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July 2016, Volume 22, Number 3

Labor, H-1B

Over the past four years, US job growth has averaged over 200,000 a month, almost all in the private sector. However, wages have risen slowly except in states and cities where minimum wages have been increased.

Labor force participation has fallen. The share of men aged 25 to 54 in the labor force fell from 97 percent in 1964 to 83 percent in 2015, lower than in many European countries. There are many reasons, including the upsurge in immigration and high rates of incarceration in the US, since those leaving prisons after serving sentences often have trouble finding jobs.

Median hourly earnings in the US were $25 in 2015, when the federal minimum wage was $7.25. Many states and cities have higher minimum wages, including California and New York, which will have $15 minimum wages for larger employers by 2022.

A lower minimum wage is often established for tipped employees because of the tips they receive from customers. Some servers at upscale restaurants can earn over $100,000 a year with tips, but most servers work in casual dining outlets where bills and tips are much lower. Some restaurants, including the high-end Danny Meyer's Union Square Hospitality Group, have ended tipping.

Tipping is controversial among activists. Some argue that customers discriminate, giving higher tips to white than to minority servers. Some restaurants try to overcome customer discrimination with tip pools that are shared equally between servers.

Many US employers require prospective employees to undergo drug tests, which are mandatory for truck drivers but widely used for other jobs as well. Many workers do not apply for jobs at firms that require drug tests; five percent of those who take drug tests fail.

Beginning December 1, 2016, employees earning less than $47,476 a year will be entitled to overtime pay for hours over eight a day or 40 a week, up from the current $23,666. DOL says that 4.6 million workers will become newly eligible for overtime pay, including many employed in fast-food restaurants.

CEOs in 2015 received an average of 335 times the average earnings of non-supervisory workers, $12.4 million a year compared to $36,900.

The upper middle class, defined as households with incomes of $100,000 to $350,000 in 2014, include almost 30 percent of US residents, double their 13 percent share in 1979 after adjusting for inflation. Between one and two percent of US households have incomes of more than $350,000 a year.

Foreign-born. Almost 17 percent of US workers in 2015, some 26.3 million, were born abroad. Over 65 percent of foreign-born US residents are in the labor force, compared with 62 percent of US born. Pay of US-born workers averaged $835 a week, and the foreign-born $680 a week.

Foreign-born workers were 11 percent of US workers in 1996, when data were first collected.

Half of the foreign-born workers were Hispanic and a quarter were Asian. The unemployment rate for foreign-born workers in 2015, 4.9 percent, was lower than the rate for US-born workers, 5.3 percent.

H-1B. USCIS received 236,000 petitions for H-1B workers in April 2016, up from 233,000 in April 2015. There are 85,000 H-1B visas available; a lottery determines which foreigners get visas.

Speculation that there would be fewer applications from H-1B-dependent employers, those with at least 50 workers and 50 percent with H-1B visas, because they must pay double the usual $4,000 per visa, proved to be wrong. India has asked the World Trade Organization to declare that the increased fees for L-1 and H-1B visas violate US WTO GATS commitments. The US doubled regular fees for H-1B and L-1 visas to $4,000 and $4,500, respectively.

The New York Times June 12, 2016 reported on the widespread use of "disparagement clauses" in severance agreements when US workers are replaced by H-1B workers. Abbott Laboratories in Illinois outsourced the work of 150 IT employees to Wipro, which said it would use a combination of US and H-1B workers to do Abbott's IT work. The fired IT workers had to promise not to disparage Abbott in exchange for severance pay and continued medical benefits. Some did not sign, and sued Abbott for discrimination on the basis of age and nationality.

Welfare Reform. Temporary Assistance for Needy Families (TANF) replaced the open-ended entitlement Aid to Families With Dependent Children (AFDC) as the major federal cash welfare program on August 23, 1996. TANF limited cash assistance to poor people to 24 consecutive months and a total of 60 months, and turned federal aid to the states that administered TANF into a block grant of $16.5 billion a year. States were required to encourage TANF recipients to work, but were given some flexibility in determining pathways to employment.

The number of people receiving federal cash benefits under AFDC/TANF poor fell from 12.3 million in 1996 to 4.1 million in 2016. In 1996, two-thirds of poor families received cash assistance. Two decades later, a quarter do.

The share of US residents with below-poverty level incomes, defined as an annual income of less than $20,160 for a family of three, was 15 percent in 2015. A quarter of poor families with children get TANF payments, down from two-thirds under AFDC.

Other federal assistance programs have expanded, including food stamps or the Supplemental Nutrition Assistance Program (SNAP) and the Earned-Income Tax Credit (EITC). SNAP, which cost $70 billion in FY15, provides an average of $127 per person per month to buy food. Some 45 million US residents redeemed their SNAP benefits at 265,000 stores around the US. Some $8 billion of SNAP benefits were redeemed in liquor and convenience stores, whose continued ability to redeem SNAP may be threatened by proposed rules to require SNAP stores to stock healthy foods.

The EITC, which requires that both the earners and dependents have social security numbers, provided $66 billion to poorer earners in 2015, while the Additional Child Tax Credit (ACTC), which requires only dependents to have social security numbers, provided $24 billion to low earners. Many unauthorized workers with US-born children receive ACTC but note EITC benefits.

Senator Bernie Sanders (D-VT) made a single-payer health insurance program a keystone of his campaign. Many countries have single-payer health insurance and spend less on health care than the US. However, the US pays doctors and hospitals more than other countries do, so a US single payer system would be more expensive unless these payments were reduced.

For example, the average US family doctor earned $207,000 in 2015, double the average in the UK, in part because of difficulties in the certification of foreign-trained medical professionals. About 80 percent of US health care spending goes to provide health care. Eliminating private insurance and its bureaucracy could save 20 percent of current spending.

Social Security is the largest federal entitlement program, with 60 million people receiving $74 billon in benefits each month. Those born after 1959 receive full benefits at age 67.

Students. There are calls for more STEM graduates (science, technology, engineering and math), even though those with doctorates in STEM and other fields have increased difficulty finding jobs that use their education. In 2014, almost 40 percent of new PhD recipients in all fields had no firm job prospects, up from 30 percent in 2009. Median salaries for new and mid-career PhDs have also been falling.

One reason is that the US is producing more PhDs, a record 54,000 in 2015, while the academic job market that hires most PhDs is shifting from tenured professors to adjuncts, who are often paid as little as $3,000 a course with no benefits. Pharmaceutical firms have shifted much of their research abroad, reducing jobs for PhD chemists.

A third of those earning PhDs, 18,000 a year, are foreigners, and 60 percent of foreigners awarded US PhDs stay in the US after earning degrees. Many spend several years as post-docs, positions that typically pay less than $50,000 a year.

The US is also producing too many lawyers, most of whom are US natives. There are 200 ABA-accredited law schools; many of their students go into debt to attend private schools that charge high tuition. A third of graduates do not pass bar exams, and of those that find jobs, less than half use their law license.

Applications to US law schools peaked at 100,000 in 2004, and then began a long decline that has accelerated since the 2008-09 recession. Enrollment in US law schools has dropped, but the number of faculty members dropped far less, encouraging some schools to admit weaker students to pay the tuition that supports the faculty.

Almost five million students are studying outside their country of citizenship, including a million in the US, of which 30 percent are Chinese. The number of foreign students is projected to double by 2040, as many public and private universities attract students from affluent families in China, India and other fast-growing countries.

A June 2016 report found that the US universities that have increased enrollment of foreign students also have found increased cheating, with international students five times as likely to be alleged to be cheating than are US students. Of the almost 600,000 foreign students enrolled in US colleges in 2015-16, almost 30 percent were Chinese, and they were most likely to face allegations of cheating.

One reason Chinese students go abroad to study is because, except for the top 100, most of the 2,500 higher education institutions in China are considered diploma mills. Average monthly salaries of college graduates in China are about $550, the same as the earnings of migrant construction workers. China awarded 7.5 million college degrees in 2015, compared with 3.8 million in the US for associate and above.

Uber. Uber considers the 400,000 "partners" who use its app and their own cars to transport customers to be independent contractors. Some Uber drivers want to be employees, which would require Uber to pay work-related taxes on their wages and entitle the drivers to unemployment and other benefits as well as the right to organize into unions.

Uber, at $60 billion the most valuable app-based gig-firm, in April 2016 agreed to pay $100 million to settle class-action labor suits involving 385,000 drivers in California and Massachusetts. Under the settlement, drivers continue to be contractors, but Uber will explain to terminated drivers why they were dropped; some whose customer ratings fell below 4.5 out of five were terminated. The settlement allows drivers to post signs in their cars requesting tips, and a drivers association will meet quarterly with Uber.

Uber controls the technology and has superior information, giving Uber power relative to its drivers. One study found that the average monthly income of those providing labor via apps, including Uber and Airbnb, was $533, representing a third of their total income of less than $20,000 a year.

Uber and other gig-based job apps, what the US government calls "digital matching firms," increase flexibility for workers. These firms use apps to facilitate transactions, user-based ratings of quality, and workers providing cars and tools and working flexible schedules.

Some economists have proposed that the current distinction between employee and independent contractor be expanded to three categories, adding one for independent workers such as those employed in the sharing economy. The employers of independent workers would make payroll tax payments, but independent workers would not be covered by minimum wage and overtime laws because they set their own hours.

Almost 30 percent of US workers require a state or local license to do their jobs, and few states recognize licenses issued by other states. President Obama, citing the difficulties faced by military spouses who move frequently, is spearheading a drive to review licensing requirements to determine if they are truly necessary.

The purpose of licensing is to protect consumers from unqualified providers of services. However, there are over 1,200 occupations that are licensed in some state or city, but only 50 that require licenses everywhere, raising questions about the logic of licensing barbers, yoga teachers and tour guides. Most licensing boards are dominated by incumbents, giving them little incentive to make it easy for newcomers.


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