Monday, December 31, 2018

Labor Line

May 2018___________________________________

Labor line has job news and commentary with a one stop short cut for America's job markets and job related data including the latest data from the Bureau of Labor Statistics.

This month's job and employment summary data are below. This month's inflation data is below.

The Establishment Job Report and Establishment Job Details for data released May 4, 2018.

American Job Market The Chronicle

Current Job and Employment Data

Jobs
Total Non-Farm Establishment Jobs up 164,000 to 148,424,000
Total Private Jobs up 168,000 to 126,106,000
Total Government Employment down 4,000 to 22,318,000

Employment Note
Civilian Non-Institutional Population up 175,000 to 257,272,000
Civilian Labor Force down 236,000 to 161,527,000
Employed up 3,000 to 155,181,000
Employed Men down 19,000 to 82,611,000
Employed Women up 21,000 to 72,569,000
Unemployed down 239,000 to 6,346,000
Not in the Labor Force up 410,000 to 95,745,000

Unemployment Rate decreased by .2 percent to 3.9% or 6,346/161,527
Labor Force Participation Rate decreased by .1 percent to 62.8%, or 161,527/257,272

Prices and inflation measured by the Consumer Price Index (CPI) for all Urban Consumers was up by a monthly average of 2.13 percent for 2017.

The May CPI report for the 12 months ending with April, shows the

CPI for All Items was up 2.5%
CPI for Food and Beverages was up 1.4%
CPI for Housing was up 3.0%
CPI for Apparel was up .8%
CPI for Transportation including gasoline was up 4.1%
CPI for Medical Care was up 2.2%
CPI for Recreation was up .3%
CPI for Education was up 1.8%
CPI for Communication was down 1.4%

This Month's Establishment Jobs Press Report

NOT AS GOOD AS IT LOOKS

The Bureau of Labor Statistics published its May report for jobs in April. The labor force declined again, this month by 236 thousand, more than last month's decline. The labor force drop was a combination of a 3 thousand increase in the employed and a 239 thousand drop in the unemployed. Normal population growth combined with the decline in the labor force, increased the number of adults out of the labor force by 410 thousand, also a bigger drop than last month. The decrease in the labor force acts to raise the unemployment rate, but the decrease in the unemployed was so big the unemployment rate dropped .2 percent to 3.9 percent for April. The labor force participation rate dropped again by .1 percent to 62.8 percent.

The seasonally adjusted total of establishment employment was up 164 thousand for April. The increase was 119 thousand more jobs in the private service sector combined with a 49 thousand increase in jobs from goods production. The total of 168 thousand more private sector jobs combined with a decrease of 4 thousand government service jobs accounts for the total increase.

The three goods production sub sectors had 49 thousand new jobs. Natural resources had a net of 8 thousand more jobs for a third month. The April gain included 7.0 thousand jobs in support activities in mining. Construction had 17 thousand new jobs that included 8.8 thousand new jobs in construction of buildings and 11.1 thousand more jobs in specialty trade contracting. The two gains were offset by a loss of just over 3 thousand jobs in heavy and engineering construction.

Manufacturing had 24 thousand more jobs for April, up slightly from last month. The gains came as 18 thousand more jobs in durable goods and 6 thousand for non-durable goods. Fabricated metal products and machinery manufacturing did well again this month with 12.3 thousand of the new jobs, part of consistent increase for these two manufacturing sub sectors in spite of tariff threats. In non-durable goods the chemical industry had 2.8 thousand new jobs to offset other non-durable losses.

Government service employment dropped a net of 4 thousand jobs for April, a bigger drop than last month. The federal government added a thousand jobs and local government added another 2 thousand jobs, but state government employment was down by 7 thousand. Both state and local government lost jobs in public education, down 3.3 thousand jobs but offset by 1.1 thousand more jobs in private schools. The net loss in education for April was 2.2 thousand jobs.

Professional and business services took first place for job gains among private service industries with 54 thousand new jobs in April. The professional and technical service sub sector added 25.8 thousand of the jobs, management of companies added 400 jobs and administration and support services including waste management had 27.6 thousand new jobs. Among professional and technical services computer design and related services added 6.7 thousand jobs followed by architecture and engineering services up 5.1 thousand jobs; accounting and bookkeeping services added 3.1 thousand jobs; management and technical consulting added another 2.9 thousand jobs in a good month for professional service jobs. In Administrative and support services, employment services added 12.3 thousand jobs along with 8.6 thousand jobs in services to buildings and dwellings; smaller gains in office administration and investigation and security services offset other small losses.

Health care had 29 thousand new jobs in April, down from last month. Ambulatory care had 16.9 thousand new jobs; hospital jobs added another 8.0 thousand; social assistance another 4.9 thousand new jobs. Nursing and residential care, usually the weakest of the health care sub-sectors, dropped 500 jobs. The April growth rate in health care employment was 1.78 percent, below the long-term average of 2.30 percent.

Leisure and hospitality had a better month with 18 thousand new jobs, but still not a good month. The arts, entertainment and recreation sub sector dropped 200 jobs based on losses in amusements, gambling and recreation not offset by small job gains in performing arts, museum visits and other entertainment services. Restaurants did better than last month but with only modest gains of 14.8 thousand new jobs. Accommodation had 4.1 thousand new jobs, a second month of bigger than normal accommodation gains.

The category, other services, had a good month with almost 14 thousand more jobs and a 2.88 percent annual growth rate. Personal and laundry services added 9.4 thousand jobs; repair and maintenance services added 2.2 thousand; and non-profit associations 1.6 thousand jobs. Information services added 7 thousand jobs, higher than usual, but 6.7 thousand of the jobs were in the motion picture and sound recording sub sector.

Otherwise though the remaining private service sectors did poorly for jobs in April. Trade, transportation and utilities lost 7 thousand jobs in April. Wholesale and retail trade picked dropped a net of 8 thousand jobs. Transportation had a net gain of 400 jobs with a decline in modal transportation, especially trucking, offset by job gains in couriers and messengers and warehousing and storage. Financial activities had a second month with 2 thousand new jobs, a modest gain for a small sub sector. Finance and insurance had a net loss of a hundred jobs with all of the gain in real estate and rental and leasing services.

The lower unemployment rate of 3.9 percent for this month is the lowest in almost two decades. In the last year of the Clinton administration I find 6 months with seasonally adjusted unemployment rates below 4 percent. The drop in the unemployment rate this month occurred because almost all of the 236 thousand that left the civilian labor force were already unemployed and then stopped looking for work and left the labor force. It is not a good sign for the economy since jobs and wages support a growing economy.

The increase in establishment employment of 164 thousand in April to 148.424 million jobs is better than last month but still only a 1.33 percent annual rate of growth. Manufacturing jobs continue to be the bright spot in the monthly report, although gains are confined to fabricated metals and machinery. Otherwise there is no reason to expect new trends or expect new worries.

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April Details

Non Farm Total +164
The Bureau of Labor Statistics (BLS) reported Non-Farm employment for establishments increased from March by 164 thousand jobs for a(n) April total of 148.424 million. (Note 1 below) An increase of 164 thousand each month for the next 12 months represents an annual growth rate of +1.33%. The annual growth rate from a year ago beginning April 2017 was +1.56%; the average annual growth rate from 5 years ago beginning April 2013 was +1.78%; from 15 years ago beginning April 2003 it was .88%. America needs growth around 1.5 percent a year to keep itself employed.

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Sector breakdown for 12 Sectors in 000's of jobs

1. Natural Resources +8
Natural Resources jobs including logging and mining were up 8 thousand from March at 730 thousand jobs in April. An increase of 8 thousand jobs each month for the next 12 months would be an annual growth rate of +13.30 percent. Natural resource jobs are up 59 thousand for the 12 months just ended. Jobs in the 1990's totaled around 770 thousand. Job growth here will be small compared to America's job needs. This is the smallest of 12 major sectors of the economy with .5 percent of establishment jobs.

2. Construction +17
Construction jobs were up 17 thousand from March with 7.174 million jobs in April. An increase of 17 thousand jobs each month for the next 12 months would be an annual growth rate of +2.85 percent. Construction jobs are up 257 thousand for the 12 months just ended. The growth rate for the last 5 years is +4.30%. Construction jobs rank 9th among the 12 sectors with 4.8 percent of non-farm employment.

3. Manufacturing +24
Manufacturing jobs were up 24 thousand from March with 12.655 million jobs in April. An increase of 24 thousand jobs each month for the next 12 months would be an annual growth rate of +2.28 percent. Manufacturing jobs were up for the last 12 months by 245 thousand. The growth rate for the last 5 years is +1.06%; for the last 15 years by
-.95%. In 1994, manufacturing ranked 2nd but now ranks 6th among 12 major sectors in the economy with 8.5 percent of establishment jobs.

4. Trade, Transportation & Utility -7
Trade, both wholesale and retail, transportation and utility employment was down 7 thousand from March at 27.720 million jobs in April. A decrease of 7 thousand each month for the next 12 months would be an annual growth rate of -.30 percent. Jobs are up by 289 thousand for the last 12 months. Growth rates for the last 5 years are +1.51 percent. Jobs in these sectors rank first as the biggest sectors with combined employment of 18.7 percent of total establishment employment.

5. Information Services +2
Information Services employment was up 2 thousand from March at 2.772 million jobs in April. An increase of 2 thousand each month for the next 12 months would be an annual growth rate of +3.08 percent. (Note 2 below) Jobs are down by 26 thousand for the last 12 months. Information jobs reached 3.7 million at the end of 2000, but started dropping, reaching 3 million by 2004, but has stayed in the 2.7 million range for a decade. Information Services is a small sector ranking 11th of 12 with 1.9 percent of establishment jobs.

6. Financial Activities +2
Financial Activities jobs were up 2 thousand from March at 8.549 million in April. An increase of 2 thousand each month for the next 12 months would be an annual growth rate of + .28 percent. Jobs are up 126 thousand for the last 12 months. (Note 3 below)This sector also includes real estate as well as real estate lending. Financial Services has been growing slowly with many months of negative growth. The long term growth rates are now at a 5 year growth rate of +1.67 percent, and a 15 year growth rate of +.38 percent. Financial activities rank 8 of 12 with 5.8 percent of establishment jobs.

7. Business & Professional Services +54
Business and Professional Service jobs went up 54 thousand from March to 20.869 million in April. An increase of 54 thousand each month for the next 12 months would be an annual growth rate of +3.11 percent. Jobs are up 518 thousand for the last 12 months. Note 4 The annual growth rate for the last 5 years was 2.53 percent. It ranks as 2nd among the 12 sectors now. It was third in May 1993, when manufacturing was bigger and second rank now with 14.0 percent of establishment employment.

8. Education including public and private -1
Education jobs went down 1 thousand jobs from March at 14.078 million in April. These include public and private education. A decrease of 1 thousand jobs each month for the next 12 months would be an annual growth rate of-.09 percent. Jobs are up 42 thousand for the last 12 months. (note 5) The 15 year growth rate equals +.72 percent, slower than the national average. Education ranks 4th among 12 sectors with 9.5 percent of establishment jobs.

9. Health Care +29
Health care jobs were up 29 thousand from March to 19.820 million in April. An increase of 29 thousand each month for the next 12 months would be an annual growth rate of +1.78 percent. Jobs are up 383 thousand for the last 12 months. (note 6) The current month was below long term trends and less than growth from a year ago when the annual growth rate was +1.97 percent. Health care has been growing at +2.30 percent annual rate for the last 15 years, a rate greater than the national rate. Health care ranks 3rd of 12 with 13.3 percent of establishment jobs.

10. Leisure and hospitality +18
Leisure and hospitality jobs went up 18 thousand from March to 16.272 million in April. An increase of 18 thousand each month for the next 12 months would be an annual growth rate of +1.33 percent. Jobs are up 279 thousand for the last 12 months. (note 7) The 5 year growth rate is 2.83%. More than 80 percent of leisure and hospitality are accommodations and restaurants assuring that most of the new jobs are in restaurants. Leisure and hospitality ranks 4th of 12 with 11.0 percent of establishment jobs. It moved up from 7th in the 1990's to 5th in the last few years.

11. Other +14
Other Service jobs, which include repair, maintenance, personal services and non-profit organizations went up 14 thousand from March to 5.848 million jobs in April. An increase of 14 thousand each month for the next 12 months would be an annual growth rate of +2.88 percent. Jobs are up 99 thousand for the last 12 months. (note 8) Other services had +.54 percent growth for the last 15 years. These sectors rank 10th of 12 with 3.9 percent of total non-farm establishment jobs.

12. Government, excluding education -2
Government service employment was down 2 thousand from March to 11.937 million jobs in April. A decrease of 2 thousand each month for the next 12 months would be an annual growth rate of -.23 percent. Jobs are up 9 thousand for the last 12 months. (note 9) Government jobs excluding education tend to increase slowly but surely with a 15 year growth rate of +.17 percent. Government, excluding education, ranks 7th of 12 with 8.1 percent of total non-farm establishment jobs.

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Sector Notes___________________________

(1) The total cited above is non-farm establishment employment that counts jobs and not people. If one person has two jobs then two jobs are counted. It excludes agricultural employment and the self employed. Out of a total of people employed agricultural employment typically has about 1.5 percent, the self employed about 6.8 percent, the rest make up wage and salary employment. Jobs and people employed are close to the same, but not identical numbers because jobs are not the same as people employed: some hold two jobs. Remember all these totals are jobs. back

(2) Information Services is part of the new North American Industry Classification System(NAICS). It includes firms or establishments in publishing, motion picture & sound recording, broadcasting, Internet publishing and broadcasting, telecommunications, ISPs, web search portals, data processing, libraries, archives and a few others.back

(3) Financial Activities includes deposit and non-deposit credit firms, most of which are still known as banks, savings and loan and credit unions, but also real estate firms and general and commercial rental and leasing.back

(4) Business and Professional services includes the professional areas such as legal services, architecture, engineering, computing, advertising and supporting services including office services, facilities support, services to buildings, security services, employment agencies and so on.back

(5) Education includes private and public education. Therefore education job totals include public schools and colleges as well as private schools and colleges. back

(6) Health care includes ambulatory care, private hospitals, nursing and residential care, and social services including child care. back

(7) Leisure and hospitality has establishment with arts, entertainment and recreation which has performing arts, spectator sports, gambling, fitness centers and others, which are the leisure part. The hospitality part has accommodations, motels, hotels, RV parks, and full service and fast food restaurants. back

(8) Other is a smorgasbord of repair and maintenance services, especially car repair, personal services and non-profit services of organizations like foundations, social advocacy and civic groups, and business, professional, labor unions, political groups and political parties. back

(9) Government job totals include federal, state, and local government administrative work but without education jobs. back

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Notes

Jobs are not the same as employment because jobs are counted once but one person could have two jobs adding one to employment but two to jobs. Also the employment numbers include agricultural workers, the self employed, unpaid family workers, household workers and those on unpaid leave. Jobs are establishment jobs and non-other. back

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Monday, May 14, 2018

Jobs and Telework

The U.S. Department of Agriculture (USDA) changed telework rules for thousands of its employees. The Washington Post [March 18, 2018] quoted a USDA spokesperson that “USDA’s telework policy is designed to be responsible to the taxpayers and responsive to the customers who depend on our services. It is also respectful of our fellow employees who come to work each day.” The change in policy promotes “USDA as one family working together as a single team to serve the American people.” House Representative Gerald Connolly from a nearby Virginia House District co-sponsored the telecommuting rules back in 2010; he called the changes a retrograde move.

The Office of Personnel Management reported a steady increase in the share of Federal Workers who telecommute, which now stands at 20 to 22 percent. Telecommuting helps relieve serious traffic congestion for commuters. I-95 into the District has an average of 23 traffic jams a day. Based on telecommuting data from USDA around Washington the new rules will add 42,000 trips a week to area commuters.

The March 18 article in the Washington Post spawned several letters to the editor. One claimed “Teleworking is a scam” because employees on site are far more productive working together and there should be no special privileges allowing employees to make the same income as those who show up everyday. Another person wrote in that working at home increased his productivity because office distractions made it hard to work. He wore head phones with piped in music to minimize “working together.”

Weary commuters spending hours a day sitting on a cement slab lookin’ up some guy’s tail pipe will recognize a subplot here. Work could be about getting work done, accomplishing necessary tasks, rather than how and where the work gets done. For authoritarian bosses work should be suffering and so they want to see all their underlings dutifully sitting in their office warming up a chair. The authoritarian boss always thinks other people cheat; no one can be trusted to do what they’re supposed to do. They have rules: no reading newspapers, no personal emails, no breaks. Anyone not in their plasterboard cubicle must be malingering, or possibly having fun.

Somehow it fits right in for the Trump people where authority and form counts and substance does not.

Wednesday, April 18, 2018

Tip Rules – A History of All You Need to Know

Tip Rules – A History of All You Need to Know

The Trump people proposed to rescind the 2011 Obama Administration Fair Labor Standards Act regulations that regulate tip-pooling arrangements. The Obama rules allowed the restaurant owner to pool tips but only among employees who customarily receive at least $30 a month in tips. Angry American Restaurant Association and other groups representing restaurant owners filed suit challenging the rules. While the litigation continued the Trump people proposed new regulations that help restaurant owners take tips from dining room help that normally receive tips to pay the wages of kitchen help that do not. In the process of working out a budget for 2018 Congress inserted new language as Title XII, Section 1201 into the budget resolution that changes the Fair Labor Standards Act. The new language intends to block the Trump proposal and appears to resolve the dispute over tips, but the matter is not entirely resolved as of now, April 2018.

The new language reads in part “An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.”

To understand why restaurant owners favor the Trump tip pooling rule requires knowing procedures under the Fair Labor Standards Act of 1938, which excluded restaurant workers from employer minimum wage obligations until 1966. In 1966 they were finally included, but only at 50 percent of the minimum wage. Some of the restaurant owners complained they shouldn’t have to pay any wages because their waiters and waitresses earned plenty from their tips.

From 1966 to 1996 the tipped wage went up when Congress raised the minimum wage, but in 1996 and again in 2007 the restaurant industry lobbied Congress to leave the tipped minimum at $2.13 an hour. The Federal tipped minimum has remained at $2.13 an hour since 1991, which makes it only 29 percent of the present $7.25 an hour minimum wage.

First, recognize that the monthly minimum wage at $7.25 an hour is $1,160 a month at 40 hours a week and 4 weeks per month. However, the $2.13 an hour sub minimum wage for tipped employees is just $340.80 a month, which means a tipped employee needs an additional amount of $819.20 a month in tips to get up to the minimum wage, or $7.25 - $2.13 = $5.12 an hour.

Under federal rules governing the Fair Labor Standards Act employers who pay a sub minimum wage must verify the additional amount from tips are enough to bring an employee up to at least the minimum wage, a practice defined as taking the tip credit. If tips are not enough to equal the minimum wage then the employer is expected to make up the difference.

Notice though the additional amount in tips received up to $819.20 per month are in lieu of normal obligations to pay wages to employees. Even if tipped employees receive tips at or above $819.20 a month, wage costs drop from at least $7.25 an hour to as low as $2.13 an hour. Even when tips are less than $819.20 a month all of the tips recorded become a cost saving tip credit for their restaurant owners. The tip credit actually has its origin in a legal case from 1942 known as Williams v. Jacksonville Terminal Pickett.


Tips and the Courts - Williams v. Jacksonville Terminal Pickett

In the case Williams v. Jacksonville Terminal Pickett decided March 6, 1942 two Red Caps, Williams and Pickett, brought suit over minimum wage requirements under the new Fair Labor Standars Act(FLSA) against two railroad terminals, Jacksonville Terminal and Union Terminal in Dallas, Texas. In response to the Fair Labor Standards Act terminal managers insisted, in writing, that beginning on October 24, 1938 all red caps must report their tips, which management would offset against their minimum wage obligations. If tips were less than the minimum wage, then management would make up the difference, otherwise not. This arrangement was a new invention of railroad management, no where in the law.

Both Williams and Pickett protested on behalf of red caps that their tips could not be used in lieu of minimum wage obligations. The management demand that tips be reported in lieu of wages in what the court called an “accounting and guarantee system” but their system ended by July 1, 1940; instead both terminals instituted a fee for service charge on passenger luggage and then paid the minimum wage in cash. Since red caps believed FLSA required payment of the minimum wage without deduction of tips, they continued to work and filed suit in United States District Court for the recovery of unpaid minimum wages between October 24, 1938, and July 1, 1940. Both disputes went to the Supreme Court combined as the case of Williams v. Jacksonville Terminal Pickett, (315 U.S. 386) discussed here.

The Supreme Court wrote “We deal here only with the petitioners' [Red Caps] assertion that the wages Act [Fair Labor Standards Act of October 24, 1938] requires railroads to pay the red caps the minimum wage without regard to their earnings from tips.”

In making their decision the Supreme Court Justices decided the terminal management letters of written notice to the red caps and their willingness to continue working provided agreement for management to treat tips as wages. The court wrote “This employment of the red caps was at will and subject to the employers' conclusions as to the desirability of continuing their employment.” Since the red caps did not quit work after receiving written notice of the “accounting and guarantee system” the justices declared they accepted the agreement.

Then the court wrote “In businesses where tipping is customary, the tips, in the absence of an explicit contrary understanding, belong to the recipient. Where, however, an arrangement is made by which the employee agrees to turn over the tips to the employer, in the absence of statutory interference, no reason is perceived for its invalidity.” Notice here the false use of “employee agrees.” The court referenced letters dictated the terms of payment and were imposed by unilateral decision of management. As such the red caps did not and could not disagree or they would be fired.
In the next paragraph of the Jacksonville Terminal opinion, the majority justices wrote “The employer furnishes the facilities, supervises the work and may take the compensation paid by travelers for the service, whether paid as a fixed charge or as a tip.” Therefore, tips are the property and revenue of the employer.

The Justices decided the Jacksonville Terminal case by a vote of five to three with one abstention. Justice Black wrote a dissent in concurrence with the other two in the minority, Justice Douglas and Justice Murphy. Justice Black wrote in part
“I am unable to agree that tips given to red caps by travellers are 'wages' paid to the red caps by the railroad. … The tip paying public is entitled to know whom it tips, the red cap or the railroad. A plan like that before us, which covertly diverts tips from employees for whom the giver intended them to employers for whom the giver did not intend them and to whom any kind of tip doubtless would not have been voluntarily given, seems to me to contain an element of deception. And I think that an interpretation of the F.L.S.A. which permits employers to benefit from such a plan does not accord with the meaning of the language used by Congress.”

Go to 1966 when the restaurant association managed to use their influence and the Jacksonville Terminal Case to get Congress to agree to the sub-minimum wage for tipped employees devised by the railroads in 1938, but now giving it the official term: tip credit. Business devised the tip credit and five justices did business a favor back in 1942 by making tips the property of business, but there is more.

The restaurant association argued the tip credit rule could result in some waiters and waitresses having tips much higher than the minimum difference while other waiters and waitresses might have tips below the minimum difference. Suppose Alice and Anne earn $15.00 an hour with tips, while Bettie and Bonnie earn only $4.00. To meet minimum wage obligations the restaurant owner will need to pay all four people $7.25 an hour or a total of $29, but the four of them earn $38 dollars. Without tip pooling management would owe $3.25 an hour of tip credit to Bettie and Bonnie, or a total of $6.50. With a pooling system the management has $15.50 of extra tip money to take from Alice and Anne to make up the $6.50 of shortfall to Bettie and Bonnie. The disparity in tips could require the restaurant owner to incur a tip credit for some of their help while the total of tips could be big enough to pay the entire tip credit obligation. Tip pooling might reduce the tip credit to zero allowing the restaurant owner to save more on wage costs by forcing employees with high tips to pay the tip credit of employees with low tips.

Pooling for those who receive tips was the rule under FLSA and the practice until Aaron Woo, a Portland, Oregon owner of Woody Woo Café decided to ignore the practice in 2009. He reasoned that the FLSA rule 203(m) only applied to those restaurants that take the tip credit and so pay the sub minimum wage. Since he paid the full minimum wage, he took it upon himself to save wage costs by pooling tips from those who receive them to those who do not; like the kitchen help. A lawsuit followed known as Cumbie versus Woody Woo Inc; Cumbie is Misty Cumbie, one of the disgruntled employees.

The District Court in Oregon dismissed the case by summary judgement and appeal was taken to the Ninth Circuit Court in Oregon. On Appeal, Cumbie argued sharing tips with the kitchen help who are not “customarily and regularly tipped employees was invalid under 29 US Code section 203(m) and the Code of Federal Regulations 29 CFR 531.52-54 written for it. Woody Woo argued that since they did not take a tip credit and paid the full minimum wage, they could devise any tip pooling arrangement that suited them.

The court read the last sentence of the statute 29 US Code 203(m), which stated that tip credit rules “shall not apply with respect to any tipped employee unless such employee has been informed by the employer of the provisions of this subsection, and all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.”

The majority ruled the Woody Woo tip credit claims irrelevant, but ruled in their favor for a different reason. They found the statute language too vague to define any specific tip pooling arrangement. Specifically they wrote “for an employer that meets its minimum wage obligation without taking a tip credit, section 203(m) is silent; therefore, there is no statutory interference.” In other words Mr. Woo could make any tip pooling arrangement he wanted and the Williams v. Jacksonville ruling remained.

The Woody Woo ruling came in 2009. In 2011, the Obama Administration revised the Code of Federal Regulations 29 CFR 351.52 to make it clear that tips are the property of the employee and that tip pools can only be made among employees who “customarily and regularly receive tips.”

Again restaurant owners were incensed and filed suit in the case Oregon Restaurant and Lodging Association versus Perez [Sec’y of Labor]. The Oregon District Court held that Cumbie left "no room" for the Department of Labor to make its 2011 rule and so granted Oregon Restaurant & Lodging's motion for summary judgment. Appeal was taken but now the same 9th Circuit Court disagreed with the District Court’s use of the Cumbie ruling.

In the new ruling the justices explained they did not hold the Fair Labor Standards Act unambiguously and categorically protects Mr. Woos tip pooling arrangement. Rather, they held that "nothing in the text purports to restrict" the practice in question.

In the new Oregon Restaurant case a majority of the justices relied on the wording of the 1974 FLSA amendments. In the 1974 amendments “Congress expressly delegated to the Department of Labor the broad authority 'to prescribe necessary rules, regulations, and orders' to implement the FLSA amendments of 1974.”

The minority justices argued “This case is nothing more than Cumbie II.” They insisted the court must follow precedent. The majority countered “We have no quarrel with Cumbie v. Woody Woo Inc. Our conclusion with respect to Cumbie is only that its holding was grounded in statutory silence.” Therefore “we find that Cumbie does not foreclose the DOL's ability to regulate tip pooling practices of employers who do not take a tip credit.” ... “In exercising its discretion to regulate, the DOL promulgated a rule that is consistent with the FLSA's language, legislative history, and purpose.”

Justice O’Scannlain wrote a dissent for the minority, which was used as the basis for a Writ of Certiorari to have the U.S. Supreme Court hear the case. The Writ was filed January 19, 2017. Looking at the Proceedings and Orders on the U.S. Supreme Court website shows the case National Restaurant Association, et al., v. Department of Labor, et al. Has many motions to extend the time to file a response, which have been granted repeatedly and last time I checked on April 16, 2018 the time was extended until May 9, 2018, but might well be extended again.

However, to complicate matters Congress intervened with new language as mentioned above, which makes employees the owners of their tips. The Congressional action in this long dreary episode of tips does not really resolve the matter for tipped employees, especially restaurant employees. As long as U.S. employees work “at will” and can be fired at any time for any reason, or no reason, tipped employees can be pressured to give up tips to their employer. Few restaurant employees have the wherewithal to pursue legal enforcement and Republican administrations are famous for not enforcing labor law.

Tip rules give a good illustration how courts will interpret legislation to favor and subsidize business. The tip rules that remain in force, and the tip credit that still remains, originated 76 years ago when the five Supreme Court justices seized on the Red Cap’s decision to continue working while claims in dispute worked through the courts. When some members of Congress tried to get restaurant employees included in the minimum wage requirements of FSLA in 1966 the Restaurant Association was right there demanding to codify their subsidy.

After successfully keeping the sub minimum wage for tipped employees fixed at $2.13 an hour for 27 years, restaurants and the Restaurant Association realized it was so low that they often had to pay $7.25 an hour just to get dining room help. That made the tip credit useless and their subsidy ended. That’s why Mr. Woo became a test case to demand expanding tip pooling to non tipped employees and restore their subsidy.

Once more Trump showed us who he is by joining corporate America to help them cheat tipped employees.

I will keep an eye on future legal developments and update them here. Or you can do it yourself. Docket files at the Supreme Court are No. 16-920, the Writ was docketed on January 24, 2017 No. 16A529

Tuesday, April 10, 2018

The Teacher Strike in Oklahoma

The Teacher Strike in Oklahoma

Public school teachers have left the classroom and taken to the streets, finally. It should be obvious to all in West Virginia and now Oklahoma the legislatures there and around the country will do nothing without a strike. Several newspapers including the Washington Post have reported the wages for Oklahoma Teachers rank 49 among the 50 states. I expect the rankings they quote come from published pay schedules with ranks and steps. Usually ranks differ for BA degree holders and for MA and ED.D degree holders, while steps differ by years of service with satisfactory or better performance reviews.

However the Bureau of Labor Statistics publishes an annual Occupational Employment Survey with the latest wage data just released this March 30. In their survey they take a large sample of wages for people employed doing one occupation among more than 800 occupational titles defined in their Standard Occupational Classification (SOC). For example, Secondary School Teachers, Except Special and Career/Technical Education have a reported median wage in Oklahoma of $40,090. The median figure means half of Oklahoma secondary school teachers earn less than $40,090; half more.

From year to year the median could go up because the state legislature approves money for an increase in the pay scale, both rank and steps. Or, it could go down because older people at higher ranks and steps leave teaching and their replacements are younger and newer teachers who enter at step 1. In Oklahoma the total of elementary, middle and high school teachers dropped by 440 from 2016 to 2017. Whatever the cause the $40,090 median wage reported for 2017 puts Oklahoma secondary teachers dead last in pay among the fifty states plus DC and Puerto Rico.

The wage for Secondary teachers in Oklahoma has been dead last since 2015 when the median wage was $41,280. Notice the wage went down from 2015 to 2017, which tells us the experienced, older teachers are leaving teaching while younger less experienced and therefore lower paid replacements are taking over.

The inflation adjusted loss of buying power for secondary teachers comes to 6.04 percent from 2015 to 2017. If we compute the inflation adjusted buying power from 2008 to 2017 the loss is 11.03 percent. The $40,090 looks especially low when 39 states have median wages for secondary teachers above $50,000, 18 above $60,000 and 6 above $70,000.

Moving on to elementary teachers finds much the same thing. The median wage for elementary teachers in 2015 was $39,270. It dropped in 2016 and again in 2017 to $38,420, a loss of inflation adjusted buying power of 5.35 percent in just two years and a 12.6 percent drop since 2008. There are 32 states that pay their 2017 elementary school teachers a median wage above $50,000

The wage for middle school teachers in Oklahoma in 2015 was $40,720. It dropped in 2016 and again in 2017 to $40,080, a loss of buying power of 4.77 percent in just two years and a 7.69 percent drop since 2008. There are 36 states that pay their 2017 middle school teachers a median wage above $50,000

On April 3, 2018 the Washington Post reported “Educators, students have seen some of the deepest reductions in the nation.” Picketing teachers had more to complain about than low salaries. Four day school weeks; old, out of date and battered textbooks; ten year old and out of date computers; leaky roofs, drafty windows, balky heating. The next day’s Washington Post quoted Oklahoma Governor Mary Fallin taunting teachers with “Teachers want more but it’s kind of like having a teenage kid that wants a better car.” Apparently red baiting protesting picketers as communists is out of date. She told CBS correspondent Omar Villafranca she doubted the teacher walkout could be a homegrown movement; their must be fascists she decided.

The strike says lots about labor relations. Private sector employees can strike if their no strike contract has expired, but even then they can be immediately and legally replace with scabs. Public sector employees seldom, if ever, have the legal right to strike. We can expect that union hating and union baiting governor Fallin would have them in court seeking an injunction and hefty fines for their union if she could break the strike.

Few strikes could be more visible and disruptive than a statewide teacher strike. Oklahoma had 48,820 employed as preschool, primary, secondary, and special education school teachers in 2017. California has 422,200. Texas has 415.920. Even little Maine has 19,150. Rarely do strikes have such a large block of professionals where those on strike have BA or MA degree skills and statewide certification. Rarely would it be necessary for management to pay much higher salaries to find strike replacements, and have to find them out of state. Rarely can strikes shut down operations for weeks or months if necessary.

The rich and the well to do are so determined to get themselves property tax vouchers to pay their private school tuition they work hard to ruin the public schools they ridicule as low class failures. Oklahoma teachers have the economic power to fight back and win their strike; lets hope they have the solidarity to do it.

Monday, April 9, 2018

Immigration and Right Wingers like Laura Ingraham

Immigration and Right Wingers like Laura Ingraham

In a recent op-ed piece in the Washington Post [April 5, 2018] Elizabeth Bruenig, comments on Fox News and Laura Ingraham: who gets an economics lesson. Ms. Ingraham taunted and ridiculed David Hogg of Parkland High School. He responded by calling for Ingraham’s advertisers to boycott her show. Bayer, Wayfair, Nestle, Hulu, Johnson & Johnson and others did so. The right wingers suddenly worry that boycotts are unfair and threaten their free speech. They also sound surprised as though their doctrine must be the same as corporate America.

Bruenig calls the advertising boycott a capital strike with a reminder that capital does what brings profits, not what’s right wing, left wing or ethically defensible. She cautions “There are no regulations or laws preventing or even restricting capital strikes.”

It is important to remember that profit, or just greed, drive corporate America and the Ingraham example does a good job illustrating the division of capital from the right wingers, but there is a better example, immigration.

Corporate America wants cheap labor and that means every immigrant they can get, skilled or unskilled, documented or undocumented. I don’t believe any other issue better illustrates the divide between capital and right wing politics. Except for the H1-B program, capital keep their immigration demands out of the news and public view and lets Fox News and Trump lead the dehumanizing bigotry parade.

Trump and the Republican Party need people like Ingraham and Fox News to keep the hate vote, now the Trump base, voting while knowing they will vote for the Republican that most reflects their hatred for immigrants. To keep the Democrats out of office and away from labor reform and income inequality, capital wants Republicans, while ignoring the divide over immigration. They remain non-committal or silent and take no responsibility for civility in the larger society. For some of us leadership comes from people who have the wealth and political power to do the right thing for the largest possible social order. Trump and the Republicans will never do that. Corporate America could do the right thing, but like Ms. Bruenig says “Capital is capital: it is not your friend.”

Thursday, March 29, 2018

The Debt Crisis at our Doorstep

The Debt Crisis at our Doorstep

In an op-ed piece of March 28, 2018 [The Debt Crisis at our Doorstep] the Washington Post published an opinion signed by five senior fellows and economists from the Hoover Institution. The worry, correctly, that 2018 federal spending will be billions and billions more than the taxes that can be collected now that the Republican Congress made steep cuts to corporate and personal income taxes. The need to borrow to make up the losses will certainly raise interest rates as they predict. Sharply higher interest rates will bring us a recession.

Then they tell us “Congress must reform and restrain the growth of entitlement programs and adopt further pro-growth tax and regulatory policies.” They ignore that Obama, and Clinton before him, delivered well performing, stable economies to the Republicans that included a responsible balance of taxing and spending in both 2001 and 2017. They ignore that America has deficits because the rich won’t pay taxes or take responsibility for the larger society. They ignore that Republicans conducted a two-year 2008-2010 depression when their gamble on Collateralized Debt Obligations failed. Now they’re poised to do it again.

Appropriate taxation can solve America’s deficit problems; piling on policies promoting yet more income inequality will not. I remind the five Hooverites - Michael J Boskin, John F. Cogan, George P. Shultz and John B Taylor – millions of households live exclusively on the Social Security benefits and millions of others get by with low interest credit cards and help from government programs that supplement their life on low wages and long hours. No such “entitlements” were in place during the great depression of the 1930’s. Maybe they’d like to do that again.

Wednesday, March 14, 2018

Trump and his Foolish Tariffs

Trump and his Foolish Tariffs

The United States economy has fully adjusted to forty plus years of continuous negotiations to decrease tariffs. To announce a draconian increase in steel tariffs and a slightly less draconian increase in aluminum tariffs on a Thursday afternoon will do nothing good for jobs or the economy. Corporate America supported lower tariffs all these years, and NAFTA trade agreements, knowing higher tariffs bring retaliation and a decrease in production and trade for everyone.

That’s a generic conclusion, but to see how foolish it really is for jobs compare establishment jobs at Iron and Steel Mills and Aluminum Production to jobs making finished or semi finished steel and aluminum products from purchased steel and aluminum. Iron and steel mills had an average monthly employment of 82.5 thousand jobs in 2017, down from 134.6 thousand jobs in 2000. Aluminum Production establishments had an average monthly employment of 57.5 thousand jobs in 2017, down from 99.9 thousand in 2000.

Fabricated metal product manufacturing companies that use steel in their production had an average monthly job total of 1.431 million in 2017. These are jobs making cutlery, hand tools, kitchen utensils, pots and pans, fabricated structural products like steel joists, ornamental and architectural products like metal window and doors, boiler, tank and shipping containers, steel and aluminum cans, hardware manufacturing, spring and wire product manufacturing, screw, nut and bolt manufacturing and on and on.

Add another 1.079 million machinery manufacturing jobs where companies buy steel to make finished products. These are jobs producing agriculture, construction, mining machinery, industrial, commercial and service industry machinery, heating, air conditioning and refrigeration equipment, engine, turbine and power transmission equipment and on and on.

So far we are protecting 140 thousand jobs (82.5+57.5) with tariffs while steeply raising prices for steel inputs to companies that have 2.51 million jobs (1.431+1.079). And I have not mentioned jobs in automobile manufacturing or transportation equipment. Eliminating foreign competition in basic steel and aluminum will raise prices, cut production and sales and jeopardize jobs producing products with 18 times more jobs than steel and aluminum (2.51/.140).

Since the end of the recession in 2010 the Bureau of Labor Statistics reports a modest recovery of manufacturing jobs, although the current total remains a million jobs below the pre-recession high of 13.4 million in 2008. Since the recession ended 8 years ago in 2010 manufacturing jobs are up a monthly average of 916.2 thousand. However, the increase disguises an unbalanced manufacturing recovery because some sub sectors like textile production, apparel, paper and printing have lost jobs. However, the increase in fabricated metal products and machinery manufacturing is up 233.5 thousand of the 916.2 thousand jobs, or 25.5 percent of the total increase. If I add just the automobile manufacturing from transportation equipment manufacturing, an increase of 274 thousand jobs, then 55.4 percent of the manufacturing total increase comes in products dependent on steel as a major input in production.

The U.S. economy desperately needs manufacturing employment. Foolish might be too nice a term for the latest Trumpism. How about idiotic? Moronic?