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October 2022, Volume 28, Number 4

Labor, FAST, Migrants

US employment returned to pre-covid levels in July 2022 as the unemployment rate dropped to 3.5 percent. The US added over 400,000 jobs a month in 2022, keeping the unemployment rate below four percent. By June 2022, private sector employment had returned to pre-covid levels, although public sector employment was still 600,000 below pre-covid levels.

The labor-force participation rate, which dropped from 63 percent before covid to 60 percent in April 2020, was 62 percent in summer 2022, which translates into 1.6 million more people employed or looking for work. Many workers 55 or older retired during covid, and the LFPR fell three percent for those under 25. About 88 percent of men 25 to 54, and 76 percent of prime-aged women, were in the labor force in summer 2022.

The federal government in March 2020 provided an extra $600 a week in unemployment insurance benefits to deal with covid-related layoffs; some $675 billion was paid out by September 2022. DOL’s IG estimated that at least 10 percent of the federal UI payments were stolen by persons who used the SSNs of dead people or prisoners and received benefits in multiple states.

Economic growth slowed in summer 2022; US GDP shrank in the first two quarters of the year. The private NBER defines a recession as a significant, persistent and broad decline in economic activity, and considers more than GDP to make after-the-fact determinations of whether there was a recession.

US labor productivity, the value of output divided by hours worked, rose over 10 percent in the second quarter of 2020 as low- but not high-wage workers lost jobs. However, by the second quarter of 2022, labor productivity fell over four percent as restaurants and hotels hired more workers. These workers generate less valuable output per hour worked.

Inflation rose more than expected in 2022, and persisted at high levels in summer 2022 even as energy prices fell. Inflation has been held in check by globalization that added workers to the labor force and held down wages and generally low energy and commodity prices. De-globalization, slower labor force growth, and the transition away from oil reverse these anti-inflation forces, promising more inflationary pressures.

Automation is spreading in warehouses. Amazon, which accounted for almost 40 percent of investment in warehouse robotics in 2021, has over 500,000 robots in its warehouses and plans to install more. Until the 2008-09 recession, most robots were in auto manufacturing; the downturn in car buying forced robot makers to turn to logistics. The US is expected to have dark warehouses, those with only robots, by 2025.

At the height of covid lockdowns in spring 2020, two-thirds of US workers were only remote, but the only-remote share of workers fell to one-third in mid-2022. Hybrid schedules that combine on-site and remote work are spreading, with many IT-related workers mostly remote while trade and hospitality workers are mostly on site. The highest rates of remote and hybrid work are in particular places, including New York City and San Francisco, and types of jobs, as with government jobs around Washington DC.

FAST. California Governor Newsom signed AB 257 in September 2022, the Fast Food Accountability and Standards Recovery Act, which creates a 10-member council to set wages and working conditions for the 500,000 employees of the fast-food industry in the state. The Fast Food Sector Council could raise the minimum wage for employees of restaurants without table service to $22 in 2023, when the state’s minimum wage will be $15.50.

FAST Council regulations would apply to restaurants with at least 100 US outlets, but would not make franchisors jointly liable for the violations committed by their franchisees. The fast-food industry and the state Department of Finance opposed AB 257, while unions supported the creation of a fast-food council. The Protect Neighborhood Restaurants aims to collect 623,000 signatures for a referendum to overturn AB 257 in the November 2024 election.

California has 70,000 owner-operators of big rig trucks, and AB 5 may require some of them to become employees of the companies that now treat them as independent contractors. Driverless trucks with safety drivers are already on restricted access highways, and may be adopted quickly if the cost of drivers increases by developing transfer hubs where trailers are handed off to local drivers for final delivery.

Migrants. There were about 2.1 million foreigners with temporary work permits in the US in 2019, making over one percent of US workers guest workers.

Three types of workers dominated among guest workers. Almost 600,000 or 30 percent of guest workers were H-1B college graduates, often Indian IT workers employed year round, followed by 335,000 L-1 intra-company transfers that also frequently involve IT workers. The next largest group included about 225,000 exchange visitors with J-1 visas, often college students who work for three to six months in the US, and 225,000 F-1 foreign students, who can work part-time while studying and full-time during school breaks.

There were about 200,000 H-2A farm workers and 160,000 H-2B nonfarm workers who filled seasonal US jobs. These six of the 24 temporary work visa categories account for over 85 percent of foreign workers.

Income. Median household income was $70,800 in 2021, meaning that half of US households had higher and half had lower incomes. Median incomes varied from a low of $63,400 in the south to $79,400 in the west.

Some 38 million people, about 11.6 percent of US residents, lived in households with incomes below the poverty line of $27,740 for a household of four. If taxes and government benefits are included, the poverty rate dropped to less than eight percent for all US residents and five percent for children.

Median earnings for all workers were $45,500, and for those who worked full-time $56,500. There were 168 million US workers with earnings in 2021, including 117 million who worked full time and year-round.

Education. Public school K-12 enrollment declined to 43 million in 2021-22. Many parents joined anti-vaccine and anti-mask protests during extended school shutdowns in 2020 and 2021, turning some Democratic suburbs into Republican suburbs.

The anti-vaccine movement took advantage of parental frustration with covid school policies to extend its reach, taking partial credit for the victory of Glenn Youngkin in the Virginia governor’s race in 2021. There could be several lasting consequences of 2020-21 covid school policies, including more mothers with school-age children voting Republican and shunning all vaccines for their children.

President Biden via executive order cancelled up to $10,000 in student debt for individual borrowers who earn less than $125,000 a year, and another $10,000 for those who received the Pell grants for low-income students. Biden also continued the covid-started repayment holiday through the end of 2022. Some 45 million Americans had $1.7 trillion of student debt in 2022, an average of almost $38,000, and 40 million are expected to benefit, with half having their student debt erased.

The CBO estimated that Biden’s student debt forgiveness plan would cost at least $400 billion. The actual cost will depend on how many students limit their loan repayments to five percent of their income when they are required to resume making payments, down from the current 10 percent. Those earning less than 225 percent of the federal poverty line will not have to repay any of their student debt.

Critics called Biden’s student debt plan the most costly executive action in history. They warned that, because many students are likely to repay only half of what they borrow, they will take out maximum student loans, which will enable colleges to raise tuition faster. They note that exempting low-earners from repaying student debt will provide incentives for students to major in subjects that may not lead to high-earning jobs.

US students currently borrow $100 billion a year for higher education, some of it to attend for-profit colleges whose graduates often fail to find higher-wage jobs. Biden’s plan ends the rule barring loans to students who attend institutions where many students default.

College enrollment is declining, from a peak of 20 million in 2011 to 18 million in 2019 and 16 million in 2022. Declining enrollment combined with rising costs are forcing some colleges to close; over 500 four-year colleges are expected to merge or close in the next five years. Boston-based Northeastern University, which emphasizes work-study programs, is expanding by taking over shrinking colleges such as Mills in California.

Half of private universities, including most elite institutions such as Harvard, give preference to the children of alumni. So-called legacy admissions are coming under attack as the USSC is set to consider whether universities may give preference to underrepresented minorities. Those admitted under legacy preferences, about a seventh of the freshman class at some elite schools, are more likely to attend and to donate.

Oberlin, a private university in Ohio, in September 2022 agreed to pay over $36 million to local bakery Gibson’s after Oberlin administrators backed students who protested when a Black student was caught shoplifting in November 2016. Students and Oberlin administrators accused Gibson’s of racial profiling for its chase-and-detain policy regarding suspected shoplifters, and a jury found that Oberlin libeled Gibson’s.

Two-thirds of US-born economic PhDs had a parent with a graduate degree in 2020, compared with 20 percent in 1970, suggesting that having educated parents is becoming a prerequisite for earning an economic PhD. In the top 15 economics 15 PhD programs, 80 percent of graduates had a parent with a graduate degree.

The share of parents with graduate degrees and college-age children rose from four to 14 percent between 1970 and 2020, perhaps reflecting the willingness of graduate degree holders and their children to accept lower salaries in exchange for more creative and enjoyable work.

The Hot Seat is a book that examines college football via the Michigan Wolverines, who attract an average TV audience of 4.7 million for their games. As TV networks pay more to broadcast college football, they run more commercials, which slows play and stretches many college games to three or four hours. Disney earns $8 a month from ESPN, while Fox News generates $2 a month.

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