October 2020, Volume 26, Number 4
Labor: Covid, AB 5, H-1B
US employment fell by 22 million in March-April 2020, but increased by 11.4 million between May and September 2020; the unemployment rate fell from a peak of almost 15 percent in April to 7.9 percent in September. In February 2020, the unemployment rate was 3.5 percent, meaning 6.5 million were unemployed; by April, there were 23 million unemployed.
Payroll protection loans kept many workers on employer payrolls even while they were not working, as with airline and theme park staff. Payroll protection benefits ended September 30, 2020, prompting widespread layoffs.
Qualifying laid-off workers received state unemployment insurance benefits and, between March and July 2020, an additional $600 a week in federal benefits. State UI benefits vary between $200 to $400 a week, making combined federal and state UI benefits for many low-wage workers more than their earnings while employed. The federal UI benefit dropped to $300 a week in August 2020.
Some employers complain that, with workers receiving more from UI benefits than earnings from work, they cannot fill low-wage positions. However, workers who were laid off often return to their old jobs even if their take-home pay drops because they fear permanent loss of their jobs.
Covid-19 is speeding changes already underway, increasing the demand for skilled workers who can work remotely and eliminating jobs for low-skilled workers who can be replaced by machines or self-service. To help low-skilled workers cope with the changing labor market, the Skills Renewal Act (S 3779) would create a $4,000 refundable tax credit to allow workers who lost jobs due to Covid-19 to train for new jobs.
A K-recovery is appearing in the US labor market. Professionals who can work remotely have adapted to working from home and benefitted from rising stock markets. Meanwhile, some essential workers were displaced by machines or lost their jobs because wealthier Americans traveled less and stopped eating in restaurants.
Covid speeded a transition to remote work and more automation, benefitting professionals with less commuting and travel and leaving fewer jobs for less-educated and skilled workers. Worker advocates believe that more unionization, fewer leveraged buyouts, and treating employees as stakeholders in firms could slow automation.
Nursing and care homes for the elderly were hotspots for Covid cases and deaths. One reason is the tension between mandatory staffing ratios and low wages, which encourages some staff to work at several nursing homes. Nursing homes have directly hired workers and employees of staffing agencies, some of whom work part-time and move between care homes. Care home operators say they cannot raise wages due to low reimbursement rates from the government agencies that pay for elderly care.
Median US household income was a record $68,700 in 2019, and the share of US residents with below-poverty level incomes was 10.5 percent, the lowest rate since 1959. Some 9.2 percent of US residents lacked health insurance for some or all of 2019.
The richest 20 percent of US households, those with incomes of at least $142,500, collectively received 52 percent of US income, and the top five percent with incomes above $270,000 received 23 percent. The poorest 20 percent of households had incomes below $28,100, and they collectively received three percent of US income.
The Census Bureau publishes a supplemental poverty rate that includes factors such as the cost of living, and found that over 17 percent of California’s residents had below-poverty level incomes in 2019, primarily due to the high cost of housing. The cost of creating housing for the homeless can be very high. Creating 250 square foot rooms in Sacramento’s Capitol Park Hotel cost $445,000 per room, more per square foot than the cost of building a detached single family home.
The US budget deficit was $3.1 trillion in FY20, which was 15 percent of the $20 trillion GDP and the largest government deficit as a share of GDP since 1945. The federal government increased spending by about $4 trillion between March and September 2020 in response to covid. Accumulated government debt topped 100 percent of GDP.
AB 5. California’s AB 5 requires app-based firms such as Uber and Lyft to treat their drivers as employees rather than independent contractors. The state sued Uber and Lyft in May 2020 to enforce AB 5, but the two ride-hailing firms blocked AB 5 temporarily and funded Proposition 22, an initiative on the November 2020 ballot to overturn AB 5. Prop 22 has become the most expensive in the state’s history, with over $185 million spent for and against efforts to endorse or overturn AB5.
Uber and Lyft argue that treating drivers as employees would increase costs by 20 to 30 percent. Uber made changes to its app to reinforce the independent contractor status of drivers, such as showing fares to drivers upfront and allowing them to decline rides without penalty. Uber and Lyft announced that if Prop 22 fails, they may franchise their apps so that franchisees would become the employers of drivers, which is the way Uber operates in Germany and Spain.
DOL in September 2020 unveiled draft regulations that would allow more workers to be considered independent contractors if they controlled how they performed their work and had the opportunity to make a profit based on their own initiative. DOL would consider the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment, to determine whether the worker is an employee or independent contractor. Under the proposed regulation, gig workers could be treated as independent contractors.
SB 1399 would have banned piece-rate pay for workers in California’s garment industry, which employs 45,000 workers, and make “brand guarantors jointly and severally” liable for any wage theft that occurs in the production of their clothing. After 72 Thais were found sewing garments in 1999 in El Monte, garment manufacturers were made jointly liable for labor law violations committed by their contractors.
Worker advocates say that the piece-rate wages paid by the contractors who sew garments for Fashion Nova and Forever 21, many owned by Korean immigrants, leave Mexican immigrant workers with below minimum wage earnings, even though contractors are supposed to “make up” worker wages to at least the state’s $13 an hour minimum wage. DOL’s analysis of contracts between garment brands, manufacturers, and contractors found that manufacturers often received too little to ensure that they and their contractors could pay minimum wages. SB 1399 failed in 2020, but Senator Maria Elena Durazo (D-LA) promised to re-introduce it in 2021.
US government debt of almost $21 trillion surpassed US GDP in June 2020. The debt rose from $17 trillion at the end of 2019, adding the US to the list of countries including Japan and Italy where debt exceeds GDP. Low interest rates, 0.7 percent on 10-year Treasury bonds, have reduced the cost of servicing large government debts.
H-1B. DOL and DHS proposed new regulations in October 2020 that will require employers of H-1B foreign workers to pay higher salaries, at least the 45th percentile of wages in the occupation rather than the 17th percentile. Foreigners (except fashion models) must have a college degree in the occupation in which they are working rather than simply a college degree. The administration predicted a third fewer H-1B petitions would be filed.
Most H-1B visa petitions offer workers Level 1 or 2 prevailing wages, which are the 17th and 34th percentile of wages in the occupation as show in Occupational Employment Statistics. The new regulations raise Level 1 and 2 prevailing wages to the 45th and 62nd percentile of OES wages.
A federal judge in October 2020 blocked implementation of a June 2020 executive order barring the issuance of some H-1B, H-2B, J-1, and L-1 visas through the end of 2020. The judge said that the order barring entries violates immigration laws and that DHS provided no analysis to explain how the bar would protect US workers.
Indians receive two-thirds of H-1B visas, and uncertainty over the future of the H-1B program could lead to more US jobs being out-sourced to India as working remotely becomes the norm. Tata Consultancy Services, the largest IT outsourcer with more than 400,000 worldwide employees, wants to improve India’s IT infrastructure so that more Tata employees in India can work remotely.
Education. Covid-19 made back-to-school planning difficult for the 56 million US K-12 students and the 20 million US college students. President Trump and many doctors urged K-12 schools to open for in-person teaching, arguing that children are less likely to get the virus, and that children need in-person instruction to learn and so their parents can work. Teachers unions, who represent about 70 percent of US teachers, countered that in-person instruction endangers their members.
Western Governors University, an online nonprofit university for working adults who want to learn new skills, granted a sixth of the US bachelor’s degrees in nursing in 2019. The Trump administration wants to expand apprenticeship programs and ensure that federally funded training programs are attuned to the needs of private business. Because US workers often change jobs, employers have been reluctant to invest in training for their employees.