House GOP Gives Low-Wage Workers “Flexibility” to Get Exploited

Just in time for Mother’s Day, House Republicans passed a bill that purportedly eases the work-family life conflicts that so many working moms (and dads) struggle with.

The bill is part of a strategy that House Majority Leader Eric Cantor developed for his caucus after the (to them) disappointing results of last year’s elections.

They’ve got an image problem, they think. For some unfathomable reason, a whole lot of voters think the Republican party cares only about the rich.

House Republicans have to show us that they’re “making life work for more Americans and their families,” as a special website Cantor created proclaims.

So he and his colleagues have decided to give working families flexibility, according to the title of the bill. “Flexibility” here refers to the ability to take time off from work without losing pay.

But not, as the proposed Healthy Families Act would. It would require most employers to provide some paid leave for personal or family health-related needs or to get help in cases of domestic violence, stalking or sexual assault.

The Working Families Flexibility Act would instead supposedly allow employees to choose compensatory time instead of overtime pay when they worked more than 40 hours a week.

This means, of course, that it would apply only to workers who get paid by the hour — those at the bottom of the wage scale. They’re the least likely to have paid leave benefits. So the bill might seem a boon to them.

But it isn’t — mainly because these workers wouldn’t really have the choice the bill seems to give them.

Hypothetically, they could choose to continue getting overtime pay instead of opting for comp. time. We have to assume that many would, since $10.00 an hour — the average wage for workers without paid sick leave — is barely enough to lift a family of three above the federal poverty line.

But, as Working America argues, employers would have the upper hand. They could give workers incentives to choose comp. time, e.g., a better shift. They could pressure them.

True, the bill specifically prohibits employers from intimidating, threatening or coercing employees to accept comp. time instead of overtime pay.

But, as the National Women’s Law Center notes, we have more than enough evidence that many employers pay no mind to provisions in our labor laws that are supposed to protect low-wage workers.

Even workers who willingly chose comp. time couldn’t necessarily use it when they needed it.

An employer could legally deny a request by saying it “unduly disrupts … operations” or grant it “within a reasonable period,” rather than for the particular day(s) or hour(s) requested.

So much for taking a day off when your kid is sick — or her school declares a snow day and there’s no one else to care for her.

So much for knowing you can get a few hours off when you need to get legal protection from an abuser.

The Working Families Flexibility Act has another implication for low-wage workers. It really is, as Working America says, a “job killer” because it enables employers to get all needed work done on the cheap.

At this point, as the Fair Labor Standards Act intended, employers have a financial incentive to hire more workers — or offer some part-timers full-time jobs — when they need to get more work done because overtime is half again as costly as straight wage.

Comp. time obviously does away with the incentive.

So here you are, working mothers. You can’t be sure you’ll generally work only eight hours a day and thus have a little time to get to the grocery store, help your kids with their homework, etc.

You can’t be sure you’ll have time off when you need it — or enough time off for a major life event like childbirth because your employer can, at any time, convert all but 80 hours of your comp. time to pay.

You can’t work overtime to make ends meet. And if, like 7.6 million workers, you’ve got a part-time job, though you’d like full-time work, you’re probably stuck with the hours you’ve got.

If House Republicans hadn’t already made “flexibility” a suspect word, this bill would do it.

Why Is the Chained CPI in the President’s Budget?

My last post took on some of the basic questions raised by the debate over using the chained CPI (Consumer Price Index) to adjust Social Security benefits.

I deferred the question in the headline here because the post was already quite long, and the answer isn’t simple. So here goes …

Social Security and the Deficit

Strictly speaking, Social Security doesn’t belong in the budget at all — at least, not in the package of spending and revenue proposals we ordinarily think of as such.

It has its own revenue stream — the payroll tax, plus an earmarked portion of income taxes paid on some of the benefits it provides. It also has $2.7 trillion in reserves, i.e., the unused portion of these taxes, invested in Treasury bonds, and the interest on these.

That’s all it’s got.

A shortfall would be dreadful, but it would have no impact on the deficit — unless, as seems likely, Congress used general tax revenues to avert a sudden, big benefits cut.

This, however, is an argument for crafting a measure that will keep the program solvent, not for putting the chained CPI in the budget.

Some say that the Trust Fund is just an accounting fiction. The Treasury bonds the reserves are invested in signify money that’s being used to help pay for items in what we ordinarily think of as the budget.

When Social Security starts drawing on its reserves, as it already has, the Treasury Department has to sell some bonds to other investors in order to pay the program what it owes — or use revenues from taxes not specifically intended for Social Security.

This doesn’t mean that Social Security is contributing to the deficit, however — any more than you or I could be said to increase the deficit if we cashed in some savings bonds a grandparent once gave us.

More Revenues Without Tax Reform

The chained CPI is probably in the President’s budget in part because it would increase tax revenues without any rate-raising or loophole-closing at all.

According to Congressional Budget Office estimates, the federal government would gain $123.7 billion* over the first 10 years because tax brackets and other annually-adjusted tax provisions, e.g., the personal exemption and standard deduction, would rise more slowly.

So even a quite small increase in income could get taxed at a higher rate. The amount we’d owe wouldn’t be a whole lot greater than what we’d owe if the Internal Revenue Service continued to use the same inflation measure it’s been using.

But the tax code would be somewhat less progressive because filers at fairly low and moderate-income levels would take the biggest hits.

And at least some low and moderate-income families would get smaller reductions and/or refunds from the Earned Income Tax Credit because the maximum credit is adjusted for inflation, as are the phase-outs that gradually lower the credit when earnings reach some level above the amount eligible for the maximum.

There would be no impact on the refundable Child Tax Credit if Congress makes the current threshold for claiming it permanent, as the President has proposed.

Big if here, since we know that Congressional Republicans have wanted the EITC and the Child Tax Credit to revert to their more restrictive pre-Recovery Act forms.

Political Strategy

The revenues raised would be a small portion of the total increase the President now says he’d settle for. So it’s pretty clear the chained CPI is in the budget mainly for strategic reasons.

The received wisdom seems to be that he’s again striving for a grand bargain — offering Republican Congressional leaders the chained CPI and Medicare spending cuts they said they wanted in the fond hope they’ll agree to a scaled-back revenue-raising plan.

Or if not that, perhaps proving they’re altogether unreasonable and ought to lose their House majority next year so that Congress can get important business done.

This is what Michael Tomasky at The Daily Beast thinks the President is up to — and why he thinks no one should fret about the chained CPI.

The Nation‘s John Nichols thinks otherwise. Look, he says, at how the chairman of the National Republican Congressional Committee is already messaging the President’s proposal as a “shocking assault on seniors.”

This is likely to depress votes for Democrats next year, Nichols predicts, citing examples from past mid-term Congressional elections.

The chained CPI proposal certainly has complicated life for Democrats in Congress now, even if they ultimately don’t have to cast an up-or-down vote on it — still TBD.

The larger issue, I think, is that the President has, to some extent, legitimized use of the chained CPI as a way to “save” Social Security — and chosen it instead of lifting the payroll tax cap.

So, as Blake Zeff at Salon asks, “How hard would it be for Republicans to push cuts through, when this [the chained CPI] is now mainstream Democratic policy?”

Cuts, I’d add, that could extend to programs specifically for low-income people, which the President’s proposal would hold harmless.

Note how House Majority Leader John Boehner grudgingly welcomes the chained CPI as an acknowledgment that “our safety net programs are unsustainable.”

This implies something far more sweeping than what the President has proposed for Social Security and Medicare, which arguably aren’t safety net programs anyway.

Well, maybe the rumblings and grumblings, mine included, are just worst-case scenarios. But I’m not ready to bet on that.

* The Office of Management and Budget estimates the revenue gain at $100 billion. Differences between CBO and OMB estimates are not unusual.

Chained CPI and Social Security: Some Questions and Answers

Back in January I said I’d delve into the impacts of using the chained CPI (Consumer Price Index) to adjust Social Security benefits.

Then the President delivered a strong defense of “the commitments we make to each other,” including Social Security. So I put my draft post aside, figuring the chained CPI was off the bargaining table.

The more fool I. As you’ve probably read, it’s among the entitlement “reforms” in the President’s proposed budget.

The White House has taken great care to package it with other changes that would supposedly protect very elderly retirees and others who’ve relied on Social Security benefits for a long time. Also to shield programs that base eligibility on income.

But as economist/blogger Jared Bernstein said some time ago, the danger is that protections like these will all get swept aside, leaving only the benefits cuts.

Here then are some of the basic issues, as I see them. More to follow in a second post.

Why Do Anything About Social Security?

Our federal policymakers must do something about the Social Security retirement and disability insurance programs — and the sooner the better.

The Trust Fund will run out of money long about 2033. If nothing is done before then, the Social Security Administration will have to rely solely on what it continuously receives from payroll taxes.

That would be enough to pay about 75% of the benefits retirees would get if the Trust Fund still had reserves — a devastating loss for the nearly two-thirds who rely mainly or entirely on those benefits.

What Could Prevent the Shortfall?

At the risk of over-simplifying, our policymakers have two choices, not counting just letting the Trust Fund dry up. They could change the system to take in more or pay out less.

A switch to the chained CPI represents the latter approach because it rises more slowly than the currently-used index — the CPI-W. So, therefore, would the benefits that seniors, severely disabled former workers and eligible survivors receive.

Policymakers could instead “scrap the cap” on the amount of wage income subject to the tax that feeds the Social Security programs.

Or they could raise it enough to cover all but the top 10% of income, as it did in 1982 after Congress stepped in to shore up the program — not for the last time, incidentally.

High earners wouldn’t like this, of course. Nor perhaps would employers, since they’re responsible for half the payroll tax.

The National Federation of Independent Business has already said that its small business members “would violently oppose” it. These, as you know, are the “job creators” that our President and Congressional leaders are so fond of.

Is the Chained CPI More Accurate for Cost-of-Living Adjustments

Proponents of the chained CPI claim that it’s simply a more accurate cost-of-living measure because it reflects consumer responses to price increases. If the price of beef goes up, they buy less of it and more chicken. Etc.

Opponents argue that the index isn’t more accurate for seniors because they spend far higher portions of their income on items that aren’t amenable to switches, especially health care.

Even the CPI-W apparently understates their cost-of-living increases.

For some time now, the Bureau of Labor Statistics has maintained an experimental cost-of-living index specifically for the elderly. Over the long haul, it has risen somewhat faster than the CPI-W. And Social Security’s chief actuary expects it will in the future.

We’d probably see similar results from a cost-of-living measure for people with severe disabilities, since many of them also have disproportionately high health care costs.

So if accuracy were the real issue, Congress would give BLS the funds to fully develop its experimental index, as The New York Times, among others, has suggested.

What Other Objections Have Opponents Raised?

The over-riding objection to the chained CPI switch is that it would effectively cut benefits. The loss in any one year would be small. But losses would mount up over time because the base for each cost-of-living adjustment, as well as the COLA itself, would be lower.

The average earner, says the Strengthen Social Security Campaign, would lose a total of $4,631 by age 75 — more than three months of benefits. Another 10 years and the loss would mount to nearly a year’s worth of benefits.

We need to recall that retired workers now get, on average, only $1,261 a month — and former workers in the Social Security Disability Insurance program somewhat less.

For 36% of seniors, Social Security provides at least 90% of income — not surprising, given what we know about retirement savings. It’s the sole source of income for 29% of the most elderly.

As I mentioned earlier, the President’s budget includes a “benefit enhancement” — popularly known as a bump up. It’s supposed to restore the cumulative losses for people who live long enough to benefit.

Most who do would still get less, according to the SSS Campaign.

Those who don’t are just out of luck, of course. And they’re disproportionately lower-income people, for whom every Social Security dollar counts.

UPDATE: After I published this, the Center on Budget and Policy Priorities issued a brief that provides more detail on the impacts of the chained CPI on Social Security retirement benefits.

What’s Happening With the Minimum Wage

Virtually every issue I write about morphs over time — new information, a new wrinkle identified, a whole new development, etc.

Nothing unusual about this. It’s how public policy is. But it’s frustrating because the posts I’ve published are out there in the cyber-world — and still read, which indicates continuing interest in learning the latest.

So here are a couple of updates on minimum wage increases.

A Better Minimum Wage Proposal

As I noted in my post about the President’s minimum wage proposal, Senator Tom Harkin and Congressman George Miller said they planned to introduce a bill that would phase in a larger increase.

Now they have. And, as promised, it would raise the federal minimum wage to $10.10 by 2015, then index it to cost-of-living increases, as the President also proposed.

Like last year’s Fair Minimum Wage Act, the new version would also gradually raise the tip credit wage until it reached 70% of the regular federal minimum — estimated at $7.07 an hour. It would then remain at 70%, thus rising whenever the regular federal minimum did.

Congressman Miller took a stab at getting the bill passed by proposing it as an amendment to the SKILLS Act — a block grant of sorts of all the federal workforce development programs that wouldn’t be killed outright.

The amendment was resoundingly defeated, with all Republicans (except those absent) and six Democrats voting against it.

Not the end of the effort, I’m sure. But it shows how tough the battle will be.

Impatience at State and Local Levels

It took Congress 10 years to pass the last federal minimum wage increase. As one bill and then another stalled, action shifted to the states.

Seventeen states raised their minimum wages higher than the frozen federal level — and in nine cases, indexed them. Several cities did so as well.

A lesson of sorts to Congressional Republicans and business interests fueling the opposition, since the federal bills they were blocking didn’t include indexing.

We’re seeing signs of a similar movement now.

Last November, voters in San Jose, California passed a ballot measure that increased the local minimum wage to $10.00 an hour — and indexed it.

Albuquerque voters also approved a ballot measure to raise and index their city’s minimum wage, with a partial exemption for employers that spend a specified minimum on child care or health care benefits.

The New Mexico legislature has passed a bill that would raise the state’s minimum wage to the same level as Albuquerque’s. Governor Susana Martinez has all but said she’ll veto it, but would approve a smaller increase.

New Jersey Governor Chris Christie did recently veto a minimum wage increase, though in a manner that would have allowed the legislature to come back with a phased-in version — and no indexing.

The legislature decided instead to put a slightly smaller increase on the ballot.

In New York, Governor Andrew Cuomo and legislative leaders have agreed to a deal that will raise the state’s minimum wage to $9.00 by 2016. No indexing, however, because Senate Republicans wouldn’t buy it. No increase in the tip credit wage either.

Minimum wage increases are also pending in six other states — some with more hopeful prospects than others. None would boost the wage as much as the Fair Minimum Wage Act would, but all would index.