Monday, December 31, 2018

Labor Line

June 2018___________________________________

Labor line has job news and commentary with a one stop short cut for America's job markets and job related data including the latest data from the Bureau of Labor Statistics.

This month's job and employment summary data are below. This month's inflation data is below.

The Establishment Job Report and Establishment Job Details for data released June 1, 2018.

American Job Market The Chronicle

Current Job and Employment Data

Jobs
Total Non-Farm Establishment Jobs up 223,000 to 148,662,000
Total Private Jobs up 218,000 to 126,336,000
Total Government Employment up 5,000 to 22,326,000

Employment Note
Civilian Non-Institutional Population up 182,000 to 257,454,000
Civilian Labor Force up 12,000 to 161,539,000
Employed up 293,000 to 155,474,000
Employed Men up 173,000 to 82,784,000
Employed Women up 121,000 to 72,690,000
Unemployed down 281,000 to 6,065,000
Not in the Labor Force up 170,000 to 95,915,000

Unemployment Rate decreased by .1 percent to 3.8% or 6,065/161,539
Labor Force Participation Rate decreased by .1 percent to 62.7%, or 161,539/257,454

Prices and inflation measured by the Consumer Price Index (CPI) for all Urban Consumers was up by a monthly average of 2.13 percent for 2017.

The June CPI report for the 12 months ending with May, shows the

CPI for All Items was up 2.8%
CPI for Food and Beverages was up 1.2%
CPI for Housing was up 3.0%
CPI for Apparel was up 1.4%
CPI for Transportation including gasoline was up 5.9%
CPI for Medical Care was up 2.4%
CPI for Recreation was up .2%
CPI for Education was up 2.0%
CPI for Communication was down .8%

This Month's Establishment Jobs Press Report

A GOOD MONTH

The Bureau of Labor Statistics published its June report for jobs in May. The employed went up, 293,000, which almost equals how much the unemployed went down, 281,000. The difference of 12,000 was the increase in the labor force. The monthly increase in the civilian population 182,000 almost equaled the number that did not enter the labor force to look for a job, 170,000. The big decrease in the unemployed assured a decline in the unemployment rate, which went down .1 percent to 3.8 percent. The labor force participation rate dropped again by .1 percent to 62.7 percent.

The seasonally adjusted total of establishment employment was up 223 thousand for May. The increase was 171 thousand more jobs in the private service sector combined with a 47 thousand increase in jobs from goods production. The total of 218 thousand more private sector jobs combined with an increase of 5 thousand government service jobs accounts for the total increase.

The three goods production sub sectors had 47 thousand new jobs. Natural resources had a net of 4 thousand more jobs for a third month of increases. The May gain included 5.5 thousand jobs in mining combined with a decline of 1.5 thousand jobs in lumbering. Construction had 25 thousand new jobs that included 20.5 thousand new jobs in specialty trade contracting. Heavy and engineering construction added another 5 thousand jobs amid small losses in construction of buildings.

Manufacturing had 18 thousand more jobs for May. Almost all of the recent gains in manufacturing go in two durable goods sub sectors, fabricated metal products and machinery, and one non-durable goods subsector, food manufacturing. These three subsectors combined for almost half the manufacturing increase, 8.9 thousand jobs. Remaining subsectors had small gains and small losses but a net gain of 9.1 thousand more jobs.

Government service employment was up a net of 5 thousand jobs for May, after last month's decline. The federal government dropped 3 thousand jobs. State government added 2 thousand jobs; local government employment added another 6 thousand. Public education had 1.3 thousand more jobs but jobs in private schools were up 7.1 thousand for an education gain for May of 8.4 thousand jobs.

Trade, transportation and utilities took first place for job gains among private service industries in May with 53 thousand new jobs. Wholesale trade had 4.2 thousand more jobs and retail trade another 31.1 thousand jobs. General Merchandise Stores had 13.4 thousand of the new jobs. Building material and supply stores added 6 thousand jobs; clothing trade stores recovered some of recent losses with 6.5 thousand more jobs. Transportation had 18.7 thousand new jobs but with virtually all the gains in three sub-sectors: trucking with 6.6 thousand new jobs, couriers and messengers with 4.8 thousand jobs and warehousing and storage with 6.6 thousand jobs. Air, rail and pipeline transport remained unchanged.

Professional and business services had a modest gain for May with 31 thousand more jobs. The professional and technical service sub sector added 22.6 thousand of the jobs, management of companies added 7.6 thousand jobs while administration and support services including waste management barely increased with a reported 200 new jobs.

Among professional and technical services accounting and bookkeeping services added 7.4 thousand jobs; computer design and related services added 6.6 thousand jobs; management and technical consulting added another 4.0 thousand jobs in a good month for professional service jobs, although legal services dropped 200 jobs. In Administrative and support services, employment services had an unusual drop of 10.3 thousand jobs offset with small job gains in services to buildings and dwellings and investigation and security services.

Health care had 32 thousand new jobs in May, up slightly from last month. Ambulatory care had 17.9 thousand of the new jobs; hospital jobs added another 6.2 thousand; nursing and residential care had a good month for jobs, adding 4.8 thousand jobs. Social assistance another 2.8 thousand new jobs for May. The growth rate in health care employment this month was 1.92 percent, below the long-term average of 2.30 percent.

Leisure and hospitality had 21 thousand new jobs, a little better than last month but not a good month anyway. The arts, entertainment and recreation sub sector added a net of 3.5 thousand of the new jobs based on job gains in performing arts and spectator sports offset by job losses in museum visits and historical sites. Restaurants did better than last month but with only modest gains of 17.6 thousand more jobs this month. Accommodation dropped 200 jobs after two months of gains.

Information services added 6 thousand jobs, for a second month of better than normal job gains. The motion picture and sound recording sub sector had 5.3 thousand of the jobs with 2 thousand more jobs in publishing, except the Internet, set against other small job losses. Finance and insurance had a net gain of 8 thousand jobs. Credit intermediaries and insurance carriers added 2.6 thousand jobs each. Real estate and rental and leasing services added another 3 thousand jobs.

The category, other services, had another good month with job gains in all three subsectors totaling almost 13 thousand and a 2.67 percent annual growth rate. Personal and laundry services added 5.1 thousand jobs; repair and maintenance services added 3.3 thousand; and non-profit associations 4.7 thousand jobs.

Establishment employment in May increased by 223 thousand to 148.662 million at a 1.80 percent annual growth rate, up from last month at 1.33 percent. Manufacturing jobs continue to be the bright spot in the monthly report, but renewed threats of steel tariffs might disrupt that because virtually all the gains keep coming in fabricated metals and machinery. Trade, transportation and utilities, information services, finance, education, other services and government all continue to have a lower share of U.S. establishment employment month by month. Business and professional services, health care, leisure and hospitality continue to gain in share. Recently though mining, construction and manufacturing stopped declining in share and started to grow fast enough to provide a growing share of new jobs. Tariffs will not help keep that going.

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May Details

Non Farm Total +223
The Bureau of Labor Statistics (BLS) reported Non-Farm employment for establishments increased from April by 223 thousand jobs for a(n) May total of 148.662 million. (Note 1 below) An increase of 223 thousand each month for the next 12 months represents an annual growth rate of +1.80%. The annual growth rate from a year ago beginning May 2017 was +1.62%; the average annual growth rate from 5 years ago beginning May 2013 was +1.78%; from 15 years ago beginning May 2003 it was .89%. America needs growth around 1.5 percent a year to keep itself employed.

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Sector breakdown for 12 Sectors in 000's of jobs

1. Natural Resources +4
Natural Resources jobs including logging and mining were up 4 thousand from April at 733 thousand jobs in May. An increase of 4 thousand jobs each month for the next 12 months would be an annual growth rate of +6.58 percent. Natural resource jobs are up 58 thousand for the 12 months just ended. Jobs in the 1990's totaled around 770 thousand. Job growth here will be small compared to America's job needs. This is the smallest of 12 major sectors of the economy with .5 percent of establishment jobs.

2. Construction +25
Construction jobs were up 25 thousand from April with 7.210 million jobs in May. An increase of 25 thousand jobs each month for the next 12 months would be an annual growth rate of +4.18 percent. Construction jobs are up 286 thousand for the 12 months just ended. The growth rate for the last 5 years is +4.34%. Construction jobs rank 9th among the 12 sectors with 4.8 percent of non-farm employment.

3. Manufacturing +18
Manufacturing jobs were up 18 thousand from April with 12.673 million jobs in May. An increase of 18 thousand jobs each month for the next 12 months would be an annual growth rate of +1.71 percent. Manufacturing jobs were up for the last 12 months by 259 thousand. The growth rate for the last 5 years is +1.09%; for the last 15 years by
-.92%. In 1994, manufacturing ranked 2nd but now ranks 6th among 12 major sectors in the economy with 8.5 percent of establishment jobs.

4. Trade, Transportation & Utility +53
Trade, both wholesale and retail, transportation and utility employment was up 53 thousand from April at 27.789 million jobs in May. An increase of 53 thousand each month for the next 12 months would be an annual growth rate of +2.29 percent. Jobs are up by 350 thousand for the last 12 months. Growth rates for the last 5 years are +1.53 percent. Jobs in these sectors rank first as the biggest sectors with combined employment of 18.7 percent of total establishment employment.

5. Information Services +6
Information Services employment was up 6 thousand from April at 2.775 million jobs in May. An increase of 6 thousand each month for the next 12 months would be an annual growth rate of +2.60 percent. (Note 2 below) Jobs are down by 19 thousand for the last 12 months. Information jobs reached 3.7 million at the end of 2000, but started dropping, reaching 3 million by 2004, but has stayed in the 2.7 million range for a decade. Information Services is a small sector ranking 11th of 12 with 1.9 percent of establishment jobs.

6. Financial Activities +8
Financial Activities jobs were up 8 thousand from April at 8.559 million in May. An increase of 8 thousand each month for the next 12 months would be an annual growth rate of + 1.12 percent. Jobs are up 125 thousand for the last 12 months. (Note 3 below)This sector also includes real estate as well as real estate lending. Financial Services has been growing slowly with many months of negative growth. The long term growth rates are now at a 5 year growth rate of +1.66 percent, and a 15 year growth rate of +.37 percent. Financial activities rank 8 of 12 with 5.8 percent of establishment jobs.

7. Business & Professional Services +31
Business and Professional Service jobs went up 31 thousand from April to 20.891 million in May. An increase of 31 thousand each month for the next 12 months would be an annual growth rate of +1.78 percent. Jobs are up 483 thousand for the last 12 months. Note 4 The annual growth rate for the last 5 years was 2.48 percent. It ranks as 2nd among the 12 sectors now. It was third in May 1993, when manufacturing was bigger and second rank now with 14.0 percent of establishment employment.

8. Education including public and private +8
Education jobs went up 8 thousand jobs from April at 14.096 million in May. These include public and private education. An increase of 8 thousand jobs each month for the next 12 months would be an annual growth rate of +.72 percent. Jobs are up 50 thousand for the last 12 months. (note 5) The 15 year growth rate equals +.72 percent, slower than the national average. Education ranks 4th among 12 sectors with 9.5 percent of establishment jobs.

9. Health Care +32
Health care jobs were up 32 thousand from April to 19.854 million in May. An increase of 32 thousand each month for the next 12 months would be an annual growth rate of +1.92 percent. Jobs are up 392 thousand for the last 12 months. (note 6) The current month was below long term trends and less than growth from a year ago when the annual growth rate was +2.01 percent. Health care has been growing at +2.30 percent annual rate for the last 15 years, a rate greater than the national rate. Health care ranks 3rd of 12 with 13.3 percent of establishment jobs.

10. Leisure and hospitality +21
Leisure and hospitality jobs went up 21 thousand from April to 16.281 million in May. An increase of 21 thousand each month for the next 12 months would be an annual growth rate of +1.55 percent. Jobs are up 262 thousand for the last 12 months. (note 7) The 5 year growth rate is 2.78%. More than 80 percent of leisure and hospitality are accommodations and restaurants assuring that most of the new jobs are in restaurants. Leisure and hospitality ranks 4th of 12 with 11.0 percent of establishment jobs. It moved up from 7th in the 1990's to 5th in the last few years.

11. Other +13
Other Service jobs, which include repair, maintenance, personal services and non-profit organizations went up 13 thousand from April to 5.862 million jobs in May. An increase of 13 thousand each month for the next 12 months would be an annual growth rate of +1.55 percent. Jobs are up 97 thousand for the last 12 months. (note 8) Other services had +.55 percent growth for the last 15 years. These sectors rank 10th of 12 with 3.9 percent of total non-farm establishment jobs.

12. Government, excluding education +4
Government service employment was up 4 thousand from April to 11.939 million jobs in May. An increase of 4 thousand each month for the next 12 months would be an annual growth rate of +.42 percent. Jobs are up 21 thousand for the last 12 months. (note 9) Government jobs excluding education tend to increase slowly but surely with a 15 year growth rate of +.18 percent. Government, excluding education, ranks 7th of 12 with 8.1 percent of total non-farm establishment jobs.

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Sector Notes___________________________

(1) The total cited above is non-farm establishment employment that counts jobs and not people. If one person has two jobs then two jobs are counted. It excludes agricultural employment and the self employed. Out of a total of people employed agricultural employment typically has about 1.5 percent, the self employed about 6.8 percent, the rest make up wage and salary employment. Jobs and people employed are close to the same, but not identical numbers because jobs are not the same as people employed: some hold two jobs. Remember all these totals are jobs. back

(2) Information Services is part of the new North American Industry Classification System(NAICS). It includes firms or establishments in publishing, motion picture & sound recording, broadcasting, Internet publishing and broadcasting, telecommunications, ISPs, web search portals, data processing, libraries, archives and a few others.back

(3) Financial Activities includes deposit and non-deposit credit firms, most of which are still known as banks, savings and loan and credit unions, but also real estate firms and general and commercial rental and leasing.back

(4) Business and Professional services includes the professional areas such as legal services, architecture, engineering, computing, advertising and supporting services including office services, facilities support, services to buildings, security services, employment agencies and so on.back

(5) Education includes private and public education. Therefore education job totals include public schools and colleges as well as private schools and colleges. back

(6) Health care includes ambulatory care, private hospitals, nursing and residential care, and social services including child care. back

(7) Leisure and hospitality has establishment with arts, entertainment and recreation which has performing arts, spectator sports, gambling, fitness centers and others, which are the leisure part. The hospitality part has accommodations, motels, hotels, RV parks, and full service and fast food restaurants. back

(8) Other is a smorgasbord of repair and maintenance services, especially car repair, personal services and non-profit services of organizations like foundations, social advocacy and civic groups, and business, professional, labor unions, political groups and political parties. back

(9) Government job totals include federal, state, and local government administrative work but without education jobs. back

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Notes

Jobs are not the same as employment because jobs are counted once but one person could have two jobs adding one to employment but two to jobs. Also the employment numbers include agricultural workers, the self employed, unpaid family workers, household workers and those on unpaid leave. Jobs are establishment jobs and non-other. back

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Thursday, June 14, 2018

GOP Repeals Michigan Wage Law

In Michigan the Republican controlled legislature repealed the prevailing wage law that applied to public construction projects. Supporters cited by the Detroit Free Press [Det. FP, June 7, 2018] claim repeal will save taxpayers money as projects paying prevailing wages “cost 10-15 percent more than if it was built by the private sector.” State representative Gary Glenn called prevailing wages a “discriminatory relic of the past.” He claims it will save “hundreds of millions of dollars.”

No one quoted in the Free Press mentions a dollar wage when speaking of a prevailing wage, but if repeal will save money then wages must fall and for wages to fall there must be a big surplus of labor. Since business keeps whining about labor shortages, they contradict themselves.

The U.S. Bureau of Labor Statistics reports the median wage for 50 construction and extraction occupations, which in Michigan is $22.67 an hour, or $47,167 a year. That puts Michigan 19th among the fifty states and the District of Columbia. A 10 percent cut would be $4,717 and leave $42,438 a year.

If, as seems likely, business contractors bid on public projects then there can be no guarantee the contractors will bid lower in response to repeal of a prevailing wage law. Unless there is vigorous competition among many contractors they maybe able to bid as usual and pocket the wage savings themselves. It appears quite likely taxpayers will get nothing from this repeal.

The Free Press reported that all Democrats in the House voted against the measure and therefore Republicans take the entire responsibility for repeal, which makes the whole episode another in string of examples of politics in a divided society. Saving taxpayers was just the excuse. Democrats will have to figure out why so many in the working class vote for Republican pickpockets who lower their standard of living.

Monday, June 11, 2018

The Birth of a New American Aristocracy - Review

Matthew Stewart, “The Birth of a New American Aristocracy: The gilded future of the top 10 percent – and the end of opportunity for everyone else” Atlantic Monthly, June 2018, 48-63

In his ten part cover story for the June 2018 Atlantic author Matthew Stewart begins dividing United States wealth into three classes: the top .1 percent, the next 9.9 percent and the 90 percent at the bottom. He defines the 9.9 percent as the new aristocracy in order to argue their self-deception makes them a cause of our growing inequality, destabilizing politics and eroding democracy.

Readers get financial information to help define the groups. The .1 percent have 160,000 households and 22 percent of American wealth in 2012, up from 10 percent in 1963. Assets of $1.2 million in 2016 puts a household in the 9.9 percent and the assets of the 9.9 percent exceed the combined assets of the top .1 percent and the lower 90 percent.

In the mass media mobility justifies inequality, but Stewart reports several research efforts that show the average income of children correlates significantly with the average income of parents. In other words, the wealth of the current generation depends very much on having wealthy parents. Comparisons with other countries show the correlation of wealth between generations gets higher in countries with higher inequality. Since the United States has the highest inequality, a parent’s wealth does a better job predicting their children’s wealth than other developed countries. Mobility today requires winning the mega-millions jackpot.

That finishes part 2, part 3 through part 6 describes some ways the 9.9 percent game the system. Those in the 9.9 percent tend to be people of “good family, good health, good schools, good neighborhoods and good jobs.” They meet and marry in process of “assortative mating.”

Part 4 outlines the game in education. Matthews reports 2.2 percent of America’s high school students graduate from private high schools and make up 26 percent of Harvard students. Education for the “sake of society” has given way to a private benefit measured by higher salary, which helps the financial benefit of the college premium correlate with a decrease in social mobility. Part 5 takes up tax subsides that favor the 9.9 percent and the .1 percent who then fill the media whining about food stamps and welfare cheats. In part 6 readers learn the returns to real estate in the “right places” may account for essentially all of the increase in the concentration of wealth over the last 50 years and coincidentally much of the isolation of the 9.9 percent from the 90 percent.

These first six parts establish a platform to discuss the politics of resentment. Part 7 confronts and scoffs at the 9.9 percent’s delusions of a meritocracy, which Stewart argues has evolved into a class of aristocracy over only a few decades. In part 8 – the Politics of Resentment – inequality provokes a chain of consequences: resentment, political division, instability. Here Stewart lets Trump make his case by citing examples of Trump stoking the fires of resentment for political gain. Stewart concedes the .1 percent delight in their manipulations, but blames the 9.9 percent for taking “our cut of the spoils” while looking “on with smug disdain” and taking it all for granted. Stewart reminds readers that resentment breeds an increase in inequality as every change made by Trump so well demonstrates: the new tax law to wit. At the end of part 8 Stewart warns the 9.9 percent they will soon find themselves the target of economic attack.

Part 9 provides a sobering reminder: reform seldom relieves inequality. History suggests it takes depression, violence, or warfare to bring change and Stewart gives the American Civil War as one example. Remember slavery is a system of cheap labor that guarantees inequality. Lincoln in his famous house divided speech addressed that issue before the civil war: “A house divided against itself cannot stand. I believe this government cannot endure permanently half slave and half free. . . . It will become all one thing, or all the other.” Free labor in competition with slave labor generated poverty, inequality and a violent political instability. Our high school textbooks emphasize the stance of the abolitionists and their ethical and moral objections to slavery. They were a factor, but the civil war started much more for economic reasons: inequality and the depressing effects of a dual wage system.

Part 10 offers a tiny bit of optimism by suggesting the 9.9 percent could get hold of themselves and offer the country some leadership. Leaders should support the larger social order and help direct resources to causes in the common good like health care. Many people of my acquaintance have wondered why so many of the 90 percent keep voting for people like Trump and the Republican pickpockets. I thought of that when Stewart mentioned the poor, southern white boys in butternut and gray that died by the tens of thousands to save the wealth and life of the southern planter class that so crudely exploited them. The United States has had one civil war and I get the feeling Stewart believes the Trump base could bring another. We can hope not, but if it comes to pass the Trump base will join the .1 percent on the one side, and the 9.9 percent will be the other; the resentful always join the authoritarians. Mr. Stewart has warned you.

Monday, May 14, 2018

Jobs and Telework

The U.S. Department of Agriculture (USDA) changed telework rules for thousands of its employees. The Washington Post [March 18, 2018] quoted a USDA spokesperson that “USDA’s telework policy is designed to be responsible to the taxpayers and responsive to the customers who depend on our services. It is also respectful of our fellow employees who come to work each day.” The change in policy promotes “USDA as one family working together as a single team to serve the American people.” House Representative Gerald Connolly from a nearby Virginia House District co-sponsored the telecommuting rules back in 2010; he called the changes a retrograde move.

The Office of Personnel Management reported a steady increase in the share of Federal Workers who telecommute, which now stands at 20 to 22 percent. Telecommuting helps relieve serious traffic congestion for commuters. I-95 into the District has an average of 23 traffic jams a day. Based on telecommuting data from USDA around Washington the new rules will add 42,000 trips a week to area commuters.

The March 18 article in the Washington Post spawned several letters to the editor. One claimed “Teleworking is a scam” because employees on site are far more productive working together and there should be no special privileges allowing employees to make the same income as those who show up everyday. Another person wrote in that working at home increased his productivity because office distractions made it hard to work. He wore head phones with piped in music to minimize “working together.”

Weary commuters spending hours a day sitting on a cement slab lookin’ up some guy’s tail pipe will recognize a subplot here. Work could be about getting work done, accomplishing necessary tasks, rather than how and where the work gets done. For authoritarian bosses work should be suffering and so they want to see all their underlings dutifully sitting in their office warming up a chair. The authoritarian boss always thinks other people cheat; no one can be trusted to do what they’re supposed to do. They have rules: no reading newspapers, no personal emails, no breaks. Anyone not in their plasterboard cubicle must be malingering, or possibly having fun.

Somehow it fits right in for the Trump people where authority and form counts and substance does not.

Wednesday, April 18, 2018

Tip Rules – A History of All You Need to Know

Tip Rules – A History of All You Need to Know

The Trump people proposed to rescind the 2011 Obama Administration Fair Labor Standards Act regulations that regulate tip-pooling arrangements. The Obama rules allowed the restaurant owner to pool tips but only among employees who customarily receive at least $30 a month in tips. Angry American Restaurant Association and other groups representing restaurant owners filed suit challenging the rules. While the litigation continued the Trump people proposed new regulations that help restaurant owners take tips from dining room help that normally receive tips to pay the wages of kitchen help that do not. In the process of working out a budget for 2018 Congress inserted new language as Title XII, Section 1201 into the budget resolution that changes the Fair Labor Standards Act. The new language intends to block the Trump proposal and appears to resolve the dispute over tips, but the matter is not entirely resolved as of now, April 2018.

The new language reads in part “An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.”

To understand why restaurant owners favor the Trump tip pooling rule requires knowing procedures under the Fair Labor Standards Act of 1938, which excluded restaurant workers from employer minimum wage obligations until 1966. In 1966 they were finally included, but only at 50 percent of the minimum wage. Some of the restaurant owners complained they shouldn’t have to pay any wages because their waiters and waitresses earned plenty from their tips.

From 1966 to 1996 the tipped wage went up when Congress raised the minimum wage, but in 1996 and again in 2007 the restaurant industry lobbied Congress to leave the tipped minimum at $2.13 an hour. The Federal tipped minimum has remained at $2.13 an hour since 1991, which makes it only 29 percent of the present $7.25 an hour minimum wage.

First, recognize that the monthly minimum wage at $7.25 an hour is $1,160 a month at 40 hours a week and 4 weeks per month. However, the $2.13 an hour sub minimum wage for tipped employees is just $340.80 a month, which means a tipped employee needs an additional amount of $819.20 a month in tips to get up to the minimum wage, or $7.25 - $2.13 = $5.12 an hour.

Under federal rules governing the Fair Labor Standards Act employers who pay a sub minimum wage must verify the additional amount from tips are enough to bring an employee up to at least the minimum wage, a practice defined as taking the tip credit. If tips are not enough to equal the minimum wage then the employer is expected to make up the difference.

Notice though the additional amount in tips received up to $819.20 per month are in lieu of normal obligations to pay wages to employees. Even if tipped employees receive tips at or above $819.20 a month, wage costs drop from at least $7.25 an hour to as low as $2.13 an hour. Even when tips are less than $819.20 a month all of the tips recorded become a cost saving tip credit for their restaurant owners. The tip credit actually has its origin in a legal case from 1942 known as Williams v. Jacksonville Terminal Pickett.


Tips and the Courts - Williams v. Jacksonville Terminal Pickett

In the case Williams v. Jacksonville Terminal Pickett decided March 6, 1942 two Red Caps, Williams and Pickett, brought suit over minimum wage requirements under the new Fair Labor Standars Act(FLSA) against two railroad terminals, Jacksonville Terminal and Union Terminal in Dallas, Texas. In response to the Fair Labor Standards Act terminal managers insisted, in writing, that beginning on October 24, 1938 all red caps must report their tips, which management would offset against their minimum wage obligations. If tips were less than the minimum wage, then management would make up the difference, otherwise not. This arrangement was a new invention of railroad management, no where in the law.

Both Williams and Pickett protested on behalf of red caps that their tips could not be used in lieu of minimum wage obligations. The management demand that tips be reported in lieu of wages in what the court called an “accounting and guarantee system” but their system ended by July 1, 1940; instead both terminals instituted a fee for service charge on passenger luggage and then paid the minimum wage in cash. Since red caps believed FLSA required payment of the minimum wage without deduction of tips, they continued to work and filed suit in United States District Court for the recovery of unpaid minimum wages between October 24, 1938, and July 1, 1940. Both disputes went to the Supreme Court combined as the case of Williams v. Jacksonville Terminal Pickett, (315 U.S. 386) discussed here.

The Supreme Court wrote “We deal here only with the petitioners' [Red Caps] assertion that the wages Act [Fair Labor Standards Act of October 24, 1938] requires railroads to pay the red caps the minimum wage without regard to their earnings from tips.”

In making their decision the Supreme Court Justices decided the terminal management letters of written notice to the red caps and their willingness to continue working provided agreement for management to treat tips as wages. The court wrote “This employment of the red caps was at will and subject to the employers' conclusions as to the desirability of continuing their employment.” Since the red caps did not quit work after receiving written notice of the “accounting and guarantee system” the justices declared they accepted the agreement.

Then the court wrote “In businesses where tipping is customary, the tips, in the absence of an explicit contrary understanding, belong to the recipient. Where, however, an arrangement is made by which the employee agrees to turn over the tips to the employer, in the absence of statutory interference, no reason is perceived for its invalidity.” Notice here the false use of “employee agrees.” The court referenced letters dictated the terms of payment and were imposed by unilateral decision of management. As such the red caps did not and could not disagree or they would be fired.
In the next paragraph of the Jacksonville Terminal opinion, the majority justices wrote “The employer furnishes the facilities, supervises the work and may take the compensation paid by travelers for the service, whether paid as a fixed charge or as a tip.” Therefore, tips are the property and revenue of the employer.

The Justices decided the Jacksonville Terminal case by a vote of five to three with one abstention. Justice Black wrote a dissent in concurrence with the other two in the minority, Justice Douglas and Justice Murphy. Justice Black wrote in part
“I am unable to agree that tips given to red caps by travellers are 'wages' paid to the red caps by the railroad. … The tip paying public is entitled to know whom it tips, the red cap or the railroad. A plan like that before us, which covertly diverts tips from employees for whom the giver intended them to employers for whom the giver did not intend them and to whom any kind of tip doubtless would not have been voluntarily given, seems to me to contain an element of deception. And I think that an interpretation of the F.L.S.A. which permits employers to benefit from such a plan does not accord with the meaning of the language used by Congress.”

Go to 1966 when the restaurant association managed to use their influence and the Jacksonville Terminal Case to get Congress to agree to the sub-minimum wage for tipped employees devised by the railroads in 1938, but now giving it the official term: tip credit. Business devised the tip credit and five justices did business a favor back in 1942 by making tips the property of business, but there is more.

The restaurant association argued the tip credit rule could result in some waiters and waitresses having tips much higher than the minimum difference while other waiters and waitresses might have tips below the minimum difference. Suppose Alice and Anne earn $15.00 an hour with tips, while Bettie and Bonnie earn only $4.00. To meet minimum wage obligations the restaurant owner will need to pay all four people $7.25 an hour or a total of $29, but the four of them earn $38 dollars. Without tip pooling management would owe $3.25 an hour of tip credit to Bettie and Bonnie, or a total of $6.50. With a pooling system the management has $15.50 of extra tip money to take from Alice and Anne to make up the $6.50 of shortfall to Bettie and Bonnie. The disparity in tips could require the restaurant owner to incur a tip credit for some of their help while the total of tips could be big enough to pay the entire tip credit obligation. Tip pooling might reduce the tip credit to zero allowing the restaurant owner to save more on wage costs by forcing employees with high tips to pay the tip credit of employees with low tips.

Pooling for those who receive tips was the rule under FLSA and the practice until Aaron Woo, a Portland, Oregon owner of Woody Woo Café decided to ignore the practice in 2009. He reasoned that the FLSA rule 203(m) only applied to those restaurants that take the tip credit and so pay the sub minimum wage. Since he paid the full minimum wage, he took it upon himself to save wage costs by pooling tips from those who receive them to those who do not; like the kitchen help. A lawsuit followed known as Cumbie versus Woody Woo Inc; Cumbie is Misty Cumbie, one of the disgruntled employees.

The District Court in Oregon dismissed the case by summary judgement and appeal was taken to the Ninth Circuit Court in Oregon. On Appeal, Cumbie argued sharing tips with the kitchen help who are not “customarily and regularly tipped employees was invalid under 29 US Code section 203(m) and the Code of Federal Regulations 29 CFR 531.52-54 written for it. Woody Woo argued that since they did not take a tip credit and paid the full minimum wage, they could devise any tip pooling arrangement that suited them.

The court read the last sentence of the statute 29 US Code 203(m), which stated that tip credit rules “shall not apply with respect to any tipped employee unless such employee has been informed by the employer of the provisions of this subsection, and all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.”

The majority ruled the Woody Woo tip credit claims irrelevant, but ruled in their favor for a different reason. They found the statute language too vague to define any specific tip pooling arrangement. Specifically they wrote “for an employer that meets its minimum wage obligation without taking a tip credit, section 203(m) is silent; therefore, there is no statutory interference.” In other words Mr. Woo could make any tip pooling arrangement he wanted and the Williams v. Jacksonville ruling remained.

The Woody Woo ruling came in 2009. In 2011, the Obama Administration revised the Code of Federal Regulations 29 CFR 351.52 to make it clear that tips are the property of the employee and that tip pools can only be made among employees who “customarily and regularly receive tips.”

Again restaurant owners were incensed and filed suit in the case Oregon Restaurant and Lodging Association versus Perez [Sec’y of Labor]. The Oregon District Court held that Cumbie left "no room" for the Department of Labor to make its 2011 rule and so granted Oregon Restaurant & Lodging's motion for summary judgment. Appeal was taken but now the same 9th Circuit Court disagreed with the District Court’s use of the Cumbie ruling.

In the new ruling the justices explained they did not hold the Fair Labor Standards Act unambiguously and categorically protects Mr. Woos tip pooling arrangement. Rather, they held that "nothing in the text purports to restrict" the practice in question.

In the new Oregon Restaurant case a majority of the justices relied on the wording of the 1974 FLSA amendments. In the 1974 amendments “Congress expressly delegated to the Department of Labor the broad authority 'to prescribe necessary rules, regulations, and orders' to implement the FLSA amendments of 1974.”

The minority justices argued “This case is nothing more than Cumbie II.” They insisted the court must follow precedent. The majority countered “We have no quarrel with Cumbie v. Woody Woo Inc. Our conclusion with respect to Cumbie is only that its holding was grounded in statutory silence.” Therefore “we find that Cumbie does not foreclose the DOL's ability to regulate tip pooling practices of employers who do not take a tip credit.” ... “In exercising its discretion to regulate, the DOL promulgated a rule that is consistent with the FLSA's language, legislative history, and purpose.”

Justice O’Scannlain wrote a dissent for the minority, which was used as the basis for a Writ of Certiorari to have the U.S. Supreme Court hear the case. The Writ was filed January 19, 2017. Looking at the Proceedings and Orders on the U.S. Supreme Court website shows the case National Restaurant Association, et al., v. Department of Labor, et al. Has many motions to extend the time to file a response, which have been granted repeatedly and last time I checked on April 16, 2018 the time was extended until May 9, 2018, but might well be extended again.

However, to complicate matters Congress intervened with new language as mentioned above, which makes employees the owners of their tips. The Congressional action in this long dreary episode of tips does not really resolve the matter for tipped employees, especially restaurant employees. As long as U.S. employees work “at will” and can be fired at any time for any reason, or no reason, tipped employees can be pressured to give up tips to their employer. Few restaurant employees have the wherewithal to pursue legal enforcement and Republican administrations are famous for not enforcing labor law.

Tip rules give a good illustration how courts will interpret legislation to favor and subsidize business. The tip rules that remain in force, and the tip credit that still remains, originated 76 years ago when the five Supreme Court justices seized on the Red Cap’s decision to continue working while claims in dispute worked through the courts. When some members of Congress tried to get restaurant employees included in the minimum wage requirements of FSLA in 1966 the Restaurant Association was right there demanding to codify their subsidy.

After successfully keeping the sub minimum wage for tipped employees fixed at $2.13 an hour for 27 years, restaurants and the Restaurant Association realized it was so low that they often had to pay $7.25 an hour just to get dining room help. That made the tip credit useless and their subsidy ended. That’s why Mr. Woo became a test case to demand expanding tip pooling to non tipped employees and restore their subsidy.

Once more Trump showed us who he is by joining corporate America to help them cheat tipped employees.

I will keep an eye on future legal developments and update them here. Or you can do it yourself. Docket files at the Supreme Court are No. 16-920, the Writ was docketed on January 24, 2017 No. 16A529

Tuesday, April 10, 2018

The Teacher Strike in Oklahoma

The Teacher Strike in Oklahoma

Public school teachers have left the classroom and taken to the streets, finally. It should be obvious to all in West Virginia and now Oklahoma the legislatures there and around the country will do nothing without a strike. Several newspapers including the Washington Post have reported the wages for Oklahoma Teachers rank 49 among the 50 states. I expect the rankings they quote come from published pay schedules with ranks and steps. Usually ranks differ for BA degree holders and for MA and ED.D degree holders, while steps differ by years of service with satisfactory or better performance reviews.

However the Bureau of Labor Statistics publishes an annual Occupational Employment Survey with the latest wage data just released this March 30. In their survey they take a large sample of wages for people employed doing one occupation among more than 800 occupational titles defined in their Standard Occupational Classification (SOC). For example, Secondary School Teachers, Except Special and Career/Technical Education have a reported median wage in Oklahoma of $40,090. The median figure means half of Oklahoma secondary school teachers earn less than $40,090; half more.

From year to year the median could go up because the state legislature approves money for an increase in the pay scale, both rank and steps. Or, it could go down because older people at higher ranks and steps leave teaching and their replacements are younger and newer teachers who enter at step 1. In Oklahoma the total of elementary, middle and high school teachers dropped by 440 from 2016 to 2017. Whatever the cause the $40,090 median wage reported for 2017 puts Oklahoma secondary teachers dead last in pay among the fifty states plus DC and Puerto Rico.

The wage for Secondary teachers in Oklahoma has been dead last since 2015 when the median wage was $41,280. Notice the wage went down from 2015 to 2017, which tells us the experienced, older teachers are leaving teaching while younger less experienced and therefore lower paid replacements are taking over.

The inflation adjusted loss of buying power for secondary teachers comes to 6.04 percent from 2015 to 2017. If we compute the inflation adjusted buying power from 2008 to 2017 the loss is 11.03 percent. The $40,090 looks especially low when 39 states have median wages for secondary teachers above $50,000, 18 above $60,000 and 6 above $70,000.

Moving on to elementary teachers finds much the same thing. The median wage for elementary teachers in 2015 was $39,270. It dropped in 2016 and again in 2017 to $38,420, a loss of inflation adjusted buying power of 5.35 percent in just two years and a 12.6 percent drop since 2008. There are 32 states that pay their 2017 elementary school teachers a median wage above $50,000

The wage for middle school teachers in Oklahoma in 2015 was $40,720. It dropped in 2016 and again in 2017 to $40,080, a loss of buying power of 4.77 percent in just two years and a 7.69 percent drop since 2008. There are 36 states that pay their 2017 middle school teachers a median wage above $50,000

On April 3, 2018 the Washington Post reported “Educators, students have seen some of the deepest reductions in the nation.” Picketing teachers had more to complain about than low salaries. Four day school weeks; old, out of date and battered textbooks; ten year old and out of date computers; leaky roofs, drafty windows, balky heating. The next day’s Washington Post quoted Oklahoma Governor Mary Fallin taunting teachers with “Teachers want more but it’s kind of like having a teenage kid that wants a better car.” Apparently red baiting protesting picketers as communists is out of date. She told CBS correspondent Omar Villafranca she doubted the teacher walkout could be a homegrown movement; their must be fascists she decided.

The strike says lots about labor relations. Private sector employees can strike if their no strike contract has expired, but even then they can be immediately and legally replace with scabs. Public sector employees seldom, if ever, have the legal right to strike. We can expect that union hating and union baiting governor Fallin would have them in court seeking an injunction and hefty fines for their union if she could break the strike.

Few strikes could be more visible and disruptive than a statewide teacher strike. Oklahoma had 48,820 employed as preschool, primary, secondary, and special education school teachers in 2017. California has 422,200. Texas has 415.920. Even little Maine has 19,150. Rarely do strikes have such a large block of professionals where those on strike have BA or MA degree skills and statewide certification. Rarely would it be necessary for management to pay much higher salaries to find strike replacements, and have to find them out of state. Rarely can strikes shut down operations for weeks or months if necessary.

The rich and the well to do are so determined to get themselves property tax vouchers to pay their private school tuition they work hard to ruin the public schools they ridicule as low class failures. Oklahoma teachers have the economic power to fight back and win their strike; lets hope they have the solidarity to do it.

Monday, April 9, 2018

Immigration and Right Wingers like Laura Ingraham

Immigration and Right Wingers like Laura Ingraham

In a recent op-ed piece in the Washington Post [April 5, 2018] Elizabeth Bruenig, comments on Fox News and Laura Ingraham: who gets an economics lesson. Ms. Ingraham taunted and ridiculed David Hogg of Parkland High School. He responded by calling for Ingraham’s advertisers to boycott her show. Bayer, Wayfair, Nestle, Hulu, Johnson & Johnson and others did so. The right wingers suddenly worry that boycotts are unfair and threaten their free speech. They also sound surprised as though their doctrine must be the same as corporate America.

Bruenig calls the advertising boycott a capital strike with a reminder that capital does what brings profits, not what’s right wing, left wing or ethically defensible. She cautions “There are no regulations or laws preventing or even restricting capital strikes.”

It is important to remember that profit, or just greed, drive corporate America and the Ingraham example does a good job illustrating the division of capital from the right wingers, but there is a better example, immigration.

Corporate America wants cheap labor and that means every immigrant they can get, skilled or unskilled, documented or undocumented. I don’t believe any other issue better illustrates the divide between capital and right wing politics. Except for the H1-B program, capital keep their immigration demands out of the news and public view and lets Fox News and Trump lead the dehumanizing bigotry parade.

Trump and the Republican Party need people like Ingraham and Fox News to keep the hate vote, now the Trump base, voting while knowing they will vote for the Republican that most reflects their hatred for immigrants. To keep the Democrats out of office and away from labor reform and income inequality, capital wants Republicans, while ignoring the divide over immigration. They remain non-committal or silent and take no responsibility for civility in the larger society. For some of us leadership comes from people who have the wealth and political power to do the right thing for the largest possible social order. Trump and the Republicans will never do that. Corporate America could do the right thing, but like Ms. Bruenig says “Capital is capital: it is not your friend.”