Blog postings by CEPR staff and updates on the latest briefings and activities at the Center for Economic and Policy Research.

It’s widely understood that private equity firms make money for themselves and their investors by loading the companies they buy with debt, selling off assets, and gaming the tax system. But, there is another, less well-known way that private equity enriches itself when it takes over a traditional company.

While relations between management and labor in traditionally managed companies are generally built on low-trust and an acknowledged divergence of interests, managers have needed to build minimum levels of trust and reciprocity to ensure the ongoing commitment of those who actually produce the company’s products to the survival and success of the business. Managers have used earnings generated by company operations to pursue strategies aimed at inducing a diverse group of stakeholders to contribute to the enterprise.

Private equity owners have no such commitment to the long-term success of the companies they acquire. Their commitment is to making returns for themselves and their investors that exceed normal market returns by 15 to 20 percent. Managerial strategies to enhance performance and assure the company’s future are viewed as reducing profits. They see defaulting on these implicit contracts that govern relationships between management and other stakeholders as a quick way to increase the returns to the company’s owners.

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The FAMILY Act was reintroduced in the 116th Congress by Kirsten Gillibrand in the Senate and Rosa DeLauro in the House. It would provide workers with income when they need to take time off for their own health including recovery from childbirth, to care for a seriously ill family member or spouse, or to bond with a new baby or an adopted or foster child. One of the arguments against paid family and medical leave that opponents frequently use to try to discredit this popular social insurance program is that workers can’t afford it. The payroll deduction, technically a tax, is actually an insurance premium that finances these paid leaves.

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CEPR regularly publishes a curated collection of original research from academic institutions and nonprofits on the state of the US labor market. The compilation is part of our ongoing effort to promote informed debate on the most important economic and social issues that affect people's lives.

The Brookings Institution

Advancing Opportunity in California’s Inland Empire

California’s Inland Empire has seen exceptional growth over the years due in large part to its affordability and close proximity to the Pacific Ocean. However, a series of busts and booms within trade and technology coupled with the Great Recession threatened to diminish the growth of the region and left many of the workers behind. This report finds ways to advance jobs opportunities in the area. The authors found the Inland Empire must increase competitiveness and diversity in “opportunity industries”— industries that contain good and promising jobs.

Center for American Progress (CAP)

How Congress Can Fix Student Loan Payment

College affordability continues to be a large issue with students borrowing approximately $91 billion in federal loans in 2018 bringing the total loan balance to about $1.5 trillion. Because the United States’ federal student loan repayment system is broken, Congress has a huge opportunity to fix that with the reauthorization of the Higher Education Act (HEA). This report emphasizes new evidence of the unsatisfactory government oversight of student loan services and analyzes steps Congress can make to put an end to default and collection agencies, codify standards for loan servicing, and improve oversight and transparency at the Office of Federal Student Aid (FSA).

The State of the U.S. Labor Market: Pre-February 2019 Jobs Day Release

Disabled workers face considerable barriers to economic security with increasing disparities  by race and income. This report uses data from the US Census Bureau’s Current Population Survey to examine current labor trends for prime-age workers with disabilities. Focusing on the unemployment rate, the employment-to-population ratio, workplace accommodations and part-time work, and income and poverty, there continues to be large disparities between workers with disabilities and those without.

Center for Budget and Policy Priorities (CBPP)

State Earned Income Tax Credits and Minimum Wages Work Best Together

Two policy tools that states can utilize to help build an equitable economy is adopting or strengthening state minimum wage and state earned income tax credits (EITCs). Both policies will boost incomes for low-wage working families, reach systematically excluded populations, and reduce poverty, especially among children. This report outlines the benefits of including both policies for families and has been updated to include the EITC and minimum wage status of each state.

Center for Economic and Policy Research (CEPR)

Nonstandard Work Arrangements and Older Americans, 2005–2017

Contingent workers and workers in alternative work arrangements have become increasingly popular in theoretical and policy thinking regarding how employment has changed over the years and what the future of work holds. Until recently, only poor information on the breadth of contingent work and nonstandard work arrangements has been available. In May 2017, the Contingent Worker Supplement (CWS), released and conducted by the Bureau of Labor Statistics (BLS), provided an opportunity to analyze how contingent work and nonstandard work arrangements has changed over the last couple decades, 22 years after the first CWS. This report examines the changes between 2005 and 2017 with a specialization in how older workers have managed.

Institute for Research on Labor and Employment (IRLE)

The Employment Effects of a $15 Minimum Wage in the U.S. and in Mississippi: A Simulation Approach

This report highlights the effects of raising the minimum wage to $15 by 2024 on the U.S. labor force, businesses, and consumers, as well as on the state of Mississippi. The authors found that increasing the minimum wage to $15 would increase earnings for about 41.5 million workers and annual pay would increase by 17.3 percent. Mississippi would see a small increase in employment growth, adding about 90,000 more jobs.

Institute for Women’s Policy Research (IWPR)

The Gender Wage Gap: 2018 Earnings Differences by Race and Ethnicity

This report analyzes the widening of the gender wage gap of full-time workers in the US between 2017 and 2018. The authors analyze the gender wage ratio and the real earnings between full-time workers from 1955 to 2018 and calculates the median weekly earnings and gender earnings ratio for full-time workers by race and ethnicity.

Women, Automation, and the Future of Work

Automation, artificial intelligence, and other technological changes look to innovate the future economy. With inconsistent reports on what the impact of these technological advances will have on workers, what’s vitally missing in literature is taking into account the perspective of different genders. This report aims to contextualize the potential impact of technological change on women and men’s employment with an emphasis on the likely effects for women.

National Bureau of Economic Research (NBER)

Automation and New Tasks: How Technology Displaces and Reinstates Labor

This report outlines the effects that automation and other types of technological change have on labor demand in the context of production. The authors argue that automation will inevitably reduce labor share in value-added because automation would shift the task content of production against labor due to a displacement effect. However, automation can reinstate labor by the creation of new tasks in which people have a comparative advantage, thus raising labor share and labor demand.

Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data

Using administrative payroll data, the authors compile new facts about nominal wage adjustments in the United States. The data helps define a worker’s per-period base contract wage separately from other forms of compensation. The report offers evidence that the degree to which base wages adjust is likely the more suitable concept of wage stickiness in many macro models. The authors also note the differences in the adjustment patterns of base wages and of more extensive wage measures that include bonuses. The results can be used to discipline models of nominal wage rigidity.

The Wrong Kind of AI? Artificial Intelligence and the Future of Labor Demand

This report identifies analyzes the benefits and implications of the advancement of artificial intelligence and automation. There are two types of AI, the good kind and the wrong kind. The good kind of automation creating new tasks activities in which workers can be productively employed. However, the author warns of how the wrong kind of AI can stagnate labor demand, reduce labor share in national income, boost inequality, and lower productivity growth.

Immigrants' Earnings Growth and Return Migration from the U.S.: Examining their Determinants using Linked Survey and Administrative Data

Using a novel panel data set of recent immigrants to the US from 2005-2007, the authors identify the determinants of return migration and earnings assimilation. The authors utilized individual-level linked US Census Bureau survey data and Internal Revenue Service administrative records in order to analyze the panel set data of recent immigrants.The report shows 10 years after arrival, almost 40 percent of immigrants had returned migrated. Those return immigrants faced downward earnings mobility within the first few years of their return migration.

National Employment Law Project

Rights at Risk: Gig Companies’ Campaign to Upend Employment as We Know It

Gig companies have been uniting with corporate allies and powerful lobbyists to influence a campaign to rewrite worker classification standards in order lock gig workers into independent contractor statuses and strip them of their basic labor rights and protections. This campaign would allow companies to avoid payroll taxes and worker lawsuits to the detriment of workers. The report outlines the policy campaign, the actors involved,  where they are generating support, and the tactics these companies are using to advance their cause. This report also provides examples of successful resistance efforts and what lessons can be derived from them.

Workplace Safety Enforcement Continues to Decline in Trump Administration

More than 5,000 workers were killed on the job in 2018 and nearly three million workers endured an injury or illness serious enough to warrant medical attention or to take time off work. Under the Trump Administration, the Occupational Safety and Health Administration (OSHA) enforcement activity has been declining for the past couple years, even though this program is crucial to saving workers’ lives. This report outlines the data released by OSHA detailing the low numbers of complicated and high-penalty cases, OSHA inspectors, and the number OSHA inspections in 2017 and 2018 under the Trump Administration.

Schwartz Center for Economic Policy Analysis (SCEPA)

Retirement Plan Wealth Inequality:Measurement and Trends

Using Health and Retirement Study data linked to summary plan descriptions and W-2s, the authors examine trends in retirement wealth inequality of older employees from 1992-2010. The study found that retirement wealth is extremely unequal with the bottom quintile holding 1 percent of retirement wealth and the top quintile holding 49 percent. The report concludes that the retirement system is failing all retirees, with those at the bottom suffering the most. Systemic failures are creating larger disparities along with new inequalities not because of income or similar earnings, but rather due to access and coverage.


Urban Institute

Inequality Versus Inclusion in US Cities

This report uses data for 274 US cities for the years 1980, 1990, 2000, and 2010 to measure economic and racial inclusion at the city level across the country. Comparing these inclusion measures with the Gini coefficient of cities, the authors found that inequality and inclusion are not highly correlated and reductions in income inequality may result in the reduction of residents of color within a city.

Leading by Example: Public Sector Apprenticeships in Kentucky

This report analyzes the process and outcome of the initiative executed by Kentucky to build talent for their state government through apprenticeship programs to enhance skills and increase productivity. The early effects are seen to be positive with employers, employees, and overall workforce seeing benefits from the program. The early success of adopting apprenticeship programs may indicate success for the expansion to other areas.

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This version reflects corrections made at 10:00 AM on March 29, 2019

The federal government’s 40 independent agencies play an important role establishing and enforcing the regulatory frameworks that govern sectors as diverse as financial securities, chemicals, nuclear weapons, and postal services. Yet, despite these essential contributions to public safety, financial security, and the public good in general, these agencies are perpetually forgotten.  

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In the coming days, advocates and lawmakers will fight to ensure that the findings of Mueller’s team are made public so that the American people may assess for themselves the results of the Special Counsel’s two-year investigation. Even as this important work unfolds, however, we must also acknowledge the limitations of the Special Counsel’s investigation. That’s why we renew our call from early January for Representative Richard Neal (D-MA) to perform his constitutional obligations and request Trump’s tax returns without any delay.

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With just under $6 trillion in assets under management (as of year-end 2018) BlackRock is the largest money manager in the world. Virtually unheard of only a decade ago, it has now grown into one of the most powerful forces in financial markets and politics alike.

Central to this ascendance was its risk management software, Aladdin. Aladdin — an acronym for Asset Liability and Debt and Derivative Investment Network — has become the “industry’s dominant platform for keeping track of portfolios.” It counts among its clients approximately 200 financial firms who use the software to manage approximately $18 trillion in assets.

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Protecting the health of workers is a crucial factor in maintaining a productive workforce. However, this objective remains inaccessible for many Americans due to the lack of universal access to paid sick leave. Over 40 million American workers still do not have access to paid sick leave and face the dilemma of either taking an unpaid day off or working while sick, thus risking their economic security, reducing workforce productivity, and threatening the health of co-workers and customers.

This problem disproportionately impacts the lives of part-time and low-wage workers. In 2018, only 40 percent of part-time workers had access to paid sick days. In comparison, 85 percent of full-time workers had access to sick pay. There’s an even larger disparity between low-income and high-income workers regarding sick pay. Shockingly, only 31 percent of the lowest income earners had access to sick pay, compared to 93 percent of the highest-paid workers.

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Yesterday a coalition of good government and progressive groups sent a letter to Speaker Pelosi urging her to “to take every available step to ensure that the House Ways and Means Committee fulfills its Constitutional obligation to provide stringent oversight.”

You wouldn’t think such a letter would be necessary. Given the broad public outcry at different rules for the rich and everyone else, you would think a Democratic Party seeking to reclaim the mantle of populism would naturally pursue opportunities to discover the “who, what, when, where, why, and how” of tax evasion.

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The Honorable Speaker Nancy Pelosi
1236 Longworth H.O.B.
Washington, DC 20515

Dear Speaker Pelosi,

We are writing you as organizations who believe that fairness and equity in both the writing and implementation of tax law is of critical importance. Our commitment to fairness is why we urge you to take every available step to ensure that the House Ways and Means Committee fulfills its Constitutional obligation to provide stringent oversight. 

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In 1990, nearly three-quarters (74.0 percent) of prime-age women, ages 25 to 54, in the US participated in the labor force. Only the Nordic countries — Sweden, Norway, Denmark, and Finland — had substantially higher shares of women in the labor force, while women’s labor force participation in Canada was modestly higher at 75.5 percent. The US ranked sixth out of 22 Organisation for Economic Co-operation and Development (OECD) countries.

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Today marks Equal Pay Day for Asian American and Pacific Islanders (AAPIs). In 2017, median earnings for Asian women in the United States — that is, those who identify themselves as “Asian alone” in the US Census Bureau’s American Community Survey and worked full-time, year-round — were $50,559 per year, compared to median annual earnings of $57,638 made by a white, non-Hispanic men (a difference of about $7,000 per year).  Asian women also earned 77 percent of what Asian men earned per year, which is smaller than what all women were paid as a percentage of all men (80 percent).

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Don't let the headline ("House Democrats prepare case to request Trump tax returns") fool you: Richard Neal's announcement of a plan to issue a request letter for Trump's tax returns comes distressingly late — and projects to be vastly too modest in scope.

Revolving Door Project, which has helped lead the way in spotlighting Neal's shirking the need for serious Congressional oversight, notes the following problems with the request as reported by NBC News.

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As federal policymakers shrink away from their campaign promises to request President Trump’s tax returns, state lawmakers are stepping up to take their place. On January 24, the New Jersey Senate passed a bill that would bar presidential and vice-presidential candidates from appearing on the ballot unless they released five years of federal tax returns. Meanwhile, there is growing momentum in New York for the TRUTH ACT, a bill which would require state tax authorities to release tax returns for any officials elected statewide, from State Comptroller and Attorney General up the ranks through to the President of the United States. That bill now has 78 cosponsors in the NY State Assembly (a majority) and 28 in the State Senate (four shy of a majority).

If passed, New York state tax authorities will be required to release Trump’s tax records within 30 days. Those records would not just include income earned in New York state but worldwide income as well.

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Social networks and the development of platform technologies have drastically transformed the way people live, work, and spend their money. The use of information and communication technologies has become an important aspect of jobs in occupations ranging from medical assistants to fast food operators, lawyers, steel workers, and others employed in traditional employment relations. The growth and popularity of online and app-based platforms like Uber, GrubHub, and TaskRabbit have raised the profile of the gig economy* and created the impression that employer-less work and gig jobs are a pervasive aspect of modern employment. A lack of consistent, rigorous data on twenty-first-century employment relations allowed speculation about the role of independent contractors, and especially gig workers, to dominate conversations about the future of work.

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CEPR regularly publishes a curated collection of original research from academic institutions and nonprofits on the state of the US labor market. The compilation is part of our ongoing effort to promote informed debate on the most important economic and social issues that affect people's lives.

Center for American Progress (CAP)

Trump’s Trade Deal and the Road Not Taken

In November 2018, the Trump administration prioritized and signed a revision to the Northern American Free Trade Agreement (NAFTA) that was rebranded as the US-Mexico-Canada Agreement (USMCA). Unfortunately, President Trump’s agreement fails to deliver on strong labor and environmental standards that workers need. Specifically, the revised agreement fails to address climate change in trade and expands monopoly protections for pharmaceutical companies that would keep US drug prices rising. This report describes what a meaningful alternative to NAFTA requires by discussing NAFTA’s economic effects on US workers and proposing recommendations that could be used to rewrite NAFTA that supports the middle class, the environment, and cooperative relationships in all three countries.

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As America grows to be a more diverse society, in many ways, it has also become a far more unequal one. American inequality has fluidly adapted to prevailing federal, state, and local institutions and continues to expose a country that has repeatedly fallen short of amending the systemic disparities among race, class, gender and ethnicity. These disparities have become increasingly more pronounced in the US economy, creating even more inequality and insecurity.

In an economy in which the wealthy benefit and the rest of the country are dramatically left behind, many lower- and middle-class workers struggle to achieve upward economic mobility due in part to flat wages and the rising costs of housing, healthcare, and the overall cost of living. These obstacles limit access to higher incomes and in turn, wealth. As high earners save much more of their income than low-wage workers, they are able to acquire more assets and build wealth — a path that is especially obstructed for black Americans who often earn much less. This is compounded by the fact that for decades, people of color have lagged behind white people by almost every economic indicator due largely to the legacy of slavery, the manifestation of structural racism, and the institutionalized exclusion of people of color from social and economic progress. Black people often face gross, structural barriers in attaining economic prosperity and wealth by way of an ascendant American social structure that has historically worked against them. American society routinely benefits white Americans while also generating adverse outcomes for people of color in the aggregate.

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In this widely read article on President Trump and the Justice Department, the New York Times characterized the Deputy US Attorney for the Southern District of New York (SDNY), Robert Khuzami, in an entirely inaccurate manner. Not only was the characterization factually wrong, meriting a correction on its own, but it also gives readers unwarranted confidence in Khuzami's independence. Indeed, Khuzami’s actual professional history merits serious scrutiny from the Times. 

The February 19, 2019 article stated that, "The inquiry is run by Robert Khuzami, a career prosecutor who took over after Mr. Berman, whom Mr. Trump appointed, recused himself because of a routine conflict of interest." (emphasis added)

The phrase “career prosecutor” conveys to a reader that Khuzami was a nonpolitical appointment who had spent the vast majority of his career in nonpolitical public service jobs prosecuting alleged criminals. Neither meaning is close to accurate, and the distance from truth actually elides the reason why Khuzami’s central role ought to stoke fear rather than generate calm.

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The Honorable Laura Wertheimer
Inspector General
Federal Housing Finance Agency
400 7th Street, SW
Washington, DC 20219

The Honorable Eric M. Thorson
Inspector General
Treasury Department
1500 Pennsylvania Avenue, N.W.
Washington, DC 20220

Dear Inspector General Wertheimer and Inspector General Thorson:

We write to request an investigation into whether officials at the Federal Housing Finance Agency (FHFA) or Office of the Comptroller of the Currency leaked information about the agency’s plans regarding reform to the Government Sponsored Entities (GSEs) with intent to manipulate markets for the benefit of investors in preferred and common shares. Sharing this confidential, market-moving information with the intent of benefiting Fannie Mae and Freddie Mac’s shareholders would represent a breach of securities law.[1]

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By February 18th, someone making $1,000,000 in 2019 will have stopped paying into Social Security for the year. Social Security, which provides retirement, disability, and survivor benefits to countless Americans every year, only taxes the first $132,900 of a salary (up from $128,400 in 2018). If you make more than this cap, that income is not subject to the tax.

Most people in the United States make less than $132,900 per year, so they will pay the 6.2 percent payroll tax every time they get a paycheck in 2019. Those who make over $132,900 get a break on any income above that amount.

If a person made $50,000 in 2019, for example, they’d pay taxes until December 31st — and have an effective tax rate of 6.2 percent. But someone making $1,000,000 in 2019 would stop paying Social Security taxes on February 18th and see a bump in their pay afterwards. This person’s effective tax rate would be just 0.8 percent. The burden of Social Security taxes falls more heavily on those who make less.

Social Security’s finances also depend on the tax cap. Social Security is projected to have a shortfall in the medium term and many argue that the program, despite its importance, needs to be cut today. Part of this shortfall is because more money has been shifted above the $132,900 cap over the last few decades: in 1983, 10 percent of wage income was over the cap; in 2016, over 17 percent was. This change represents a large share of the shortfall.

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February 12 marks the introduction of the Family and Medical Insurance Leave Act (FAMILY Act) into both houses of Congress. The FAMILY Act would create a national paid leave program that would cover working people across the country. It would allow moms and dads paid time off to care for or bond with a new child, partners and spouses time to care for a sick loved one and military caregiving. The Act is respectful of the diversity of modern families and recognizes that the need for family leave can extend beyond the traditional parent-child relationship, for instance, ensuring that a grandparent can take time to care for an ailing grandchild. The Act would provide much needed support to the 83 percent of workers without family leave through their employers and the less than 40 percent that have medical leave through an employer-provided disability insurance program.

Paid leave is widely popular with the public with voters across the country recognizing the need for a national paid family leave program. States and cities helped build momentum for paid leave at the national level through their own successful paid leave programs. Like the FAMILY Act, many of these programs require a small contribution from both the employee and the employer. Opponents to paid leave often claim that these policies are job-killers and impose an undue burden on businesses. Evidence shows, however, that these state and city programs have been very successful without hurting employers.

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As the percentage of workers who can count on a traditional defined-benefit pension is falling rapidly, we have been lowering the Social Security benefits relative to their earnings. This reduction in benefits has not been widely noted because it takes the form of an increase in the age at which workers can receive their full benefits. This had been age 65 for workers who reached age 62 before 2003.

The age for full benefits then rose gradually to age 66 for workers who reached age 62 after 2008. It remained at this age until 2017, at which point it again began to increase, reaching 67 for workers who turn 62 after 2022. This increase in the age for full benefits amounts to roughly a 12 percent reduction in the value of a worker’s Social Security.

There was a further reduction in the 1990s that received little attention because of its technical nature. Benefits are indexed after retirement to the rate of inflation as measured by the Consumer Price Index (CPI).

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