged or sealed; in South Carolina, for example, juvenile offenders must pay more than $300.

Back when Dequan Jackson’s mother was unable to pay his court costs, the family was scraping by on meager slices of the father’s disability checks. Six months ago, Ms. Jackson finally landed a job, as a cashier at Walmart, but the probation bill still seems beyond reach, she said, because “we are literally living from paycheck to paycheck.”

If his family had been able to hire a private lawyer, Dequan might have been diverted to a community program and never charged in the first place. Once charged, the court and probation fees might have been waived on hardship grounds, if the family had received proper advice from overburdened public defenders and probation officers. But bewildering bureaucracies, and a lack of sustained legal help, are common obstacles.

In the end, it took the volunteer help of justice officials who met Dequan through that class for him to obtain this year the promised reduction of his crime to a misdemeanor.

Dequan dreams of getting a football scholarship to college and has already received strong interest from two schools, he said.

But for college and after, it would clearly help to have his record expunged or sealed.

The family has not yet looked into the procedure. It will cost them $125.

 

 

 

Apple, Congress and Missing Taxes

The lead editorial in today’s New York Times exposes how Congress, by tacitly allowing  Apple to park its foreign profits ($215 billion last June) in Ireland almost tax-free (0.005%), may have robbed the US of most of its future tax claims against these profits when they are repatriated.

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Tim Cook, CEO of Apple (Photo: Nikki Ritcher) 

 

Apple and the United States are crying foul over the ruling in Europe that Apple received illegal tax breaks from Ireland and must hand over 13 billion euros ($14.5 billion), a record tax penalty in Europe.

But Apple and the United States have only themselves to blame for the situation.

Apple has engaged in increasingly aggressive tax avoidance for at least a decade, including stashing some $100 billion in Ireland without paying taxes on much of it anywhere in the world, according to a Senate investigation in 2013. In a display of arrogance, the company seemed to believe that its arrangements in a known tax haven like Ireland would never be deemed illegal — even as European regulators cracked down in similar cases against such multinational corporations as Starbucks, Amazon, Fiat and the German chemical giant BASF.

Congress, for its part, has sat idly by as American corporations have indulged in increasingly intricate forms of tax avoidance made possible by the interplay of an outmoded corporate tax code and modern globalized finance. The biggest tax dodge in need of reform involves deferral, in which American companies can defer paying taxes on foreign-held profits until those sums are repatriated.

Initially, deferral was a convenience for multinationals, as they sought investment opportunities abroad. Today, it is the taproot of global tax avoidance. Financial engineering has let American companies shift profits into foreign accounts, while they lobby Congress for tax-rate cuts in exchange for repatriating the money. Currently, there is some $2 trillion in corporate profits in offshore tax-deferred accounts; besides Apple, Microsoft, Google, Cisco and Oracle also have large stashes. Apple is one of nearly two dozen major corporations pushing Congress for a “tax holiday,” which would let companies bring back foreign-held money over the course of a year at a discounted tax rate, rather than the current rate, 35 percent.

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European Commissioner Margrethe Vestager, who is demanding that Apple pay Ireland $14.5 billion of unpaid taxes.

Before the European ruling on Tuesday, the debate over a tax holiday had pitted Republicans, who have generally favored the idea, against Democrats, who have viewed it as an unjustified reward for tax avoidance. The Democrats have history on their side. A tax holiday in 2005 lowered the corporate rate to 5.25 percent, enticing corporations to repatriate some $300 billion. It was billed as a way to create jobs and increase investment, but the money was used mostly for dividend payments, share buybacks (which tend to raise executive pay) and severance for laid-off employees. Worse, the tax holiday inspired multinationals to stash as much money abroad as they possibly could in anticipation of another holiday.

The European ruling, however, could sharply alter the terms of the congressional debate. Republicans and Democrats alike have always assumed that foreign-held profits would one day be repatriated. The big question was the rate at which they would ultimately be taxed. Similarly, the Treasury assumes that deferred foreign profits will one day be taxed when it projects future revenues — an important measure of the nation’s fiscal health.

But the money won’t be repatriated and taxed under American law if Europeans, in the course of enforcing their own laws against tax havens, get their hands on it first. And that, in a nutshell, is why members of Congress and Treasury officials are so upset about the Apple ruling. They understand, correctly, that tax-law enforcement in Europe could reduce the sums they expect to collect taxes on someday. What they don’t understand, or aren’t saying, is that they brought the problem on themselves.

The way forward is not to declare a tax war with Europe. It is for Congress to agree on a way to tax foreign-held corporate profits. President Obama put forth a reasonable approach in 2015, when he proposed a mandatory 14 percent tax on multinationals’ current offshore profits — whether they are repatriated or not — and, thereafter, a new minimum tax rate of 19 percent on profits moved offshore. An even better approach would be to simply end indefinite corporate tax deferral, imposing American taxes on profits when they are made.

Republicans rejected Mr. Obama’s proposal in 2015, and there is no chance that lawmakers will engage in such a debate so close to the election. But the next president and Congress will need to act to ensure that at long last, American corporations pay their fair share in taxes.