Childcare Workers Underpaid, While Families Face High Care Costs

November 9, 2015

A recent blitz of social media communications about how little childcare workers get paid. The engine behind them is Fight for 15 —  a campaign for a $15 an hour minimum wage, originally by and for fast food workers, backed by SEIU (the Service Employees International Union).

Childcare workers joined last March, but they’ve become more vocal — or more precisely, had their voices channeled — only in the last month or so, as a lead up to the Fight for 15 strike on Veterans Day.

The Economic Policy Institute, which has strong organized labor ties, published a report last week showing, from various perspectives, how relatively low childcare workers’ wages are — and predictable consequences.

The report raises larger issues. Some details on the wages first, then a segue into a couple of those.

The median wage for childcare workers is $10.31 an hour — 39.3% less than for all other workers. This, in fact, may understate the difference because the median doesn’t include childcare workers who have no official employer but themselves.

What’s more telling is the pay gap for workers who’ve got at least some college education, as nearly 61% of childcare workers do.

Those with less than a four-year degree get paid a median of $4.88 an hour less than their counterparts in other occupations. For those with a bachelors degree, the per-hour median is $10.78 (44.8%) less.

The pay gap doesn’t simply reflect other demographic differences commonly linked to wage rates, e.g., gender, race/ethnicity, age. The “child care penalty,” as EPI calls it, remains when they’re factored in.

Not surprisingly, childcare workers have a higher poverty rate than all other workers combined — 14.7%, as compared to 6.7%.

The “penalty” doubles for childcare workers with incomes at or below 200% of the official poverty line — a commonly used measure because the line reflects the Census Bureau’s unrealistically low poverty thresholds.

EPI turns to its family budget calculator. The maps its report includes show that the median childcare worker wage falls short of what a single person, living alone needs for basic living expenses in virtually every community in the country.

One of those basic living costs, though not for the single person, is child care, of course. Center-based care for either an infant or a four-year-old costs far more than what the typical childcare worker can afford.

Such care for an infant in the District of Columbia would eat up 89.7% of the childcare worker’s wage — and only 17% less for a four-year-old.

What this means, of course, is no center-based child care unless heavily subsidized — and not only in the District. It often isn’t, especially for parents whose incomes put them above the extremely low cut-offs for states’ Temporary Assistance for Needy Families programs.

The end result for a childcare worker can be no earned income because she’s got to quit her job, as one featured in a ThinkProgress story did when her youngest was put on a subsidy waiting list.

The subsidy did come through. It’s a piece of one of those larger issues — the fact that we taxpayers subsidize employers that pay very low wages because workers perforce turn to public benefits.

A study put hard numbers on this cost-shift in the fast food sector several years ago. Researchers at the University of California, Berkeley, including several from the fast food team, have done the same for childcare workers.

Of those who worked, at least part-time and for at least somewhat over half the year, 46% received benefits from at least one of five “public support” programs — Medicaid, the Children’s Health Insurance Program, SNAP (the food stamp program), TANF and the Earned Income Tax Credit.

Costs of these supports totaled, on average, $2.4 billion a year — about 55% of it for Medicaid and CHIP, since healthcare costs are disproportionately high. But average yearly costs of the EITC (presumably the refundable part) and SNAP totaled more than $1 billion.

“Child care workers’ job quality does not seem to be highly valued in today’s economy,” EPI remarks. Somewhat of an understatement when we consider not only their typically low pay, but the notably few with employer-sponsored benefits, e.g., health insurance.

This too seems a piece of a larger issue. Anne Marie Slaughter argues that we don’t value caregiving. She’s referring to a “workplace culture” that discourages or denies time off for family responsibilities — and to public policies that have thus far done little about this.

But it also applies to wages for professionals in what Professor Cheryl Carleton refers to as “the caring industry,” e.g., teachers, nurses, home health aides.” The fact that they’re historically — and still predominately — “female occupations” goes far to explain this.

And probably wages for childcare workers too, since all but a small fraction are women. But we do, in a way, value their work. Otherwise, parents would just park their kids any old place.

So why do we have childcare workers who’ve got to campaign for $15 an hour — less than 200% of the federal poverty line for a three-person family, assuming (as we shouldn’t) full-time, year round work?

The issue here is somewhat different than for fast food workers. Not that they don’t deserve a decent wage too. But most of the skills their work requires are gained on the job — not skills they bring with them from postsecondary education, specialized training or prior experience.

And fast food restaurant owners claim that they’ve got to control labor costs to keep prices low because they’ll otherwise lose customers. Not letting them off the hook, mind you, but customers do balk at price increases. And owners seem not to have a profit margin they can whittle down much — not, at least, if they’re franchisees of the major chains.

By contrast, childcare costs are dauntingly high — and rising. Professor Deborah Phillips, who worked on the Berkeley study, says “we’ve no idea” where the money is going, since obviously not to wages. Perhaps to other costs, as spokespersons for childcare centers say.

Regardless, we’ve got two big problems — unaffordable child care and a great many childcare workers who can’t afford basic living costs, child care included.

We can’t look to the private market to solve either, I think. As EPI concludes, we’ll need public policies.

And we should have them because they’d serve vital public interests—supporting and suitably rewarding valuable work, ensuring that all our nation’s children have the daily care and experiences that give them a good start in life and more.



Benefits of Overtime Rule Reform Not Only More Jobs or More Pay

July 27, 2015

My post on the Obama administration’s proposed overtime rule reform focused mainly on how it could benefit low-wage workers, even though the current rule already entitles most of them to overtime pay. For them, I argued, the story is more jobs — or perhaps in some cases, more full-time jobs.

Employers would create these jobs, rather than pay one-and-a-half times the salary rate for workers they could no longer classify as overtime-exempt. How those workers view the new rule deserves some attention too. profiles a woman who works for a national auto supply chain. She’s a manager and travels around, remodeling stores. She puts in 50 to 70 hours a week, but gets paid just the same as if she worked no more than 40 — just over $40,000 a year.

“I’m just so beat down,” she says. “I’m 100 pounds heavier than when I started the job.” The post nevertheless focuses on what she’d do if paid for her extra hours, as the proposed rule would require.

Well, she wants the money — needs it actually because she’s defaulting on loans her daughter took out to pay for college.

Her children are all grown now, and she apparently doesn’t have a husband or partner to come home to. She still, I suppose, has personal relationships and interests outside of work — or wishes she did.

But it seems she’d prefer the grueling scheduling — and the aforementioned impacts on her health — to adjusted duties, which might be what her employer chooses instead of paying her roughly $30,000 more a year for overtime.

Yet many workers, I think, will welcome the new overtime rule because it will mean fewer hours on the job — and lower out-of-pocket costs too. Consider what it would mean for our auto supply chain manager if her five children still lived at home.

She’d have to pay someone to care for them in the late afternoon and early evening yours, assuming they were all old for school. After-school care alone costs at least $1,100 or so — and as much as about $8,200 — per child, Child Care America reports.

And then there’d be the costs of having someone pick the kids up and care for them till next morning when she was out of town.

Alternatively, she might orchestrate care by friends, relatives and/or neighbors — generally a stressful juggling exercise. Can be guilt-ridden too, for reasons I don’t suppose I need to spell out.

Stress and guilt are both likely, I think, regardless of children, especially when overtime is unpredictable and mandatory. At least one in five workers who’d become non-exempt under the proposed rule can’t refuse to work extra hours if they want to keep their jobs. An even higher portion for those in the auto supply chain manager’s salary bracket.

These are the sorts of things that lead another woman to say that the new overtime rule “would have made everyone a lot happier in their job” if it had been in effect when she also was working as many as 70 hours a week keeping a small, short-staffed dollar store running.

Happiness in this case would have resulted from her employer’s keeping overtime in check, rather than shell out thousands of dollars more than it would have cost to have enough other workers for the low-skill tasks she had to shoulder.

We’re going to hear more about work/life balance, it seems. Jeb Bush has already set off fireworks with his remark that Americans will have to work longer hours for the economy to grow at the rate he’s promised. He’s since walked it back, but not altogether persuasively.

Clinton’s tack on growth includes, among other things, policies that would draw more women into the workforce. She alludes to higher — and equal — wages.

She also cites policies that would enable women to work “without worrying every day about how they are going to take care of their children or … a family member who gets sick” — mandatory paid sick and family leave, affordable child care and “fair scheduling.”

The last apparently refers to schedules workers know well in advance and can count on, rather than the irregular, on-and-off hours that make life so difficult for many employed by restaurants and other retail businesses.

Clinton mentions the proposed overtime rule, but as a fair pay issue, i.e., a measure to increase income. I think it also belongs in the “family-friendly” category.

I understand that some workers want — and need — all the extra income the new rule might enable them to earn. But others would welcome relief from ongoing compulsory overtime.

I know I would have. And I didn’t have children to arrange care for — and feel guilty about because I wasn’t there to help with homework, cheer at the dance recital or soccer game, etc.

The Labor Department would like to know how you who’d become eligible for overtime view the proposed reform. Likewise those of you who would have been eligible if it had been in place before.

It invites us to comment on the proposal. And having eyeballed the comments posted thus far, I’ll tell you those business associations whose gloom-and-doom predictions I earlier cited are rallying their members.

Those who support the proposal can also sign on to a petition the Economic Policy Institute and the Center for American Progress Action Fund have launched. Signers can add a personal story about how the reform would help them.

And I’d be remiss if I didn’t note that the National Partnership for Women and Families has its own petition, calling specifically for a rule “finalized as is,” i.e., not watered down to placate the business interests that want no rule change at all.

Go for it!



What Would Overtime Reform Mean for Low-Wage Workers?

July 16, 2015

I’ve been thinking about the Obama administration’s proposed overtime rule reform — specifically, how it would affect low-wage workers, if at all.

Short answer is that it wouldn’t affect them directly. The main reason is that most are paid by the hour, which automatically qualifies them for one-and-a-half times their regular wage if they work more than 40 hours in a week. Not that they always get paid for overtime, mind you. But that’s a separate issue.

The proposed rule also wouldn’t directly affect workers whose take-home pay reflects a salary, rather than an hourly rate, if it’s no more than $23,660 — less than would lift a family of four above the federal poverty line. These poor and near-poor workers are already entitled to overtime pay.

Nor should the proposal affect workers who get paid more, but whose “primary duties” don’t meet specific tests, e.g., involve executive functions or exercising “discretion and independent judgment” on “matters of significance” to the overall management or business of the operation.

Workers whose primary duties don’t meet any of the tests are supposed to get overtime pay under the current rule. Many don’t, however, because the tests enable employers to exempt workers whom no reasonable person would consider executives or administrators with the scope and independence the test seems to call for.

The license employers have to exempt large portions of their white-collar workforce is not an unintended consequence of the rulemaking process.

I recall well when the Bush administration’s Labor Department moved to update the overtime rule. Fast food restaurant companies — through their associations and directly behind closed doors — lobbied hard for broad exemption criteria, unrelated to the amount of time a worker spent on those primary duties. Other business interests did the same.

They got what they wanted. So, for example, an assistant restaurant manager who spends most of her time pitching in where crew members can’t keep up could get no extra pay for doing the same things they do, but for 50 or 60 hours a week if she merely makes sure that at least two of them do what they’re supposed to and tells her higher-ups whom she thinks they should hire, fire and/or promote.

The proposed rule doesn’t alter the duties tests, though the Labor Department considered doing that and asks for comments on whether they “work as intended.”

Instead, it simply raises the pay threshold to what it would have been if it had kept pace with consumer price inflation during the last 40 years — probably $50,400 when the final rule becomes effective. The new threshold would then rise so that it continued to correspond to the 40th percentile of all weekly wages.

So the proposed rule might seem irrelevant to low-wage workers, except those whose salaries are at or barely above the current threshold. But it’s likely to affect them — just as the current rule does, but in the opposite way.

Basically, the current version enables employers to hire fewer workers than they’d otherwise need for routine tasks like cleaning floors, restocking shelves and checking on backroom inventories by shifting those tasks to “executive” staff, who have to do at least some of them for free.

Today, only about 7.6% of retail supervisors qualify for overtime, based on their salaries, the Economic Policy Institute has reported. The proposed rule would cover somewhat over 56% — and roughly 79.5% of first-line restaurant supervisors like the overworked, underpaid assistant manager.

Hard for me to see how this would not induce employers to hire more workers for those routine tasks — or in some cases, convert part-time to full-time jobs.

That’s a far cry from what the associations that lobby on behalf of affected businesses say. The proposed rule would have “a significant job-killing effect,” the National Retail Federation warns.

It also claims that the proposed rule would “force” companies to downgrade positions and to rely more on part-time, entry-level workers — halfway acknowledging, without intending to, that they’ve been relying on exempt employees to do what entry-level workers could.

The Chamber of Commerce predicts something similar — lost benefits, flexibility, status and opportunities. Here again, we’re given to understand that employers will respond by cutting back on lower-level salaries positions they’ve classified as exempt.

The Chamber also alleges harms to small businesses in particular. This, I take it, is because we’re supposed to have a soft spot in our hearts for mom and pop operations and those risk-taking entrepreneurs oft-heralded (somewhat misleadingly) as our leading job creators.

If these doomsday prophecies sound familiar, that’s because they’re very similar to what the associations and some of their members say about any and all minimum wage increases, as well as other policy changes that would make life better for low-wage workers, e.g., mandatory paid sick leave.

We’ve had minimum wage increases, of course. Numerous studies have found little or no effect on employment. In the relatively few states and cities that require paid sick leave, employers seem to be doing just fine.

Now, we’re a long way from a final rule that updates federal overtime requirements. What the Department of Labor ultimately issues could look quite different. How businesses will respond is simply unknowable, association warnings notwithstanding.

We can guess, however, that they’ll respond in different ways. They may reduce salaries so as to pay non-exempt workers the same total amount, once estimated time-and-a-half is factored in. Probably not, however, for workers already on board.

They may, as an NRF-commissioned study hypothesizes, cut bonuses and benefits, risking the loss of their most qualified workers and prospects, unless all their competitors follow suit.

They may instead make no such adjustments. They’d then probably put tighter controls on overtime. Some could, I suppose, boost worker productivity such that more gets done during a 40-hour work week.

Only so much more they can do on that score, however, especially when tasks can’t be automated. If they can be, they probably will be anyway, so long as that doesn’t bust the budget.

But I’m still inclined to think that a goodly number of employers will hire more workers to compensate for the loss of unpaid labor. The overtime rule update will thus be a job creator. Happy to see that at least one labor economist thinks so too.




What Raise the Wage Would (and Might) Do at State and Local Levels

May 11, 2015

As I said the other day, Senator Patty Murray and Congressman Bobby Scott have introduced an ambitious bill to at long last raise the federal minimum wage — and at longer last, do away with the sub-minimum tip credit wage.

One might wonder why we need the bill when so many states, plus some local governments have already raised their minimums. The answer lies in part in the higher and uniform wage floor the Murray-Scott Raise the Wage bill would set.

The other part — more speculative — has to do with how the bill could affect further state and local minimum wage initiatives. Assuming, as seems reasonable, that Congress won’t pass it, we’re likely to see such initiatives as we approach the sixth year since a federal minimum wage increase.

And the more we see, the more we could see the bar raised for employers’ quasi-voluntary initiatives to raise the wage floor for their lowest-paid workers. “Quasi” because they’re clearly responding to well-publicized campaigns they rightly view as threats to their brands — and bottom lines.

Direct Effects on State and Local Minimum Wage Rates

As in the past, state and local governments have grown increasingly impatient at the federal government’s failure to raise the minimum wage. Fourteen states and the District of Columbia passed their own increases last year.

None of them, however, now mandates a wage as high as $12 an hour, though minimums in a few major cities will eventually exceed it. And only four of the new state laws, plus the District’s provide for annual cost-of-living adjustments once their new rates are fully phased in.

Eyeballing the rates they’ve set and the full phase-in dates, I doubt that any, except perhaps the District’s will match $12 in 2020. More importantly, we still have 19 states that peg their minimum wage to the federal or have no minimum wage law of their own.

And only seven states require employers to pay their workers the full minimum wage, even those who often earn tips. Not that we haven’t seen efforts to eliminate tip credit wages in other states — and in the District.

All steamrollered by the National Restaurant Association’s state affiliates, allied groups purporting to represent small businesses and the restaurant industry’s hired gun, the Employment Policies Institute (not to be confused with the Economic Policy Institute).

What the Rates Tell Us

The varying minimum wage rates themselves tell us a couple of things. First — and most obviously — workers in some states will be stuck with the current federal minimum and significantly lower sub-minimum unless the federal law is changes.

Second, also obviously, many millions of workers in most, if not all other states would also get paid more under the Murray-Scott bill. As I mentioned earlier, the Economic Policy Institute estimates 37.7 million by 2020, not counting workers paid the $2.13 federal tip credit wage — or as in the District, a slightly higher sub-minimum.

How Raise the Wage Could Raise Wages Without Changing Federal Law

Much as we might wish, Congress won’t raise wages for those 37.7 million workers and the additional uncounted tip credit workers — not at least, until new elections dramatically shift the party balance. Raise the Wage could nevertheless have near-term, real-world effects.

These would arise from the way the bill may alter the framework within which policymakers and we, the voter/consumer public, assess current and reasonable minimum wages.

Essentially, the proposed minimum could become a new reference point, of sorts, for initiatives to raise state and local minimum wages. The proposed tip credit wage phase-out might become a reference point too.

We already see how the fast-food worker strikes — and more recently, some broader strikes — have made $15 an hour seem just and reasonable for more than an outlier city like Seattle.

The movers and shakers behind San Francisco’s recent ballot measure didn’t just pull their $15 an hour minimum out of a hat. Nor, I think, was the overwhelming voter support for the measure unrelated to the fact that $15 no longer seems like mere pie in the sky.

In fact, it’s made $12 an hour five years from now seem like a quite modest proposal — as indeed, it is. Recall that $12 in 2020 won’t be worth as much as it is today. If it were effective today, a full-time, year round minimum wage worker’s take-home pay would still be less than needed to lift a four-person family above the poverty line.

So Raise the Wage is by no means the be-all-and-end-all. Nor would the sponsors and many cosponsors say otherwise. But it would ease the budget crunch for poor and near-poor working families, narrow the yawning gap between them and the highest earns — and perhaps, as some who ought to know say, also prove a benefit to employers who’d have to pay it.

As I’ve suggested, it may do all of these good things in the not-distant future, even if, as expected, the Republican leaders in Congress let it die because they want to spare their members what could be a troublesome vote.

But we won’t see those good things everywhere and for everyone without changes in the federal law.

If at First You Don’t Succeed, Try, Try Again to Raise the Minimum Wage

May 7, 2015

As you may have read, Senator Patty Murray and Congressman Bobby Scott have introduced a bill to raise the federal minimum wage. It’s the latest in an ongoing, going-nowhere-now series of Democratic efforts to raise the wage.

The Murray-Scott bill has several major features in common with its recent predecessors, but also several that are somewhat different. What foreseeably won’t be different are the cavils opponents will raise, not to mention the fate of the bill in Congress — this Congress, at least.

But Raise the Wage — the name of the bill, as well as its main thrust — is hardly a futile gesture. For one thing, it gives Democrats a popular, differentiating issue to campaign on.

For another, the bill can further focus attention on the shrinking value of the current minimum wage, the plight of workers who receive it and the safety-net costs higher-income taxpayers cover to keep those workers and their families from utter deprivation.

What the Bill Would Do for the Federal Minimum Wage

The bill would gradually raise the federal minimum wage from $7.25, where it’s been stuck since mid-2009, to $12.00 in 2020. The first phase of the increase — 75 cents — would kick in at the beginning of next year. The wage would then rise by $1.00 each year thereafter.

After 2020, the wage would be adjusted annually by the same percent as the national median hourly wage increased. This is one of the differences from the earlier bills, which provided for annual adjustments based on consumer price inflation.

The Economic Policy Institute, which provided analytic support for the new approach, argues that benchmarking to the median wage is fairer because adjusting merely for inflation “assumes that minimum-wage workers should not expect their standard of living to improve relative to the standard achieved by workers 50 years ago.”

In 1968, when the federal minimum wage was worth $10.79 in today’s dollars, it was slightly over half the median. It’s about 37% of the median now and would return to roughly the 1968 ratio, according to EPI estimates.

What the Bill Would Do About the Tip Credit Wage

The Murray-Scott bill would also very gradually phase out the tip credit wage, i.e., the minimum employers must pay employees who receive more than $30 a month in tips. The federal tip credit wage is currently $2.13 an hour, as it has been since 1991. And it’s still the legal sub-minimum in 17 states.

The bill would boost it to $3.15 next year and then increase by no more than $1.05 an hour until it equaled the regular federal minimum. The same adjustments based on the median wage increase would then apply.

This is more ambitious than bills introduced in the last several years, which would have gradually raised the tip credit wage until it reached 70% of the regular federal minimum and then preserved that ratio.

What Opponents Will Say

Quick out of the box, economist/blogger Jared Bernstein anticipates “the same tired arguments” we hear every time anyone floats the notion of a minimum wage increase. He heads his post with a graphic from EPI that dispatches with some of the myths.

No, minimum wage workers aren’t mostly teenagers. Only 11% are under 20 — many considerably older, since their average age is 36. No, they’re not earning some extra spending money for fancy cell phones and the like. On average, their earnings make up more than half their family’s income.

And despite what we will undoubtedly hear again, a minimum wage increase will not hurt those it’s intended to help. A recently-published analysis of more than 200 studies concludes that “increases in the minimum wage … have very modest or no effects on employment, hours, and other labor market outcomes.”

How Many Workers Helped

EPI estimates that the newly-proposed increase would benefit more than 37.7 million workers by 2020 — more than one in four of the entire workforce. This includes not only those who’d be legally entitled to increases, but about 7 million whose wages are somewhat higher. They’d get a bump-up as employers adjusted their pay scales to preserve a differential.

The projected impact is so broad because the Murray-Scott bill would lift minimum wages even in the majority of states and the District of Columbia that now have minimums higher than the federal. And I would assume it’s even broader because the vast majority still permit a sub-minimum tip credit wage — a factor EPI’s estimates apparently don’t fold in.

I’ll have more to say about these angles in a separate post.

In the interim, you can demonstrate support for the Raise the Wage bill by signing a petition EPI has launched.


Why We Should Care About Payroll Tax Holidays for High Earners

February 19, 2015

Last week, the top 1% of American workers finished paying their Social Security taxes for the year — an inflection point flagged and flogged by the Center for Economic and Policy Research. On the very same day, the Senate Budget Committee held a hearing on the impending depletion of the Social Security Disability Insurance trust fund.

These two events are related because the first provides a fresh perspective on the second, as well as a solution that’s not fresh, but seems sensible anyway.

As I’ve written before, the so-called DI trust fund will run out of reserves in 2016, unless Congress and the President agree on a solution. If they don’t, former workers with severe disabilities will receive only about 80% of their benefits — an average loss of nearly $244 per month.

That’s a real dent in the household budget. Average benefits now are $1,165 a month for disabled workers themselves and only $811 more for those with qualifying spouses and children.

The shortfall has been predicted for a long time, based mainly on demographic changes in the workforce, e.g., the aging of the baby boomer cohort, the large increase in the number of women working — and working long enough to qualify for SSDI.

Federal policy choices have contributed as well — specifically, the decision to take some pressure off the Old Age and Survivors trust fund by raising the eligibility age for full retirement benefits. But for that, many disabled baby boomers wouldn’t be receiving SSDI benefits any more.

All these factors explain why money is going out of the DI trust fund. The beginning of the payroll tax holiday for the very highest earners — and upcoming tax holidays for others who are doing quite well — explains why not as much money is flowing in.

As I’m sure you know, all of us who get paid for our work owe payroll taxes. If we’re employees, we pay 6.2% for Social Security. Our employers deduct it from our checks and pay the same amount. If we’re self-employed, we owe the whole 12.4%.

But the income subject to Social Security payroll taxes is capped — and always has been. For more than 30 years, the cap has been adjusted annually based on the average national wage index.

The index almost always rises, though rarely by a lot. The cap this year is $118,500 — up by $1,500 from last year.

But as everyone who hasn’t been living in a cave knows, more and more income is flowing to very high earners — those making a million or more a year. There were already six times as many of them in 2013 as in 1989, according to the Center for American Progress.

So more and more income escapes the Social Security tax. And it’s not only wage income enjoyed by the millionaires and billionaires, as this year’s cap indicates.

Class warfare alert! Not really. The point is that income inequality helps explain why the DI trust fund could soon run dry — and why the OASI trust fund will long about 2034 — unless our federal policymakers come up with a way to preserve the benefits that most workers and their families need.

A stopgap solution we already have — a relatively small increase in the share of payroll taxes going to the DI trust fund. But as I recently wrote, House Republicans have passed a rule to block any such shift, precedents notwithstanding.

They say they want a long-term solution to the whole solvency problem. Thus far, however, the most we can glimpse of what they have in mind comes from Senate Budget Committee Chairman Mike Enzi, who opened last week’s hearing.

He trashed on the President, of course — in part, for proposing the payroll tax shift. But he also suggested that more workers with disabilities severe enough to meet SSDI’s strict standards could actually work because technology enables people to work from home, start their own businesses, etc.

Michael Hiltzik at the Los Angeles Times perceives a move to distinguish deserving from undeserving SSDI recipients. Perhaps. Or perhaps it means something that one of Enzi’s friendly witnesses advocated “early intervention,” i.e., rehabilitation and other services to keep people with “work-limiting conditions” in the labor force.

Bottom line, however, is that enabling some additional workers with disabilities to remain gainfully employed won’t do a whole heck of a lot to keep the DI trust fund solvent — and nothing at all to preserve full benefits for retirees.

Uncapping the payroll tax cap would. If Congress had simply scrapped the cap four years ago, it could have closed about 90% of the projected funding gap for 75 years.

Other cap-scrapping scenarios could have closed roughly 70-80%. These, which seem more politically realistic, would have boosted benefits for higher earners, as well as capturing more of their income. We’ve had cap-lifting, as well as cap-scrapping proposals too.

So there’s more than one way to minimize the projected shortfall. But any solution that leaves the cap alone is bound to severely reduce retirement benefits — perhaps deny some severely disabled workers and their families any benefits at all.

Not much of a worry for those folks whose tax holiday has already begun. But for the rest of us ….

President Proposes Much-Needed Unemployment Insurance Reforms

February 12, 2015

The unemployment rate may be down from its recession peak. but we’ve still got jobless workers, as we always do. Unemployment insurance benefits are supposed to be their safety net. Yet only 27% of them received any UI benefits last year, the National Employment Law Project reports.

NELP offers about a dozen recommendations to avert a repetition. These are things states and the District of Columbia could do. But the report also flags several problems Congress can address, including one that only it can.

President Obama picks up on these in his proposed budget for next fiscal year. One proposal could make UI benefits available to more jobless workers, regardless of labor market conditions. It could also help them get back to work quicker.

Another proposal could, but wouldn’t necessarily restore benefit levels and weeks of coverage that some states reduced when they had to borrow from the federal government to meet their UI obligations — not a forced choice, as one of NELP’s senior staff attorneys notes.

The boldest of the proposals — and the one I’ll focus on here — would overhaul the Extended Benefits program.

How EB Fits Into the UI System

Unlike the Emergency Unemployment Compensation program that got so much attention when Congress dawdled over renewals and then let it die, the EB program is as permanent as anything federal legislation creates can be.

As its name suggests, it’s supposed to extend UI benefits beyond the period states’ regular programs cover when unemployment rates are unusually high.

But it doesn’t kick in fast enough to serve as a secure safety net for jobless workers — and as a boost, through their spending to state economies. Nor does it reliably deliver federal support for benefits as long as needed — a lesson driven home by the Great Recession.

How the EB Program Works

Under ordinary circumstances, states and the federal government share the costs of EB benefits. States “trigger on” when either the unemployment rate for their UI-eligible workers or their total unemployment rate reaches a specified percent and is a specified percent higher than the rate during the prior two years.

The UI-eligible worker provisions apply unless states have adopted the total unemployment alternative. The latter allows for a smaller percent increase over the so-called look-back period — 10%, instead of 20%. And it provides an additional seven weeks of benefits if the state unemployment rate is over 8%.

In either case, however, the unemployment rate must continuously rise or states will “trigger off.” So there’ll be no more benefits for workers still jobless at the end of the period their state’s regular UI program covers, even if the unemployment rate is still high. Or at least, there won’t be unless Congress enacts a temporary extension like EUC.

What the President Proposes

The President’s budget would convert EB to a federally-funded program, as it temporarily was under the Recovery Act. But eight states that retrenched their own programs would have to revert to 26 weeks or the pay half they do now.

The budget would also reform the problematic trigger system — and provide up to a year’s worth of benefits, in addition to the weeks state UI programs cover.

Basically, it sets up four employment rate triggers, beginning at 6.5% and continuing at 1% intervals up to 9.5%. Each of these produces an additional 13 weeks of benefits.

An alternative formula would trigger benefits if a state’s unemployment rate rose very rapidly. Instead of the usual 6.5%, for example, a state would qualify if its unemployment rate, plus the percent increase over the year equaled at least 6.5%.

This, as the White House budget summary says, “would ensure that the UI program responds quickly to dampen the effects of recessions and provides a critical safety net for unemployed workers in states where jobs are scarce.”

Not a critical safety net for all jobless workers, however. That shocking 27% NELP reports reflects, among other things, state eligibility criteria that deny UI benefits to many part-time workers and to others whose recent work history consists of temporary jobs, with lapses in between.

One of those other parts of the President’s UI packages would give states a financial incentive to expand eligibility in at least two specific ways. These, I’m told, will include those that states had time-limited incentives to adopt under the Recovery Act.

So new hope perhaps for jobless part-timers in nearly half the states that still deny them UI benefits if they can’t, in good faith, seek full-time employment. Also perhaps for some on-and-off-again workers in a dozen states.

What’s for anyone not to like? Well, for one thing, the way the proposed budget would offset the additional costs — two minor tax increases, one for employers and one for all but the lowest-earning employees. Are Republicans in Congress going to go for this? Are the associations that purport to represent employers?

The best the President can do at this point is to lay down a marker, says New Republic columnist Danny Vinik, echoing an unnamed administration official. “Now it’s up to Republican leaders to respond,” he adds. Interesting to see if they do.



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