SOURCE: AP/Alan Diaz

Immigration reform activists hold a sign in front of Freedom Tower in downtown Miami, Monday, January 28, 2013.

A new report by our colleagues at the Center for American Progress shows that creating a path for undocumented immigrants to earn legal status and citizenship will lead to substantial wage gains for these workers. In turn, these wage gains will help spur the American economy and lead to significant increases in gross domestic product, tax revenue, and jobs in the coming years.

Some observers may worry that the gains for newly documented immigrants will come at the expense of native-born American workers. But our review of economic research finds these fears to be unfounded.

Studies of the last large-scale legalization effort in 1986 found that legalization did not reduce wages for native-born American workers and, in some cases, actually raised wages. More recent research on the effect of increases in immigration over the past few decades find little to no wage or employment effects, providing additional confirmation for the earlier legalization studies, as well as alleviating concerns about possible harm from future immigration.

Further, this body of research finds that those with low levels of education, as well as Americans of color, are also likely to be unharmed by immigration, though the research does suggest that the wages of other immigrants may be reduced.

Contrary to common fears, immigrants are not frequently in direct competition with native-born American workers, in part because they tend to have different skill sets. Native-born American workers, for example, are likely to have much greater English language skills than new immigrants, allowing native-born workers to access more skill-intensive jobs.

American workers are not harmed and may even benefit from immigration, because immigrants tend to be complementary workers who help make Americans more productive. Bussers at a restaurant, for example, help to make waiters more efficient by increasing the number of tables a waiter can cover.

Other immigrants—those who are better established in the workforce—however, may find themselves in more direct competition with newly legalized workers, and the research suggests that the wages of the former group may suffer. Still, the small negative wage effect the research finds for existing immigrants is at least partially ameliorated for many mixed-status families—families that contain both documented and undocumented immigrants—by the increased wages that are a result of legalization for formerly undocumented workers.

Let’s take a closer look at the research on how workers are affected by immigration and legalization.

After the United States granted legal status to a large number of undocumented workers in 1986 through the Immigration Reform and Control Act, economists have been able to directly study the wage effects of granting legal status. The research of this period that focused on how the legalization of undocumented workers impacted native-born American workers finds that wages were unharmed.

Perhaps the most directly relevant study of the effect of legalization is by economists Elaine Sorensen of the Urban Institute and Frank D. Bean of the University of Texas at Austin. The study looked at the trends in wages of several groups and compared trends before the passage of the 1986 immigration reform to trends afterward. Researchers studied native-born workers and immigrants who had been in the United States for varying lengths of time. Each of these groups—native born and immigrant—was then divided into those of Mexican origin and white, non-Hispanic workers. These gradations allowed the authors to determine which groups, if any, newly legalized immigrants were competing against. The authors found that the wages of native workers, whether white or of Mexican origin, were not affected by the legalization of undocumented workers. The wages of more tenured immigrants of Mexican origin were decreased, however, because they tend to compete for the same jobs as newly legalized immigrants.

The other study most directly on topic is by economists Deborah A. Cobb-Clark, Clinton R. Shiells, and B. Lindsay Lowell, of Illinois State University, the International Monetary Fund, and the U.S. Department of Labor, respectively. Their research examined the effect of legalization on average wages for production workers in the manufacturing sector, a sector known at the time to frequently hire undocumented workers. Their study estimated the effect of legalization by looking at how average manufacturing wages differed across metropolitan areas with differing amounts of newly legalized workers. Cobb-Clark, Shiells, and Lowell found that legalization had a statistically significant positive effect on wages, though the magnitude of the increase was very small.

These results on the effects of legalization are consistent with a large and growing body of research on immigration and wages. An emerging consensus in the academic literature concludes that the wages of native-born workers, even low-skilled workers, are not significantly decreased by increases in immigration. In fact, immigration may very well increase their wages because the research suggests that the complementary effect may outweigh any impact from an increase in competition.

For years economists disagreed about the effect of immigration on wages. One group of economists, exemplified by Harvard University economist George Borjas, argued that immigration was a simple story of supply and demand. Immigrants increased the supply of labor and therefore reduced the wages of similarly skilled native-born Americans. Research in this vein tended to look at national labor markets when evaluating the effect of immigration and found significant decreases in wages for all workers, particularly for low-skilled workers.

A second group of economists argued that the national-level studies did not recognize that immigrants were not directly competing with many native-born workers because immigrants provided a different kind of labor than native-born Americans. This group of economists focused on studying regional labor markets to prove their point.

One study by University of California, Berkeley, economist David Card looked at the sudden influx of Cuban immigrants in Miami due to the Mariel Boatlift of 1980. He found that the large increase in low-skilled immigrants did not have any significant effect on the wages or employment opportunities of low-skilled native workers. Card separated out native workers into whites, blacks, Cubans, and Hispanics and found that none of these groups were adversely affected by the increased Cuban immigration.

More recent research has rectified these two strands of the literature—the national and the local approaches—to provide strong evidence that increases in immigration do not reduce wages for native-born American workers. This emerging consensus has been reflected in recent articles appearing in The New York Times and The New Yorker magazines, among other places.

The studies that are creating a new consensus take a national approach, such as those that found negative wage effects, but tweak the research method to account for several facts about the labor market that the area studies recognize. These adjustments, as detailed by Heidi Shierholz, an economist at the Economic Policy Institute, account for the difference in how readily employers switch between different types of workers.

First, the new national approach accounts for the inability of employers to perfectly substitute immigrants for native-born workers, who have skills that many immigrants cannot easily acquire, such as fluency in English. Since employers are less able to hire immigrants for jobs that require the kinds of skills most native-born workers have, fewer immigrants are competing against native workers than the method favored by Borjas assumed. Secondly, the new national approach takes into account the fact that employers can easily switch between high school dropouts and workers with a high school degree because these groups of workers have similar levels of job-relevant skills. Because of this hiring flexibility, the effect of an increase in immigrant workers who often have less than a high school degree is borne by a much larger group than previous research recognized.

The new national approach, like the older papers, also considers the role of immigrants as complements, making native-born workers more productive.

This new consensus is best reflected in several papers by economists Gianmarco Ottaviano of the Universita’ di Bologna, Italy, and Giovanni Peri of the University of California, Davis. In a 2012 paper Ottaviano and Peri studied the effects of immigration from 1990 to 2006 first by estimating the different elasticities of labor—how readily employers can substitute one kind of worker for another type of worker. The authors then plugged these estimated elasticities into a national labor model similar to one used by Borjas. They found native workers, on average, had their wages go up 0.6 percent due to increased immigration. And perhaps more interestingly, native-born workers with less than a high-school education also saw their wages increase. Ottavino and Peri did find, however, that increased levels of immigration reduced the wages of the average foreign-born worker.

More recent research has also found that immigration does not affect the employment of native-born workers. A 2009 paper by Peri and economist Chad Sparber of Colgate University found that immigration did not reduce the employment opportunities of native-born American workers. They found that native workers move into more highly skilled occupations in response to immigration. Specifically, black workers were more than three times as likely as nonblack workers to shift into higher-skill jobs. In a separate 2011 paper, Peri adapted the approach from his paper with Ottaviano to look at the employment effects of immigrants in California. Peri found that immigration to California between 1960 and 2005 did not affect the employment of native workers. This research implies that the legalization of undocumented immigrants would also not affect employment as these workers are already employed and therefore pose no threat to native workers.

In short, research on the 1986 legalization of undocumented workers, as well as more recent research on increased immigration, strongly suggests that a new effort to provide legal status for currently undocumented workers would not harm American workers, and in fact is likely to benefit them. Given that research also finds that legalization would increase the wages of the formerly undocumented workers, lawmakers should feel confident that legalization would be good for workers and the American economy.

David Madland is the Director of the American Worker Project at the Center for American Progress Action Fund. Nick Bunker is a Research Assistant at CAPAF.

* Note that the inflation adjusted average hourly wage of production and nonsupervisory workers declined by 3.7 percent from 1987 to 1992, but the research indicates that the Immigration Reform and Control Act’s legalization program did not cause the wages of native workers to decline.

SOURCE: AP/Darron Cummings

Ben Fairchild of Decatur, Indiana, displays a sign outside of the Statehouse in Indianapolis on January 4, 2012.

The Bureau of Labor Statistics released data today showing that the national union membership rate dropped to 11.3 percent in 2012—a net decline of 0.5 percentage points from 2011. The private-sector unionization rate continued its steady decline, dropping to 6.6 percent from 6.9 percent in 2011. And in a new and troubling—though expected—trend, the union membership drop in the public sector was more pronounced: Its rate dropped to 35.9 percent from 37 percent in 2011. The long and steady decline in union membership is worrisome, as unions are vital for a strong middle class. (see Figure 1)

State-level policy has recently become increasingly important to the fate of unions. States such as Indiana and Michigan passed “right-to-work” laws in 2012 that undermine the strength of unions by requiring them to provide services for which they are not compensated, while Wisconsin passed a law in 2011 that repealed collective bargaining rights for most of the state’s public-sector workers. These policy choices, as well as similar ones made in the past, can significantly impact unionization rates, and they help explain the wide variation in unionization among states. Using the Bureau of Labor Statistics data released today, along with data from an online database managed by economists Barry T. Hirsch and David A. Macpherson, we can see how trends in unionization have differed across states in recent years.

Since 1983, the earliest year for which comparable data is available, the overall unionization rate has declined—from 20.1 percent to 2012’s 11.3 percent. This decline, however, has not been uniform across the 50 states, due in part to states’ differing labor laws. Some states allow public-sector workers to collectively bargain, while others do not. Similarly, 24 states have “right-to-work” laws on the books that undermine unions by making them provide services without compensation. These policy differences are part of the reason why a state such as New York—which allows public-sector workers to collectively bargain—has a unionization rate of 23.2 percent, while a state such as North Carolina—a “right-to-work” state with weak rights for public-sector workers—has a unionization rate of only 2.9 percent, according to the Bureau of Labor Statistics data.

Using data on union membership rates from the Bureau of Labor Statistics and Hirsch’s and Macpherson’s database, we can also see how union membership rates have changed across the states over time. From 2009—roughly the end of the Great Recession—through 2012, states saw their union membership rates decline by an average of 0.25 percentage points per year. Compare that rate of decline to 0.15 percentage points per year between 2001 and 2007, the average rate of decline during the previous recovery. Indeed, it appears as though the decline in union membership rates is accelerating in the post-Great Recession economy. The overall level of employment may be growing, but union members are becoming a smaller and smaller share of the labor force.

Of course, the decline in union membership rates has been worse in some states than in others. Figure 2 shows each state’s average annual percentage-point decline in its union membership rate from 2009 through 2012 and compares those changes with the previous recovery from 2001 to 2007.

Several of the states that passed laws undermining workers’ rights have seen a significant fall-off in union membership. Wisconsin, which repealed collective bargaining rights for most of its public-sector workers in 2011, saw its overall union membership rate decline by an average of 1 percentage point a year from 2009 to 2012. In fact, Wisconsin’s union membership rate dropped by 2.1 percentage points from 2011 to 2012—one of the largest drops in the country, according to the data from the Bureau of Labor Statistics.

Moreover, Indiana saw its overall union membership rate drop from 11.3 percent in 2011 to 9.1 percent in 2012, as its “right-to-work” bill went into affect. And Michigan—a state that also passed a “right-to-work” bill in 2012 and previously passed an emergency manager law, which allowed unelected officials to unilaterally renegotiate union contracts—saw its union membership rate decline by an average of 0.55 percentage points a year from 2009 to 2012. According to the Bureau of Labor Statistics, the state’s membership rate dropped by 0.9 percentage points alone from 2011 to 2012. The trend of deunionization in these states will only worsen if these laws continue to stand.

State governments have been the focus of labor policy in recent years, as conservative governors and legislatures have passed bills that affect organizing in both the public and the private sectors. These policies threaten to accelerate the decline in unionization that has been so pronounced over the past 30 years. These state-level attacks must be rejected, and policies that help workers freely choose whether or not to organize should be adopted if we want to strengthen organized labor. Because strong unions are necessary for a strong middle class, these policies will help create a vibrant middle class—the engine of economic growth.

David Madland is the Director of the American Worker Project at the Center for American Progress Action Fund. Nick Bunker is a Research Assistant at CAPAF.

SOURCE: AP/David Kohl

Republican presidential candidate Mitt Romney speaks in Portsmouth, Ohio, Saturday, October 13, 2012.

Endnotes and citations are available in the PDF version of this issue brief.

Former Massachusetts Gov. Mitt Romney claims that if he is elected into office, he will create more than 12 million new jobs in his first term, a pace of 250,000 jobs each month. And the real kicker: The Romney presidential campaign predicts 7 million of these new jobs will be generated simply by cutting taxes.

This is, in a word, unbelievable. Kevin Hassett, economic advisor to the Romney campaign, said on National Public Radio recently that “Gov. Romney’s tax plan is modeled after the successful tax plans of the past, and it would generate growth because it would increase the incentive to do things that are good for America’s economy and America’s workers.” But we’ve heard this hyperbole before. Hassett was a part of the team claiming that President George W. Bush’s supply-side economics would create a strong economy. In fact, actual economic performance under these policies fell more than 8 million jobs short of what Bush economic advisors predicted. Hassett was wrong then and he’s wrong now.

The truth is, Gov. Romney is ignoring facts and history while employing seriously flawed economic logic. The evidence shows that the kind of tax plan Gov. Romney proposes to implement is a job killer. What’s more, successful tax plans of the past followed a different path than the one Gov. Romney now outlines. A number of economists dug into the numbers to demonstrate that the Romney economic plan would, if anything, push our economy back into recession and cost Americans jobs. This issue brief details the following:

• Gov. Romney’s 59-point plan for job creation will do the opposite, costing 360,000 jobs in 2013 alone by our conservative estimate.
• Gov. Romney and his advisor’s insistence on supply-side economics that didn’t work in the past and won’t work now.
• There is broad consensus and economic evidence that now is not the time to implement the spending cuts and deficit-reduction measures the Romney campaign is proposing.

In short, Gov. Romney’s plan does not contain any new or innovative policies to stimulate job growth and instead will bring back the Bush-era supply-side strategies that stunted job growth and led to the Great Recession. Let’s now delve into the details.

Gov. Romney’s job plan will lead to job losses

In a white paper outlining his economic platform, “Believe in America: Mitt Romney’s Plan for Jobs and Economic Growth,” Gov. Romney offers a 59-point plan to create jobs and lower unemployment. The Center for American Progress Action Fund went through this 59-point plan and, by a conservative tally, found that the plan would actually cost the economy about 360,000 jobs in 2013 alone. The 59 proposals in the Romney jobs plan can be grouped into four basic categories:

• Thirteen of Gov. Romney’s “jobs” proposals in fact offer no change in policy. It would defy the laws of nature for no change to create changes in employment of the magnitude Gov. Romney is promising. (See numbers 1, 2, 10, 17, 19, 23, 24, 33, 37, 49, 50, 51, 52 of his plan.)
• Twenty-six proposals should be expected to yield no discernible impact on job creation based on available economic theory and evidence because they are not really jobs proposals. Gov. Romney, for example, proposes renewing the president’s authority to negotiate trade agreements (number 18), a policy President Barack Obama has shown is not necessary to negotiate trade deals, nor would any new negotiations under a would-be President Romney be completed in any relevant timeframe. Another Romney proposal (number 21) suggests simply renaming some of America’s international trade relationships after Ronald Reagan, which may rally the conservative base but will not create a single job.
• Six proposals would directly eliminate jobs from the U.S. economy. These proposals would create tax incentives that encourage corporations to ship jobs overseas (number 7), and would undermine growth-enhancing investments in education, science, infrastructure, and health (numbers 8, 53, 54, 56, 57).
• Gov. Romney himself admits that cuts to public services and investments on the scale he has proposed as job-creating policies could cause an economic “recession or depression.” Even assuming a gradual phase-in, the expenditure and public service worker cuts can be expected to cost nearly 450,000 jobs in 2013.

The remaining few of his policies would be expected to yield some modest job creation. The scale of his tax cuts for the rich, for example, would likely lead to at least a little job creation, though far less than supply-side adherents assert. Of course, these proposals rank among the least efficient—and least equitable—policies for promoting job growth.

They would cost billions of dollars in tax revenues but only create between 39,000 and 107,000 jobs in 2013. That’s less than the average number of private-sector jobs created per month in 2012 thus far. What’s more, these estimates make the generously unrealistic assumption that foregone tax revenues and expenditures of public services would have no adverse economic costs.

This analysis of Romney’s jobs plan is consistent with research from the Economic Policy Institute that, using slightly different assumptions, found that Gov. Romney’s plan would lead to the addition of 87,000 jobs in all of 2013 if his proposed tax cuts were deficit-financed.

While it may seem like the estimates from these two nonpartisan think tanks are far apart—losing 360,000 versus adding 87,000—in reality, they are both saying that the Romney plan is a jobs bust. Over the past 12 months under President Obama, the economy has added 1.8 million jobs, so keeping on the same path is vastly better for job creation than the Romney plan.

Yet both the Center for American Progress and the Economic Policy Institute calculations overestimate the stimulus effects of the Romney plan because they do not include the elimination of tax deductions and loopholes as yet unidentified by the Romney camp. During the first presidential debate, Gov. Romney insisted that his tax cuts would be “revenue neutral.” His tax plan would cut tax rates by 20 percent for all taxpayers, costing the U.S. Treasury almost $5 trillion in lost tax revenue over 10 years. Romney argues it won’t cost $5 trillion, because he will offset the losses from lower rates by ending deductions and closing loopholes; he has not, however, indicated which ones.

Indeed, the most likely source of tax increases would be to eliminate loopholes and deductions that benefit the middle class, such as the mortgage interest deduction. EPI’s estimate of Gov. Romney’s economic plan, assuming that some of the cuts are offset to be revenue-neutral—specifically the 20 percent cut to individual income tax rates and the alternative minimum tax—but the others would be deficit financed. This is therefore a more accurate representation of Gov. Romney’s plan and the resulting job-creation figure. That number is an estimated loss of 608,000 jobs in 2013 and an additional loss of 1.3 million in 2014.

As Figure 1 shows, no matter how you cut it, Romney’s plan is worse than the status quo. His plan will either create a paltry number of jobs, far slower than the current pace, or will actually eliminate jobs and push the United States back into recession.

And if you don’t believe these estimates of jobs under the Romney plan, simply look to recent history.

Gov. Romney’s jobs plan rehashes the failed Bush-era strategies

We know what happened in the 2000s after the Bush tax cuts: After those supposedly job-creating tax cuts, our economy experienced its worst record for growth in investment, employment, and incomes in half a century—devastating our middle class.

The key argument in the supply-side story is that if Americans give the wealthy back their taxes, they will invest those added funds, thus growing the economy, creating jobs, and improving middle-class incomes. Of course, in the 1980s and 2000s, we tried exactly that, and it bears repeating—it didn’t work. Both eras experienced significant tax cuts aimed at higher-income households that were supposed to spur investment. But compared to the 1990s, the rate of growth of investment was actually much slower in the 1980s and the 2000s. (see Figure 2) And it turns out that the supply-side logic is backwards. Employment and incomes also grew more slowly in the 1980s and 2000s compared to the 1990s, when tax rates were raised. (see Figures 3 and 4)

In telling Americans that the Romney economic plan will create jobs, economist Kevin Hassett doesn’t just get his history wrong; his economic logic is off as well. He, like most supply-siders, argues that tax cuts work because they incentivize investors to invest. In their view, inequality is good because it creates that drive that capitalism needs.

As it turns out, incentives matter, but the supply-siders have the logic backwards. Creating the foundations for long-term, sustainable economic growth means using the power and resources that the government can bring to the table to support a strong middle class, which creates the opportunity for more people to become entrepreneurs and highly productive members of our economy. The economy also needs a strong middle class to support stable demand and effective governance—two pieces of the puzzle that have been eviscerated by the high inequality created by supply-side policies.

Moreover, the supply-side notion that higher inequality always creates drive is false in its own right. New research in behavioral economics shows individuals tend to prefer more equitable outcomes. When people’s sense of fairness is regularly violated, it can reduce motivation. Along these lines, there is a growing body of experimental research indicating how high levels of income inequality can have counterintuitive effects on people’s motivation to work and invest.

In gutting the government and promoting higher inequality, Gov. Romney would underinvest in the kinds of goods and services that support the middle class and improve future productivity and future economic growth. We can now see, for example, that higher inequality is limiting access to education among talented but low-income students. Letting teachers languish in the unemployment queue, instead of in the classroom where they should be, means that we are denying today’s children and young people access to a good education. This hurts us all because if today’s children cannot access skills that allow them to maximize their talents, they will not be as productive in the labor market in years to come, lowering future economic growth.

These are the reasons why economists across the political spectrum continue to point to the fact that our economy is too fragile to begin to focus on deficit reduction in the near term.

Now is not the time to prioritize deficit reduction over jobs

Besides going against what many economists believe, Gov. Romney’s plan for deficit reduction is going against a broad economic consensus that deems austerity measures ill-timed for the current economic climate. In an effort to reduce the deficit, the Romney plan would likely include significant cuts to crucial government services and more layoffs. Spending cuts at this point in the recovery threaten to derail economic growth and job creation. Federal Reserve Chairman Bernanke pointed this out in a recent speech, arguing, “Fiscal policy, at both the federal and state and local levels, has become an important headwind for the pace of economic growth.”

And if actually looking at the Romney plan or U.S. history aren’t compelling enough, we can look to Europe. Countries that have been implementing the kind of austerity packages that Gov. Romney proposes are now teetering toward, if not already in, recession. The United Kingdom, for example, has been paring back spending, but as they have done so, their rate of growth and job creation have both stalled. In fact, newly released forecasts from the International Monetary Fund show economic growth prospects for Great Britain being revised down as well as for most other European countries where austerity has been aggressive, including Germany and France. According to the IMF’s analysis, fiscal contraction now poses one of the top risks not just to the U.S. economy, but also to the overall world economic recovery.

The United States can’t afford the Romney jobs plan

Gov. Romney wants us to go backwards in time and rewrite history to say that supply-side economic policies successfully create a strong economy. You can take his word for this argument, or you can look to sound economic analysis and the undisputed historical economic facts under similar policy approaches. The implications of Gov. Romney’s economic platform and his advisors’ jobs predictions are clear: Don’t believe the hype.

Heather Boushey is Senior Economist at the Center for American Progress Action Fund. Adam Hersh is an Economist with the Action Fund.

SOURCE: AP/Bebeto Matthews

A coalition of New York City unions rally for a "March for the Middle Class" across the Brooklyn Bridge to City Hall in 2011. Union membership provides an income boost to middle-class families and is good for economic growth.

New Census Bureau data on state incomes released yesterday show just how important unions are to creating a strong middle class. An update to an analysis in our April 2011 report, “How Unions Make the Middle Class,” finds that a 10-percentage-point increase in the unionization rate would boost the average annual income for middle-class households—unionized or not—by $1,501 a year. Ensuring the United States has a strong middle class is critical, as the middle class is the engine of economic growth.

Unions strengthen the middle class by advocating for workers both in the workplace and in our democracy. Organized labor not only fights for higher wages and better benefits at work but it also makes democracy work for the middle class and advocates for policies that boost the middle class as a whole. As the new Census data make clear, stronger unions create a strong middle class not only at the national level but at the state level, as well.

In 2011, for example, the five states with the lowest unionization rates—North Carolina, South Carolina, Georgia, Arkansas, and Louisiana—all had middle classes with below-average strength, with strength defined as the share of income going to the middle 60 percent of households. Four out of the five states with the highest unionization rates—Alaska, Hawaii, Washington, and Michigan—all had middle classes with above-average strength.

The chart below shows the state-by-state impact of increasing unionization rates by 10 percentage points, returning them roughly to their 1980s levels. All middle-class households would feel the effects of this benefit, whether they have union members or not. These figures are based on a regression analysis that looks at how unionization rates affect the share of income going to the middle class, while taking into account other important factors such as education levels, unemployment, the income level of a state, and industry employment mix.

The boost from increased unionization is roughly equivalent to the $1,664-per-household boost from increasing college attainment rates by 10 percentage points. Improving educational outcomes and increasing access to higher education are correctly pointed out as important steps for bolstering the middle class, but, as our numbers show, we should not underestimate the importance of unions.

The American middle class has weakened over the past several decades and now receives the lowest share of income it ever has—45.7 percent—since the data were first collected in 1967. We can begin to rebuild our middle class, however, starting with these 35 policies. As our analysis shows, strengthening organized labor is one of the most important first steps.

David Madland is the Director of the American Worker Project at the Center for American Progress Action Fund. Nick Bunker is a Research Assistant with the Action Fund.

SOURCE: AP/Robert Durell

Karen Wallace, right, and Meryleigh Brainerd, left, both teachers in Calaveras County, join in a candlelight vigil in front of the California State Capitol to express sympathy with union members in Wisconsin. The crowd was protesting Gov. Scott Walker's (R-WI) attempt to strip public employee union members of their right to collective bargaining.

Endnotes and citations are available in the PDF version of this issue brief.

Democrats and Republicans alike believe that mobility is a critical part of the American Dream. President Barack Obama says the “very heart of America” is that we tell our children “that in this country, even if you’re born with nothing, work hard and you can get into the middle class.” Similarly, Gov. Mitch Daniels (R-IN) echoes the views of conservatives when he points out that “upward mobility from the bottom is the crux of the American promise.”

But some U.S. states have more economic mobility than others. According to data from the Pew Center on the States, a handful of states—among them Maryland and New Jersey—do much better on a range of mobility measures than the national average, and are almost twice as mobile as some of the worst performing states such as Louisiana, Oklahoma, and South Carolina.

But what makes a state more or less mobile? Gov. Daniels and other conservatives may be interested to learn that strengthening labor unions—a group that they have often attacked—would help increase economic mobility.

Even a cursory review of the Pew mobility list indicates that union membership seems to affect mobility significantly: Six of the eight most mobile states have high unionization rates—Connecticut, Rhode Island, New Jersey, Utah, Massachusetts, Colorado, and Maryland—and all but 1 of the 10 least mobile states—South Carolina, North Carolina, Mississippi, Arkansas, Tennessee, Alabama, Louisiana, West Virginia, Georgia, and Oklahoma—have low unionization rates and laws that discourage unionization.

Indeed, the 10 states with the highest unionization rates—New York, Hawaii, Michigan, New Jersey, Washington, Minnesota, Illinois, Ohio, Wisconsin, and Oregon—perform considerably better on a range of measures of mobility than the 10 states with the lowest levels of unionization —South Carolina, North Carolina, Texas, Arizona, Mississippi, Georgia, Florida, Virginia, New Mexico, and Arkansas. As the charts in this brief highlight, states with high rates of unionization have greater absolute and upward mobility and lower rates of downward mobility than states with lower unionization rates.

More advanced analysis further bears out this relationship. According to Center for American Progress Action Fund analysis of data from the Pew Center on the States, states with high union membership rates are more likely to have high levels of economic mobility, even after controlling for other factors such as education, income levels, inequality, and unemployment.

Our analysis finds that education is the most important source of mobility—but unionization rates matter quite a bit as well. Increasing the unionization rate in the average state by 10 percentage points—roughly to the level they were in 1980—would be associated with an increase of just under 4 percentage points in the share of the population that is upwardly mobile. This is about two-fifths of the impact of boosting the share of the workforce with a college degree by 10 percentage points.

Boosting economic mobility is one more way unions help support the middle class. Our previous research finds that if unionization rates increased by 10 percentage points—to roughly the level they were in 1980—then the typical middle-class household, unionized or not, would earn $1,479 more a year. Harvard University sociology professor Bruce Western and University of Washington sociology professor Jake Rosenfeld find that the decline of unions accounts for one-third of the rise in wage inequality in the United States over the past 30 years.

As a result, policymakers that are concerned about boosting mobility and strengthening the middle class should add increasing the strength of organized labor to their list of policy solutions. This issue brief looks at the leading factors that increase economic mobility and then explores how increased unionization is in fact key to increasing mobility.

Factors that increase mobility

Unions

Unions boost economic mobility in several different ways. First, unions help workers negotiate for higher and rising wages. Labor unions are particularly effective at boosting the wages and mobility of young, immigrant, low-wage, and African American workers. Unions also push for increased job training and career ladders, which both help boost mobility over a lifetime.

And outside of the workplace, labor unions help get ordinary citizens involved in politics to advocate for public policies that help boost mobility such as the minimum wage and investments in education. States with higher levels of unionization have more generous social safety nets that lift workers up as well as cushion blows.

Education levels

Of course, other factors contribute to economic mobility besides the strength of labor unions. The most commonly cited factor is increasing education levels. More educated workers not only have higher wages and lifetime earnings but also see more rapid growth in their earnings. One study by Anthony P. Carnevale, Stephen J. Rose, and Ban Cheah of Georgetown University found median earnings growth for college-educated workers to be twice that of those with just a high-school degree over the past 20 years.

Income inequality

Income inequality can also have an effect on economic mobility. As the rungs on the economic ladder get further apart and the wealthy have greater advantages to pass on, it becomes harder for others to move up. For example, research by economists Wojciech Kopczuk, Emmanuel Saez, and Jae Song, of Columbia University, the University of California, Berkeley, and the Social Security Administration, respectively, finds that mobility for male workers declined as wage inequality increased. Similarly, research by University of Ottawa economist Miles Corak finds that countries with less inequality have greater economic mobility.

Economy’s income level

A fourth factor that may influence economic mobility is the income level of the economy. A rising tide may not lift all boats, but it does at least lift some. Specifically, research by University of Arizona sociologist Lane Kenworthy finds that incomes for low- and middle-income households are correlated with GDP per capita, or economic output per person. But Kenworthy also finds the most important factors for boosting incomes are “a combination of increases in employment, wages, and net government transfers.” Therefore, we are unsure if increased GDP per capita will necessarily boost economic mobility.

Unemployment

The level of unemployment in an economy also affects economic mobility. Unemployment obviously affects current earnings, but a number of economic studies also find that unemployment can have a significant effect on a worker’s future earnings as well. An unemployed worker loses skills while off the job and they often have to take a lower wage when they do find a new job, resulting in lower wages and slower earnings growth. States with high levels of unemployment would be more likely to have lower levels of absolute and upward mobility.

Data and results

Economic mobility, in the broadest sense, is a measure of the movement of an individual’s income. Mobility can be measured over the course of a few years, the course of a lifetime, or even between generations of families. The Pew Center study focuses on economic mobility within one individual’s life; issues of mobility relative to earlier generations are not discussed. The report uses three different measures of mobility during the course of one career: absolute mobility, upward mobility, and downward mobility.

Absolute mobility measures how much an individual’s earnings have increased over his lifetime. A person is considered upwardly mobile by the Pew study if they start in the bottom half of the national earnings distribution and move up at least 10 percentage points in the earnings distribution. Conversely, someone is downward mobile if she started in the top 50 percent of the national distribution and fell at least 10 percentage points.

Pew’s data look at the earnings of individuals when they were between the ages of 35 and 39, and then when the same individuals were between 45 and 49. The first wave of observations happened between 1978 through 1997 and the second wave happened between 1988 and 2007. As the charts in this report highlight, states with high rates of unionization have greater absolute mobility and upward mobility and lower rates of downward mobility than states with lower unionization rates.

A more thorough multivariate regression analysis, which controls for other economic factors, still shows a strong link between union membership and mobility. Our analysis controls for each states’ education, economic inequality, average income, and share of the population that is employed. We measure the level of education by the share of the workforce that has a college degree, inequality by the share of income going to the middle 60 percent of households by income, and the income level by the state’s gross domestic product per capita.

In order to compensate for the fact that the so called labor force participation rate—or the percentage of the population that is either employed or actively looking for work—affects measured unemployment, we use the employment rate, or the share of population that is employed, as our control measure for the effects of unemployment.

Our results find a strong and statistically significant relationship between union membership and economic mobility. The simple relationship between union membership and mobility is statistically significant for all three forms of mobility: absolute, upward, and downward. The relationship between union membership and both absolute and upward mobility remain statistically significant when we add our controls, though the relationship between unionization and downward mobility becomes statistically insignificant when we add our controls.

We discuss the results of one regression analysis examining upward mobility in the next section, but the results for absolute mobility are very similar. In both regression analyses an increase in union density boosts mobility by about two-fifths as much as an increase in college completion rates. (see Figure 4)

We find a positive relationship between the union-membership rate and upward mobility that is significant at beyond the 1 percent level. This means there is less than 1 percent probability the relationship is due to pure chance.

Moreover, the results are substantively significant. A 10 percentage point increase in the union membership rate in a state would be correlated with a 3.71 percentage point increase in the state’s population that is upwardly mobile. If Missouri, for example, saw its union-membership rate increase to 20 percent from 10 percent in 2010, then we would expect the share of its population that is upwardly mobile to increase to 35 percent from 31 percent. That increase would put it just above the national average for upward mobility.

The share of the workforce that is college educated is also positive and strongly correlated with upward mobility. A 10 percentage point increase in the share of workforce with a college degree would be correlated with a 10.9 percentage point increase in the state’s upwardly mobile population. Let’s use Missouri as an example again. Increasing its college-educated workforce to 29.4 percent from 19.4 percent in 2010 would be associated with an increase in the share of the upwardly mobile population to 41 percent. Missouri would then have a level of upward mobility similar to Oregon, becoming one of the most mobile states in the country.

For our other control variables, we find a positive relationship between the strength of the middle class and upward mobility that is statistically significant at the 5 percent level. We also find a positive, but statistically insignificant, relationship between the employment rate and upward mobility.

Finally, the data show no clear relationship between a state’s economic output per person and upward mobility, an unsurprising result given previous research. Indeed, the United States overall has seen GDP per capita increase as mobility has stagnated in recent decades. For those interested, more data on this regression and another looking at absolute mobility are available in Figure 4.

Conclusion

In our efforts to boost economic mobility in the United States, we cannot afford to overlook the contributions of labor unions. Increased union membership is associated with higher income mobility, greater upward mobility, and lower downward mobility. Other policy options, especially increasing the quality and availability of education, are vitally important. But the contributions of unions are overlooked at our own peril. Rebuilding the strength of the union movement is critical to increasing economic mobility and restoring the middle class.

David Madland is the Director of the American Worker Project at the Center for American Progress Action Fund. Nick Bunker is a Research Assistant with CAPAF.

SOURCE: AP/Rick Bowmer

In this May 20, 2011, file photo taken in Salem, Oregon, Cathy Williams, center, of Portland, stands with thousands of state workers gathered at the Oregon Capitol. Oregon is one of the top states in the country when it comes to union membership, with more people joining unions there each year.

Last year the middle class received the smallest share of the nation’s income since these data were first reported, according to U.S. Census Bureau numbers released today. The middle 60 percent of households received only 45.7 percent of the nation’s income in 2011, down from the historical peak of 53.2 percent in 1968.

The declining share of income received by the nation’s middle class has been driven by stagnant incomes for middle-class earners coupled with rapidly rising incomes for the highest earners. It’s a major shift brought about by many factors—factors that have either led to slower growing middle-class incomes, such as increased globalization, and factors that increase the pay of those at the top, such as the increasing financial benefit of a college education.

And then there is another often overlooked dynamic: the decline of labor unions. As the following chart shows, over the past several decades, the decline in the unionization rate tracks almost perfectly with the decline in the share of income going to the middle class.

According to the latest Census figures, the average income for the top 5 percent of households increased by 5 percent in 2011 to $311,444, while the median household income fell to $50,054, leading to a decrease of 0.8 percentage points in the share of income going to the middle class compared to 2010. Since 1979 the top 5 percent of households have increased their share of the nation’s income from 16.9 percent to 22.3 percent, according to Census figures.

Unions are crucial to reversing this trend. By advancing the interests of the middle class in the workplace and in our democracy, unions help build and strengthen the middle class.

In the workplace, workers who join together in unions are able to negotiate on a more equal footing with their employers. Unionization not only helps increase wages and benefits for union members but also can set a standard for employers who aren’t working with unions to follow when union density is sufficiently high.

In the political arena, union involvement is central to boosting voting rates by enlisting members in registration and get-out-the-vote efforts, and unions are champions of economic programs that create a strong, robust, and expanding middle class. Unions pushed for and have defended Social Security, the minimum wage, and more recently the Affordable Care Act. By acting as a lobbyist for workers, organized labor helps create a democracy that works for the middle class.

According to our previous research, a 10 percentage point increase in union membership would translate into an extra $1,479 per year for the average middle-class household, whether or not that household includes union members—about the same effect as boosting college graduation rates by the same margin. Similarly, sociologists Bruce Western and Jake Rosenfeld of Harvard University and the University of Washington, respectively, have calculated that approximately one-third of the increase in male wage inequality from 1973 to 2007 was due to decreasing unionization—about the same amount they ascribed to the increasing payoff of a college education.

Unfortunately, unions, both in the private and public sector, find themselves under attack. The past two years have seen conservative governors attack the collective bargaining rights of public-sector workers. This past February, Indiana became the 23rd state to pass a “right-to-work” law, and at its recent national convention, the Republican Party passed a party platform that is hostile to organized labor.

Today’s Census numbers show that the worrying trend of middle-class stagnation and increasing income inequality is continuing. We can begin to rebuild the middle class in many ways, including these 35 policies CAP outlined last month. But in order to truly build an economy and a democracy that works for the middle class, we need a strong and thriving union movement. Ensuring that we have a robust middle class is important not only for those in it but for the entire country, as a strong middle class is the foundation of strong economic growth.

David Madland is the Director of the American Worker Project and Nick Bunker is a Research Assistant at the Center for American Progress Action Fund.

SOURCE: AP/Mike Groll

Wendy Brown of Schenectady, New York, holds a sign before an Occupy Albany rally pushing for a raise in the state's minimum wage. Women, especially women of color, would benefit from a boost in the federal minimum wage.

See also: The Facts on Raising the Minimum Wage When Unemployment Is High by T. William Lester, David Madland, and Nick Bunker

The current federal minimum wage of $7.25 per hour is far too low. A full-time worker earning the minimum wage makes just $15,080 per year, below the poverty line for a family of three. From 1968 to 2010, incomes for the top 1 percent of earners increased by 110 percent, but the inflation-adjusted value of the minimum wage has fallen by 31 percent. If the federal minimum wage had kept pace with the rising cost of living over the past 40 years, it would be $10.52 per hour today.

Women are disproportionately harmed by a low minimum wage because women—and especially women of color—are much more likely hold low-wage jobs than men. The typical woman earns 77 cents for every dollar the typical man does, and the fact that women are more likely to be minimum-wage earners than men contributes to that disparity. This gap is especially distressing now that two-thirds of mothers are either the breadwinners or co-breadwinners for their families.

In 2011 more than 62 percent of minimum-wage workers were women compared to just 38 percent of male minimum-wage workers. Slightly more than 2.5 million women earn the minimum wage or less, while approximately 1.5 million men do. This imbalance is even more drastic once you consider that women were just 46.9 percent of all employed workers in 2011.

Female workers earning the minimum wage are also disproportionately workers of color. African American women were 15.8 percent of female workers making the minimum wage in 2011 compared to 12.3 percent of all employed workers. Similarly, Hispanic women were 16.5 percent of female minimum wage earners but were only 12.5 percent of employed workers.

Women also disproportionately earn the subminimum wage for tipped workers such as waitresses and bartenders: Sixty-six percent of workers earning the federal tipped minimum wage of $2.13 were women in 2010, according to analysis by Restaurant Opportunities Centers United. Moreover, the federal tipped minimum wage hasn’t been increased since 1991.

Finally, women earning the minimum wage are also overwhelmingly adults—not teenagers. More than 76 percent of women earning the minimum wage are 20 years old or older. In fact, 40 percent of female minimum-wage earners are over the age of 30.

In short, the minimum wage is not just a worker policy—it is also a woman’s policy.

Who would be affected by a minimum wage hike?

A hike in the minimum wage wouldn’t only affect those who earn the minimum wage. Certainly, those who earn between the current minimum wage and the new minimum wage would be directly affected and see their wages increase. But workers earning near the new minimum wage would also see an indirect increase due to what economists call a “spillover effect.”

The following chart describes the workers who would have been affected by increasing the minimum wage to $9.80 an hour, as proposed by Sen. Tom Harkin (D-IA) in his Rebuild America Act. More than 55 percent of workers affected by the minimum wage hike would be women. About 57 percent of those directly affected and 51.3 percent of those indirectly affected by the increase would be women. Similarly, women of color would be especially affected by the increase: Sixteen percent of affected female workers would be African American, while 19.3 percent would be Hispanic. The vast majority of women who would be affected by an increase in the minimum wage are also adults. More than 88 percent of female workers who would see a wage increase are older than 20. Nearly 55 percent of affected female workers would be older than 30, and 39 percent would be above the age of 40.

Raising the minimum wage would give a needed boost to the incomes of low-wage women. This one move alone certainly wouldn’t solve all of the inequities women face in the labor market, but it would be a step in the right direction.

The hard work done by employees in low-wage jobs should be rewarded adequately. Improving pay for these workers—both the women and men—is vital for rebuilding the middle class and creating an economy that works for all of us.

David Madland is Director of the American Worker Project at the Center for American Progress Action Fund. Nick Bunker is a Research Assistant with the project.

See also:

• The Facts on Raising the Minimum Wage When Unemployment Is High by T. William Lester, David Madland, and Nick Bunker

SOURCE: AP/ David Zalubowski

Recent studies show that increasing the minimum wage even during hard times is good policy, providing higher pay but no loss of jobs.

See also: Women Are the Biggest Losers from Failure to Raise Minimum Wage by David Madland and Nick Bunker

Raising the minimum wage would be good for our economy. A higher minimum wage not only boosts workers’ incomes—something that is sorely needed to boost demand and get the economy going—but it also reduces turnover and shifts businesses toward a high-road, high-human-capital model.

Still, some policymakers may be nervous about increasing the minimum wage while unemployment is so high. Yet, both the federal and states governments have raised the minimum wage numerous times during periods of high unemployment and the evidence indicates that employment has been unaffected.

A significant body of academic research has found that raising the minimum wage does not result in job losses even during hard economic times. There are at least five different academic studies focusing on increases to the minimum wage made during periods of high unemployment—with unemployment rates ranging from 7 percent to 12.3 percent—that find an increase in the minimum wage has no significant effect on employment levels. The results are likely because the boost in demand and reduction in turnover provided by a minimum wage counteracts the higher wage costs.

Similarly, a simple analysis of increases to the minimum wage on the state level, even during periods of state unemployment rates above 8 percent, shows that the minimum wage does not kill jobs. Indeed the states in our simple analysis had job growth slightly above the national average.

In our analysis we reference five academic studies of the minimum wage that include periods of high unemployment, cover different geographical areas and different time periods, and use a range of methodologies—from small case studies to large econometric analysis—lending great credibility to their findings. The most recent studies are considered significant improvements over all previous studies because of the methodology employed. One recent study, for example, used the same methodology as earlier studies finding a small disemployment effect on teenagers, but the newer study controlled for the condition of the regional economy, something previous studies had failed to do. Additionally, other recent studies have examined U. S. counties that border one another but had different minimum wages (because they are in different states). All the studies came to the same conclusion—that raising the minimum wage had no effect on employment. Moreover, all of the studies included cases where the minimum wage was raised during a period of high unemployment. These studies should go a long way in assuaging policymakers’ fears and boost their willingness to raise the minimum wage.

While academic studies should inform the minimum wage debate, they do not always provide the kind of evidence that policymakers and the public can easily digest.

To help highlight the results underlying these academic studies, we provide a simplified analysis of state minimum wage increases during periods of high unemployment.

We examined every state minimum wage increase from 1990 through 2011 where the state unemployment rate was above 8 percent. We then compared the rate of job creation over the next 12 months following the minimum wage increase in these states to the national average.

Of the 35 cases where a state minimum wage was increased during a period of high unemployment, 21 saw job increases over the next year at a rate faster than the national average, while 14 witnessed job growth at a rate below the national average. The average rate of job creation for a state after a minimum wage increase during a period of high unemployment was 0.48 percentage points above the national average. The median employment growth was also slightly above the national average.

A few states, including Alabama and Tennessee in 2009, saw 12-month job increases well above the national average. Some states, however, including Michigan in 2008 and Arizona in 2011, had significantly worse employment outcomes than the national average. But the average state that increased its minimum wage had 12-month job growth that mirrored the national average, with most states doing slightly better than the national average.

Likewise, separate analysis of minimum wage increases that occurred as a result of federal action versus increases coming from state action yields nearly identical results—national and state employment growth virtually matched.

While this simple analysis does not have the rigorous controls required of full-blown academic research, these results provide additional evidence demonstrating increases in the minimum wage are unlikely to have harmful effects on employment. When combined with the academic studies, these more anecdotal findings provide a compelling picture of the employment effects of the minimum wage.

Policymakers should feel confident that raising the minimum wage would not have harmful employment effects and instead would likely provide the kind of boost in consumer demand that our economy sorely needs.

David Madland is Director of the American Worker Project at the Center for American Progress Action Fund. Nick Bunker is a Special Assistant with the American Worker Project.

T. William Lester is an assistant professor in the department of city and regional planning at the University of North Carolina, Chapel Hill.

Full Citations for Academic Papers in Chart 1:

Arindrajit Dube, T. William Lester, and Michael Reich, “Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties,” The Review of Economics and Statistics 92 (4) (2010): 945 – 964.

Arindrajit Dube, T. William Lester, and Michael Reich, “Do Frictions in the Labor Market? Accessions, Separations and Minimum Wage Effects.” Working Paper 5811 (IZA Discussion Paper Series, 2011).

David Card and Alan B. Krueger, “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply,” American Economic Review 90 (5) (2000): 1397-1420.

Lawrence F. Katz and Alan B. Krueger, “The Effect of the Minimum Wage on the Fast-Food Industry,” Industrial and Labor Relations Review 46 (1) (1992): 6-21.

Sylvia A. Allegretto, Arindrajit Dube, and Michael Reich, “Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data,” Industrial Relations 50 (2) (2011): 205-240.

See also:

• Women Are the Biggest Losers from Failure to Raise Minimum Wage by David Madland and Nick Bunker

SOURCE: AP/Charles Krupa

Republican presidential candidate Newt Gingrich speaks at the John F. Kennedy School of Government at Harvard University in Cambridge, Massachusetts, Friday, November 18, 2011. While speaking at the school, Gingrich presented a plan for youth that would hire poor minority middle-school students as janitors.

Republican presidential candidates over the past few months engaged in 25 public debates, sharing their views on a wide range of issues from who best embodies the ideals of former President Ronald Reagan to why the wealthy deserve more tax breaks. Yet in all of these engagements, the candidates rarely took the opportunity to present a comprehensive strategy to support our nation’s young Americans.

Former House Speaker Newt Gingrich presented a plan for youth that would turn poor minority middle-school students into an army of janitors. That is not the bold, grand vision that one expects from the professed leading thinker of the conservative movement. For his part, former Massachusetts Gov. Mitt Romney only presented a set of vague ideas that would provide more block grants for states to build human capital.

Republican candidates in these debates missed a real opportunity to articulate their vision for young Americans. Instead, the candidates seemed to be speaking of an alternate reality where the real challenges facing young Americans simply didn’t matter. This is alarming. Young Americans need a comprehensive policy vision from their potential presidential leaders as well as a grasp of the targeted resources needed to help our youth build and share in the future prosperity of our nation. Instead the candidates have repeated conservative party-line mantras about more block grants, lower taxes, and fewer regulations—all designed to shift more of our nation’s resources to those who need it least.

So when the Republican presidential candidates meet again later this month for their next debate, here are some facts they could usefully explore.

Challenges facing young Americans

The backdrop of these debates is rising poverty and economic hardship among children and young adults. Recent census data show an alarming increase in the number of children who were poor or near poor, with more than one in five children under age 18 living in poverty, and 44 percent of children living in families with annual household incomes below $44,700 for a family of four. Across all racial groups, the rate of child poverty increased between 2009 and 2010.

This trend of economic hardship continues into the young adult years when most Americans typically start to get a foothold in the workforce. Young adults ages 18 to 24 are falling into poverty at higher rates than older adults. Roughly 22 percent of these young people lived in poverty in 2010, almost one in three young African Americans, and more than a quarter of young Hispanic Americans. The data also revealed that more young adults ages 25 to 34 are moving back into their parents’ homes, with 5.9 million young adults living with their parents during the year.

A future without a plan for youth

Today’s changing U.S. economy requires youth to earn a high school diploma and some form of postsecondary credential to compete for the types of jobs that are available. At the same time, starting one’s career during the Great Recession and subsequently slow recovery will keep more young Americans out of the workforce than previous generations. This could exacerbate the recent trends where younger workers have lost ground and have seen a reduction in wealth and assets.

In 2009 households headed by adults younger than 35 years old had 68 percent less wealth than households of their same-aged counterparts in 1984. By contrast, households headed by adults ages 65 and older possessed 42 percent more median net worth than their same-aged counterparts in 1984. These employment and economic trends are particularly alarming for young Hispanic and African American workers. In 2011, amid positive signs of economic recovery, the average unemployment rate for workers ages 20 to 24 was 14.6 percent; one in four African Americans and 16 percent of Hispanics in this age range were out of work.

Without an aggressive response, today’s young workers will continue to experience lower labor market attachment and reduced long-term earnings. Over time, if fewer young people are able to find employment with adequate wages, their ranks among the middle class will shrink, further exacerbating the current wealth gap in the United States.

Five simple strategies to support youth

A comprehensive plan that includes job training, access to education, and youth engagement will allow young Americans across all racial groups to share in the future prosperity of our country. Here are five simple strategies all candidates for president should embrace to reduce poverty and create more opportunities for all young Americans.

Invest in child care and early learning

Investments in child care and early learning provide multiple benefits. First, by improving access to safe and affordable child care, more low-income parents can enter the labor market and begin earning. Second, studies show that children who participate in early learning programs perform much better in school and are much more likely to graduate from high school on time.

Promote high school graduation and improve access to higher education

Among young workers, greater educational attainment, including a high school diploma or some college coursework, reduces the rate of unemployment. During the recent recession and the economy’s initially uneven recovery, between April 2007 and April 2010, the unemployment rate for young workers (16- to 24-year-olds) with no high school diploma and not currently enrolled in school increased from 19.7 percent to 33 percent.

Develop an inclusive jobs creation and training plan for young workers

Critical investments are needed for year-round youth employment programs that will allow youth to gain needed job skills, promote on-the-job training programs, mentorships for at-risk youth, and expand sector-specific training partnerships to prepare youth for jobs in growth sectors such as information technology and health care.

Promote youth service

Expanding opportunities for youth to serve their communities is a critical component of building skills for at-risk youth. These opportunities not only allow young people to provide much-needed service to their neighbors, but they also provide critical workforce skills, which are necessary to get a foothold in the tight labor market.

Invest in stronger community systems

Youth who grow up in high-poverty communities often lack resources such as high-performing schools, adequate public transportation, and access to information technology. These community factors place low-income youth at a higher risk of growing up poor. Investments and innovations are needed to address these challenges through targeted programs to spur economic growth, rebuild crumbling infrastructure, and create more opportunities.

Taken together, these five simple strategies to support children and youth would be an effective and efficient way to help those most in need of a hand up in our economy to get a good start in life. The Republican presidential candidates often talk about their commitment to providing opportunity to all Americans, but more must be done than just presuming the marketplace will provide.

Desmond Brown is a consultant to the Center for American Progress Action Fund’s Half in Ten antipoverty project and an expert on poverty issues and welfare reform.

SOURCE: AP/ Darron Cummings

Protestors outside the Indiana House of Representatives during the debate on a right-to-work law that ultimately passed. 

Download this issue brief (pdf)

What are right-to-work laws?

In states where the law exists, “right-to-work” makes it illegal for workers and employers to negotiate a contract requiring everyone who benefits from a union contract to pay their fair share of the costs of administering it. Right-to-work has nothing to do with people being forced to be union members.

Federal law already guarantees that no one can be forced to be a member of a union, or to pay any amount of dues or fees to a political or social cause they don’t support. What right-to-work laws do is allow some workers to receive a free ride, getting the advantages of a union contract—such as higher wages and benefits and protection against arbitrary discipline—without paying any fee associated with negotiating on these matters.

That’s because the union must represent all workers with the same due diligence regardless of whether they join the union or pay it dues or other fees and a union contract must cover all workers, again regardless of their membership in or financial support for the union. In states without right-to-work laws, workers covered by a union contract can refuse union membership and pay a fee covering only the costs of workplace bargaining rather than the full cost of dues.

There is scant evidence these laws create jobs, help workers, or are good for a state’s economy, as supporters claim. Instead, these laws weaken unions and thereby hurt workers, the middle class, and local economies. We present here a Right-to-Work 101 so that the debate over right-to-work laws proceeds based on the facts.

Right-to-work laws don’t create jobs

Researchers who study the impact of right-to-work laws find that these laws do not create jobs—despite supporters’ claims to the contrary. The Indiana Chamber of Commerce, for example, claims that “unionization increases labor costs,” and therefore makes a given location less attractive to capital. The purpose, then, of right-to-work laws is to undermine unions and therefore lower wages in a given state, thus attracting more companies into the state.

But in practice this low-road strategy for job creation just doesn’t pan out. Despite boosters’ promises of job creation, researchers find that right-to-work had “no significant positive impact whatsoever on employment” in Oklahoma, the only state to have adopted a right-to-work law over the past 25 years⎯until Indiana did so days ago⎯and consequently the best example of how a new adopter of right-to-work laws might fare in today’s economy. In fact, both the number of companies relocating to Oklahoma and the total number of manufacturing jobs in the state fell by about a third since it adopted such a law in 2001.

Indeed, most right-to-work advocates’ purported evidence of job growth is based on outdated research and misleading assertions. An Indiana Chamber of Commerce-commissioned study found right-to-work states had higher employment growth between 1977 and 2008 compared to states without a right-to-work law, but much of that growth could be attributed to other factors. Those factors included the states’ infrastructure quality, and even its weather—which the study ignored.

Recent research from the Economic Policy Institute that controlled for these factors finds that right-to-work laws have not increased employment growth in the 22 states that have adopted them.

Right-to-work laws hurt workers

Right-to-work laws lower worker pay and benefits and make workplaces more dangerous for all workers—whether unionized or not—by weakening unions.

Unions have a significant and positive effect on the wages and benefits of union and nonunion workers alike. Unionized workers are able to bargain for better wages, benefits, and work conditions than they would otherwise receive if negotiating individually. The effect on the average worker—unionized or not—of working in a right-to-work state is to earn approximately $1,500 less per year than a similar worker in a state without such a law.

Workers in right-to-work states are also significantly less likely to receive employer-provided health insurance or pensions. If benefits coverage in non-right-to-work states were lowered to the levels of states with these laws, 2 million fewer workers would receive health insurance and 3.8 million fewer workers would receive pensions nationwide.

The fact that unionization raises people’s wages and benefits is borne out by surveys of union members and by common sense. Unions also affect the wages and benefits of nonunion workers by setting standards that gradually become norms throughout industries. To compete for workers, nonunion employers in highly unionized industries have to pay their workers higher wages. And unions support government policies (such as minimum-wage laws) that raise workers’ pay.

Right-to-work laws also may hurt workplace safety. For instance, the occupational-fatality rate in the construction industry—one of the most hazardous in terms of workplace deaths—is 34 percent higher in right-to-work states than in states without such laws. And one academic study finds that increasing union density has a positive effect on workplace safety in states with no right-to-work laws (for every 1 percent increase in unionization rates there is a 0.35 percent decline in construction fatality rates), but in right-to-work states, the effect of union density on safety disappears.

Unions are democratic organizations: If employees didn’t like their contracts, they would vote to reject the contract, vote to change their union officers, or vote to get rid of their union—all of which can be done under current law.

Right-to-work laws weaken the middle class

By weakening unions right-to-work laws also weaken the middle class. From pushing for fair wages and good benefits, to encouraging citizens to vote, to supporting Social Security and advocating for family-leave benefits, unions make the middle class strong by giving workers a voice in both the market and our democracy.

Nine of the 10 states with the lowest percentage of workers in unions—Mississippi, Arkansas, South Carolina, North Carolina, Georgia, Virginia, Tennessee, Texas, and Oklahoma—are right-to-work states. All of them also are saddled with a relatively weak middle class. The share of total income going to the middle class—defined as the middle 60 percent of the population—in each of these states is below the national average.

If unionization rates increased by 10 percentage points nationwide, the typical middle-class household—unionized or not—would earn $1,479 more each year. In fact, dollar for dollar, strengthening unions is nearly as important to the middle class as boosting college-graduation rates.

Right-to-work laws hurt small business

Since few small businesses are ever unionized, changing union regulations won’t affect them. Yet unlike big manufacturers who can choose which state to expand into, most small businesses are rooted in a local community and dependent on local consumers. When right-to-work laws lower the wages and benefits of area workers, they also threaten to reduce the number of jobs in the economy by reducing consumer demand.

The Economic Policy Institute estimates that for every $1 million in wage cuts, six jobs are lost in the service, retail, construction, real estate, and other local industries. For big manufacturers that sell their products all over the globe, this may be less important.

For small businesses that depend on local sales, reducing the amount of disposable income in local employees’ pockets can be devastating.

Right-to-work laws create rules that would hurt all organizations but only apply to unions

The corporate lobbyists who push for right-to-work legislation—such as the Chamber of Commerce and the National Right to Work Committee—want unions to operate under a set of rules that none of them accept for themselves. These lobbyists would never think of serving the interests of companies that refuse to pay dues to their organizations, yet they want unions to do so in order to drain their resources.

Federal law already guarantees every worker who is represented by a union equal and nondiscriminatory representation—meaning unions must provide the same services, vigorous advocacy, and contractual rights and benefits. This guarantee applies regardless of whether the employee is a union member. So if a non-dues-paying employee encounters a problem at work, the union is required to provide that individual full representation at no charge.

By contrast, the Chamber of Commerce and other employer organizations restrict some of their most valuable services to dues-paying members. When asked if they would agree to provide all services to any interested business, even if that business does not pay dues, Chamber representatives explained that they could not do that because dues are the primary source of Chamber funding and it would be unfair to other dues-paying members. And that certainly makes sense—for unions as well as the Chamber.

The Chamber of Commerce and National Right to Work Committee want unions to be the only organizations in the country that are required to provide full services to individuals who pay nothing for them. This is no different than enabling some American citizens to opt out of paying taxes while making available all government services. This is not an agenda to increase employee rights but rather to undermine the viability of independent-employee organizations.

Right-to-work laws are bad for our political democracy

Right-to-work laws infringe on the democratic rights of the electorate by weakening unions. Unions help boost political participation among ordinary citizens and convert this participation into an effective voice for pro-middle-class policies. By weakening unions, they are less able to advocate for pro-worker policies within our government and help get workers out to vote.

Research shows that for every percentage-point increase in union density, voter turnout increased by 0.2 to 0.25 percentage points. This means that if unionization rates were 10 percentage points higher during the 2008 presidential election, 2.6 million to 3.2 million more citizens would have voted.

Unions also help translate workers’ interests to elected officials and ensure that government serves the economic needs of the middle class. They do this by encouraging the public to support certain policies as well as by directly advocating for specific reforms. Unions were critical in securing government policies that support the middle class such as Social Security, the Affordable Care Act, family leave, and minimum-wage laws.

Indeed, this may be a large part of why many conservatives support right-to-work laws. Research demonstrates that supporters’ claims that these laws will create jobs and strengthen local economies are not credible. Instead, supporters may back these laws as a pretext for attacking an already weakened union movement in hopes of crippling it as a political force and as an advocate for all workers.

The bottom line: Right-to-work laws work against the critical needs of our economy, our society, and our democracy.

David Madland is Director of the American Worker Project at the Center for American Progress Action Fund. Karla Walter is a Senior Policy Analyst with the project. Ross Eisenbrey is vice president of the Economic Policy Institute.

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SOURCE: AP/Andy Manis

Gov. Scott Walker (R-WI) talks to the media at the State Capitol in Madison, Wisconsin. In March of last year, he signed an antiunion bill that stripped public-sector workers of collective bargaining rights. 

The Bureau of Labor Statistics, or BLS, data released today on the union status of the American workforce in 2011 show no growth in union membership—a troubling sign as the nation debates how to strengthen the middle class. That’s because unions help strengthen the middle class by giving workers a voice in the economy and our democracy. Yet the fact that union membership didn’t significantly decline—even amid a weak economy and harsh political opposition—is a significant accomplishment and offers some hope for the future.

Overall, the BLS figures show that the union membership rate fell from 11.9 percent in 2010 to 11.8 percent in 2011, but the difference is so small that the rate effectively stayed the same. The total number of union members also stayed constant at approximately 14.8 million. The membership rate is the lowest in more than 70 years, continuing a long decline.

Taking a closer look at the numbers, the number of private-sector workers who are union members slightly increased from 7.1 million in 2010 to 7.2 million in 2011, as the percentage of private-sector workers in unions remained constant at 6.9 percent. In contrast, the number of public-sector workers who are union members fell slightly from 7.62 million to 7.56 million, although due to the sharp cutbacks in state employment, the percentage of unionized public-sector workers actually increased slightly from 36.2 percent to 37 percent.

The majority of states had slightly declining or constant union membership rates in 2011. Several states, however, including Colorado, Maryland, and Oregon, had their union membership rate increase. The data in two particular states—Wisconsin and Indiana—are worth taking a look at in depth.

Wisconsin, the site of a large debate over unions early last year, saw its union membership rate decline from 14.2 percent in 2010 to 13.3 percent in 2011. The bill stripping public-sector workers of collective bargaining rights passed by conservatives in Wisconsin unfortunately worked, as membership declined. Wisconsin was not alone in attacking public-sector workers, though, as Ohio and Michigan also passed laws that hurt workers.

Indiana, on the other hand, saw its union membership rate increase from 10.9 percent in 2010 to 11.3 percent in 2011. Regrettably, the membership gains seen in 2011 may not be repeated in 2012. Indiana is on the precipice of passing a “right-to-work” bill that makes collective bargaining and union membership more difficult. Indiana’s union membership, and therefore its middle class, will take a hit if the bill passes.

Nationally, in terms of race and gender, the union membership rate for men declined slightly in 2011, from 12.6 percent in 2010 to 12.4 percent, while the rate for women increased by 0.1 percentage points to 11.2 percent in the same timeframe. African Americans continued to have the highest rate of membership at 13.5 percent in 2011, as white Americans, Asian Americans, and Hispanic Americans had rates of 11.6 percent, 10.1 percent, and 9.7 percent, respectively. Given that the long-term trend for union membership is decline, and that unions faced great headwinds in 2011, there is some reason to celebrate a lack of continued decline.

But it is still discouraging that union membership is not increasing. The public debate has recently shifted to the topics of income inequality and the state of the middle class. But the health of the union movement should concern anyone interested in creating an economy that works for everyone and not just the wealthy few.

For instance, unions help boost political participation among ordinary citizens—especially among members, but also among nonunion members—and convert this participation into an effective voice for pro-middle-class policies.

This explains why states with a greater percentage of union members have significantly higher voter turnout rates, as well as higher minimum wages, a greater percentage of residents covered by health insurance, stronger social safety nets, and a more progressive tax code.

Strong unions build the middle class by giving workers a voice in the workplace and in our democracy. Building a middle class for the 21st century will be difficult until union membership starts to increase.

David Madland is the Director of the American Worker Project and Nick Bunker is a Special Assistant with the Economic Policy team at American Progress.

SOURCE: AP/Lawrence Jackson

Union workers and supporters gathered at a rally in 2003 outside the U.S. Department of Labor, calling for legislation that makes it easier for workers to form a union, which is beneficial to the middle class and boosts our economy.

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On Friday the Department of Labor will release data on the union status of the American workforce. Unfortunately the data are likely to show a decline in the percentage of workers who are unionized because of the one-two punch of long-term trends—such as the escalation of aggressive employer campaigns against union representation—and political attacks such as Wisconsin’s new law banning public-sector collective bargaining.

Even though less than 12 percent of all workers are currently union members, Americans—whether unionized or not—should care about this decline because unions give workers a bigger say in our economy and our political system. That helps the middle class, and it’s good for democracy.

As our research and a number of academic studies find, unions strengthen the middle class and significantly reduce economic inequality. In fact studies indicate that the decline in union density explains as much of today’s record level of inequality as does the increasing economic return of a college education.

Most research on the importance of unions to the middle class tends to focus on how unions improve market wages for both union and nonunion workers. This research is no doubt vital, but it gives short shrift to the critical role unions play in making democracy work for the middle class.

Unions help boost political participation among ordinary citizens—especially among members, but also among nonunion members—and convert this participation into an effective voice for pro-middle-class policies.

This explains why states with a greater percentage of union members have significantly higher voter turnout rates, as well as higher minimum wages, a greater percentage of residents covered by health insurance, stronger social safety nets, and a more progressive tax code, as charts in this brief will illustrate.

That unions are important to the strength of the middle class is easy to see by looking at the close relationship between the two over time. In 1968 the share of income going to the nation’s middle class was 53.2 percent, when 28 percent of all workers were members of unions. Since then, union membership steadily declined alongside the share of income going to the middle class. By 2010 the middle class only received 46.5 percent of income as union membership dropped to less than 12 percent of workers. (see graph below)

The middle class weakened over the past several decades because the rich secured the lion’s share of the economy’s gains. The share of pretax income earned by the richest 1 percent of Americans more than doubled between 1974 and 2007, climbing to 18 percent from 8 percent. And for the richest of the rich—the top 0.1 percent—the gains have been even more astronomical—quadrupling over this period, rising to 12.3 percent of all income from 2.7 percent.

Even though unions weakened, they are still critically important to the middle class: The states with the lowest percentage of workers in unions—North Carolina, Georgia, Arkansas, Louisiana, Mississippi, South Carolina, Tennessee, Virginia, Oklahoma, and Texas—all have relatively weak middle classes. In each of these states, the share of income going to the middle class (the middle 60 percent of the population by income) is below the national average, according to Census Bureau figures.

This issue brief digs deeper into these findings by highlighting the critical role that unions play in making the political system work for the middle class. They do this in two key ways: increasing voter participation and advocating for policies that help the middle class.

As an increasing number of citizens feel their democracy is no longer responsive to their needs, the role unions play is ever more important.

Helping get the vote out

Unions help get ordinary citizens—union and nonunion alike—involved in politics by, for example, knocking on doors, educating workers on the issues, and helping them feel their efforts will make a difference.

Case in point: A 1 percentage point increase in union density in a state increases voter turnout rates by 0.2 to 0.25 percentage points according to analysis by Benjamin Radcliff and Patricia Davis, political scientists at the University of Notre Dame and the State Department, respectively. In other words, if unionization were 10 percentage points higher during the 2008 presidential election, 2.6 million to 3.2 million more Americans would have voted.

Similarly, research by Roland Zullo, a labor studies professor at the University of Michigan, shows that self-described working-class citizens—whether unionized or not—are just as likely to vote as other citizens are when unions run campaigns in their congressional district. Yet when unions don’t run campaigns, working-class citizens are 10.4 percent less likely to vote than other citizens.

A similar pattern holds for communities of color. Voters of color are just as likely to vote as white voters in districts with union campaigns but are 9.3 percent less likely to vote in districts without campaigns.

Figure 2 below shows that states with higher levels of unionization have higher levels of voter turnout by highlighting the relationship for all federal elections from 1980 to 2010. This relationship would also hold if we were to look at only presidential elections or only midterm elections. Other factors contribute to voter turnout, but unionization certainly plays an important role in getting the vote out.

Unions play a critical role in getting ordinary citizens involved. The United States has one of the lowest voter turnout rates in the industrialized world, an average of 56.9 percent, and one of the lowest rates of union membership, an average of 12.1 percent in the 2000s, as Figure 3 shows below. If union membership continues to decline, the quality of our democracy will as well.

Before people take political action, they must think it is worthwhile—that the benefits are greater than the costs. But the costs of action—time, money, and energy—are sometimes higher than the benefits of action. This is especially true with actions such as writing a letter to a member of Congress or tracking the progress of a bill, but it can hold true even for an action as simple as voting. This is why in many cases, people rationally decide that they are better off doing nothing, which in turn often means they don’t vote or take other political actions.

Unions help decrease the costs and increase the benefits of participation so that more people get involved. They do this in a number of ways—from simply knocking on doors and letting people know about an election and providing information about an issue to helping people get to the polls or write a letter and making people feel more powerful and thus likely to succeed. Relatively few people participate spontaneously in politics but rather are likely to take action when groups such as unions mobilize them to do so.

As a result being a union member makes a person more likely to vote and participate in politics, but unions also increase participation among nonmembers. Nonunion members are often the recipients of union efforts to educate and mobilize. Getting middle- and working-class citizens to vote and otherwise get involved in democracy is especially important because higher-income people are much more likely to participate in politics than the middle class.

Advancing policies that support the middle class

Making democracy work for the middle class involves more than getting citizens involved in the political process, however. Ordinary citizens also need some level of influence over which policies are actually debated, their final structure, and whether they get passed or not.

This requires expertise and sustained attention as well as resources and the ability to mobilize them at the right time. The problem is that these tasks are nearly impossible for unorganized citizens to perform. As a result, as individuals, ordinary citizens have a very hard time actually influencing policy debates—even when their preferred candidate wins.

Unions play a critical role in translating workers’ interests to elected officials and ensuring that government serves the economic needs of the middle class. They do this by encouraging their members and the general public to support certain policies as well as by directly advocating for specific reforms.

Unions provide legal and regulatory expertise, create space for collaborative negotiations, ensure effective implementation of policies, mobilize members at key points in the legislative process, and act as a strong counterbalance to powerful interest groups that support policies that would harm the middle class.

Historically and today unions are one of the few organized interests that have the capacity and the mission to launch sustained and successful policy campaigns during drawn-out political battles.

To be sure, not every policy unions support clearly benefits all of the middle class—some favored policies have been more narrowly targeted to benefit their membership—but as a general rule most of what unions support is about promoting a strong middle class. As Nobel-laureate economist Paul Krugman argues, during the middle part of the last century in the United States, “government policies and organized labor combined to create a broad and solid middle class.”

Social scientists consistently show that strong labor unions are closely associated with low levels of inequality and more generous social programs that benefit the middle class. Indeed, University of Wisconsin political scientist Graham K. Wilson argues that unions in the United States have had more political success promoting broad social measures such as the Civil Rights Act of 1964 than they have promoting measures more strictly tied to their membership.

A closer look at the role of organized labor’s engagement in the policy process clearly shows a strong concern about the prosperity of the middle class and indicates that, though their ability to influence policy has diminished, unions continue fighting for the middle class, and their efforts make a big difference.

The charts and descriptions that follow highlight several middle-class-building policies that unions are instrumental in supporting.

Minimum wage 

Unions are vocal supporters of the minimum wage and living wages. They have long championed minimum wage bills, from creation of the federal minimum wage with the Fair Labor Standards Act in 1938 to the most recent increase in 2009. Not surprisingly states with higher levels of unionization are more likely to have higher minimum wages, as Figure 4 shows below. Due to the federal minimum wage, the relationship between higher unionization and higher minimum wages is more evident for states with minimum wages above the federal level.

The decline of the inflation-adjusted value of the minimum wage is partially responsible for increased inequality especially at the lower end of the income distribution. Research has found that, while the effect may not be as large as previously thought, the decrease in the value of the minimum wage is responsible for a fair amount of the increase of inequality at the bottom end of the income distribution. Not only does the minimum wage affect workers at that specific wage, it also has a spillover effect on the wages of other lower-wage workers.

Increasing the minimum wage, therefore, would help reduce inequality at the bottom and strengthen the middle class.

Social safety net

Unions are also key supporters and defenders of the social safety net. Not only have they advocated for public health programs, but they also fight for strengthening programs such as unemployment insurance. These programs help lift people into the middle class as well as cushion the blow of a job loss for middle-class Americans.

Historically, unions were supporters of the development of Social Security as well as state-level social safety net programs during the New Deal. As Figure 5 shows, the relationship between union density and strength of the social safety net holds to this day. The figure uses an index of social spending that ranks the most generous spending state as 50. If higher union membership is associated with a stronger safety net, then we would see a positive relationship, which we do. States with higher union density do, in fact, tend to have stronger social safety nets.

Health care coverage

Unions secure decent wages for all workers, and they also help workers receive benefits including health care insurance. This occurs not just because unionized workers are more likely to receive health insurance from employers, but also because organized labor is a strong proponent of public policies that provide health coverage.

Unions supported Medicare and Medicaid during the 1960s, and they were key supporters of the Affordable Care Act as it worked its way through Congress. They also push for greater Medicaid coverage in the states.

Health care coverage not only protects workers from the potentially large out-of-pocket costs of health care, but increased coverage improves health outcomes and allows workers to remain on the job and earn more.

As Figure 6 shows, residents of states with higher unionization rates are more likely to have health insurance.

Progressive taxation

Unions influence how government funds are spent, but they also affect how the programs are paid for. As a result, state tax systems are more progressive in states with higher levels of unionization.

Academic research finds a strong relationship between progressivity of a state’s tax system and its unionization level. Using data from the Institute on Taxation and Economic Policy, we can see this relationship graphically. Our measure of progressivity is the ratio of the share of income paid in state taxes by the middle 20 percent to the share of income paid in state and local taxes by the top 1 percent. A large ratio indicates a regressive tax system; a smaller ratio means a more progressive system.

Because sales taxes are central in many state tax systems, the poor and the middle class generally pay a higher share of their income in state taxes than the rich. But this problem is generally less in states with stronger unions, as can be seen in Figure 7. As representatives of middle-class Americans, unions lobby for a progressive tax system in which the wealthy pay a larger share of their income in taxes.

The top 10 states by union density had an average ratio of 1.9 while the bottom 10 states by union density had an average ratio of 2.43 in 2009—meaning that the state tax system was much more progressive (less regressive) in states with higher union density.

One can think of this ratio as follows: If in a state with higher union density, a middle-class person would pay 9 percent of their income in state taxes, and a person in the top 1 percent will pay approximately 4.7 percent. In contrast, in a state with low union density, if the middle-class person pays the same percent of their income, a person in the top 1 percent would pay approximately 3.7 percent of their income.

In short, a tax system is more likely to raise more money from the rich, instead of the middle class, when unions are stronger.

Conclusion: Unions work for everyone, not just their members

Naysayers argue that unions are just another interest group, but the fact is that organized labor fights for the common interests of many Americans. Unions have in many ways helped workers who have never paid union dues in their lifetimes.

What’s more, the role unions play in making our democracy work is critical at this juncture when inequality is at record levels and an increasing number of citizens feel their democracy is no longer responsive to their needs. Indeed, in 2009, 59 percent said they don’t think most elected officials care what people like them think, up 10 percentage points from 1987—a time when unions were stronger and inequality lower.

In short, rebuilding the strength of organized labor is necessary if we intend to make democracy work for the middle class.

David Madland is the Director of the American Worker Project, and Nick Bunker is a Special Assistant with the Economic Policy team at the Center for American Progress Action Fund.

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SOURCE: AP/ Bob Bird

Investing in a stronger middle class would bolster our education system and our economy.

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See also: The Middle Class Is Key to a Better-Educated Nation by David Madland and Nick Bunker

America’s economic future depends in large part on the quality of our nation’s public education. Education increases productivity, sparks innovation, and boosts our economic competitiveness. In a globally competitive environment, we can’t afford to have a poorly educated workforce.

To boast a world-class public education system requires investments. Alas, we have not invested as much as needed to stay ahead of our international competitors, and the results are clear: Fifteen countries now have higher college graduation rates than us, and our average test scores are lower than those of not just peer countries but also less wealthy places such as Slovenia and Poland.

Not surprisingly, the American public thinks we should be making greater investments in education, with polls showing strong and growing support for increased spending. Seventy-two percent of Americans support spending more on education today, up from 65 percent in 1985. So why have we not been making the investments in education that the public desires and the economy demands?

There are of course many reasons but a key, though often overlooked, piece of the explanation is the decline of the American middle class. Societies with a strong middle class make greater investments in public goods such as education, which helps fuel their future economic success. Because paying for private school imposes a much greater, and sometimes impossible, hardship on middle-class families than it does on the wealthy, middle-class families have a strong incentive to make public schools work. The middle class invests its time and energy in public schools and supports higher levels of spending on education—and especially the taxes necessary to pay for it—than do the rich.

Moreover, people in strong middle-class societies feel they share a similar fate and thus are more willing to make investments that they may not directly benefit from, such as, for example, in education when they do not have school-age children.

Over the past several decades, however, America became less of a middle-class society as the wealthy captured most of the economy’s gains. The top 1 percent’s share of income rose to 23.5 percent in 2007, the last year before the beginning of the Great Recession, up from 9.12 percent in 1974, while over this same time period, the share of income going to the middle class (defined as the middle 60 percent of the population) fell from 52.2 percent to just 46.9 percent. The share of income going to the bottom 20 percent over this period stayed around 3 percent, declining by less than 1 percentage point.

As the rich pull away from the middle class, the relative political power of the wealthy significantly increases compared to the middle class.

As the rich pull away from the middle class, the relative political power of the wealthy significantly increases compared to the middle class. This dramatic change in power distorts our political system, leading to not as much investment in the public goods needed to maintain a healthy middle class, including a great public education system. The rich are able not only to purchase ever more political influence but also boost their political power relative to the middle class, which now feels less influential and thus votes less often and gets involved in politics less frequently. As a result, the views of the American middle class now hold less political weight than they used to.

Because of the decline of the middle class, education spending is lower than it would be otherwise. Indeed, four decades ago the United States ranked second among high-income countries in education spending as a share of GDP—the broadest measure of a country’s income level—with only Canada outspending us, according to the World Bank. In 2008, the most recent year data are available, we ranked 11th—and Canada, whose middle class has also shrunk significantly, dropped to 16th, as countries with stronger middle classes like Sweden and New Zealand edged ahead.

In states across the country, a similar dynamic has played out as well. Since the Great Recession began, most states have cut education spending, yet in those states with a stronger middle class, education spending has not been cut by nearly as much on average. Moreover, of the five states that cut education spending the most, the middle class in four is weaker than the national average. And of the five states that increased education spending the most, four had stronger middle classes than the average.

To flesh out these observations and help quantify the importance of a strong middle class to making investments in education, we examined in detail educational spending in all 50 states over the past two decades

—the entire period for which complete data are available. We find that a weaker middle class is associated with significantly lower levels of education spending, controlling for other factors that affect education spending such as state income levels, the percentage of minorities in a state, and the age distribution of the state. Specifically, we find that a 1 percentage point increase in the share of income received by the middle class is associated with an increase of $64 per-pupil spending on public school kindergarten-through-12th-grade education.

Our study suggests that if the middle class received the same share of income as it did in late 1960s—approximately 7 percentage points more—then spending per pupil on education would be about $447 higher today. In a state such as Louisiana, the median state in terms of student population, that would have translated into $308,839,005 more in education spending during the 2009-10 school year.

Importantly, increased education spending tends to lead to greater levels of achievement. Many of the factors that boost educational performance require resources. Hiring and retaining good teachers and principals takes money, as do supplies, enrichment programs, small class sizes, and high-quality facilities.

To be sure, there is room to improve the efficiency of our current levels of education spending. But strong middle-class societies also tend to spend government money more efficiently than unequal societies, with less waste, fraud, and abuse, suggesting that the increased educational spending would be likely put to good use. Case in point: Researchers commonly find that in more equal societies, corruption is less prevalent and educational resources are allocated more equitably, ensuring most students have sufficient resources, not just the privileged.

Additionally, a strong middle class boosts educational attainment through far more than just increased spending. The ways in which a strong middle class leads to better educational outcomes, such as middle-class parents putting pressure on administrators to fire or transfer bad teachers, are described more completely in our companion report, “The Middle Class Is Key to a Better-Educated Nation.”

Skeptics may argue that over the past several decades as the middle class declined, spending on education generally increased. But we spend more on education now because we are a much richer society. Per capita GDP nearly doubled over the past four decades, adjusting for inflation, increasing from $26,669 in 1967 to $46,804 by 2008, providing much greater resources for spending on a range of goods, including education. Research consistently finds that as the income level of a society increases, it spends more on education.

Skeptics might also note that all Americans, including the wealthy, generally support increased educational spending. They would be correct. But the middle class expresses higher levels of support for spending on education than do the wealthy, suggesting that spending on education would be even greater if the middle class had more political power.

As a result, neither of these points refutes the basic argument of this paper, which is that spending on education is higher when the middle class is stronger.

In the pages that follow, we explore other studies done on the relation between a strong middle class and support for a variety of public investments that benefit the overall strength and well-being of society. We then examine how a strong middle class results in a strong democracy, and consequently in a proclivity for those societies to invest in important public programs such as public education. Our paper then turns to the topic at hand—the demand for a quality public education system and the willingness to pay for it—before presenting our seminal state-by- state analysis of the correlation between a strong middle class and spending on public education per pupil.

In short, this paper argues that a stronger middle class is likely to be good for our nation’s educational system. And improving education in the United States would be good for our economy.

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• The Middle Class Is Key to a Better-Educated Nation by David Madland and Nick Bunker

SOURCE: AP/ Tony Dejak

Strengthening a weakened middle class would lead to significant improvements in our national education system.

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Education is key to America’s economic success as technological change and global competition increase exponentially. Unfortunately, where once our nation was atop the world academically, today American students rank in the middle of the pack. Fifteen countries now have higher college graduation rates than us, and our average test scores are lower than those of not just peer countries but also less- wealthy places such as Slovenia and Poland.

Not surprisingly, business leaders and the American public are concerned about the quality of American education. There are myriad proposals about how to improve the U.S. education system. Yet a critical but often overlooked reason for our poor educational achievement is the decline of the American middle class over the past four decades.

America today is less of a middle-class society as the wealthy capture most of the economy’s gains. The top 1 percent’s share of income reached 23.5 percent in 2007, the last year before the Great Recession, up from 9.12 percent in 1974. Over this same time period, the share of income going to the middle class, defined as the middle 60 percent of the population, fell to 46.9 percent from 52.2 percent, and the share of income going to the bottom 20 percent stayed at roughly 3 percent, declining by less than 1 percentage point.

When poor and lower-income Americans can’t work their way into the middle class, and when the middle class sees its share of income shrinking, that harms our nation’s educational achievement in several ways. Societies with a strong middle class make greater investments in education—as described in detail and quantified in our companion report, “Middle Class Societies Invest More in Public Education”—and all else being equal, higher levels of spending tend to boost educational performance.

At the family level, people living in strong middle-class societies are more likely to get involved in making their children’s schools better, pushing to raise educational standards, and putting pressure on school administrators to fire or transfer bad teachers. And some of the culture and behaviors that middle-class parents pass on to their children about education, such as valuing school achievement and attending school, are thought to come from their middle position in society with a level of income and security that makes them neither rich nor poor. All of this helps boost educational achievement. What’s more, in more middle-class societies, citizens—rich, poor, and middle class alike—tend to be healthier and healthier students do better academically.

In more middle- class societies, citizens—rich, poor, and middle class alike—tend to be healthier and healthier students do better academically.

Finally, expectations for educational performance can have a significant impact on educational outcomes. Societies sometimes have lower expectations for those at the bottom of the economic spectrum—an effect that may be more pronounced in societies with a weaker middle class. In contrast, societies that expect everyone to excel in school if given the opportunity boast more students doing better and going onto college.

To quantify the impact of the middle class on educational achievement, we examined math scores in all 50 states between 2003, the first year data on all states are available, and 2009, the most recent year complete data are available. We found that a weaker middle class is associated with significantly lower levels of math performance. Our results held even when controlling for a host of other factors that affect outcomes, such as the state’s income level, childhood poverty rates, and the percentage of students who are English language learners.

Our results indicate that a stronger middle class is associated with higher test scores, separate and above any effects of poverty, overall income levels, and the percentage of non-English speakers. In short, the “middle-classness” of a state directly influences its educational achievement.

Specifically, we found that each percentage point increase in the share of income going to the middle class is associated with an increase of 0.69 points on the National Assessment of Educational Progress composite scale for math.

Our study suggests that if the middle class received the same share of income as it did in the 1960s—approximately 7 percentage points more—then the median state, which had a math score of 284 in 2009, would have a score 4.83 points higher today. If just a single state—for example, Florida, which currently ranks 16th from the bot- tom on standardized tests—boosted its middle-class income share by 7 percentage points, the results suggest that its scores would rise to the level of the states with the median score— Delaware, Iowa, and North Carolina in 2009.

To put this in context, a $20,000 increase in a state’s gross domestic product per capita—the commonly used measure of a state’s income level—results in about an eight-point increase in math scores. Such an increase in per capita GDP would be about the same increase the United States experienced between 1967 and 2009.

In the pages that follow, we will present the array of academic research on this topic that supports the premise of our paper, and then detail the school and nonschool functions that a strong middle class supports in our education system and our society. We turn next in the paper to the specific results of our analysis, which find that a stronger American middle class is associated with higher levels of academic achievement.

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See also:

• Middle-Class Societies Invest More in Public Education by David Madland and Nick Bunker

SOURCE: AP/Jay LaPrete

Gov. John Kasich (R-OH) answers questions during a news conference Friday, October 21, 2011, in Columbus, Ohio.

Ohioans will vote tomorrow in a referendum on the fate of Senate Bill 5—a law that slashes the state’s public-sector workers’ collective bargaining rights. Polls show that Ohio voters will very likely reject the new law. That’s a prediction that shouldn’t be surprising: Americans consistently report that they support workers’ right to organize, and Ohioans are no exception.

S.B. 5 is an extreme attack on public-sector workers’ right to bargain collectively. It prohibits public employees, including teachers, police officers, and firefighters, from bargaining over many types of benefits, and even public safety concerns—such as appropriate staffing levels for police and firefighters. And it allows locally elected officials to unilaterally impose their side’s offer when labor and management cannot reach a deal—a provision prominent Republican opponent State Sen. Bill Seitz said was like “going to divorce court and finding out your wife’s father is the judge.”

Ohioans protested for weeks and successfully petitioned for a referendum on S.B. 5 after the state legislature passed the law by the slimmest of margins.

All signs now point to the law’s defeat. Opponents of S.B. 5 collected 900,000 signatures calling for the referendum even though only 231,000 were needed. The latest polling (here and here) shows voters support repeal by double-digit margins—including a Quinnipiac University Polling Institute poll finding 57 percent of Ohioans favor repeal and 32 percent oppose (a 25-point margin).

Some analysts claim that Gov. John Kasich (R-OH) and S.B. 5’s proponents guaranteed the bill’s failure by not carving out an exemption for emergency responders. And it’s true that Americans are uniquely reverent toward first responders. But it’s not just the popularity of firefighters and police officers that will cause voters to reject the law.

Americans—Ohioans included—believe that collective bargaining is a fundamental right for all workers. Wisconsin excluded police and firefighters from a similar law stripping public-sector workers of collective bargaining rights enacted this spring. Opposition to the Wisconsin law was just as intense as to S.B. 5, and nationwide more than 61 percent of Americans said that they would oppose such a bill in their state, according to the Gallup survey research group.

Americans understand that labor unions provide necessary protections for all workers. Most Americans (61 percent), according to the Pew Center for People and the Press, believe that “labor unions are necessary to protect the working person,” and 51 percent say that labor unions have a positive effect on “working conditions for all Americans.” A strong majority (68 percent) of Americans say that labor unions help unionized workers, according to Gallup.

Admittedly, unions are not immune from public critique. Only a slim plurality (44 percent) of Americans report that their first reaction is to side with unions in disagreements between unions and state and local governments—compared to 38 percent that side with government—according to Pew. And according to the Quinnipiac University Polling Institute, 60 percent of Ohioans support changes to require the largely unionized public sector to pay a larger portion of their health benefits.

But Americans know it is unions’ ability to bargain that gives workers a voice in the workplace. Most Ohioans (56 percent) say that public employee unions should be able to bargain over their health insurance plans even though they support increased benefits payments, according to the Quinnipiac poll. And 55 percent of Americans believe that union agreements ensure fair treatment for union workers compared to only 34 percent who say that these agreements give union workers unfair advantages.

So if S.B. 5 is defeated tomorrow, Ohioans won’t just be rejecting the bill because it attacks emergency responders. Rather Ohioans—like the rest of the country—understand that the right to bargain is essential to the well-being of American workers.

Karla Walter is a Senior Policy Analyst with the American Worker Project at the Center for American Progress Action Fund.

SOURCE: AP/Susan Walsh

Rep. Donald Payne's (D-NJ) resolution highlights the fact that unions provide important benefits to the 99 percent of Americans that need to work for a living by allowing them a voice in our economy and democracy.

Rep. Donald Payne (D-NJ) introduced a commonsense resolution yesterday recognizing that strong labor unions help build a healthy middle class. The resolution would not change the law at all but would simply highlight the fact that unions provide important benefits to the 99 percent of Americans that need to work for a living by allowing them a voice in our economy and democracy. Our country desperately needs to hear this message right now, and it is a small but important step toward rebuilding our middle class. Unfortunately, instead of supporting Rep. Payne’s efforts, House Republicans are tearing away at Americans’ right to form unions.

Unions have won important rights for working Americans—including the 40-hour work week, safe and healthy working conditions, and social safety net programs—but they aren’t just an artifact of history. The American Worker Project has conducted extensive research—cited in Rep. Payne’s resolution—on how unions increase middle-class incomes today.

When unions are strong they can ensure that workers are paid fair wages, receive the training they need to advance to the middle class, and are considered in corporate decision-making processes. Unions also promote political participation among all Americans, give ordinary Americans a voice within our government, and help secure policies that support the middle class, such as Social Security, family leave, and the minimum wage.

But as unions became weaker over the past four decades, they became less and less able to perform these functions—and the middle class withered.

Over time, the strength of the middle class and the strength of the union movement have tracked closely together, as can be seen in the chart below. In 1968 the share of income going to the nation’s middle class—the middle 60 percent of the population by income—was 53.2 percent, when 28 percent of all workers were members of unions. Since then, union membership has steadily declined alongside the share of income going to the middle class. By 2010 the middle class only received 46.5 percent of income as less than 12 percent of workers were unionized.

Further, the states with the lowest percentage of workers in unions—North Carolina, Georgia, Arkansas, Louisiana, Mississippi, South Carolina, Tennessee, Virginia, Oklahoma, and Texas—all have relatively weak middle classes. In each of these states, the share of income going to the middle class is below the national average, according to Census Bureau figures.

Today, approximately 12 percent of American workers are unionized. If unionization rates increased by 10 percentage points—to roughly the level they were in 1980—the typical middle-class household, unionized or not, would earn $1,479 more a year.

And as unions have weakened, the lion’s share of the economy’s gains has gone to the wealthy rather than the middle class. The share of pretax income earned by the richest 1 percent of Americans more than doubled between 1974 and 2007, climbing to 23 percent from 9 percent.

Unfortunately, House Republicans are using every maneuver available to undercut working Americans’ right to unionize. A draft House budget bill released a few weeks ago would cut funding to the National Labor Relations Board—the agency charged with conducting union elections and investigating unfair labor practices—by 20 percent as compared to President Barack Obama’s FY 2012 budget request, and would prohibit the administration from modernizing union election procedures and requiring companies to post signs to inform workers of their right to organize.

Even worse, three-quarters of House Republicans voted to eliminate all funding for the NLRB last spring, which—if passed—would have prevented the enforcement of labor law for several months. And some House conservatives have signaled that they will be slow to appoint any new members to the NLRB even though two of the four board members’ terms expire this year—a move that will cripple the agency’s ability to act.

Rep. Payne’s resolution recognizes that Americans who work for a living need unions to advocate them in the market and our democracy. Unfortunately, House Republicans are so busy trying to destroy unions that they are willing to ignore what 99 percent of Americans really need—even when these Americans are taking to the streets to demand it.

Karla Walter is a Senior Policy Analyst and David Madland is the Director of the American Worker Project at American Progress.

The Action Fund sent the following letter to the administration today in support of its efforts:

October 7, 2011

Debra Carr, Director
Division of Policy, Planning and Program Development
Office of Federal Contract Compliance Programs
200 Constitution Avenue, NW
Washington, D.C. 20210

Regarding: RIN 1250-AA03

Dear Ms. Carr,

The Center for American Progress Action Fund would like to submit comments on the proposed rulemaking (RIN 1250-AA03) to create a compensation data collection tool.

We applaud the Office of Federal Contract Compliance Programs for its efforts to create a meaningful data collection tool that could help the agency uncover compensation discrimination among contractors.

The federal government has a long commitment to preventing discrimination among contractors. President Lyndon B. Johnson signed Executive Order 11246 in 1965 to ensure that federal government contractors and subcontractors “take affirmative action to ensure that applicants are employed, and that employees are treated during employment without regard to their race, color, religion, sex, or national origin.”

But currently the federal government has limited ability to monitor which contractors and industries are struggling with women and people of color entering and advancing in the workforce.

The proposed data collection tool can dramatically and cost-effectively increase the efficacy of the OFCCP’s enforcement efforts. And to do so, the survey should cover all contracted workers; improve review of companies before they receive lucrative government contracts; collect comprehensive information on wages and benefits; and be publically available. This would enable the government to identify and analyze industry trends and prevent future discrimination by screening companies before they receive a contract.

Cover all contracted workers: The government does a bad job of tracking federal contract workers. There is currently no way to quantify the actual number of contracted employees who perform government work at any given time. However, the Economic Policy Institute estimates that 43 percent of all employees who do the government’s work are employed by contractors.[1] Federal agencies are beginning to collect this data, but collection methodologies vary and the data is unreliable and does not provide a complete picture of the work performed by contractors. The OFCCP survey could be a valuable tool in getting an accurate number of how many workers are employed on federal contracts. But current data limitations prohibit the federal government from determining an accurate sample. For this reason, the survey should cover all types of government contracts—including construction contracts—and be administered to all contractors, rather than just a sample.

Improve review of companies before they receive contracts: The Federal Acquisition Regulation requires that before awarding supply and service contracts over $10 million contracting officers must work with the OFCCP to screen companies for EO 11246 compliance.[2] The government is also banned from entering into contracts of lesser value with companies that have been found to be noncompliant, but prescreening of these companies is less effective.[3] The government should ensure that all companies are in compliance with EO 11246 before they receive a lucrative government contract by using the OFCCP data tool to screen all prospective contractors to see if their compensation data indicates that further investigation is necessary.

Collect comprehensive information on wages and benefits: Wage and benefit packages have become increasingly complex in the years since President Johnson enacted EO 11246. But today we know very little about the wages and benefits contractors pay their workers.[4] The data collection tool should survey employers about their full menu of worker pay and benefits. Pay data should not only include wage and salary information, but also income from other types of worker compensation programs—such as profit and gain sharing, stock options, and stock purchase plans—and employee ownership programs—such as co-ops and employee stock ownership plans, or ESOPs. Benefits data should include paid leave; health and retirement benefits, as well as whether the company offers family-friendly benefits such as job-protected paid or unpaid family leave, paid sick days that can be used to care for a sick child or other family member; flexible workplace schedules; and child- and elder-care subsidies. The survey should also ask contractors if benefits packages are available to employees’ same-sex and opposite-sex domestic partners (similar to the question asked on the National Compensation Survey).

Make survey results public: The public has a right to know about the hiring and promotion practices of contractors receiving billions of taxpayer dollars every year. Sunlight is a powerful force that can expose wasteful and abusive contracts and help ensure that the government only does business with responsible contractors. And public access fits with existing laws and goals of the administration. The Freedom of Information Act requires agencies to proactively identify government documents falling within its scope that will receive multiple public requests and make them available, which is likely for most of the data included in the survey.[5] President Obama also stated at the beginning of his term that, “All agencies should adopt a presumption in favor of disclosure, in order to renew their commitment to the principles embodied in FOIA, and to usher in a new era of open Government.” The OFCCP should publically release the data from the new survey to give the public an accurate picture of EO 11246 compliance. This includes both detailed aggregate data and as many details from individual employer responses as possible without jeopardizing legitimate company secrets.

Past experience demonstrates that the data collection tool would be both feasible for businesses to administer and provide useful information. The OFCCP successfully initiated a similar reporting requirement—the Equal Opportunity survey—in 2000. Though the Bush administration shut down the survey before it could be fully implemented, researchers hired by the Department of Labor to evaluate the survey found that it was a useful tool in determining contractor noncompliance and urged the department to “implement the EO Survey requirement for all federal contractors.”

Thank you for your consideration of these comments.

Sincerely,

David Madland
Director of the American Worker Project
Center for American Progress Action Fund

Endnotes

[1]. Kathryn Edwards and Kai Filion, “Outsourcing Poverty” (Washington: Economic Policy Institute, 2009).

[2]. Federal Acquisition Regulation Subpart 22.8—Equal Employment Opportunity.

[3]. Ibid.

[4]. For example, there is no actual accounting of how many contracted workers are paid poverty wages, despite research indicating that it is a widespread problem. The Economic Policy Institute has estimated that nearly 20 percent of contracted workers are not paid enough to keep a family of four out of poverty. (See Edwards and Filion, “Outsourcing Poverty.”).

[5]. See 5 U.S.C. § 552 (a) (2).

Stronger Unions Create a Stronger Middle Class

•  Change in middle class earnings
•  Average change in earnings for middle class households

See also:

• Unions Make the Middle Class: Without Unions, the Middle Class Withers by David Madland, Karla Walter, and Nick Bunker
• Infographic: Six Ways Unions Build a Strong Middle Class
• As Unions Weaken So Does the Middle Class by David Madland and Nick Bunker
• New Census Data Show Middle Class Continues to Struggle by David Madland and Nick Bunker

Sources:

Unions raise wages and benefits

"Workers who join unions earn 15 percent more-or $2.50 more per hour-than nonunion counterparts and are more likely to have health and retirement benefits."

John Schmitt, “The Union of the States” (Washington: Center for Economic and Policy Research, 2010).

Unions build career ladders to the middle class

"Fifty-six percent of unionized workers have access to work related education assistance compared to 48 percent of nonunion workers."

Bureau of Labor Statistics, “National Compensation Survey: Employment Benefits in Private Industry in the United States, March 2007” (2007), available at http://www.bls.gov/ncs/ebs/sp/ebsm0006.pdf. (The BLS has not updated this statistic since 2007.)

Also, when unions are involved, training is of higher quality…

C . Jeffery Waddoups, “Union-Management Training Partnerships in the Hotel Industry: The Case of Las Vegas and San Francisco.” Working Paper (The New Economic Information Service and the Foundation for Democratic Education, 2002).

Daniel Marschall, “The institutionalization of workplace learning in American unions: Innovations for new work systems and labor movement renewal.” In David Finegold and others, eds., Transforming the U.S. Workforce Development System: Lessons from Research and Practice (Ithaca: Cornell University Press, 2010).

Unions ensure middle-class workers are represented in corporate decision making

"Unions help create internal balance in corporate decision making. If unions were stronger today, more corporations would consider how middle class workers were affected when making major decisions."

Sanford Jacoby, The Embedded Corporation: Corporate Governance and Human Resources Management in the United States and Japan (Princeton: Princeton University Press, 2005).

Unions promote political participation

"For every 1 percent increase in union density, voter turnout for all Americans increases by 0.2 to 0.25 percent-…"

Benjamin Radcliff and Patricia Davis, “Labor Organization and Electoral Participation in Industrial Democracies,” American Journal of Political Science, 44 (1) (2000): 132-141.

Unions help balance the disproportionate influence of corporations and trade associations on Congress

"In 2010, corporate and trade associations Political Action Committees outspent labor by $218 million And the difference in lobbying expenses was over $2 billion."

Center for Responsive Politics, “Lobbying, Top Spenders,” and “Ranked Sectors,” available at: http://www.opensecrets.org.

Jacob Hacker and Paul Pierson, “Winner Takes All Politics: Public Policy, Political Organization, and the Precipitous Rise of Top Incomes in the United States,” Politics and Society 38 (152) (2010).

Unions help ensure policies that benefit the middle class

"It would be hard to exaggerate the influence that the labor movement has had on creating and maintaining the social safety net that undergirds the American middle class."

Paul Krugman, “The Great Wealth Transfer,” Rolling Stone, December 14, 2006.

Thomas Byrne Edsall, The New Politics of Inequality (New York: W.W. Norton & Company, 1984).

See also:

• As Unions Weaken So Does the Middle Class by David Madland and Nick Bunker

SOURCE: Center for American Progress

Download this testimony (pdf) (full citations included)

Thank you Chairman Jordan and Ranking Member Kucinich for inviting me to testify today. My name is Heather Boushey and I’m Senior Economist at the Center for American Progress Action Fund.

The American Jobs Act will create jobs, which is exactly what America needs Congress to prioritize. The American Jobs Act includes a number of key proposals that have recently had bipartisan support, including infrastructure investments, putting teachers back in schools, tax cuts targeted for small businesses, and help for the unemployed.

Presidents and Congresses of all political stripes—including the Bush administration—have embraced short-term, temporary fiscal expansion to create jobs in times of labor market weakness. Each time, they worked as intended. We know this from an empirically grounded body of literature documenting the effectiveness of fiscal expansion and the importance of economic multipliers in creating jobs above and beyond those directly created by one firm or one government project. And this isn’t just the experience of the United States. Economies around the world reflecting a wide range of economic ideologies understand the importance of government action in the face of economic crises.

Independent economic forecasters are already weighing in and they agree that the plan will boost growth and employment:

• Mark Zandi, chief economist at Moody’s Analytics, estimates that the plan will add 2 percentage points to U.S. economic growth next year, add 1.9 million jobs, and cut the unemployment rate by a percentage point.
• Macroadvisors, a prominent financial planning firm, says the plans will boost the level of U.S. gross domestic product by 1.3 percent in 2012 and 0.2 percent in 2013 and will create 1.3 million jobs in 2012 and 0.8 million in 2013, relative to baseline.
• Goldman Sachs economists estimate that it will bring a 1.5 percent increase in U.S. gross domestic product in 2012.

The plan will address the fundamental issues facing the U.S. economy. The lingering consequences of the Great Recession—the housing crisis, the jobs crisis, the fear among businesses to invest their earnings despite record profits—continue to push against faster economic growth and job creation. In short, the economy continues to suffer from a lack of demand. Monetary authorities have already pushed interest rates down to zero and fiscal policy is a critical policy tool for fighting unemployment. As Federal Reserve Chairman Ben Bernanke said in Jackson Hole in August, “Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not, as a consequence, disregard the fragility of the current economic recovery.”

The American Jobs Act builds on what we know works to get people back to work. The weight of the empirical evidence is that the steps taken in early 2009 were a down payment on the recovery. They brought the economy back from the precipice and created millions of private-sector jobs. Private employers have added jobs for 18 straight months for a total of 2.4 million jobs since the economy bottomed out in February 2010 and including more than 300,000 jobs in manufacturing since its low point in December 2009. There is much more to be done, however, as this isn’t enough jobs given the depth of the Great Recession.

Denying that there was any impact of fiscal expansion is an ideological stance, not one grounded in empirical analysis. Not that long ago, there was bipartisan agreement that recessions called for increased spending. In January 2008 Congress passed the Economic Stimulus Act, which injected more than $150 billion into the economy, with the support of 165 Republicans. President Bush signed it. In the spring of 2008, Congress extended benefits for the long-term unemployed, with the support of 182 Republicans. President Bush signed it into law. These policy actions had their intended effect by temporarily boosting spending. But the collapse of the housing bubble led to a contraction that has been deeper and darker than any in recent memory and employment declines mounted after the financial crisis of 2008 spilled over into the broader economy.

By taking decisive action to address the hemorrhaging of jobs and the fall in economic activity, Congress and the administration actually reduced the deficit, relative to where it would be today had no such action been taken. At the most basic level, government spending reduced unemployment and thus increased tax revenues. The current projected budget deficit for fiscal year 2011 stands at $1.3 trillion. Had Congress done nothing to stop the hemorrhaging of jobs, economists estimate that the deficit would have ballooned to more than twice as large as it actually did, hitting $2.6 trillion in fiscal year 2011.

The American Jobs Act is a measured approach that will boost job creation

The American Jobs Act includes a number of key proposals that have recently had bipartisan support. It invests in infrastructure and schools, targets aid towards small businesses, helps the long-term unemployed, and provides every working American with a payroll tax cut.

The American Jobs Act builds on what we know works to get people back to work in an economy like what we have now. The role of government in our economy is not, of course, limited to times of economic distress. Government investments in basic science brought us the Internet, the microwave oven, and satellite communications, and have led the fight against cancer. Government investment in new, innovative businesses has helped many companies grow into household names. The Small Business Investment Company Program, financed by the federal Small Business Administration, helped Nike Inc., Apple Inc., and FedEx Corp. grow into the global business powerhouses they are today.

Government spending is also an important part of the economy. Millions of people work for the government and millions more are employed in government-funded work, and all those dollars flowing into the economy create even more jobs. For example, the Federal Highway Administration periodically estimates the impact of highway spending on direct employment, defined as jobs created by the firms working on a given project; on supporting jobs, including those in firms supplying materials and equipment for projects; and on indirect employment generated when those in the first two groups make consumer purchases with their paychecks. In 2007 $1 billion in federal highway expenditures supported about 30,000 jobs—10,300 in construction, 4,675 in supporting industries, and 15,094 in induced employment.

Today, though, is a special time when it comes to the role of government. Unless Congress acts, the private sector will continue to generate insufficient demand. Because customers have less money to spend due to the collapse of the housing bubble and the ensuing high unemployment, businesses have little incentive to hire and invest. The federal government can help with this. It can take measures to create private-sector jobs by moving up investments that the public needs anyway—investments in roads and bridges; investment in changes that the country needs to make, such as the movement to a more energy efficient cleaner economy; investments in education and research and development. We know this most recently from fighting the Great Recession.

Investments in infrastructure—both human and physical capital—will put people to work now and yield lasting benefits for the economy, increasing growth in the long run. These are the kinds of investments that historically have had bipartisan support as they boost productivity for all American businesses while creating jobs. As AFL-CIO President Richard Trumka and U.S. Chamber of Commerce President Thomas Donohue stated, “With the U.S. Chamber of Commerce and the AFL-CIO standing together to support job creation, we hope that Democrats and Republicans in Congress will also join together to build America’s infrastructure.”

The American Jobs Act will invest $140 billion in infrastructure. Based on economist Mark Zandi’s most recent estimates, this should raise U.S. economic output by $220 billion.

Key investments include:

Investing in our human capital. The American Jobs Act includes $35 billion to prevent up to 280,000 teacher layoffs and keep police officers and firefighters on the job. Because of ongoing budget shortfalls, local governments have been hemorrhaging employees—including nearly 300,000 teachers since April 2009, the most recent peak. These layoffs not only add to the unemployment queue but will reduce future American competitiveness.

We know that this will be effective. As a result of the State Fiscal Stabilization Fund and other steps taken in 2009, the Department of Education reports that more than 400,000 teachers got to keep their jobs. Direct aid to states, much of which benefited America’s schools, to a large extent, created jobs in the private sector. Every increase of $100,000 in state aid increased employment by 3.8 jobs for a year, of which 3.2 jobs were outside the government, health, and education sectors.

Investing in our nation’s physical capital. The American Jobs Act includes $25 billion to modernize and upgrade our school infrastructure and an additional $5 billion to modernize community colleges. We know that there is great need for this kind of investment. The accumulated backlog of deferred maintenance and repair amounts to at least $270 billion.

The American Jobs Act also includes $50 billion in immediate investments for highway, highway safety, transit, passenger rail, and aviation activities. Here, too, we know there is great need: The American Society of Civil Engineers estimates that we need to spend at least $2.2 trillion over the next five years just to repair our crumbling infrastructure. This doesn’t even include things like high-speed rail, mass transit, and renewable energy investments we need to free ourselves from foreign oil and climate change. Of the $50 billion, $27 billion will make our nation’s highway systems more efficient and safer for passenger and commercial transportation, $9 billion of investments will repair our nation’s transit systems, $2 billion in funding will improve intercity passenger rail service, $2 billion will improve safety, add capacity, and modernize airport infrastructure across the country.

We know that investments in infrastructure will create jobs in the private sector:

• Increased investments in infrastructure saved or created 1.1 million jobs in construction industry and 400,000 jobs in manufacturing by March 2011 and almost all of these jobs were in the private sector.
• By the end of 2010, $93 billion in invest¬ments to the green economy had created or saved nearly 1 million American jobs. These 997,000 jobs include both the “green jobs” created directly by investment in specific industries and indirectly by their suppliers, as well as the additional jobs created when workers spend their incomes back into the economy.
• In fiscal year 2010 the U.S. Department of Agriculture’s Rural Development Fund allocated more than $21.2 billion to seven USDA programs that invest in rural infrastructure, businesses, and homes. These programs upgraded public utilities and community facilities, provided broadband connections to businesses and homes, invested in rural businesses, and helped rural families purchase homes. In addition to improving quality of life, these investments resulted in more than 300,000 jobs for rural residents.

The reason for this success is simple: Upgrading roads, bridges, and other basic infrastructure not only creates jobs but also paves the way for businesses small, medium, and large to benefit. Infrastructure investments lower the cost of doing business, making U.S. companies more competitive. And they put people to work earning good, middle-class incomes, which expands the consumer base for businesses.

The American Jobs Act lays the foundation for future infrastructure investments as well by creating a National Infrastructure Bank, or NIB, based on work by Sens. John Kerry (D-MA), Kay Bailey Hutchison (R-TX), Jay Rockefeller (D-WV), and Frank Lautenberg (D-NJ), and Rep. Rosa DeLauro (D-CT). The NIB will be a government-owned entity that will operate independently and be bipartisan, with no more than four of its seven-member board from the same political party. Eligible projects would include transportation infrastructure, water infrastructure, and energy infrastructure. Loans issued by NIB would use approximately the same interest rate as similar-length U.S. Treasury securities and could be extended up to 35 years, giving the NIB the ability to be a “patient” partner side by side with state, local, and private co-investors. The NIB would finance no more than 50 percent of the total costs of any project.

This idea has bipartisan support. As Sen. Hutchison said of the NIB, “This common-sense proposal will help close America’s widening infrastructure funding gap, create millions of American jobs in the next decade, and make the United States more competitive in the 21st century.”

The collapse of the housing bubble has devastated communities across the country as they are left with vacant properties, which further pull down asset values. Project Rebuild will invest $15 billion in proven strategies that leverage private capital and expertise to rehabilitate hundreds of thousands of properties in communities across the country, through rebuilding and repurposing distressed real estate, support for-profit development when consistent with project aims and subject to strict oversight, scale successful land bank models, and establish property maintenance programs to create jobs and mitigate “visible scars” left by vacant/abandoned properties.

The American Jobs Act builds on the success of bipartisan tax cuts and focuses specifically on small businesses. It will cut in half firms’ payroll taxes on the first $5 million in payroll and will provide a complete payroll tax holiday for employers who create new jobs or increase wages, capped at applying to $50 million in new wages. Every firm will benefit but small firms will see a larger boost. It will also extend the 100 percent business expensing through 2012 ($5 billion), helps small businesses and entrepreneurs access capital, and streamlines regulations that small businesses have to abide by.

Tax cuts are an effective way to boost the economy when demand is low, although the multipliers are smaller than for other expenditures, such as unemployment benefits and infrastructure investments. Based on recent experience, $50 billion in tax expenditures will generate $52.5 billion in additional economic activity and the $5 billion to extend 100 percent expensing will generate $1.45 billion.

A business payroll tax cut has broad, bipartisan appeal and economists agree it will create jobs:

• The National Federation of Independent Business has said that a payroll tax holiday for small businesses “would … [help] struggling businesses reduce costs. … eliminating the payroll tax can reduce unemployment and keep people working during a period of slowed economic growth.”
• Sen. Orrin Hatch, the top Republican on the Senate Finance Committee, said he would “probably be for” an employer-side payroll tax cut.
• In 2010, 50 House Republicans—including Michelle Bachmann and Select Committee on Deficit Reduction member Jeb Hensarling—co-sponsored legislation (The Economic Freedom Act of 2010) to halve employer- and employee-side payroll tax rates, and expand allowances for business expensing, along the lines of the president’s plan.

The complete tax credit for new hires also has broad appeal. Moody’s Chief Economist Mark Zandi, for example, said last year, “At the top of the list is a temporary tax break for firms that in­crease their payrolls. Businesses may expand payrolls by giving their existing employees more hours, raising wages, and/or hiring more workers.”

The 100 percent expensing is an idea is popular with business groups. The National Federation of Independent Business called expensing a “big victory” for small business: “Bottom line – just about every small business can write-off the full amount of investments they want to make in 2010 and 2011.”

The American Jobs Act extends unemployment insurance to the long-term unemployed and implements reforms to help the unemployed find jobs. The key element is to extend the benefits to the long-term unemployed that will expire in December 2010, but there is also a list of new efforts specifically targeted at helping the long-term unemployed find work.

Unemployment benefits stabilize the economy by increasing the demand for goods and services, which at this point in the economic recovery continues to be crucial to saving and creating jobs and boosting earnings. They also help workers and their families by putting money in their pockets while they search for a new job. Unemployment benefits kept 3.3 million people out of poverty in 2009, and they enable those out of work to keep putting food on the table and pay their bills.

Money targeted toward the long-term unemployed helps not only those individual families hardest hit by the Great Recession but also kept dollars flowing into their local communities and helps unemployed workers access health care, undoubtedly mitigating the well-documented negative health effects of unemployment. In a report for the Department of Labor, Wayne Vroman, an economist at the Urban Institute, estimated that unemployment benefits have kept an average of 1.6 million American workers in jobs every quarter during the recession.

For the past half century, Congress has always extended unemployment benefits to the long-term unemployed when unemployment was high and doing so in this recession should be no different. Both Republican and Democratic Congresses have provided emergency unemployment benefits and extending unemployment benefits has not historically been a partisan issue. During the past 40 years, Congress has not once allowed unemployment benefits for the long-term unemployed to expire when the unemployment rate was above 7.2 percent—1.9 points lower than it is today.

The American Jobs Act also provides more assistance to the long-term unemployed. All new claimants for long-term unemployment benefits will receive robust reemployment services and eligibility assessments and it will become unlawful to refuse to hire applicants solely because they are unemployed or to include in a job posting a provision that unemployed persons will not be considered.

The American Jobs Act also implements a series of reforms aimed specifically at helping out-of-work workers in today’s high-unemployment economy:

• Reduce layoffs by implementing Sen. Jack Reed (D-RI) and Rep. DeLauro’s plan for work sharing that lets workers receive pro-rated unemployment benefits as compensation for a reduction in hours at businesses that would otherwise lay workers off. These programs already currently operate in more than 20 states and have been shown to be effective in other countries. Recent research by the International Monetary Fund points to the importance of the massive expansions to Germany’s short-term work program called “Kurzarbeit,” which led to hours reductions but not unemployment. While the country’s economic output fell more during the Great Recession than it did in the United States (through the winter 2010), the German unemployment rate actually decreased and is now only 6.1 percent, a third lower than that of the United States.
• Compensate older workers who take a new job for lower pay rather than claiming unemployment benefits. Older workers are not only less likely to find work after job displacement, but if they find a job, they are more likely to earn much less than before. In January 2010, among workers aged 55 to 64 who were displaced between 2007 and 2009, nearly two-thirds of women (62.8 percent) and men (62.3 percent) were not working at all. By contrast, among workers aged 35 to 44, half of men (50.3 percent) and nearly 6 in 10 women (57 percent) were working. Most of the full-time workers who were displaced who find reemployment earn less than they had before they were displaced. Among older workers, about half are making at least 20 percent less than before being displaced from their job.
• Encourage displaced workers to become entrepreneurs by removing barriers that discourage participation in existing programs and enable states to connect entrepreneurs with mentoring and access to capital through Small Business Administration and other public and private resources.
• Provide states with support for summer job programs for low-income youth in 2012 and year-round employment for economically disadvantaged young adults.

The American Jobs Act targets specific demographic groups who are too often left behind. It will enhance employment and job training opportunities that will benefit minorities, women, and socially and economically disadvantaged individuals in transportation-related activities, including construction, contract administration, inspection, and security.

This is an imperative. In August the Department of Labor released data that show that African Americans have an unemployment rate of 16.7 percent, more than double that of whites, whose unemployment rate was 8.0 percent. Hispanic unemployment was 11.3 percent. Workers without a high school diploma have an unemployment rate of 14.3 percent, more than three times as high as among those with a college degree, who have an unemployment rate of 4.3 percent. Women who maintain families have an unemployment rate of 11.9 percent.

Returning veterans are having a hard time finding work and the American Jobs Act focuses on their specific needs. The Returning Heroes Tax Credit will provide up to $5,600 for long-term unemployed veterans, a Wounded Warriors Tax Credit of up to $9,600 that will increase the existing tax credit for firms that hire long-term unemployed veterans with service-connected disabilities, and a Department of Defense-led task force and enhanced job search services through the Department of Labor will help Veterans get private-sector jobs.

The American Jobs Act will provide every American with a payroll tax cut. The American Jobs Act expands the tax cut enacted in December 2010 by cutting employees’ payroll taxes in half for 2012. This extension will provide a payroll tax cut worth $175 billion to American workers in 2012 and will result in a tax cut of about $1,500 for the typical household earning $50,000. Based on recent experience, this tax cut will generate $222.3 billion in additional economic activity.

Tax cuts are an important policy for boosting incomes. Independent forecasters have estimated that a failure to extend the payroll tax cut next year would reduce growth next year by one-half to two-thirds of a percentage point. The Congressional Budget Office wrote last year that a payroll tax cut for employees has a larger immediate impact on job creation than most other tax cuts it evaluated, including across-the-board income tax cuts.

Last year 139 House Democrats and 138 House Republicans voted together to reduce employee payroll taxes, as well as 43 Democratic senators and 37 Republican senators. The leadership of both parties—Speaker Boehner, Minority Leader Pelosi, Majority Leader Reid, and Minority Leader McConnell—supported the December tax deal.

To ensure that the American Jobs Act is fully paid for, the president will release a detailed plan and call on the Joint Committee to come up with additional deficit reduction necessary to pay for the act and still meet its deficit target.

The American Jobs Act is targeted at the most important problems facing the U.S. economy

The American Jobs Act will work because we have the evidence that shows that these policies have worked in the past. We know that the problem right now continues to be a lack of demand and that expansionary fiscal policy is the right step.

Over the past few months, there has been a growing chorus of broad, widespread agreement among independent economic forecasters, as well as economists from across the political spectrum, that the action is needed now to address the shortfall in aggregate demand not cuts in public spending. A few examples are:

• Bill Gross, founder and co-chief investment officer of the investment management firm Pimco, the world’s largest bond fund, and a prominent Republican, says we need “to create a demand for labor. The private sector is not going to do it.” Even if the government must do it directly, “Putting a shovel in the hands of somebody can be productive.”
• JPMorgan Chase & Co.’s economists said, “the US and Europe are dangerously close to recession. … the most critical period for the US economy will likely be 4Q11, when we may see some fallout from the heightened volatility of risk markets, and 1Q12, when we get an automatic tightening fiscal policy if, as our US team currently assumes, this year’s fiscal stimulus measures will expire.”
• Martin Feldstein, Professor of Economics at Harvard University and former Chairman of the Council of Economic Advisers under President Ronald Reagan, said in July: “The high unemployment reflects the lack of demand rather than any fundamental problems with the US labour market.”

The massive economic hole left by the collapse of the housing bubble and the ensuing financial crisis and high unemployment continue to limit consumption and investment. This means that firms have too little economic incentive to invest and hire more workers. The collapse of the housing bubble destroyed trillions of assets for U.S. families. The ensuing financial crisis virtually stopped the flow of credit and led to sharp layoffs and record-high job losses in late 2008 and early 2009. Households continue to cope with high unemployment, fewer hours of work, and lower incomes, while most businesses still face fewer customers than before the crisis. In dollar terms, after rising to a high of 8.1 percent in mid-2009, as of the second quarter of 2011, the shortfall in aggregate demand amounts to almost 7 percent of U.S. gross domestic product.

Corporations have begun to make money but are stockpiling their cash rather than investing. From December 2008 to August 2011, profits in the nonfinancial corporate sector rose in inflation-adjusted terms by 101.8 percent after taxes. The nonfarm nonfinancial business sector is holding almost $1.9 trillion in cash, the highest level since the fourth quarter of 1959. With companies sitting on large amounts of cash—the share of financial assets that is cash is higher than at any time since 1984—firms already have the funds to invest. And firms that need to borrow face historically low interest rates.

Even though corporate America is flush with cash, investment is at the lowest level in more than four decades. So far in this business cycle, from December 2007 to present, business investment has averaged 10.2 percent of GDP and equaled less than 10 percent of GDP in the second quarter of 2011, the lowest average in more than four decades. This low level of investment is not because of the cost or availability of capital, which continues to be at lows not seen since the 1960s. What activity firms are engaging is not targeted towards job creation: The Federal Reserve’s survey of senior loan officers shows that while banks are lending for mergers and acquisitions, which often lead to job losses, they are not lending for investment in plants and equipment that will create jobs and expanding economic opportunities.

Employers say they are not hiring because they do not see enough customers coming through their doors. The National Federation of Independent Businesses, an organization representing small business owners, reported in August, as it has each month since mid-2009, that “weak sales” are small business owners’ biggest problem. In June they concluded:

It is simple: when sales pick up, owners will have a reason to hire more workers to take care of customers, to produce more output and will have a reason to invest in new equipment and expansion. The proximate cause of the collapse of spending in 2008 was reduced consumer spending.

As Jeffery Braverman, owner of Nutsonline, an e-commerce company in Cranford, New Jersey, that sells nuts and dried fruit put it, “Business demand is what drives hiring.”

The supply-side mantra of tax cuts for the wealthy is not a job-creation strategy for current economic conditions, especially given past policy decisions. It’s important to remember that we have been living in a Bush-tax-cut economy since 2001. That brought us an anemic economic recovery from the 2001 recession. Investment growth, employment growth, and overall economic output all were slower than any other economic recovery in the post-World War II era. The result: For the first time in more than a half century, middle-class families saw their incomes fall during an economic expansion, from 2000 to 2007, in inflation-adjusted terms, even as the economy overall grew.

What’s more, in the interest of encouraging firms to invest and create jobs, we have kept tax levels below the Bush levels for the entire Great Recession and have already extended these tax cuts for another two years beginning in 2011. The problem we face is not that the wealthy are not rich enough. The problem is that the policies of the 2000s left us with a hollowed out middle class that should be the engine of economic growth.

Recent regulatory changes are not the reason for today’s high unemployment. First, let’s remember how we got here: Beginning in the 1980s, financial players had been given wider latitude to make investment choices, regardless of the potential risk, and that, according to the Financial Crisis Inquiry Commission, was a key factor in creating today’s economic crisis. When the housing bubble burst, it became abundantly clear that exotic financial products and a lack of attention to the downside risk meant that our nation’s largest financial actors were in trouble and credit seized up. Regulators had a job to do but they failed to protect the U.S. economy from a financial crisis, a crisis that has left 14 million out of work and sharply pulled down family incomes.

Regulations create a level playing field for businesses and prevent economically costly damage to consumers and public health. When you go to a gas station, a gallon is a gallon; the aspirin you buy at the pharmacy is really aspirin, and the ground beef is actually beef. The courts enforce contracts, and markets are regulated so investors can invest with some confidence that the information they receive is honest.

Congress has a key role to play in getting America back to work

Recent weak economic data should be a wake-up call to responsible members of Congress that cutting deficits right now is a job-killing strategy. There are clear steps that policymakers could take to boost employment and the American Jobs Act is an important step forward. It includes key elements of a job-creating policy agenda: infrastructure investments, reducing layoffs by keeping workers in their jobs in key sectors such as like education, and ensuring that benefits are available to the unemployed while they search for jobs search.

Let’s put aside the misguided focus on short-term deficits and the manufactured crises of this spring and summer—in particular, holding the economy hostage over the debt ceiling. The United States should not try to imitate the kinds of austerity policies being pursued in Europe but rather focus on boosting employment.

Download this testimony (pdf) (full citations included)

Heather Boushey is Senior Economist at American Progress.