Monday, December 31, 2018

Labor Line

January 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 January, 2018.

American Job Market The Chronicle

Current Job and Employment Data

Total Non-Farm Establishment Jobs up 148,000 to 147,380,000
Total Private Jobs up 146,000 to 125,039,000
Total Government Employment up 2,000 to 22,341,000

Employment Note
Civilian Non-Institutional Population up 160,000 to 256,109,000
Civilian Labor Force up 64,000 to 160,597,000
Employed up 104,000 to 154,021,000
Employed Men up 155,000 to 81,821,000
Employed Women down 51,000 to 72,200
Unemployed down 40,000 to 6,576,000
Not in the Labor Force up 96,000 to 95,512,000

Unemployment Rate stayed the same at 4.1% or 5,576/160,597
Labor Force Participation Rate stayed the same at 62.7%, or 160,597/256,109

Prices and inflation measured by the Consumer Price Index (CPI) for all Urban Consumers was up by a monthly average of 1.26 percent for 2016.

The December CPI report for the 12 months ending with November, shows the

CPI for All Items was up 2.2%
CPI for Food and Beverages was up 1.4%
CPI for Housing was up 2.8%
CPI for Apparel was down 1.6%
CPI for Transportation including gasoline was up 4.4%
CPI for Medical Care was up 1.7%
CPI for Recreation was up 1.4%
CPI for Education was up 2.2%
CPI for Communication was down 5.0%

This Month's Establishment Jobs Press Report


The Bureau of Labor Statistics published its January report for jobs in December. The labor force was up 64 thousand, while 96 thousand of estimated population growth did not enter the labor force. The employed increased by 104 thousand because the unemployed dropped by 40 thousand, a reversal of last month's increase in the unemployed. The decrease in the unemployed just offset the small increase in the work force to keep the unemployment rate steady at 4.1 per cent. The labor force participation rate also held steady at 62.7 percent in December, for the third month.

The seasonally adjusted total of establishment employment was up 148 thousand for December. The increase was 91 thousand more jobs in the private service sector combined with a 55 thousand increase in jobs from goods production. The total of 146 thousand more private sector jobs combined with an increase of 2 thousand government service jobs accounts for the total increase.

The goods production sub sectors had a good month for December with 55 thousand new jobs. Construction added 30 thousand jobs with gains primarily in specialty contracting with 23.8 thousand more jobs, especially good for unseasonable December. Residential construction added 8.2 thousand more jobs offset by small loses in non-residential construction and heavy and civil engineering construction. Manufacturing did well for December with 25 thousand more jobs distributed as 21 thousand more durable goods jobs and 4 thousand more non-durable goods jobs. Machinery manufacturing topped all manufacturing categories with 6 thousand new jobs; fabricated metal products were next with 5.4 thousand new jobs. Food manufacturing had the only significant gains among non-durables with 4.5 thousand new jobs. Natural resources had a net of no jobs.

Government service employment was up a combined 2 thousand seasonally adjusted jobs for December. The federal government added a thousand jobs and local government another 5 thousand jobs including public education to offset a decline of 4 thousand jobs in state government also including education. Public education was down a net 400 jobs because the local public schools added 2.6 thousand jobs while state education dropped 3 thousand jobs. Private education was also down, 300 jobs, making the combined decrease of 700 education jobs for December.

Health care had 29.2 thousand new jobs and leisure and hospitality 29 thousand new jobs and so they roughly tied for the largest job increase for December, although both modest gains for a month. Health Care had gains in three of its four sub-sectors. Ambulatory care had 14.8 thousand new jobs; hospital jobs another 12.4 thousand; nursing and residential care 4.2 thousand new jobs. The gains were offset by a decline of 2.2 thousand jobs in social assistance. The December growth rate in health care employment was 1.79 percent, lower than December a year ago and well below the 15 year trend of 2.31 percent.

A little of 85 percent of leisure and hospitality job gains came in restaurants, a total of 25.1 thousand jobs. The arts, entertainment and recreation sub sector added 3.8 thousand jobs mostly in performing arts and spectator sports. Accommodations added 300 jobs.

Professional and business services had 19 thousand more jobs, well below the usual range of new jobs. The professional and technical service sub sector had a rare decline in jobs, mostly because of a decrease of 15.4 thousand jobs in accounting and bookkeeping services. Management of companies added 3.8 thousand jobs; administration and support services including waste management had a net increase of 20.2 thousand jobs, a modest increase for this sub sector.

Apart from accounting and bookkeeping services already mentioned, other professional and technical services did poorly. Computer design and related services added only 3.3 thousand new jobs; architecture and engineering services 2.3 thousand jobs; management and technical consulting and legal services each had less than a thousand new jobs. Among administrative and support services, employment services added 10.8 thousand jobs; investigation and security services added 4.8 thousand jobs offset by small losses in. business support services.

Trade, transportation and utilities did very poorly for December with a loss of 10 thousand seasonally adjusted jobs. While wholesale trade added jobs, retail trade dropped 20.3 thousand jobs in December. December is always the biggest month for retail sales so when retailers report significant gains in retail sales as is usual for December and retail jobs go down anyway, it suggests ominous change as online shopping eats away at retail employment. Transportation had 1.8 thousand new jobs, a poor month where modal transportation including airlines had small losses. Utilities dropped 900 jobs.

Information services a net of 7 thousand jobs, reversing four months of job losses. Motion picture and sound recording had 7.4 thousand new seasonally adjusted jobs offset by small losses in publishing, broadcasting except the Internet and telecommunications. Financial activities added a net of 6 thousand jobs with finance and insurance adding 3.7 thousand jobs and real estate and rental and leasing services picking up a combined 2.2 thousand. The category, other services had 12 thousand new jobs with all three sub sectors reporting gains with growth rates above average. Personal and laundry services added 3.9 thousand jobs, an unusually large gain. Repair and maintenance services added another 1.3 thousand jobs; non-profit associations picked up 6.3 thousand jobs.

Establishment employment was up 148 thousand in December to 147.380 million jobs, a lower gain than last month but an annual growth rate of 1.21 percent, also lower than last month. While I see no sign of change in basic trends, no sector did well except possibly construction which has never had even 6 percent of national establishment employment. When none of the three sectors that drive employment - health care, leisure and hospitality and professional and business services - create even 30 thousand jobs it does not bode well for employment. No other sectors can take their place in American employment.


December Details

Non Farm Total +148
The Bureau of Labor Statistics (BLS) reported Non-Farm employment for establishments increased from November by 148 thousand jobs for a(n) December total of 147.380 million. (Note 1 below) An increase of 148 thousand each month for the next 12 months represents an annual growth rate of +1.21%. The annual growth rate from a year ago beginning December 2016 was +1.41%; the average annual growth rate from 5 years ago beginning December 2012 was +1.76%; from 15 years ago beginning December 2002 it was .81%. America needs growth around 1.5 percent a year to keep itself employed.


Sector breakdown for 12 Sectors in 000's of jobs

1. Natural Resources +0
Natural Resources jobs including logging and mining were unchanged from November at 727 thousand jobs in December. 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 +30
Construction jobs were up 30 thousand from November with 6.993 million jobs in December. An increase of 30 thousand jobs each month for the next 12 months would be an annual growth rate of +5.17 percent. Construction jobs are up 210 thousand for the 12 months just ended. The growth rate for the last 5 years is +4.07%. Construction jobs rank 9th among the 12 sectors with 4.7 percent of non-farm employment.

3. Manufacturing +25
Manufacturing jobs were up 25 thousand from November with 12.539 million jobs in December. An increase of 25 thousand jobs each month for the next 12 months would be an annual growth rate of +2.40 percent. Manufacturing jobs were up for the last 12 months by 196 thousand. The growth rate for the last 5 years is +.95%; for the last 15 years by -1.15%. 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 -10
Trade, both wholesale and retail, transportation and utility employment was down 10 thousand from November at 27.470 million jobs in December. A decrease of 10 thousand each month for the next 12 months would be an annual growth rate of -.44 percent. Jobs are up by 74 thousand for the last 12 months. Growth rates for the last 5 years are +1.39 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 +7
Information Services employment was up 7 thousand from November at 2.722 million jobs in December. An increase of 7 thousand each month for the next 12 months would be an annual growth rate of +3.09 percent. (Note 2 below) Jobs are down by 40 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 now holds in the 2.7 million range. Information Services is a small sector ranking 11th of 12 with 1.9 percent of establishment jobs.

6. Financial Activities +6
Financial Activities jobs were up 6 thousand from November at 8.498 million in December. An increase of 6 thousand each month for the next 12 months would be an annual growth rate of + .85 percent. Jobs are up 134 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 +1.66 percent, and a 15 year growth rate of +.39 percent. Financial activities rank 8 of 12 with 5.8 percent of establishment jobs.

7. Business & Professional Services +19
Business and Professional Service jobs went up 19 thousand from November to 20.943 million in December. An increase of 19 thousand each month for the next 12 months would be an annual growth rate of +1.09 percent. Jobs are up 527 thousand for the last 12 months. Note 4 The annual growth rate for the last 5 years was 2.92 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 14.2 percent of establishment employment.

8. Education including public and private -1
Education jobs went down 1 thousand jobs from November at 14.068 million in December. 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-.06 percent. Jobs are up 105 thousand for the last 12 months. (note 5) The 15 year growth rate equals +.74 percent, slower than the national average. Education ranks 4th among 12 sectors with 9.6 percent of establishment jobs.

9. Health Care +29
Health care jobs were up 29 thousand from November to 19.641 million in December. An increase of 29 thousand each month for the next 12 months would be an annual growth rate of +1.79 percent. Jobs are up 374 thousand for the last 12 months. (note 6) The current month was above long term trends and greater than growth from a year ago when the annual growth rate was +2.02 percent. Health care has been growing at +2.31 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 +29
Leisure and hospitality jobs went up 29 thousand from November to 16.050 million in December. An increase of 29 thousand each month for the next 12 months would be an annual growth rate of +2.17 percent. Jobs are up 306 thousand for the last 12 months. (note 7) The 5 year growth rate is 2.89%. 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 10.9 percent of establishment jobs. It moved up from 7th in the 1990's to 5th in the last few years.

11. Other +12
Other Service jobs, which include repair, maintenance, personal services and non-profit organizations went up 12 thousand from November to 5.810 million jobs in December. An increase of 12 thousand each month for the next 12 months would be an annual growth rate of +2.48 percent. Jobs are up 109 thousand for the last 12 months. (note 8) Other services had +.49 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 +3
Government service employment was up 3 thousand from November to 11.942 million jobs in December. An increase of 3 thousand each month for the next 12 months would be an annual growth rate of +.33 percent. Jobs are up 2 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.


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



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


Tuesday, January 9, 2018

Fast-food and the Risk to Jobs

Fast-food and the Risk to Jobs

A recent Washington Post article [Caitlin Dewey, “For fast-food franchises, price cuts hard to digest” WP 12-29-17] describes the problems corporate franchisers like Subway and McDonalds cause their franchise holders by declaring promotional discounts on key parts of their menu. Discounts please the board of directors who want more revenue but squeeze the profits out of franchisees that face rising costs.

From 2015 to 2016 jobs at food services and drinking places increased by 367.9 thousand jobs as reported by the U.S. Bureau of Labor Statistics. Full service restaurants and fast food restaurants had a combined 309 thousand new jobs, which were split almost evenly between them. Except for a slight pause during the 2008-2010 recession these jobs have increased every year since 1990. Full service restaurants have 5.4 million jobs; limited service fast food 4.3 million jobs. That would be consistent with the article’s citation from the U.S. Department of Agriculture data reporting 18 thousand new fast food restaurants between 2009 and 2014.

There was no mention of the risk to the economy if restaurant and fast food expansion comes to a halt. Those 367.9 thousand new jobs I mentioned above make up just under 15 percent of the country’s new jobs for the year.

The fast-food industry fusses about wage costs going up over the last ten years, 2006-2016, and higher minimum wages in 29 states, but occupational employment survey data shows modest increases. The hourly median wage for fast food cooks (#35-2011) over the same 10 year period increased from $7.41 to $9.55 and hour. If the 2006 wage of $7.41 increased at exactly the rate of inflation until 2016 it would be $8.82 an hour instead of $9.55. Fast food cooks got an annual average of 2.57 percent increase in wages when the inflation rate was 1.76 percent a year. The modest increase in buying power from 2006 to 2016 applies to the median wage, which may not be the starting wage in an industry with a high turnover rate.

Looking at the state files I find only one state, Washington, with a median wage for fast food cooks more than $12 an hour, which represents 1 percent of national employment of fast food cooks.

Three states Hawaii, Massachusetts and North Dakota have a median wage for fast food cooks more than $11 an hour and less than $12 and hour, which represents 2.1 percent of fast food cooks.

Five states with Alaska, California, DC, Oregon and Vermont have a median wage for fast food cooks more than $10 an hour and less than $11. California has 19.8 percent of nationwide fast food cooks with a median wage of $10.54 an hour.

Twenty-five states pay more than $9 and less than $10, which is 40.8 percent of nationwide jobs for fast food cooks; the remaining 17 states pay less than $9 an hour, which is 31.4 percent of the national jobs for fast food cooks.

The WP article reports that year over year sales at fast food restaurants and fast-casual chains have fallen dramatically over the past two years, suggesting saturation levels of new chains and franchisees. Rather than have price cutting promotions they might consider raising prices. Remember price cuts can only increase revenue if sales increase by a larger percentage than the price decrease, no guarantee in market filled with new competition.

During the ten years from 2006 to 2016 the number of fast food cooks declined from 612 thousand to 513 thousand in 2016, helping to increase the surplus of labor for low wage jobs. The news media likes to report on job growth and lately about a shortage of jobs without mention that so many new jobs have low wages, especially in fast food. The fast food industry could change that given those higher wages franchisees now have to pay. Instead of helping to contribute new jobs in low wage occupations, the fast food industry may not generate new jobs at all.

Monday, December 4, 2017

A Tax Bill to Depress the Economy

A Tax Bill to Depress the Economy

The so-called tax bills just passed by the House and Senate will depress the economy, which is easy to understand.

Governments rapidly return all of their tax money to the economy for salaries, schools, health care, defense contractors, road building and plenty more. They tend to put tax money into the spending stream as it arrives generating spending for, and income to, millions of people widely dispersed in all the states. Federal tax money tends to be spent in the United States and therefore supports the domestic economy.

To cut taxes by billions and billions to enrich a small number of people and corporations with no need to return that buying power to the spending stream guarantees a slowdown. A look at annual Corporate 10K reports often finds billions sitting as cash in liquid accounts. Corporations are slow to return revenues and profits to the spending stream and they have no obligation to spend in the United States. Tax money that once supported our domestic economy will end up going abroad.

The rich speculate in stocks and real estate and trendy collectibles and bid up the price of things that already exist, all of which creates nothing much for employment or the economy. Recall the Credit Default Swaps and Collateralized Debt Obligations after the Bush era tax cuts, and the depression that followed.

Claims that tax breaks to the rich creates a bigger supply of capital to finance investments ignores the need for demand and the mass buying power that cannot exist in a country with the crude and extreme inequality of the United States and tax bills to make it worse.

The bloated and privileged rich can do nothing to benefit the country or the economy buying the Congress and helping themselves to the country’s buying power. Some of us think the wealthy and the Congress have a responsibility to support the welfare of the larger society. Instead they act like marauders and midnight looters, pillaging and laying to waste.

Saturday, November 25, 2017

Job Rights and Sexual Harassment

Job Rights and Sexual Harassment

The recent spate of sexual harassment charges against a growing number of men by a growing number of women derives directly from the U.S. history of labor relations. Notice the majority of charges occur as part of employment and while on the job. The harassers tend to be past middle aged white men accustomed to giving authoritarian orders to people who have no job rights.

As I recall from my high school history, it was all white men who wrote our constitution. In spite of the “all men are created equal” stuff in the Declaration of Independence, their constitution left women out entirely and then created a whole under class of people with no rights at all; slaves they were called. We did have a great civil war to end slavery, but authoritarian white male privilege and notions derived in part from dictatorial authority over slave women, who I have read, were subjected to some grimy and disgusting sexual abuse. Unlike slaves you can quit your job, but in the United States employees work at will; anyone can be dismissed at any time and without cause or explanation. If you dare to study closely your job rights under U.S. state and federal law be sure to compare them with slavery.

Privileged white men of authority hate any communitarian self help efforts like labor unions and they have successfully neutralized those efforts since 1789. Remember Trump bragged about groping married women before the election. Sexual harassment will continue unabated in the current environment of labor law. Well defined job rights remain as an essential precursor to ending, or even reducing, sexual harassment.

Monday, October 16, 2017

Trump and NAFTA

Trump and NAFTA

Trump will have to fight the most powerful interests of corporate America to end NAFTA, which he now threatens to do. Any study of NAFTA since its inception in 1993 finds direct benefits to the growth of U.S. Domestic Production(GDP), not to mention the benefits to Canada and Mexico. It is unnecessary to cite studies since there are many and they all find benefits.

In the initial years NAFTA eliminated thousands of jobs. The U.S. textile industry nearly disappeared after NAFTA. In North Carolina, for example, there were 288 thousand jobs in 1990 in textile mills and apparel manufacturing. By the end of 2016 it was 42 thousand. Across the country these same industries had 1.629 million jobs in 1990; by 2016 it was 359 thousand. In the cut and sew industry alone jobs dropped from 749 thousand in 1990 to only 105.8 thousand by 2016.

Much of the NAFTA related job loss occurred before NAFTA generated a significant increase in trade along with new production and investment. Over the 24 years of NAFTA new trade related production expanded U.S. GDP and generated replacement jobs. Whether the new jobs generated because of NAFTA are more than jobs lost because of NAFTA is irrelevant to the current Trump demand. Current NAFTA trading does support U.S. establishment employment in 2017, which guarantees killing NAFTA will cut jobs and do noticeable harm to employment.

Corporate America will not be happy to see an end to NAFTA, but the job loss will be a minimal concern in NAFTA matters. They have always had the money and clout to get their way, but corporate nerves do get frayed with Trump bluster. If Trump cared about the working class and acted as a leader, he would ignore the NAFTA fight and work to change the horrendous federal personal income tax that bores down so heavily on wage earners. He would work to revise and enforce the Fair Labor Standards Act to raise the minimum wage and guarantee overtime pay for all and a few more.

If corporate America cared about the working class and acted as leaders who cared about Americans, they would acknowledge Congress and President Clinton did them a favor with NAFTA back in 1993 and then support sharing some of the benefits with the working class.

By now, the end of 2017, Trump policies all demand and intend to destroy something - Obama Care, climate accords, Iran nuclear deals, TPP, NAFTA, – except taxing, spending and Federal Reserve policy keep going on as before. He hasn’t destroyed the economy … yet.

Wednesday, October 11, 2017

Minimum Wages in Seattle

Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle.” Ekaterina Jardim, Mark C. Long, Robert Plotnick, Emma van Inwegen, Jacob Vigdor, Hilary Wething, National Bureau of Economic Research, June 2017

In yet another study of the minimum wage six authors tell readers they intend to evaluate the wage, employment and hours effects of a first and second phase in of the Seattle Minimum wage ordinance. The first phase raised the minimum wage from $9.47 an hour to $11.00 an hour on April 1, 2015. The second phase raised the wage from $11.00 an hour to $13.00 an hour on January 1, 2016. They analyze “employment in all sectors paying below a specified real hourly rate.”

The paper’s opening sentence starts with the standard obsessions economists always cite against minimum wages: “Economic theory suggests that binding price floor policies, including minimum wages, should lead to a disequilibrium marked by excess supply and diminished demand.” Economists predict a raise in the minimum wage will reduce employment of those earning a wage lower than the minimum wage. The see cause and effect as part of their doctrine.

They conclude the first phase effect was smaller than the second phase, which second phase caused a decrease in hours worked in low wage employment by 9 percent while the wage of low-wage workers’ was about 3 percent so that the cost of this wage hike outweighed its benefits for these workers. They conclude the minimum wage hurts low wage labor because hours lost makes a loss bigger than the gain from higher wages.

People leave jobs and lose jobs for many reasons, especially in low wage employment where turnover rates can be high. If the Seattle minimum wage causes employers to decrease employment, it could be useful to go out and ask these low wage employers if they recently off employees and was that because of the higher minimum wage. Typically Economists resort to analysis using large data sets filled with severe shortcomings like the Seattle study I review here.

Their data set comes from Washington’s Employment Security Division, which is produced as part of national Unemployment Insurance(UI) system administered by each state. Old timers refer to it as ES 202 data, or just “the 202” data. It is compiled and used by the Bureau of Labor Statistics in their benchmark revision of the Current Employment Survey.

ES 202 data is reported by single or multi establishment within county and Metropolitan Statistical areas coded by industry using the governments North American Industry Classification System(NAICS). Public reports of the data have monthly employment and payroll totals, but there are no occupations reported and names of employers or employees remain suppressed and confidential.

The authors inform readers that the Employment Security Division provided them the total hours worked in addition to the employment and payroll totals. Further the Employment Security Division partitioned the Seattle-Bellevue-Evertt Washington Metropolitan Division data to break out Seattle as a special and private favor to them, perhaps from their connection with the University of Washington. Because their data is a special favor and confidential the authors were required to sign a document promising not to release the data under threat of legal action against them. Therefore no one else gets to look at the data; they provide only a summary of aggregated data by quarter in their Table 3 on page 45.

They state “This unique data set allows us to measure the AVERAGE wage paid to each worker in each quarter. We compute an hourly wage rate as total quarterly payroll divided by quarterly hours worked, which corresponds to average hourly earnings. They call these numbers a realized hourly wage rate. Therefore they use an average wage of thousands of employees, an amount no one actually earns. Actual wages paid to employees will be above and below the average.

In addition their data excludes those working at establishments with more than one location. These include a variety of chain stores and franchise restaurants in Seattle and the surrounding county and metropolitan areas. Seattle’s minimum wage for a business with 500 or more employees such as McDonald’s or Costco was $13.50 an hour during the time when smaller single establishment business had an $11 an hour minimum wage. The employees included in the study had a strong incentive to move out of small business and into the large businesses excluded from the study.

In addition they define low skill employment as those working with an average hourly wage rate of $19 an hour or less. While they give an excuse for doing this, they do so without knowledge of the occupations of the employees included in the sample or the skills, experience or education needed in the unknown occupations that justify such a decision. An establishment with an average wage of $19 an hour will have many earning wages above $19 an hour, which could be occupations that need college degree skills.

In their methodology at page 16 the authors admit the hazards of their partition at $19. They write “The proxy for low-skilled employment will produce accurate estimates of the impact of minimum wage increases to the extent that a wage threshold accurately partitions the labor market into affected and unaffected components.” Their partition comes at an AVERAGE wage causing some who work with an actual wage above $19 an hour to be included in the below $19 partition while others will be in the below $19 partition who have wages above the $19 partition. There can be no assurance the 9 percent decline in total hours they cite ever worked an hours below the minimum wage or lost their job because of it.

Further they state “[The threshold wage] will overstate employment reductions if the threshold is set low enough that the minimum wage increase causes pay for some work to rise above it. This concern is particularly relevant given previous evidence of "cascading" impacts of minimum wage increases on slightly higher-paying jobs.” The previous evidence of “cascading impacts” comes from several Neumark and Wascher studies and a book, one of which is reviewed on this link at The cascading impact terminology refers to people who lose their below minimum wage job, but rather than be out of work they apply for and find work at a higher wage.

As I have suggested before people who lose their minimum wage job do not disappear, but begin looking for other jobs in other occupations with wages higher in the wage distribution. Forced to leave a sub-minimum wage job the newly unemployed increase the supply of labor in other occupations where they moderate wages in higher wage occupations and add to employment. The authors might recognize the millions of opportunities to move from low wage to higher wage employment by looking at wage distributions by occupation reported by the U. S. Bureau of Labor Statistics in their Occupational Employment Survey.

Their Summary of data in Table 3 supports this view. The table has three columns for total jobs, total hours and total payroll and a fourth column has computed average wages. The rows are for each quarter from the second quarter of 2014 to third quarter of 2016. The first column of each category has only those employers with employees that have an average monthly wage of $13 an hour or less. The second has only those employers with employees that have an average monthly wage of $19 an hour or less. The third set has an average monthly wage for all employers and employees.

These partitions allow a further partition into two additional columns through subtracting the less than $13 column from the less than $19 column, which leaves only those establishment employers with an average wage greater than $13 an hour and less than $19 an hour. Further subtraction leaves another column of only those employers with an average wage of $19 or more. Every employee and his or her employer is part of one and only one mutually exclusive column of the data.

These columns have the “cascading effects” but they show the benefit of the Seattle Minimum wage. In the second quarter of 2014 those working at establishments with an average wage less than $13 an hour total 39,807. By the third quarter of 2016 the total falls to 23,232, a loss of 16,575 working at establishments with an average wage less than $13 an hour.

Over that two year and one quarter period a low inflation rate combined with the higher minimum wage would tend to reduce people working at establishments that have an average wage below $13 an hour. Economists like to suggest that is a bad result caused by the minimum wage, but during the same period those working at establishments with an average wage above $13 and below $19 increased from 53,152 to 63,610, a gain of 10,548 jobs at above the minimum wage. Those working at establishments with an average wage above $19 increases from 199,681 to 249,675, a gain of 49,994 jobs. These are exactly what to expect if the minimum wage benefits low wage workers. In Seattle wage workers seek employment in other establishments in occupations that pay above the minimum wage.

In their 2008 book Neumark and Wascher Minimum Wages, cited by the authors in their Seattle study write on page 116, “. . . as we emphasized earlier in this chapter the potential for minimum wage increases to affect wages higher in the wage distribution is also important in assessing the effects of minimum wage policy.” It is. That is where the benefits of the minimum wage will be and that is where they are in Seattle.

This paper has no right to be a part of the public debate on minimum wages because it makes no attempt to persuade a general audience and cannot be read except by those with experience in the specialized terminology of the economics fraternity. It uses suppressed data and undefined insider terms from other studies such as region fixed effect, period fixed effect, treatment effect, idiosyncratic shock among other terms.

Business predictably opposes an increase in the minimum wage. It raises costs for businesses that depend on low wage employment and thereby pressures owners and managers to experiment with prices, jobs and work schedules. It might in some situations reduce long term profits, but that does not mean a higher minimum has no benefits to labor or the larger economy from those who will have more buying power.

Academic economists work under pressure to confirm market theory. When they do what is good for their career, the news media and the public seize on the conclusions and nothing else. They evaluate the conclusions based on academic credentials not the credibility of the work.

In Seattle I read the mayor and city council ignored the hecklers and went ahead with the next phase of their minimum wage program; they raised the minimum wage to $15 an hour. If I could get the suppressed employment data I could determine the benefits to labor and the economy I predict will continue.

Friday, September 8, 2017

Insulting Labor

Insulting Labor

The current United States Secretary of Labor, Alexander Acosta, has proposed putting former President Ronald Reagan in the Department’s Labor Hall of Honor. Ronald Reagan became president in January 1981 and so it was still early in his first term when the strike of the nation’s air traffic controllers union, PATCO, started August 3, 1981. The strike ended abruptly two days later when President Ronald Reagan fired 11,345 air traffic controllers. The firing ended, or busted, the union, which was decertified with little delay.

Many cite the failed PATCO strike as the date of an abrupt degeneration in U.S. labor relations. Reagan era strikes brought similar strikes with union defeats and failures at Phelps-Dodge in Arizona, to airline pilots, to Yale University support staff, at Hormel, at International Paper and others. Bush era strikes at Pittston Coal Co, A.E. Staley, Caterpillar and Bridgestone-Firestone were all defeats for organized labor.

It does not matter which side anyone takes in these disputes or that Reagan was the innocuous head of the Screen Actors Guild. Putting a management figure who crudely busted a union into a Labor Hall of Honor amounts to be a deliberate Trump style insult that ridicules and debases organized labor. Ronald Reagan was rigid and sanctimonious through the whole episode but I doubt even he would choose to show such contempt for the others in a labor hall of honor.