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July 2019, Volume 25, Number 3

Labor, H-1B

The US unemployment rate fell to a 50-year low in April 2019, 3.6 percent, marking 103 months of job gains. Average hourly earnings rose at a three percent annual rate to $23.30. In 2018, employers added an average 223,000 jobs a month. Job growth slowed in 2018, and was 224,000 in June 2019, the 10th anniversary of the end of the 2008-09 recession.

The federal minimum wage has been $7.25 since 2009, and is now 31 percent of the average wage. Many states and cities have raised their minimum wages and aim to have a $15 an hour minimum wage by 2022 or sooner. Currently, 29 states have minimum wages above the federal level.

Most economists believe that minimum wages of 50 to 60 percent of the median wage do not result in significant job losses. A $15 an hour, the minimum wage would be about 70 percent of the median US wage. France and Portugal have national minimum wages that are 60 percent of median wages.

Foreign-born. Foreign-born men have higher labor force participation rates than US-born men, 78 percent compared to 67 percent in 2018. Foreign-born women have a lower participation rate, 54 compared to 58 percent for US-born women. Foreign-born workers are mostly male, 57 percent compared to 52 percent of US-born workers, and more likely to be in the 25-54 age group, 73 percent compared to 62 percent.

The 28.2 million foreign-born workers in the 162-million strong US labor force in 2018 were 17.4 percent of US workers. About half of foreign-born workers were Hispanic, and a quarter were Asians. Among US-born workers, Hispanics were 11 percent and Asians were two percent.

The unemployment rate of foreign-born workers in 2018 averaged 3.5 percent, compared to 4.0 percent for the US-born; the unemployment rate of the foreign-born men was even lower at 3.0 percent. For all racial and ethnic groups, foreign-born workers had lower unemployment rates than similar US-born workers. For example, among Hispanics, an average 3.8 percent of the foreign-born were jobless in 2018, compared to 5.5 percent of US-born Hispanics.

The gap in labor force participation was especially large for foreign-born women with children under 18, only 61 percent compared to 75 percent of US-born women with children under 18 were employed or looking for work. For women with children under three, the gap was even larger, 45 percent of foreign-born women and 66 percent of US-born women with small children were in the labor force.

Over 21 percent of foreign-born workers did not complete high school, compared with four percent of US born workers. About 37 percent of foreign-born workers, and 41 percent of US born workers, had college degrees. Foreign-born Hispanics with less than a high school education were much more likely to be in the labor force than similar US-born Hispanics: 63 percent of foreign-born Hispanics without high school diplomas, compared to 46 percent of US-born Hispanics, were in the labor force in 2018.

The foreign-born are concentrated mainly in particular occupations, including in agriculture, construction and services. Two percent of foreign-born men, compared to 0.8 percent of US-born men, were in farming. Similarly, 16 percent of foreign-born men, compared to 8.3 percent of US-born men, were in construction occupations. Among women, 10 percent of foreign-born women, compared to two percent of US-born women, were in cleaning and maintenance occupations.

The share of immigrants among construction workers is rising, from 20 percent in 2004 to 25 percent in 2016. Immigrants are half of the workforce in construction specialties such as plastering, roofing and hanging drywall. Immigrants are believed to be a third of workers in the hotel and lodging industry, a quarter of home health care aides and 20 percent of those in the food service industry.

The median earnings of foreign-born workers were 20 percent lower than for US-born workers, $758 a week compared to $910. The gap in earnings was larger for foreign-born men than for foreign-born women, who earned 84 percent as much as US-born women. Similarly, the gap was larger for older workers: foreign-born workers 55 and older earned 75 percent as much as similar US-born workers, while those 25-34 earned 92 percent as much as similar US-born workers.

The gap between the earnings of foreign-born and US-born workers reverses as education rises. Foreign-born workers with less than a high-school education earned an average $535 a week in 2018, compared to $578 for similar US-born workers. However, foreign-born workers with college degrees averaged $1,362 a week, compared with $1,309 for similar US-born.

Automation. How many "good jobs" will be lost to automation? Maersk in June 2019 said that driverless cargo carriers would be introduced in July 2019 at its terminal in Los Angeles-Long Beach, the largest US container port with 484 acres and 26 miles of road that handles a third of US goods imports.

The International Longshore and Warehouse Union contract with shipping firm Maersk allows automation, but opponents tried to block a permit needed to charge the automated carriers to slow their introduction, prompting Maersk to use automated carriers with diesel engines to recharge batteries. The automated carriers that move containers to and from ships over 24 hours a day, compared to 16 hours for the current diesel carriers manned by ILWU members.

H-1B. The H-1B program continues to generate controversy. Many tech firms argue that there are not enough IT workers in the US to keep them competitive globally, so they should have easy access to the foreigners they want to hire. Foreigners with H-1B visas are required to stay with their employer, and most stay with one employer for the six years they are permitted to stay in the US in the hope that their employer will sponsor them for an immigrant visa.

Critics of the H-1B program point out that H-1B workers must satisfy their employers to remain in the US. Many employers prefer to hire young workers to minimize wage and benefit costs and maximize hours worked. They call H-1B workers indentured servants.

Gig Economy. The California Supreme Court in April 2018 made it more difficult for employers to classify workers as independent contractors by adopting the ABC test in its Dynamex decision, which concluded that package delivery drivers were employees, not contractors. Dynamex's business was delivering packages, and workers performing jobs that are part of the "usual course" of the company's business are employees.

California businesses want exemptions from the Dynamex decision so that Uber drivers and other gig workers are still considered contractors. AB 5 seeks to clarify who is and who is not an employee.

Some unions may be willing to allow Uber drivers and other gig workers to remain independent contractors if firms recognized them as the bargaining agent for gig workers. Citing the difficulty of contacting drivers without the help of Uber, a New York area union agreed that the drivers could remain independent contractors if Uber recognized the union as their bargaining representative.

Lyft and Uber went public in spring 2019, and their share prices dropped after trading began. The two major ride-hailing firms had combined losses of over $5 billion in the year ending March 2019. Both are having trouble recruiting and retaining drives, who earn $9 to $16 an hour after expenses. About two-thirds of Uber drivers in 2015-16 stopped driving after six months.

Lyft, which operates mostly in the US, reported that two million people drove for the company sometime in 2018, with over 90 percent driving fewer than 20 hours a week. Uber, operating in 63 countries, had almost four million drivers in the fourth quarter of 2018. Both Lyft and Uber give 70 percent of fares to drivers.

The Department of Labor in April 2019 issued an opinion letter finding that workers of an app-based cleaning firm were independent contractors rather than employees, reversing earlier Obama-era guidance that gig workers should be considered employees. The labor costs of app-based firms such as Uber would be 20 percent to 30 percent higher if their drivers were deemed employees. Up to five million people find at least part-time work via apps.

DOL is struggling to define the relationship between master brands and their franchisees to determine liability for labor law violations. The Obama DOL advocated broad liability, meaning that McDonald's or Hilton could be jointly liable for a franchisee's violations if they provided software and other human resource advice and materials to the franchisee.

The Trump DOL in April 2019 proposed regulations that would limit master-brand liability for franchisee labor law violations. There are almost 750,000 franchisees in the US, and the new rules would make them solely liable for labor law violations if they hired and fired workers, supervised them and kept their employment records.

The NLRB is wrestling with a similar dilemma. When Democrats had a majority, they issued the 2015 Browning Ferris decision, which made the operator of a waste-handling firm jointly liable for labor law violations with the staffing firm that supplied workers. The current Republican-majority NLRB may reverse this Browning Ferris decision.

Strikes. Some 10.5 percent of US workers are members of unions, including 6.4 percent of private sector workers and 34 percent of public sector workers.

There are relatively few strikes by private-sector workers. In April 2019, some 30,000 UFCW-represented employees of Stop & Shop went on strike in northeastern states, demanding an increase in their average $21-an-hour wage to offset rising worker-paid health insurance premiums.

Student Debt. The number of US undergraduate and graduate students was 17.5 million in 2018-19, down almost two percent from 2017-18. The largest drop was at four-year, for-profit colleges, which enrolled fewer than 750,000 students, down from almost a million. Four-year, private nonprofit colleges enrolled 3.8 million students. College enrollment peaked at 20 million in 2011-12.

The US had 19.5 million full-time workers with bachelor's degrees in 2018, up from 7.6 million in 1980. Over 34 percent of US residents 25 and older have bachelor's degrees.

The US has a student debt problem, with borrowers owing a collective $1.5 trillion; 40 percent is owed by graduate students. Many students do not earn degrees but find it hard to escape from their student debt.

College tuition has risen much faster than inflation since 1980, including much faster than health care costs. Some trace rising college tuition to the Higher Education Act of 1965, which allowed the federal government to guarantee loans made by banks to students. The result was a voucher system in which students chose which college to attend and took out loans to finance their education. The Higher Education Act of 1972 created Sallie Mae to buy loans from banks so that they could make more loans to students.

Since almost all students could take out loans for higher education, colleges raised tuition and fees. Colleges were not penalized for dropouts, so they could lower admissions standards to collect tuition. Some critics say that successive lowering of admissions standards to collect tuition from weak students contributed to high drop out rates and massive student debt.

Training. The Council of Economic Advisers in June 2019 released a report concluding that "government job-training programs appear to be largely ineffective and fail to produce sufficient benefits for workers to justify the costs." Over 40 federal-worker training programs served more than 10 million US workers in FY17.

The CEA was especially critical of the dislocated workers program funded under the Workforce Innovation and Opportunity Act (WIOA). The CEA also cited Job Corps and programs that put formerly incarcerated people back to work as examples of failing programs.