A Bold Approach to the Jobs Emergency: 15 Ways We Can Create Good Jobs in America Today

A BOLD APPROACH TO THE JOBS EMERGENCY 1

A BOLD APPROACH TO THE JOBS EMERGENCY15 WAYS WE CAN CREATE GOOD JOBS IN AMERICA TODAY

The Bernard L. Schwartz Rediscovering Government Initiative The Roosevelt Institute

A BOLD APPROACH TO THE JOBS EMERGENCY2


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I

A BOLD APPROACH TO THE JOBS EMERGENCY15 WAYS WE CAN CREATE GOOD JOBS IN AMERICA TODAY

Nell Abernathy, Program Manager

Je! Madrick, Director, Bernard L. Schwartz

Rediscovering Government Initiative



CREATE MORE JOBS1. Increase Fiscal Stimulus2. Invest In Infrastructure3. Fund Direct Employment 4. Counteract Short-term Wall Street Strategies5. Regulate Private Equity

CREATE FUTURE JOBS11. Increase Public Funding of Research and Development12. Invest in Clean Energy13. Revamp Workforce Training14. Expand Programs Aimed at Opportunity Youth15. Reduce Child Poverty

CREATE BETTER JOBS6. Raise the Minimum Wage7. Expand the Earned Income Tax Credit8. Institute National Paid Sick & Family Leave9. Protect the Right to Organize10. Enforce Labor Laws


We believe the American economy is now failing its people. As we write this, an economic recovery has been underway since 2009, but the unemployment rate has fallen only to 6.6 percent from 10 percent. Most of the reduction occurred only because many Americans stopped looking for jobs and were no longer count-ed as unemployed. Astonishingly, the proportion of the working age population with jobs is at a 36-year low. This is not acceptable in the United States.

The employment-to-population ratio is far worse for the young, for minorities, and for the less educated. The aging of the population, as baby boomers approach retirement, can only explain part of this decline. In fact, the employment rate of the young population is at its lowest since World War II. The unemployment rate for African Americans remains nearly twice that of white Americans. More than a third of the unemployed have been looking for but unable to find work for six months or more. These long-term unemployed Americans are now at a record number, and the evidence shows that over time they will increasingly have di"culty finding a job. Poor wages are also part and parcel of this American failure. Today’s typical house-hold earns no more after inflation than in 1995. Median wages have not increased since the economic recovery began in 2009, which is unheard of in an economic recovery. We are creating some jobs, but most of them pay subpar wages. What is most disturbing about the nation’s response to the current crisis is the fatalistic acceptance that the U.S. can’t achieve full employment again. The nation seems vexed and sadly resigned to failure. The U.S. must recognize that it has a jobs emergency, not a new status quo.

We at Rediscovering Government have dedicated ourselves to finding workable solutions through intelligent, well-designed government policies to meet the great-est social challenge of our time. Business and government as partners have long guaranteed the breadth of opportunity that is the American Dream, and the social fairness that has become the pride of the nation.

The U.S. government regulated distribution of land and financed the canals and railroads. It built our public schools and sanitized the nation’s cities. It built high-ways and financed the nation’s critical technological and medical research. It cre-ated the social programs — from unemployment insurance to Social Security, the minimum wage, the Earned Income Tax Credit, and, perhaps most important, civil rights legislation — that helped assure the nation’s economic bounty would be fair-ly shared.

But the battle for justice has never been easy, and it is not easy now. We believe the unemployment rate can be reduced to 5 percent or even 4 percent and that wages can rise robustly for the large proportion of workers. These must be our specific goals.

LETTER FROM THE DIRECTOR


What follows is fi fteen ideas about creating jobs, raising incomes, and investing in future growth, many of them taken from the jobs conference we sponsored in Washing-ton, D.C. last June. We o! er these as guidelines to the many opportunities the nation has available to solve its employment problems. We realize not all these are politically practical, but we also believe all of them are ultimately workable and are at one with the nation’s history.

These ideas amount to a full-court press; we believe the jobs emergency requires nothing less than a broad-based, relentless e! ort to create jobs. Other commentators may have comparably good ideas, or better ones. We do not mean to exclude them. Our ideas are meant to be a renewal of optimism, a call to action to reclaim our future, and an end to the sense of futility that is seriously damaging the nation.

Je! Madrick, DirectorBernard L. Schwartz Rediscovering Government InitiativeRoosevelt Institute



CREATE MORE JOBS1. Increase Fiscal Stimulus2. Invest In Infrastructure3. Fund Direct Employment4. Counteract Short-term Wall Street Strategies5. Regulate Private Equity


INCREASE FISCAL STIMULUS

Up to 7 million new jobs…

Lawmakers have abandoned the most important policy tool we have to create jobs. We need substantial fiscal stimulus through more government spending. The federal deficit should be enlarged right now, not reduced.

Depending on the size of the spending package and the targeted programs, fiscal policy could create up to 7 million new jobs and return the US to full employment. 1

Both theory and empirical evidence show that every dollar the government spends has more than a dollar’s worth of impact on growing national incomes. Recipients of government-funded paychecks, unemploy-ment benefits, or food stamps, and those who benefit from Social Security, the Earned Income Tax Credit, and savings because their health insurance is covered by Medicare, use those dollars to buy food and other goods, and pay the rent or mortgage on their homes. Those businesses whose sales are raised then, in turn, spend more themselves. Thus the e!ects of stimulus multiply throughout the economy, especially during times of economic weakness.

In fact, if government spending had been rising since 2008 at the same rate as it had during other economic recoveries, we would already have an additional 5 million jobs. 2

Instead, the Federal Government, through the congressionally man-dated sequestration, cut spending sharply, reducing GDP by 0.6

percent and costing the economy 750,000 jobs in 2013.3

Congress should embrace a second round of fiscal stimulus in the form of infra-structure investment, research and development investment, clean energy jobs, and the extension of unemployment insurance, additions to food stamps, and sev-eral of the job policies discussed in this report.

1

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The Congressional Budget O"ce estimates $1 in government spending on infrastructure adds $1.80 to overall GDP. Every $1 spent on unemployment benefits or food stamps adds $1.50 to the economy.


CREATE MORE JOBS

1 Fieldhouse, Andrew and Rebecca Thiess. 2013. “The ‘Back to Work’ Budget.” Washington, DC: The Economic Policy Institute. (http://www.epi.org/publication/back-to-work-budget-analysis-congressional-progressive/)2 Bivens, Josh. 2013. “Deal or No Deal on Shutdown and Debt Ceiling, Biggest Fiscal Policy Crisis Remains Unad-dressed.” Washington, DC: Economic Policy Institute. (http://www.epi.org/publication/deal-deal-shutdown-debt-ceil-ing-biggest/)3 Congressional Budget O"ce. 2013. Automatic Reductions in Government Spending. (http://www.cbo.gov/publica-tion/43961)


Up to 1.8 million new jobs…Among the other unforced errors in government jobs policies today is the inex-plicable neglect of the nation’s infrastructure needs. We could create between 1.5 and 1.8 million new jobs by 2020 by investing an additional $150 to $180 billion in infrastructure each year.4

Every dollar spent building roads, bridges and other infrastructure projects adds about $1.80 to GDP. Meanwhile, a dollar of corporate tax cuts contributes just $0.40 to the economy.5

Further, 90 percent of the jobs directly created by infrastructure spending pay wages that fall in the middle of the income distribution. 6

This investment doesn’t just a!ect today’s economy. Investments in transportation, broadband, and utilities infrastructure are critical to future growth and long-term economic sustainability. A public spending package would provide much needed upgrades to our roads, highways, railways, and bridges, which have declined to a state of disrepair as federal spending on infrastructure as a percentage of GDP has fallen by 50 percent since the 1960s.

A plan from McKinsey, the large consulting firm, to raise infrastructure investment’s share of GDP by 1 percentage point would improve productivity substantially, the consulting firm calculates, and increase annual GDP by $600 billion by 2030.

Annual incremental GDP by 2020$ billion

85-10025-30

85-9530-40

45-552 70-320

High EstimateLow Estimate

CONSTRUCTION

JOBS

IMPACT

1.1 MILLION-

1.3 MILLION

100,000-

120,000

160,000-

190,000

100,000-

120,000

25,000-

30,000

1.5 MILLION-

1.8 MILLION

MANUFAC-

TURING

SERVICES1 OTHER

FACTORS2

TOTAL

INVEST IN INFRA-STRUCTURE

2

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McKinsey concludes we could create 1.5 to 1.8 million jobs with its propos-al. A program modeled after the Progressive Caucus’s infrastructure pro-posal would establish an infrastructure bank for public-private partner-ships, increase spending by $1.1 trillion over the next decade, and create or preserve 3.5 million jobs by 2020.7

4 Lund, Susan, James Manyika, Scott Nyquist, Lenny Mendonca, and Screenivas Ra-maswamy. 2013. “Game changers: Five Opportunities for US growth and renewal.” McK-insey Global Institute. 5 See Footnote 3.6 Department of the Treasury and Council of Economic Advisers. 2012. A New Economic Analysis of Infrastructure Investment. (http://www.treasury.gov/resource-center/econom-ic-policy/documents/20120323infrastructurereport.pdf) 7 U.S. Congress. 2013. Congressional Progressive Caucus. The Back to Work Budget. (http://cpc.grijalva.house.gov/uploads/Back%20to%20Work%20Budget%20-%20Execu-tive%20Summary.pdf)

CREATE MORE JOBS

Every dollar spent building roads, bridges and other infrastruc-ture projects adds about $1.80 to GDP. Meanwhile, a dollar of corporate tax cuts contributes just $0.40 to the economy.


FUND DIRECTEMPLOYMENT

Up to 1 million new jobs for the long-term unemployed…

A direct job employment program, similar to the New Deal-era Works Progress Administration, could create up to 1 million new jobs at a cost of $48.6 billion, or less than 6 percent of the 2009 stimu-lus, according to one analysis.8

Public spending on direct employment provides by far the biggest bang for the taxpayer’s buck. Not only does it em-ploy people and inject spending into the economy, it also reduces govern-ment outlays on other programs — such as Medicaid, the children’s health insur-ance program, and unemployment in-surance — which o!ers savings of about $18 billion.

In addition, a government jobs program could tar-get the people who need it most — the 4.1 million Americans who have been out of work more than six months and are being passed over by private employers due to the stigma of long-term unemployment, and those under twenty-five whose unemployment rates are espe-cially high.

In a proposal to create 1 million direct jobs, economist Philip Harvey suggests the government contract with non-profit organizations to administer the program, a model used successfully in the Federal Work-Study program. Former administration economist Jared Ber-nstein suggests adopting a model based on the one used by the Temporary Assistance to Needy Families program, which he says successfully employed 250,000 Americans in 2009 in the private, non-profit and public service sectors.

8 Harvey, Philip. 2011. “Back to Work: A Public Jobs Proposal for Economic Recov-ery.” New York City: Demos. (http://www.demos.org/sites/default/files/publica-tions/Back_To_Work_Demos.pdf)

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CREATE MORE JOBS

BI-PARTISAN SUPPORT

Even conservative economist and former McCain advisor Kevin Has-sett testified before Congress in fa-vor of a federal jobs program as the best solution to the discrimination that the long-term unemployed face when applying for jobs.

“If somebody’s 40 years old, and not employed for 25 years, that costs governments lots of money, and if we think rationally about reducing spending, maybe it's worth it to pay for their first year at a private em-ployer. Direct hiring, or a direct sub-sidy for hiring, could save taxpayers a fortune. And it could save a life,” he said.

“The New Deal strat-egy allows the precise targeting of its direct job creation e!ect to ensure that the jobs it creates in that way are fairly allocated.”

- Philip Harvey, Rutgers University.


COUNTER-ACT SHORT-TERM WALLSTREET STRATEGIES

Increased private investment in capital, labor, and research and development…

Expanding tax credits for corporate investment in capital and equipment, research and development, and workforce training would help counteract the rise of short-term business strategies rewarded by Wall Street.

According to a 2005 survey, in order to hit earnings targets, 80 percent of managers reported that they would cut research and development funding and 55 percent of Chief Financial O"cers reported that they would forgo an attractive investment op-portunity.9

In an alarming recent study, the Information Technology and Innovation Foundation (ITIF) found corporate investment in information processing equipment and software grew rapidly in the 1980s and 1990s, but stagnated in the 2000s.10

Increasingly, corporate capital is being funneled to stock buybacks and dividend pay-ments. Firms listed on the New York Stock Exchange were on track to spend $754 billion on 885 buybacks in 2013, compared to just 52 repurchases in 1985, according to a study from Birinyi Associates.11

Over the last several decades, corporations have also increased the ratio of dividends to capital investment from about 20 percent in the 1970s to more than 60 percent in the 2000s, reducing the funds available for investment.12

Corporations have every right to buy back shares and raise dividends. Higher stock prices, in turn, can lower their cost of capital. But evidence has become overwhelming that this has been carried too far.

“The companies that were on the forefront of in-vesting in the U.S. economy stopped investing in the labor force, stopped creating these high val-ue-added jobs,” William Lazonick told the Roos-evelt Institute at our 2013 Jobs Conference.

The government can use the tax code to incentivize more productive investment. For example, increasing tax breaks through the Alternative Simplified Credit (ASC) from 14 percent to 20 percent would encourage corporations to spend an additional $7.5 billion on research and development annually and would ultimately increase annual GDP by $66 billion, according to a report from the ITIF.13 Coupled with tax credits for capital investment and workforce training, along with a financial transaction tax designed to reduce short-term trades, productive investment could be substantially increased.

4

“On the face of it shareholder value is the dumbest idea in the world. Sharehold-er value is a result, not a strategy…. Your main constituencies are your employees, your customers, and your products.”

- John F. Welch, Jr., Former GE CEO

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9 Pearlstein, Steven. 2013. “How the Cult of Shareholder Value Wrecked American Business,” Wash-ington Post, September 9. (http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/09/how-the-cult-of-shareholder-value-wrecked-american-business/)10 Stewart, Luke A. and Robert D. Atkinson. 2013. “Restoring America’s Lagging Investment in Capi-tal Goods.” Washington, DC: Information Technology and Innovation Foundation. ( http://www2.itif.org/2013-restoring-americas-lagging-investment.pdf)

11Jia Lynn Yang, “Companies Turn-ing Again to Stock Buybacks to Re-ward Shareholders,” The Washing-ton Post. December 15, 2013. http://www.washingtonpost.com/business/economy/companies-turning-again-to-stock-buybacks-to-reward-share-holders/2013/12/15/58a2e99c-4aef-1 1e3 - 9890 -a 1e0997f b0c0_stor y.html?tid=pm_business_pop12 See Footnote 10. 13 Atkinson, Robert D. and Scott M. An-des. 2011. “17 is Not Enough: The Case for a More Robust R&D Tax Credit.” Washington, DC: Information Tech-nology and Innovation Foundation. (http://www.itif.org/publications/17-not-enough-case-more-robust-rd-tax-credit)

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1600

1400

1200

1000

800

600

400

200

0

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1400

1200

1000

800

600

400

200

0

S&P

500

Inde

x

Mea

n re

purc

hase

s, $m

illio

ns

S&P 500 Index Mean repurchases S&P 500 companies

Sources: Compustat and company

MANIPULATING THE STOCK MARKET IN THE 2000s:BUYBACKS PUSH S&P 500 INDEX TO NEW PEAK IN 2007


REGULATE PRIVATE EQUITY

Protect workers from negative e!ects of leveraged buy-outs…

New evidence suggests the jobs market would benefit from intelligent constraints on leveraged buyouts and private equity activity. There is a strong tendency for private equity firms to extract short-term benefits for their partners at the expense of jobs and wages.

Cornell Professor Rosemary Batt and former Rutgers Professor Eileen Appelbaum reviewed existing econometric studies and found a preponderance of evidence that firms taken over by private equity are more likely than similar public firms to cut jobs and cut wages. One major reason for job cuts is high debt service requirements, be-cause the acquisitions are almost invariably made with borrowed funds.

While many private equity firms say they are making distressed companies more e"cient, studies find that both employment growth and profitability tend to be higher at target firms preceding takeovers than at similar public firms that aren’t subject to takeovers.

In addition, the much-acclaimed increase in produc-tivity at firms that are taken over is often not a re-sult of improved management so much as it is due to

selling or closing of weak subsidiaries and workforce reduction.

Batt and Appelbaum do not believe the baby should be thrown out with the bath wa-ter, but propose that excessive incentives for private equity and leveraged buyouts should be reduced.

A main financial advantage in acquiring companies is the interest deduct-ibility on the debt taken on for tax purposes. The current debt-to-enter-prise-value ratio for private equity-owned buyouts is 67 percent compared to 14 percent for comparable publicly traded firms. If the interest-deduc-tion on debt for acquisitions is reduced or eliminated, a principal source of profits would be reduced. Decisions would be made on the economic sense of the project instead of its tax advantages.

Batt and Appelbaum also make other interesting suggestions. For example, there could be a prohibition applied to the payment of dividends for two years after the buyout is undertaken. Another possibility is to make the new owners liable for pension obligations.

14 Appelbaum, Eileen and Rosemary Batt. Forthcoming. Private Equity at Work: When Wall Street Manages Main Street. New York, NY: Russell Sage Foundation.

5

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HARNESSING THE BENEFITS

Private equity does have bene-fits for some industries. In par-ticular, Batt and Appelbaum find that for small and mid-sized businesses, private equity firms often provide scarce capital needed to expand and thrive. But for large industries, exces-sive remuneration for private equity funds leads to too many buyouts that are detrimental to the economy, according to data gathered in Batt and Appel-baum’s forthcoming book, Pri-vate Equity at Work: When Wall Street Manages Main Street.

Bought-out firms go bankrupt more often than their public counterparts, at nearly two times the rate according to a study of private equity takeovers from 1970 to 2007. 14



CREATE BETTER JOBS6. Raise the Minimum Wage7. Expand the Earned Income Tax Credit8. Institute National Paid Sick & Family Leave9. Protect the Right to Organize10. Enforce Labor Laws


RAISE THE MINIMUM WAGE

Lift 6 million people out of poverty…

Raising the federal minimum wage to $10.10, a proposal now in a bill before Con-gress, would benefit nearly 30 million people and lift around 4.6 million people out of poverty immediately, according to one respected study. When long-term impacts are included, 6.8 million people would be lifted above the poverty line.15

We believe the methodology used in this analysis is significantly superior to the one used in a February report by the Congressional Budget O"ce (CBO). No one doubts that raising the minimum wage would have a substantially beneficial impact on those in poverty and those just above the poverty line.

Respected economists debate the impact of a minimum wage increase on employ-ment rates, with the body of research suggesting either no loss of jobs or at worst a modest loss. Some studies suggest that increased demand from higher paid work-ers in a region could actually boost growth and create more jobs.

The February report from the CBO projected substantial job losses. We have little doubt the CBO inflated that figure, partly based on flawed recent research. The much-trumpeted 500,000 jobs lost is not a forecast but a mid-point in a very wide distribution of potential outcomes. Even so, the CBO forecasts a $10.10 minimum

wage would increase wages for 16.5 million workers, more than 30 times the number of people projected to lose jobs.17

According to the Economic Policy Institute, enacting the proposal to raise the minimum wage to $10.10 by 2016 would raise wages for 27.8 million workers, increase GDP by $22 million, and add 85,000 new jobs to the economy.

While the current minimum wage translates into an annual income of $15,080, or 19 per-cent below the o"cial poverty line for a family of three, the minimum wage has not always been a poverty wage.

If the 1968 minimum wage were adjusted to a conservative index of inflation, it would have reached $9.40 by 2012. Indexed to the growth of the wages of the average produc-tion worker, the minimum wage would be $10.65. Indexed to the growth of labor pro-ductivity, it would be $18.30 today. Indexed to the traditional measure, the CPI-U, it would be roughly $10.52 cents today.16

We believe a minimum wage a dollar or two higher than the currently proposed $10.10 would likely be economically productive, with minimal job losses.

6

7.25Actual

CPI-U 10.52

10.01

12.25

15.34

21.72

9.22CPI-U-AS

1/2 Average Wage

1/4 productivity

1/2 productivity

Full productivity

0.00 5.00 10.00 15.00 20.00 25.00

MINIMUM-WAGE BENCHMARKS FOR 2012, RELATIVE TO 1968 HIGH-WATER MARK

2012 DOLLARS PER HOUR

Source: Author’s analysis of BLS, CBO data.

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15 Dube, Arindrajit. 2013. “Minimum Wages and the Distribution of Family Incomes.” (https://dl.dropboxusercontent.com/u/15038936/Dube_MinimumWagesFamilyIncomes.pdf)16 Cooper, David. 2013. “Raising the Federal Minimum Wage to $10.10 Would Lift Wages for Millions and Provide a Modest Economic Boost.” Washington, DC: Economic Policy Institute. (http://www.epi.org/publication/raising-feder-al-minimum-wage-to-1010/)17 See Footnote 7.

CREATE BETTER JOBS


EXPAND THE EARNEDINCOME TAX CREDIT

Reduce the severity of poverty for 3.8 million Americans...

Expanding the Earned Income Tax Credit (EITC) to childless Americans would lift 300,000 workers out of poverty and improve incomes for 3.8 million people.18

The EITC has been one of the most e!ective government tools for aiding the working poor. While the current structure of the EITC provides significant bene-fits for single parents with children, the benefits remain small for childless adults. Currently, low-income childless workers receive an average of just $270 from the tax credit. In fact, many childless minimum-wage workers are taxed into poverty. For example, a childless minimum wage worker making $14,500 annually is ineligible for the EITC and must pay more than $2,500 in pay-roll taxes.

President Barack Obama has called on Congress to expand EITC coverage to these low-wage workers. A proposal from the Center on Budget and Policy Priorities (CBPP) would lower the minimum age eligibility from 25 to 21; raise the credit rate for childless workers

from 7.56 to 15.3 percent, the rate of the payroll tax; and raise the maximum income for credits from $14,340 to $19,245.

The CBPP proposal would reduce poverty for nearly 4 million workers. In conjunction with an increased minimum wage, an ex-panded EITC could be even more powerful.

18 Marr, Chuck, Krista Ru"ni, and Chye-Ching Huang. 2013. “Strengthening the Earned Income 19 Sawhill, Isabel and Quentin Karpilow. 2014. “A No-Cost Proposal to Reduce Poverty & Inequality.” Washington, DC: The Brookings Institute. (http://www.brookings.edu/re-search/papers/2014/01/09-no-cost-proposal-reduce-poverty-inequality-sawhill)

7

The tax credit, which reduces the income tax liability of low-paid Americans, lifted about 6.5 million people out of poverty in 2012,19 some 3.3 million of which were children of the working poor.

CREATE BETTER JOBS

CURRENT CHILDLESS WORKERS’ EITCDOES LITTLE TO OFFSET INCOME &

PAYROLL TAXES

Full-time, minimum-wage worker

($14,500)EITC: $0

$186 EITC

$1,826Federal income

and payroll taxes

$2,669Federal income

and payroll taxes

Source: Center for Budget and Policy Priorities based on 2013 estimates


INSTITUTE NATIONAL PAID SICK &FAMILY LEAVE

Reduce economic insecurity for 9 million working poor…

A federal policy providing paid sick and family leave to all American workers would provide additional security to some 50 million workers who lose a day’s pay when they or a family member are sick.

In particular, low-wage workers and new mothers would be lifted from the edge of pov-erty. More than three-quarters of the bottom 10 percent of earners don’t get paid sick leave20 and most of these workers would fall below the poverty line if they had to skip just three and a half days of work a year. 21

Among working mothers who lose their jobs after staying home with a newborn, less than half found jobs again within a year. By contrast, 87 percent of mothers with paid family leave returned to work within a year.22

Providing workers with paid leave not only supports working families, but raises pro-ductivity. “Presenteeism,” the practice of employees going to work when they are sick because they can’t a!ord time o!, costs the economy at least $160 billion annually.23

Paid leave proposals have proven successful at city and state levels. Two years after San Francisco passed an ordinance requiring employers to o!er paid sick days, 70 percent of employers supported the law.24 Two years after Connecticut enacted paid sick leave, only 1 percent of surveyed employers said they had reduced wages as a re-sult.27 Low wage workers in high turnover jobs are more likely to return to work after pregnancy in California, where a family leave policy is in place, than in any other state.25

Senator Kirsten Gillibrand’s Family and Medical Insurance Leave Act, would replicate

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these successful local strategies and provide paid leave to all Americans who give birth or tend to a medical emergency. Self-sustaining insurance, funded through a

0.2 percent payroll tax, would pro-vide an individual with 66 percent of his or her monthly pay up to a capped amount for up to 12 weeks.

20 The Bureau of Labor Statistics. 2013. “National Com-pensation Survey: Employee Benefits in the United States, March 2013.” Washington, DC: Department of Labor..21 Gould, Elise, Kai Filion, and Andrew Green. 2011. “The Need for Paid Sick Days: The Lack of a Federal Policy Further Erodes Family Economic Security.” Washington, DC: Economic Policy Institute. 22 Farrell, Jane and Joanna Vanator. “Paid Family and Medical Leave.” Washington, DC: Center for American Progress. (http://www.americanprogress.org/wp-con-

tent/uploads/issues/2012/08/pdf/medical_leave_factsheet.pdf)23 Stewart, Walter F., Judith A. Ricci, Elsbeth Chee, and David Morganstein. 2005. “Lost Productive Health Time Costs from Health Conditions in the United States: Results from the American Productivity Audit.” Journal of Occupational and Environmen-tal Medicine 47(12):1227-1234.24 Community Services Society. 2012. “The Impact of Paid Sick Days on Jobs: What’s the Real Story?” New York City: Community Service Society (http://b.3cdn.net/nycss/d53aaf5763daaa089b_8bm6bluvr.pdf)27 Appelbaum, Eileen and Ruth Milkman. 2014. “Good for Business? The Case of Paid Sick Leave in Connecticut.” Washington, DC: Center for Economic and Policy Research. (http://www.cepr.net/index.php/blogs/cepr-blog/is-paid-sick-leave-good-for-busi-ness)25 Appelbaum, Eileen and Ruth Milkman. 2011. “Leaves That Pay: Employer and Worker Experiences with Paid Family Leave in California,” Washington, DC: Center for Economic and Policy Research. (http://www.cepr.net/publications/reports/leaves-that-pay)

CREATE BETTER JOBS

“Work can’t pay if it doesn't last, and it can’t last if it jeopardizes your kids or other people that you love and have responsibility for. What we need to remember is that the lack of these policies costs people their jobs,” - Ellen Bravo, Family Values @ Work.


PROTECT THE RIGHT TO ORGANIZE

Improve workers’ bargaining power…

Union membership has been key to building the middle class that drove U.S. economic growth. Once, unions covered more than 30 percent of the workforce, but now just over 10 percent are covered, and only 7 percent of private workers.

To raise union membership from these historically low levels, the government could implement a range of policies to correct current legal imbalances favoring employers.

Studies show that on average, union membership increases wages by 12 percent for all workers and by 21 percent for the lowest-wage workers.26 Union members are more likely to secure employer paid health insurance, retirement, and on the job training. If union rates increased 10 percentage points to 1980s levels, both union and non-union middle class households would see annual income rise by $1,479.27

Of the six job categories adding the most workers today, only one — registered nurses — has traditionally been unionized. Obsta-cles to union organizing are signifi cant. For example, currently managers can use work-space and work hours to campaign against unionization, while workers must organize o! -site. To form a union, the majority of workers must vote with cards in person, and online or o! -site votes are not recognized. Government can pass laws to reverse these disadvantages to organizing.

Further, new legal defi nitions of the employ-er-employee relationship could expand or-ganizing rights to the growing fi eld of contin-gent workers. Independent contractors are currently not covered by labor laws. Similar-

ly, when a corporation subcontracts work, it avoids responsibility for the labor standards at the sub-contracted facilities.

States and cities are piloting new legal tools to pro-tect these workers. The federal government should learn from their successes.

26 Schmitt, John. 2008. “The Union Advantage for Low-Wage Workers.” Washington, DC: Center for Economic and Poli-cy Research. (http://www.cepr.net/documents/publications/quantile_2008_05.pdf)27 Madland, David, Karla Walter, and Nick Bunker. 2011. “Unions Make the Middle Class.” Washington, DC: Center for Ameri-can Progress. (http://www.americanprogressaction.org/issues/poverty/news/2011/09/23/10349/as-unions-weaken-so-does-the-middle-class-2/)

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TIES THAT BINDAS UNION MEMBERSHIPDECREASES, MIDDLE C!SS INCOME SHRINKS

‘67 ‘69 ‘71 ‘73 ‘75 ‘77 ‘79 ‘81 ‘83 ‘85 ‘87 ‘89 ‘91 ‘93‘95 ‘97 ‘99 ‘01 ‘03 ‘05 ‘07 ‘09

54

52

50

48

46

44

42

30

25

20

15

10

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n mem

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hip ra

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Mid

dle c

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hare

of ag

greg

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eUnion Membership Rate

Middle Class Shareof Aggregate Income

CREATE BETTER JOBS

NEW ORGANIZING MODELS

In one breakthrough California case, workers who were not paid what they were promised by a Wal-Mart sub-contractor were enabled to hold Wal-Mart liable for back pay. The legal case established Wal-Mart as the employer of record, responsible for conditions at sub-contractors along the supply chain.

In another example, which now serves as a benchmark case, 70,000 home care workers in Los Angeles legally established a public authority as a stand-in for their nu-merous individual employers. They could then bargain as a group with them. The legal model has spread to home-care workers in other states and also to publicly funded day-care providers.


CREATE BETTER JOBS

ENFORCE LABOR LAWS

Protect the growing number of low-wage workers…

Increasing enforcement of labor laws could protect millions of low-wage workers from wage theft and unsafe conditions, helping to ensure that work pays.

In a 2009 survey of 4,387 low-wage workers, more than two-thirds had experi-enced at least one pay-related violation in the previous week, costing an average of 15 percent of their total income, or $2,634 out of $17,616 annually.28

According to the study conducted by Annette Bernhardt, a Roosevelt Institute Fellow, 26 percent of respondents had been paid less than the minimum wage, 76 percent had been underpaid for their overtime hours, and 70 percent did not receive any pay at all when they worked overtime. If they complained, 43 percent of the respondents experienced illegal retaliation, such as firing, from their super-visors.

The rise in illegal labor practices is correlated with a decline in federal labor law enforcement. The number of federal wage and hour enforcement actions fell by 61 percent between 1980 and 2007, and the number of inspectors fell by 31 percent, even as the number of American workers grew 51 percent.29

Meanwhile, even when employers do get caught violating laws, the typical penalty for violating minimum wage laws ($121) is so small that it rarely outweighs the cost of paying the minimum wage to employees. 30

Increased resources for wage and hour inspectors — along with improved access to legal services for at-risk workers to seek compensation — could ensure that ev-

10

39.9%

$1 per hour or less

$1.01-$2 per hour

$2.01-$3 per hour

$3.01-$4 per hour

More than $4 per hour

Source: National Employment Law Project

16.3%

25.6%

9.6%

8.7%


ery worker get the wages he or she earns. According to the Nation-al Employment Law Project (NELP), a 50 percent increase in the number of federal wage hour investigators over four years could win a return of $112 million in stolen wages for 137,500 workers.31

28 Bernhardt, Annette, Ruth Milkman, Nik Theodore, Douglas Heckathorn, Mira-bai Auer, James DeFilippis, Ana Luz González, Victor Narro, Jason Perelshteyn, Diana Polson, and Michael Spiller . 2009. “Broken Laws, Unprotected Workers: Violations of Employment and Labor Laws in America’s Cities.” New York City: National Employment Law Project. 29 Bernhardt, Annette, Michael Spiller, and Nik Theodore . 2013. “Employers Gone Rogue: Explaining Industry Variation in Violations of Workplace Laws.” Industrial & Labor Relations Review 66(4):808-832.30 Weil, David. “Public Enforcement/Private Monitoring: Evaluating a New Ap-proach to regulating the Minimum Wage.” Industrial and Labor Relations Review 58(2):238-257.31 National Employment Law Project. 2012. “100 Days for America’s Workers.” (http://www.nelp.org/100days)

CREATE BETTER JOBS

“For a typical apparel contractor, the potential cost of not complying with minimum wage and overtime laws was $121, compared with a poten-tial benefit of $12,205.”

- Annette Bernhardt, The Roosevelt Institute



CREATE FUTURE JOBS11. Invest In Research and Development12. Invest In Clean Energy13. Revamp Workforce Training14. Expand Programs Aimed at Opportunity Youth15. Reduce Child Poverty


INVEST IN RESEARCH AND DEVELOPMENT

Up to $860 billion in increased GDP...

Increased federal investment in research and development is necessary to provide a foundation for long-term growth and ensure future economic competitiveness.

Publicly funded laboratories and universities have fueled America’s much-admired innovation economy far more than most people realize. Government-financed re-search and development has led to game-changing technologies, including com-puters, microchips, and prototypes for Google’s search algorithms and Boeing’s 707.

But instead of investing in the future, Con-gress has cut federal research spending by 8.8 percent, costing 200,000 direct and indirect jobs annually.

If, as opposed to sequestration levels of funding, we returned to the 2011 rates of research and development funding as a percent of GDP, we would reap an addi-tional $203 billion in GDP between 2013 and 2021, according to a report from the Information Technology and Innovation Foundation. If we returned to the rate at which the federal government has histor-ically invested in research and develop-ment, we would reap an additional $565

billion in GDP during that period. If we in-vested in research at the same rate as Chi-na, GDP would rise by $860 billion by 2021.

31 American Energy Innovation Council. 2011. “Catalyzing American Ingenuity: The Role of Government in Energy Innovation.” (http://americanenergyinno-vation.org/catalyzing-ingenuity-2011).32 Mazzucato, Marianna. 2011. The Entrepreneurial State. London: Demos.33 Hicks, Justin and Robert D. Atkinson. 2012. “Eroding out Foundation: Se-questration, R&D, Innovation and US Economic Growth.” Washington, DC: Information Technology and Innovation Foundation. (http://www2.itif.org/2012-eroding-foundation.pdf)34 See Footnote 9.

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CREATE FUTURE JOBS

GOVERNMENT INNOVATION

Economist Marianna Mazzu-cato documents that govern-ment-financed researchers made the scientific discover-ies behind most of Apple’s key products. Additionally, the government-funded National Institutes of Health has made 75 percent of the key pharma-ceutical breakthroughs of the last three decades. The federal government is the most promis-ing investor in nanotechnology, which many believe will be the dominant technology of the fu-ture. And, of course, everyone knows the Defense Department developed the Internet.


INVEST IN CLEAN ENERGY

Be a leader in a $5 trillion global industry…

Investing in clean energy technology creates jobs in the short term, and builds our do-mestic capacity in the global clean energy market, which is expected to double in size to $460 billion by 2030.

Now is the time to up the ante. According to 2011 study from Political Economy Re-search Institute, every $1 in green investments supports 1.5 times as many jobs as $1 in defense spending.35 The American Energy Innovation Council (AEIC), spearheaded by business leaders including Bill Gates of Microsoft and Je! Immelt of General Electric, has called for a three-fold increase in US energy innovation spending, and new federal policies designed to support demand for emerging technologies.

“Wise investments in a new generation of energy technology are not only justified, but vital to our future,” according to a 2013 AEIC report.

Despite the need for increased investment, U.S. spending on energy research fell from $8.8 billion in the 1970s to $4.4 billion in 2012, and tax breaks continue to support fossil fuels. As the business leaders who comprise the AEIC stated, “if the United States fails to invent new technologies and create new markets and jobs that will drive the transformation and revitalization of the $5 trillion global industry, we will have lost an opportunity to lead.”36

The AEIC also urges the Federal Government to support the private sector’s e!orts and create demand for new technolo-gies by committing to buy clean energy.

In this vein, Senator Ed-ward Markey’s American Renewable Energy and E"ciency Act would set targets for clean energy

production, create 400,000 direct jobs, and spur $200 billion in additional capital investment.15 In-vestments in clean energy in the Rocky Mountain Region alone could create 209,000 jobs spurring $137 billion in investments, according to a report from the Center for American Progress.37

35Pollin, Robert and Heidi Garrett-Peltier. 2011. “The U.S. Employment E!ects of Military and Domestic Spending Priorities.” Amherst, MA: Department of Economics and Political Economic Research Institute. 36 American Energy Innovation Council. 2011. “Catalyzing American Ingenuity: The Role of Government in Energy Innovation.” (http://americanenergyinnovation.org/catalyzing-ingenuity-2011/)37 Goad, Jessica, Daniel J. Weiss, and Richard W. Caperton. 2012. “The Vast Potential for Renewable Energy in the American West.” Washington, DC: Center for American Progress. www.americanprog-ress.org/issues/green/report/2012/08/06/12002/the-vast-potential-for-renewable-energy-in-the-american-west/

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CREATE FUTURE JOBS

WHAT ABOUT SOLYNDRA?

There is a great deal of skep-ticism that government can “pick winners.” The collapse of Solyndra, the solar company which borrowed $500 million from the federal government, is seen as a prime example of government failure. But Solyn-dra represented a small per-centage of the government’s clean energy portfolio. Many too quickly forget Washing-ton’s success in saving GM recently, or the creation of SEMATECH in 1988, which re-vitalized the American micro-processor industry. These are but two of many successful examples.

Percent

China Japan Canada S. Korea U.S.

0.12

0.10

0.08

0.06

0.04

0.02

0.00

0.11%

0.10%

0.05%

0.03% 0.03%


REVAMP WORKFORCE TRAINING

Train up to 2.5 million workers annually...

In general, claims by some that business cannot find adequately trained workers have been exaggerated. Nevertheless, research suggests that reformed and fully funded workforce training programs would provide many recent graduates and older workers with the skills to help them find jobs in today’s market. Some esti-mate raising skills could fill more than 500,000 jobs immediately. 38

US workforce-training programs are overly complex and chronically under-funded; other developed nations provide models for robust and e!ective career and tech-nical training programs.

Apprenticeships, which prove a valuable training tool in other industrial countries, are comparatively rare in the US. Only 400,000 U.S. students were in appren-ticeship programs in 2011, less than a quarter of the number in Germany. Just 16 percent of U.S. students pursue vocational training programs, compared with rates of 21 percent and 26 percent respectively in Sweden and Finland.39 To equal these apprenticeship rates, we would need to train 1.5 million to 2 million graduates by 2020.

A proposal from the Center for American Progress would consolidate the existing $10 billion spent annually on fractured and at times ine!ective workforce programs into a Workforce Investment Bank designed to reach 2.5 million workers annually. The reformed program would fund 1.5 million workers enrolled in technical, com-munity college, or apprenticeship training, and an additional 1 million workers in basic education and skills programs.40

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CREATE FUTURE JOBS


CREATE FUTURE JOBS

Source: The Center for American Progress, Utah Department of Workforce Services

YEAR 1 YEAR 2 YEAR 3 YEAR 4

$2,500

$2,000

$1,500

$1,000

$500

0

-$500

-$1,000

UTAH’S WORKFORCE TRAINING PAYS DIVIDENDSFour-year earnings increases for participants in the state’s occupational training programs

MENWOMEN

A revamped federal training program could repli-cate existing models for success. Utah’s training programs, which provide “learn and earn” training, degree programs, and occupational training, in-crease earnings across the board for women and men.41

38 Steigleder, Stephen and Louis Soares. 2012. “Let’s Get Se-rious About Our Nation’s Human Capital.” Washington, DC: Center for American Progress. (http://www.americanprogress.org/issues/2012/06/pdf/workforce_training.pdf)39 See Footnote 4.40 See Footnote 38.41 See Footnote 38.


43%

1 in 5 young people are disconnected39% of disconnected youth live below the poverty line3x more likely to come from

poor neighborhoods

White

Hispanic

African American

27%

25%

Asian Other

16-24 year olds who are not in schoolnot employed, nor college graduates.

WHO ARE OPPORTUNITY YOUTH?

CREATE FUTURE JOBS

EXPAND PROGRAMS AIMED AT OPPORTUNITY YOUTH

14Invest in 1 million young people who are out of school and out of work…

To boost both future employment levels and productivity growth, the US can ex-pand programs that re-integrate the 6.7 million young people who are both out of work and out of school.

The country’s young and less-ed-ucated have been particularly hard hit by the recession, which expanded still further the ranks of young people ages 16 to 24 who are neither working nor in school. Policy analysts call them “opportunity youth.”

Reconnecting these “opportuni-ty youth” to the mainstream will support future growth by enrich-ing America’s human capital and will reduce the long-term fiscal burden associated with discon-nection.

For each young person who does not reconnect to work or school, lifetime lost earnings and demand for public services can amount to $235,000, according

to one major study. The economic burden of the current group of disconnected 16- to 24-year-olds will exceed $1.5 trillion over their lifetimes. 42

Programs that provide training and other services, like Youth Build, Job Corps, and Americorps, have track records of successfully reconnecting young people. Scaling existing programs to reach 1 million opportunity youth would cost about $6.4 billion dollars annually and result in overall savings of $102 billion over time, even if only 60 percent of partic-ipants are aided, according to research from Civic Enterprises, a public policy group. 43

PROGRAMS THAT WORK

Longitudinal studies of Job Corps, an ed-ucational and training program for low-in-come young people, found the program increased student attainment of the General Equivalency Diploma (GED), a high school equivalency certificate, and vocational certificates. It also reduced participants’ involvement with crime, lowering rates of arrest, conviction, and incarceration when compared with a con-trol group.

Similarly, YouthBuild, which provides ser-vices to high school dropouts, helped half the participants secure a GED or high school diploma in 2010, and more than 60 percent enroll in college or secure a job with average wages of $9.90 per hour. Analysis has shown every dollar invested in YouthBuild students o!ers an estimat-ed social return on investment of at least $7.80. For YouthBuild students who had been involved with the child welfare or juvenile justice systems, the social return rises to between $10.80 and $42.90.


A proposal from Civic Enterprises would, if enacted, increase funding for the most suc-cessful opportunity youth programs to more than double their reach. The group calculates that such an investment would provide a future return on investment more than 20 times initial costs. 44

42 Belfield, Clive R. Henry M. Levin, and Rachel Rosen. 2012. “The Eco-nomic Value of Opportunity Youth.” Civic Enterprises.43 Bridgeland, John and Tess Mason-Elder. 2012. “A Bridge to Recon-nection: A Review of Federal Funding Streams Reconnecting America’s Opportunity Youth.” Civic Enterprises. (https://youthbuild.org/sites/de-fault/files/news/2012/09/3269/BridgeReconnectionOY_Final.pdf)44 See Footnote 44.

“I’m excited to see the youth that are out there and that really want these programs,” Cherie La-Cour-Duckworth, from the Urban League of Greater New Orleans, told us. “They are screaming for them. But funding has been cut drastically.”

CREATE FUTURE JOBS


CREATE FUTURE JOBS

REDUCE CHILDPOVERTY

Improve outcomes for the 15.5 million children in poverty…

While economists are divided on the degree to which current levels of under-em-ployment are the function of a skills gap or a wage gap, all agree that skilled and healthy workers are critical to long-term economic growth.

In an e!ort to build human capital, business leaders and policy makers have of-ten focused on college education, K-12 reform, or, recently, expanding pre-kinder-garten. All these are welcome. But recent research increasingly reveals that child poverty is itself a major contributor to the achievement gaps of later years. Break-throughs in neuroscience find a significant impact on brain chemistry due to the stress caused by poor economic conditions, including family instability. Measur-able cognitive gaps have recently been found in one-year-olds and evidence shows that poor children struggle more in pre-K and kindergarten than their peers.

Inequality really begins at birth and, in the U.S., more than 22 percent of children live in poverty, the highest rate of any major “rich” nation in the world.

According to a 2010 study in North Carolina, an additional $4,000 a year for the poorest households successfully improved outcomes for children in poverty, re-ducing their likelihood of committing minor crimes by age 17 by 22 percent and increasing their educational attainment by one year.45 This is but one of many studies in various disciplines that demonstrate the damages and disadvantage of early poverty.

15


Raising parents out of poverty is perhaps the most direct way to reduce child poverty. The government can expand fund-ing streams that put money in the hands of poor parents, in-cluding expanding programs such as the Earned Income Tax Credit, the Child Tax Credit, and raising the minimum wage.

The US should also begin to employ conditional cash trans-fers to families with children, a strategy that has proven e!ec-

tive in Latin America and a handful of cities across the US. The government transfers can incentivize constructive parental behavior by requiring, for example, that children be regularly taken to a pediatrician, that proper hygiene is maintained, and that par-ents attend child-raising classes.

The upfront investment pales in comparison to the financial and social costs of neglect-ing our nation’s youngest.

45 Akee, Randall K. Q., William E. Copeland, Gordon Keeler, Adrian Angold, and E. Jane Costello. 2010. “Parents’ Incomes and Children’s Outcomes: A Quasi-experiment Using Transfer Payments from Casi-no Profits.” American Economic Journal: Applied Economics 2(1):86-115. (http://www.aeaweb.org/articles.php?doi=10.1257/app.2.1.86)

CREATE FUTURE JOBS

By age 3, a child’s brain is already 80 percent developed. By age 5, 90 percent.


A BOLD APPROACH TO THE JOBS EMERGENCY 39IRooseveltinstitute.org @RooseveltInst

Documents

A Bold Approach to the Jobs Emergency: 15 Ways We Can Create Good Jobs in America Today