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April 2017, Volume 23, Number 2

Jobs, Robots, H-1B

US employment rose from 148.8 million in 2015 to 151.4 million in 2016, that is, the US added a net 2.6 million jobs or over 200,000 a month. The U-3 unemployment rate averaged 4.9 percent in 2016, down from 5.3 percent in 2015. In March 2017, unemployment fell to a decade-low rate of 4.5 percent.

The labor force participation rate, the share of persons 16 and older who were employed or looking for work, was 66 percent in 2007, fell to 62.7 percent in 2015, and rose to 62.8 percent in 2016. Some analysts prefer the employment-to-population ratio, which was 60 percent in 2017, and 78 percent for civilians aged 25 to 54.

Both ratios are up from their lows in 2008-09, but not as high as they were in 2007. The share of US residents 65 and older who are working for wages rose from 13 percent in 2000 to 19 percent in 2016, and is projected to increase to a third by 2025.

There were 5.4 million US businesses with paid employees in 2014, and 89 percent had fewer than 20; these 4.85 million small businesses accounted for 17 percent of all employees.

The federal minimum wage was raised to $7.25 an hour in 2009. Since then, average hourly earnings have increased by $4 to $26 in 2017. Many cities and states are raising their minimum wages, as with California's $15-an-hour minimum wage in 2022.

Robots. How should the US prepare for a labor market offering fewer jobs making goods and more jobs providing services? Robots are displacing blue-collar men without college degrees in manufacturing, while the jobs that are hardest to automate require more education, and only a third of US adults have college degrees.

Retraining workers with a high-school education or less has a very mixed record. Some studies suggest that government-funded training programs raise worker earnings, while others conclude that training programs that are reimbursed if their graduates have higher earnings select workers who would succeed even without retraining. Economists note that, with factories that acquire robots concentrated, a wave of displaced workers may retrain for health care jobs only to find that there are not enough such jobs locally to hire them.

Some propose government wage insurance for workers who are displaced from one job and find another lower wage job. There is also talk of expanding the earned-income tax credit or creating a universal basic income for all persons. More likely to be enacted are proposals for portable work-related benefit programs, so that workers can maintain health insurance and accumulate pension credits even if they change jobs.

There is widespread agreement that too many US jobs, 30 percent, require licenses. In many cases, licenses protect incumbents from new competition or enrich the schools that provide the training necessary to obtain the license.

Federal and state governments continue to grapple with how to regulate Uber and other app-based services that undergird the so-called gig economy that treats workers as independent contractors. Uber, with 200 US recruitment centers, says its drivers earn $20 to $25 an hour driving, with Uber covering their startup costs. New York City had 5,500 yellow cabs over 156,000 licensed taxi drivers, up 10,000 over 2015.

Some critics note that, with Uber and other app-based firms treating the workers who provide services as independent contractors, there is no need to complete I-9 forms to verify legal status nor obey the Fair Labor Standards Act regulating minimum wages and hours of work.

H-1B. The H-1B program makes it easy for most US employers to hire college-educated foreigners to fill US jobs that normally require college degrees. The major protection for US workers is a cap on the number of H-1B visas, 65,000 a year plus 20,000 for foreigners with masters degrees.

USCIS announced that it had received enough requests for H-1B visas for FY18 between April 3 and April 7, 2017. Employers requested 236,000 visas during the first week they were available in FY17. DHS uses a lottery to determine who gets the visas available.

A bill introduced in Congress would rank H-1B applications by salary, and give priority for visas to those with the highest salaries. Some Congressional leaders urged Trump to issue an executive order requiring USCIS to rank applicants for H-1B visas by salary and issue visas to foreigners promised the highest US salaries.

An estimated 20,000 US employers hire at least one H-1B worker each year. Two-thirds of H-1B visas go to tech firms, and in 2014 a third went to India-based outsourcers such as Tata Consultancy Services, Infosys and Wipro that do some of a firm's IT work in the US with H-1B workers and send the rest to India. Nasscom estimated that the global revenue of India-based outsourcers was $108 billion in 2016, with 60 percent from the US. Outsourcers employ 3.7 million people in India.

During the 2016 campaign, Donald Trump promised to "end forever the use of the H-1B as a cheap labor program." Trump's website promised to "establish new immigration controls to boost wages and to ensure that open jobs are offered to American workers first."

Trump promised to "restore the integrity" of the H-1B program so that it admits only "the best and the brightest." He continued: "The H-1B program is neither high-skilled nor immigration: these are temporary foreign workers, imported from abroad, for the explicit purpose of substituting for American workers at lower pay."

Trump was referring to cases such as Southern California Edison, which replaced directly hired IT workers paid $110,000 a year with H-1B workers provided by outsourcers Tata and Infosys who were paid $65,000 a year. USCIS in April 2017 said that employers seeking to hire H-1B workers at the lowest of four pay levels will have to prove that the jobs they are offering are "specialty" labor.

H-1B dependent firms, including India-based outsourcers with 15 percent or more H-1B workers in their labor forces, must try to recruit US workers unless they pay their H-1B workers at least $60,000 a year. Many outsourcers pay their workers slightly more than $60,000 a year. There are four skill levels with prevailing wages, and 80 percent of H-1B visas go to foreigners in the lowest level.

A study released in February 2016 found that H-1B workers depressed the wages of similar US workers by up to 10 percent in 2001 while bolstering the profits of IT firms.

DOL. Ex-US Attorney Alexander Acosta was nominated to be DOL Secretary after Andy Puzder withdrew in February 2017 after it was revealed he hired an unauthorized housekeeper. In March 2017, Puzder resigned as CEO of CKE Restaurants Holdings.

Acosta, the only Hispanic in Trump's cabinet, is expected to favor cooperation with employers to promote adherence to DOL regulations rather than litigation. The Obama Administration issued regulations to double the minimum salary threshold for employees to be exempt from overtime pay from $23,660 to $47,500. A federal judge blocked the new overtime regulation from taking effect, and many employers expect Acosta to withdraw it.

DOL's Wage and Hour Division recovered nearly $1.9 billion in back pay for workers denied minimum wages, overtime and family and medical leave and other protections during the eight years of the Obama Administration via consent decrees, settlements and court verdicts. WHD also issued interpretations of regulations that made more firms jointly liable with affiliated businesses for labor law violations and tightened definitions of independent contractors.

Obama-era WHD Administrator David Weil coined the term fissuring to describe firms outsourcing jobs, as when contractors rather than employees clean supermarkets. With technology allowing "lead firms" to monitor the work of the contractors they use, the labor market fissured, with lead firms paying high wages and offering benefits to their directly hired employees, but contractors competing for work and bringing low-skilled and often immigrant workers who are paid far less into workplaces as well.

One study suggests that contractor, temp, and on-call employment accounted for most of the employment growth between 2006 and 2016, bringing their total employment to 24 million, and that the wages of janitors and security guards provided by contractors are 10 to 25 percent lower than those of direct hires. Weil tried to reduce outsourcing by making the beneficiary of the work liable for violations committed by contractors, but decades of experience with farm labor contractors having joint liability with the farmers who use their services demonstrates that joint liability is not a panacea.

WIOA. Some employers complain that they cannot find skilled workers, while some workers complain they cannot find jobs. Can government-funded job training fill the gap? The New York Times on February 23, 2017 reviewed what it called the "dizzying constellation of programs to help struggling workers prepare for new careers," noting that the GAO found 47 different federal training-related programs administered by nine agencies in FY09.

The 2014 Workforce Innovation and Opportunity Act was designed in part to streamline the government's approach to job training, but critics say that many WIOA-funded programs are not close enough to employers to impart the skills they want quickly. Employer or demand-driven training helps to ensure that graduates get jobs, but wind up subsidizing particular employers by providing training at taxpayer expense.

President Trump's budget proposal for 2017-18 would shift $52 billion in federal spending in the $4-trillion budget to the military, giving it $575 billion for FY18. The budgets of the EPA and DOS would be reduced by about 30 percent, and those of USDA and DOL by about 20 percent, in order to increase the budget of DOD by 10 percent. Analysts note that reducing federal spending on the poor appeals to Trump supporters who earn more than the poverty line of $24,000 for a family of four, and thus are not eligible for many federal anti-poverty programs.

DOL receives about $12.2 billion in discretionary spending, including three-fourths for the Employment and Training Administration, which distributes funds to states for unemployment insurance benefits and to job training providers.

Health. The share of GDP devoted to means-tested benefits such as Medicaid and SNAP food benefits rose almost a percentage point between 2008 and 2016 to four percent. During the 1980s, less than two percent of GDP was spent on means-tested benefits. Total US social spending was 19 percent of GDP in 2016, compared with 22 percent in the UK, 25 percent in Germany, and 27 percent in Sweden.

Over 60 percent of those with incomes below the poverty line receive assistance from at least one means-tested benefit program, compared with 13 percent of those with incomes above the poverty line. By race, 13 percent of non-Hispanic whites received means tested benefits in 2015, compared with 36 percent of Hispanics and 42 percent of Blacks.

Trump promised to repeal the Affordable Care Act, and the American Health Care Act unveiled in March 2017 would replace the ACA, save money, but increase the number of uninsured residents, largely because the penalty for not having health insurance would be repealed. Health insurance premiums would rise in the short term under the AHCA, but then fall. One projection forecast that there would be 56 million uninsured in 2026 under the AHCA, and 28 million under the ACA.