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January 2023, Volume 29, Number 1

Labor, Education

The US unemployment rate was low in fall 2022 at 3.5 percent, as the US added an average of 400,000 jobs a month. The labor force was 165 million at the end of 2022, including 159 million employed persons.

Many employers complained of difficulty recruiting; there were twice as many job vacancies, about 12 million, than unemployed workers, about six million, throughout 2022. The CPI rose by eight percent in 2022, while average hourly earnings rose five percent, suggesting declining real wages.

The USITC released a report in October 2022 that concluded US minorities were most adversely affected by US free-trade policies over the past three decades. Free trade put US workers in more direct competition with workers in lower-wage countries, reducing their bargaining power.

DOL in October 2022 proposed regulations that could require some firms that now treat workers as independent contractors to consider them to be employees; employers are liable for payroll taxes on employee wages. Uber and Lyft now treat their drivers as independent contractors and say that the cost of rides would increase by 20 to 30 percent if drivers were employees. The DOL proposal overturns a Trump regulation that gave firms more leeway to consider workers to be independent contractors.

Some of the 500,000 foreigners in the US with H-1B visas lost their jobs during a wave of tech layoffs in 2022; they have 60 days to find another US job or leave the country. Many H-1B workers are from India, and many hope to be sponsored by US employers for immigrant visas. US employers asked for almost 500,000 H-1B workers for FY23, when 85,000 were available to for-profit companies; recipients were chosen by lottery.

USCIS proposed to raise the cost of an H-1B visa from $470 to $1,595 in January 2023, and to increase the cost of an L-1 visa from $460 to $1,985.

The Economic Development Administration awarded 21 grants to create good jobs in poor areas, including a future of food project in the San Joaquin Valley. Experience bringing good jobs to poor people in lagging areas is not promising; most economists favor helping people to move to opportunity. Evaluations of the 9,000 Opportunity Zones created by the 2017 tax law conclude that they reduced tax bills for high-income people but created few jobs and little development.

A rise in shoplifting is accelerating the expansion of online sales, where sellers must cope with returns but not $100 billion a year of “shrink,” which doubled since 2018. Stores say that many factors, from too few staff to changes in laws that reduced punishment for theft, are responsible for more theft; thieves can sell items on Amazon or eBay.

The 60,000 app-based delivery workers in New York City are pushing for a city mandated $23.82 an hour minimum wage by 2025, with tips bolstering worker pay further. Delivery workers are independent contractors who decide when and where to work, and app firms say that a New York City minimum wage law could have workers competing to deliver from popular restaurants. New York City says that app-based food delivery workers, many of whom are immigrants, now earn an average $15 an hour including tips.

The Federal Trade Commission in January 2023 proposed to ban of noncompete clauses in employment contracts in order to increase worker mobility and wages. Noncompete clauses in employment agreements typically prohibit employees from moving to another employer in a similar business or starting a competing firm for several years after leaving the employer. The FTC estimates that 20 percent of US workers have signed noncompete clauses, which are often regulated by states.

California and Oklahoma make noncompete clauses unenforceable in nearly all employment contracts. Studies find that ending noncompete clauses increases both worker mobility and wage increases, and that ending them prompts employers to find other tools to retain talent such as deferred compensation.

The McKinsey consulting firm was founded in 1926 was transformed by Marvin Bower in 1933 into a global consultancy that helps businesses to increase profits. McKinsey hires fewer than two percent of the 200,000 applicants who seek its $200,000 jobs each year.

Critics allege that McKinsey consultants raise short-term profits by reducing costs. Laying off workers, reducing investments in worker benefits and R&D, and raising prices gives McKinsey consultants an aura of success, but these strategies may weaken firms in the long term. Evaluating the effects of McKinsey strategies over time is difficult because the firm does not disclose its clients or strategies. One critic says that McKinsey may be “the single greatest legitimizer of mass layoffs than anyone, anywhere, at any time in modern history.”

Gambling is a government-sanctioned means of extracting money from people who often fail to understand that most will lose money. Casino gambling, once confined to Nevada, has spread to most states, and has been joined by gambling on sports since 2018. FanDuel and DraftKings joined with professional leagues to develop systems that entice people to try online betting, offering free online bets.

Education. The number of K-12 pupils in public schools, almost 50 million in 2019, dropped to 48 million during covid and is expected to continue to fall to 46 million by 2030. Some seven million K-12 pupils were enrolled in private schools in 2021.

Before covid in 2020, almost half of US electronic job postings required a college degree. College-degree-required postings dropped to a third of all postings in 2020 and 2021, and rose to 40 percent in 2022, reflecting a shift by more major employers and governments to seek skills rather than credentials. IBM says that most of its US jobs no longer require a college degree.

College degrees typically result in higher lifetime earnings, $2.8 million compared to $1.6 million for an individual in one study. About 60 million US workers 25 and older have college degrees, and 70 million do not.

The annual open doors report estimated that a million foreign students, including graduates who remain in the US for optional practical training, were in the US in 2021-22. China accounted for 300,000 foreign students and OPTs, followed by 200,000 from India.

President Biden wants to cancel up to $20,000 in student debt and allow borrowers to repay 10 percent of their incomes, but his plan was challenged by states and borrowers who repaid their loans and those who would have to pay state income taxes on the forgiven debt. Under Biden’s plan, those earning up to $150,000 as individuals or $250,000 as a household are eligible for debt relief. Some 22 million people applied for loan forgiveness at in October 2022.

The CBO estimated the cost of loan forgiveness at $400 billion over a decade, assuming that 90 percent of the 37 million eligible borrowers would participate. The Biden administration estimates that 80 percent of eligible borrowers would participate, reducing the cost to $380 billion over a decade. A federal appeals court in October 2022 placed the loan forgiveness plan on hold.

The US Supreme Court heard arguments in October 2022 in cases that allege Harvard and the University of North Carolina use race to prioritize the admission of some minorities. The USSC upheld the use of race to select incoming students in 2003 to allow universities to create a “critical mass” of minority students, but the majority opinion noted that affirmative action should not be necessary after 25 years, that is, in 2028.

Most observers expect the USSC to end affirmative action in higher education. Chief Justice Roberts has said: “The way to stop discrimination on the basis of race is to stop discriminating on the basis of race.” Courts and the public have become skeptical of affirmative action, even as many leaders continue to support the policy. University of California has been barred from using affirmative action since 1966 and, according to UC leaders, “struggles to enroll a student body that is sufficiently racially diverse to attain the educational benefits of diversity.”

The 200 selective US colleges and universities that include Harvard and UNC admit fewer than half of their applicants are most likely to give preferences to minority applicants to achieve diversity. These selective colleges and universities argued that they need to consider the race of an applicant in order to ensure diverse classes.

In 1960, the US was about 90 percent white and 10 percent Black; Hispanics were not recorded until 1970. The book Classified: The Untold Story of Racial Classification in America, concludes that “affirmative action categories almost always expand rather than contract, as more and more groups lobby to get affirmative action preferences and then lobby to protect those preferences.” Changes to immigration law in 1965 increased Hispanic and Asian immigration, changing the composition of the US population and creating new minorities.

Universities are becoming hotbeds of protest. Some University of Florida faculty protested the trustee decision to hire ex-Senator Ben Sasse (R-NE) as president in October 2022. Penn State in October 2022 ended plans for a Center for Racial Justice to address “the challenges of racism, racial bias and community safety that persist in our nation” by saying that it would instead expand existing efforts to combat racism.

Oxford philosopher William MacAskill’s book, What We Owe the Future, lays out the case for effective altruism, defined as doing as much good as possible with the money and time available and considering future generations. Many of the movement’s pioneers distributed insecticide-treated bed nets to prevent mosquitoes from giving people malaria; they also consider ways to retain human control over AI and how to prevent the spread of engineered pandemics. The organization GiveWell on Open Philanthropy supports projects guided by effective altruism.

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