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January 2020, Volume 26, Number 1

Labor, Health, UBI

The US unemployment rate was below four percent during 2019, ending the year at 3.5 percent. The US added 2.1 million jobs in 2019, an average 175,000 a month, down from 2.7 million or 225,000 a month in 2018. Between 2009 and 2019, the US added 22.6 million jobs.

Women held a majority of jobs at the end of 2019, the second time since 2009-10 that employed women outnumbered employed men.

The Democrat-controlled House in July 2019 passed a bill that would raise the federal minimum wage from $7.25 to $15 an hour by 2025; the bill has little chance of being enacted under President Trump. More cities are adopting higher minimum wages for specific industries, such as workers employed at airports or the hotels surrounding airports that are on city-owned land. Airport workers in New York, Chicago and Los Angeles have higher minimum wages than other workers in these cities.

Some data suggest that wages are rising fastest for low-skilled workers, in part because 29 states have minimum wages higher than the federal minimum wage, and many raise their minimum wage each January. California's minimum wage went from $12 to $13 an hour on January 1, 2020.

Some 17 percent of US workers were born abroad, including five percent who are unauthorized and one percent who have legal guest worker status.

Gallup reported that a quarter of US workers have nontraditional work arrangements with multiple income sources, including half who have multiple jobs to earn extra money and a third to generate sufficient earnings. A sixth of tax filers reported self-employment income in 2017, but half of them also received a W-2 form from an employer, which explains why over 90 percent of all tax filers report W-2 income.

The Current Population Survey and the American Community Survey identify people by their major job, and do not report an increase in self-employment.

Softbank's Vision Fund, created in 2016 to invest $100 billion in startups, has been accused of accelerating the independent contractor model, under which workers are uncertain whether they will have work and earnings. The Vision Fund has backed 88 startups, many in developing countries and many devoted to ride hailing and delivery services. The sovereign wealth funds of Saudi Arabia and Abu Dhabi are among big investors in Softbank's Vision Fund.

The Shift Project documents the effects of changing work schedules on low-wage on call workers, meaning that the workers may not know from day to day whether they will be employed. Scheduling software allows managers to call in workers as needed to handle the flow of business. The Schedules That Work Act pending in Congress would require employers to provide schedules two weeks in advance and compensate employees whose schedules are abruptly changed.

Wage inequality has risen in the US, and especially in California, which has seven of the 10 most unequal metro areas. The wages of workers at the 90th percentile of earners are 65 to 79 percent higher than the wages of workers at the 10th percentile of earners in cities from San Diego to San Jose, making the so-called 90/10 ratio 6.5 to 7.9 for the seven most unequal California cities.

California's Future of Work Commission is exploring state policies to reduce inequality; its report is due in May 2020. A third of California's workers earn less than $15 an hour, and a fifth of low-wage workers have some college education. The Commission aims to slow what some call the "day labor-ization" of the economy, where workers do not know where or for how long they will work.

AB 5 went into effect January 1, 2020, an effort to force a million independent contractors to be considered employees. A major purpose of AB 5 was to require Uber and Lyft to consider their drivers employees and pay taxes on their wages. There were many unanticipated side effects, as freelance writers, translators, clergy and others found that the firms that once hired them as freelancers did not want to hire them as employees.

Massachusetts enacted a Domestic Workers Bill of Rights in 2014, and in 2019 the state Attorney General decided that au pairs in the US on J-1 cultural exchange visas are workers entitled to at least the state's $12.75 an hour minimum wage. The Department of State, which administers the J-1 program, requires au pairs to be paid at least $195 a week and to receive room and board; in Massachusetts, they will have to be paid about $500 a week. Families with au pairs want the right to deduct from higher wages the cost of room and board.

US manufacturers employed 13 million workers at the end of 2019. Increasingly, manufacturing workers have college degrees; by 2025, the majority of US manufacturing workers are expected to have college degrees.

H-1B. The IT workforce is young. Over 60 percent of IT workers are 22-44, compared with half of all US workers. Almost 30 percent of IT workers are 35-44, compared with 20 percent of all US workers.

Many firms prefer younger workers with fresh skills, while some older workers say that firms want younger workers to save money on wages and benefits. Many IT firms report trouble recruiting new workers, even as older IT workers say they have trouble getting job offers.

Currently, no more than seven percent of the 140,000-a-year employment-based green cards can go to citizens of any one country, resulting in long waits for immigrant visas for Indian and Chinese H-1B holders. The Fairness for High Skilled Immigrants Act (S 356) would phase out per-country limits on employment immigrant visas, and allow those who have been approved for immigrant visas, but have not yet received them, to change jobs and travel in and out of the US, giving them a quasi-immigrant status.

S 356 would also prohibit firms with 50 percent or more H-1B and L-1 visa holders from hiring more, effectively setting a quota on the share of H-1B and L-1 foreign workers at 50 percent.

SNAP. Welfare reform in 1996 required childless adults to work or train at least 20 hours a week to qualify for food stamps or be restricted to SNAP benefits for a maximum three months in a three-year period. States can get this work requirement waived if their unemployment rate at least 20 percent higher than the US average.

In August 2019, some 36.4 million US residents received SNAP benefits.

Beginning in April 2020, able-bodied adults without dependents will have to work or be in training at least 20 hours a week, and USDA will restrict waivers to work requirements only for states with unemployment rates of six percent or more and only for one year. Some 700,000 adults are expected to lose SNAP benefits.

Health. The Kaiser Family Foundation reported in October 2019 that the average annual family premium for employer-provided health insurance was $21,000 for 2020, with employees paying $6,000 or almost 30 percent. Average deductibles paid by employees ranged from $1,500 to $2,000.

The Trump administration allowed states to require able bodied recipients of Medicaid to work in order to receive benefits on Medicaid beneficiaries. Nine states imposed work requirements, and another nine requested permission to impose work requirements in Fall 2019. Medicaid expanded from 50 million in 2010 to 75 million recipients in 2019 due to provisions of the Affordable Care Act.

Some 33 million low-income children receive health insurance via Medicaid and the Children's Health Insurance Program. However, about five percent of US children lack health insurance, including children whose immigrant parents are reluctant to risk being rejected for immigrant visas because their children received means-tested federal benefits.

UBI. Fears that automation will displace workers has prompted proposals for a universal basic income. Democratic presidential Andrew Yang wants Americans to choose between a $1,000 a month UBI payment or the current mix of social welfare programs. Those who choose the UBI could not receive any federal benefits except social security and veteran's benefits. Some 125 residents of Stockton have been receiving $500 a month since spring 2019 in a test of a universal basic income.

Economists Saez and Zucman find that most Americans pay 24 to 30 percent of their income in federal, state and local taxes. The 400 highest-income Americans had an average tax rate of only 23 percent in 2018, contradicting the belief that the US has a progressive tax system. High-income taxpayers benefit from exemptions for corporate and estate taxes, prompting Saez and Zucman to urge a wealth tax and fewer loopholes to extract more taxes from the high-income Americans.

Saez and Zucman assume that corporate taxes are paid by shareholders, which means that the 2017 tax law reducing corporate taxes lowered the taxes paid by the rich who own most corporate stock. Other analysts assume that some corporate taxes are paid by workers in the form of lower wages. Saez and Zucman do not include earned income tax credits as income to recipients, treating them instead as government transfers.

Education. Program for International Student Assessment (PISA) data show that US 15-year olds are slightly above average in reading and below average in math compared to 15-year olds in other countries. The bottom 20 percent of US 15-year olds were far below average, often reading at the levels expected of 10-year olds.

The PISA test was given in 2018 to 600,000 15-year olds in 79 education systems around the world, and included both public and private school students.

US student debt topped $1.6 trillion in 2019, as a million students defaulted on student loans, often after they dropped out. Personal debt tied to autos, by comparison was $1.3 billion and, across the US, car dealerships make more money financing than selling vehicles.

Almost 1,000 US four-year colleges graduated less than half of their first-time-in-college, full-time students within eight years of enrollment, including the University of Phoenix. These colleges were accredited to admit students who receiver grants or take out loans under Title IV of the Higher Education Act. The accreditors have no firm guidelines to distinguish failing and successful schools, prompting proposals to establish a minimum standard for success in terms of graduation rates for an institution to be accredited.

Saez, Emmanuel and Gabriel Zucman. 2019. The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay. Norton.