Robert Kuttner, A Presidency in Peril: The Inside Story of Obama’s Promise, Wall Streets’s Power, and the Struggle to Control our Economic Future, (White River Junction, VT, Chelsea Green Publishing, 2010), 274 pages, $25.00
In his second book on the Obama presidency, Robert Kuttner contrasts what President Obama promised in his campaign with what he is delivering as president. He promised a progressive program of change from his predecessor: George Bush. By 2010, the Obama promises started looking like more of the same.
The book opens with a short declaration: Barak Obama is at risk of being a failed president. Kuttner delves briefly into the Obama personality before going on in journalistic fashion to explain how and where he deserted his campaign promises and stopped doing what he said he would do in his campaign.
Following the introduction, the next five chapters take the reader through the issues and policies of Obama the campaigner compared to Obama the President. First, in the Politics of Capture, Kuttner contrasts the campaign and the campaigners with the group that took over after the election. The careers and experience of those that took control had a record of policies and positions from previous work on Wall Street or in previous administrations. The record left by Robert Rubin, Lawrence Summers, Rahm Emanuel and a few others lets Kuttner differentiate the influence of the new people from the progressive speeches of the campaign.
Chapter two titled Continuity and Collusion sketches the fateful choices and feeble policies toward the mortgage mess, bank failures and the timid recession stimulus plan. The discussion emphasizes the similarities of the Bush policies with the Obama policies. Even though Kuttner evaluates the Bush-Obama policies in historical perspective and makes alternative policy suggestions chapter two and the three chapters that follow become a well documented issue oriented narrative of disappointment in Obama, the President and politician.
When Kuttner narrates the reform efforts of former Federal Reserve chair Paul Volker to restore the Glass-Steagall banking act, Obama voters feel what they voted to change slipping away. When Kuttner recounts the reform efforts of Elisabeth Warren to create a new consumer financial protection agency, and describes the tepid efforts to control financial derivatives, Obama voters feel disappointed as the Obama administration abandons reform for the status quo.
In crony capitalism we meet the insiders from Citi bank and Goldman Sachs and the double standard of negotiations and policies between financial bailouts and the bailout of the auto industry. By now readers realize Kuttner was taking daily notes and doing regular interviews as he followed the path of the Obama administration during its first year. Readers get details of policy discussions between Obama insiders and their differences with dissenters in Congress, the independent agencies and the administration.
Chapter six, titled Political Malpractice, returns to the theme of a presidency in peril. It starts with a reminder that a Republican, Scott Brown, easily beat a Democrat, Martha Coakley, in the Massachusetts special election to fill Senator Kennedy’s senate seat. In a famously democratic state the Republican won by 57 to 37 percent as disgusted voters switched parties. Kuttner cites other polls, commentary and events to reinforce the mood of the voters and their growing refusal to accept the President’s apparent identification with narrow financial interests or his refusal to fight for the changes he supported before the election.
The final chapter begins by comparing Obama in the first year with other Democrats, especially Bill Clinton and Harry Truman. The feisty and blunt talking Truman abandoned private negotiation for public confrontation: highlighting differences between the parties in the process. The Harry Truman review stands out in stark contrast to Obama with his bland explanations of behind the scenes dealing.
Kuttner digresses with fiscal, tax and global economic policy suggestions that deliver more for working people, before returning to Obama the organizer and the need for a social movement. In a section, It takes a Movement, he remembers the “stunning capacity to inspire Americans after decades of dashed hopes and failed politicians,” but then admits Obama the organizer is dead, or transformed into an organization man who wants to be accepted by the group he needs to confront.
It is clearly hard for Kuttner to accept his own words because he takes nearly nine pages to describe the historical trials and tribulations that go with organizing effective social movements and the part presidents might play in them. When he writes “Interacting with a President who has been a source of both great hope and disappointment is a tricky affair,” he expresses the same frustration there was with President Clinton and President Carter. Their label was Democrat but they failed to lead social movements or stand up for working people and Democratic causes.
Kuttner ends with a note of optimism that the economy is weak enough, the Republicans empty enough and President Obama practical enough to bring change for a larger social and national interest. Maybe, but Kuttner does a better job showing that the disappointed are a large enough group to elect a Harry Truman candidate who will think big. Who that might be is a good question. I have to confess that reading A Presidency in Peril makes me doubt it is Barak Obama.
Saturday, January 29, 2011
Sunday, January 23, 2011
Michigan Jobs
A Comprehensive Review and Analysis of Michigan Jobs (2,175 words)
The dismal state of the Michigan job market continues to be a topic of news and politics. Michigan jobs trended upward through the 1990’s reaching a monthly average high of 4.68 million establishment jobs in 2000, which turned out to be the beginning of a continuous decline. Note (1) By 2009 monthly average jobs were down to 3.88 million, a drop of 70 thousand jobs from 1990 to 2009, and a drop of 800.1 thousand jobs from 2000 and 2009.
Michigan is the only state with a decline in statewide employment from 1990 to 2009. The decline between 2000 and 2009 is the biggest drop among all 50 states and the District of Columbia and the biggest percentage decline, 17.1 percent. Michigan jobs are still dropping, down 32 thousand for 2010 through October.
Given the reality of Michigan labor markets it is not surprising that candidates for state office in the November election typically discussed plans for new jobs, and sometimes in confident tones. Such a long slide makes it hard to blame one party, or one policy, but either party that holds elected office will want to improve the outlook on jobs. Let’s review their circumstance and weigh their prospects for success.
Manufacturing
Michigan had 839 thousand manufacturing jobs in 1990. In the early 1990’s manufacturing jobs dropped briefly below 800 thousand, but ended the decade with a high for manufacturing in Michigan: 898 thousand jobs. By 2009 manufacturing jobs were barely 462 thousand, a loss of 376.6 thousand jobs from 1990 to 2009 and a loss of 435 thousand jobs after 2000.
Even though Michigan suffered heavy manufacturing job losses other states had the same problem. In 1990, Michigan manufacturing employment ranked 10th among the 50 states in percentage of statewide employment with 21.3 percent of statewide jobs. North Carolina ranked first with 26.4 percent of statewide jobs in manufacturing.
Even though North Carolina began to lose manufacturing jobs sooner than Michigan, North Carolina went from 824 thousand manufacturing jobs in 1990 to 447 thousand in 2009. The North Carolina drop of 376.2 thousand jobs is almost identical to the Michigan manufacturing loss of 376.6 thousand in the same years, 1990 to 2009.
North Carolina relied on the Textile industry in similar fashion as Michigan relied on the automobile industry. North Carolina lost 240 thousand textile industry jobs between 1990 and 2009, whereas Michigan lost 208 thousand automobile jobs in the same period. Even though Michigan manufacturing job losses are severe they do not look worse than North Carolina, yet Michigan lost 800.1 thousand statewide jobs from 2000 to 2009 while North Carolina was able to maintain statewide employment in the same period at 3.9 million jobs.
High Productivity Services
Both Michigan and North Carolina need new jobs to replace their lost manufacturing jobs before they can add jobs. That means both states must have faster than average growth in service industry jobs to make up for the decline in manufacturing. Trouble is there are major sectors of the service economy where the jobs don’t grow, or grow too slowly to maintain their share of statewide jobs.
For example, wholesale and retail trade jobs in Michigan declined by 54 thousand from 1990 to a low of 604 thousand in 2009, a loss of 1.1 percent of statewide jobs. Using computer technology in trade, especially for barcodes and inventory management and for Internet sales, increases labor productivity. Retail and wholesale sales volumes per work hour are up and sometimes at rates comparable to productivity in manufacturing.
The expanded use of computers and digital technologies has raised productivity and slowed the growth of jobs in information services like newspapers, broadcasting, phone services and in financial services like banking, lending and insurance as America slowly shift to a paperless economy. The share of these jobs decline as America and Michigan gets more news from the Internet, and electronic banking replaces driving to the bank to exchange paper with a teller.
Health Care, Education and Professional Services
From 1990 to 2009 when Michigan lost 70 thousand jobs, Michigan’s declining sectors lost 475 thousand jobs. The declining sectors guarantee that the difference of 405 thousand jobs shifted to other sectors of the Michigan economy, especially health care, education and professional and technical services.
Health care including social services in the national economy continues to create more jobs month after month where it now has 12.5 percent of America’s establishment jobs. The recent expansion of health care insurance passed by Congress will help the states generate new jobs. Michigan health care has 160 thousand new jobs since 1990 with 13.7 percent of statewide jobs, above the national average and up from 9.4 percent.
Education employment for public and private elementary, secondary and post secondary education continued to grow from 1990 to 2009. Michigan reached a peak of 437 thousand jobs in the years from 2003 to 2005 and then dropped back to 421 thousand in 2009. The share of education in statewide jobs continued to go up reaching 10.9 percent in 2009, even though 2009 education totals are up only 61 thousand jobs since 1990.
Professional and technical services have jobs in law, accounting, architecture, engineering, computer design, management consulting, scientific research, advertising, and veterinary services. Michigan increased professional services jobs between 1990 and 2009 going from 202 thousand to 221 thousand jobs. The 2009 total is 5.7 percent of statewide employment, just equal to the national average in professional services jobs. Michigan needs to expand these services but professional service jobs are down from a high of 276 thousand in 2000 to 221 thousand in 2009.
Low Productivity Services
Health care, education and professional services accounted for 240 thousand of the 405 thousand of the jobs that shifted from declining sectors from 1990 through 2009. The remaining 165 thousand of the 405 thousand replacement jobs shifted into local business support services and leisure and hospitality services, where low productivity helps maintain jobs that pay modest wages.
There were 92 thousand replacement jobs shifted to business support services with jobs in administrative and facilities services, employment services, temporary help services, telemarketing, security, janitorial maintenance, landscaping and a few more. These new jobs are a 2.5 percent increase in the share of Michigan jobs between 1990 and 2009.
An additional shift of Michigan jobs were scattered into leisure and hospitality services such as accommodations, restaurants, performing arts, spectator sports, amusement parks, casinos, golf and country clubs, fitness and recreation centers, selected personal services, and a broad category of non-profit associations that includes foundations, advocacy and civic groups, professional associations and a few more. The total of these replacement jobs come to 73 thousand from 1990 to 2009.
Michigan vs. North Carolina
North Carolina avoided a general decline in statewide employment that plagues Michigan. North Carolina and Michigan had about the same performance in jobs from 1990 to 2000. Differences show up in the period from 2000 to 2009 when North Carolina did better in health care adding 131 thousand jobs and better in education adding 79 thousand jobs. Michigan added only 83 thousand health care jobs and 8 thousand jobs in education. North Carolina did better in professional services adding 31 thousand jobs; Michigan was down 55 thousand professional service jobs in the 2000 to 2009 period.
Otherwise North Carolina maintained itself with local services jobs and by adding 48 thousand jobs in state and local government, excluding education. Michigan had a decline of 14 thousand state and local government jobs excluding education from 2000 to 2009 and much bigger losses in trade, which dropped 141 thousand jobs compared to a loss of only 13 thousand jobs in North Carolina. Even though Michigan has gambling and gambling jobs and North Carolina does not, Michigan lost 19 thousand jobs in leisure and hospitality; North Carolina gained 66 thousand leisure and hospitality jobs.
North Carolina has 448 thousand manufacturing jobs left after losses every single year since 1995; 462 thousand manufacturing jobs remain in Michigan. Both states needs these jobs, but other states want them, the Federal government continues to ignore manufacturing moving abroad and rising labor productivity continues to limit jobs. In the last decade, North Carolina did better than Michigan generating more service jobs buying and selling within their state than Michigan was able to do. In spite of the difference both states have a declining share of manufacturing jobs and a growing share of jobs in local services.
Reality Check
The reality of shifting jobs between service sectors together with the long term decline in manufacturing limits the options for Michigan jobs. As of 2009 35.2 percent of Michigan jobs remain in manufacturing and the service sectors decimated by higher labor productivity and the use of computer technologies. Even though jobs in wholesale and retail trade are restricted from higher labor productivity, the Michigan loss of 141 thousand trade jobs between 2000 and 2009 is especially high. Michigan must do better in trade to have a chance at job growth.
Politicians seldom advocate government jobs as a solution to job needs, but Michigan cannot afford to sit by and let these jobs decline, no matter how unpopular taxes and spending come to be. Government jobs are spread out geographically and help maintain a core of jobs in many communities. If these jobs decline, other jobs will decline with them.
In Michigan and North Carolina, like other states all over the country, jobs are shifting out of high productivity industries and into low productivity industries like leisure and hospitality and personal services. Low productivity is the friend of jobs, but few politicians want to brag about new jobs in leisure and hospitality as waiters, waitresses, maids, cashiers, ushers and ticket takers. Low productivity jobs tend to have low pay and families need two or three of these jobs to pay the bills and survive.
The state legislatures and the governors of Michigan and all states will need to support health care expansion and concentrate on producing as much health care within their respective states as possible if they expect to meet the needs of new jobs. Think of more health care and job growth as the same.
Public education has helped provide new jobs in Michigan for nearly 20 years, which needs to continue if Michigan wants jobs. In the last few years private schools have added jobs while local public school are down more than 40 thousand jobs since just 2004. Private schools and all the state’s colleges have a chance to bring in out of state students and create jobs.
Professional services give a chance to promote services and jobs that brings in spending from outside the state to support jobs with exported services. Health care and education tend to be local services, whereas professional services are increasingly produced and delivered by computer in the global economy. Michigan must expand professional services if it expects to have more jobs.
Combine the 35.2 percent of high productivity sectors where jobs decline with the low productivity sectors where the wages are low, add in government jobs excluding education, and the total comes to 63.3 percent of Michigan jobs. Jobs in health care, education and professional services account for another 30.3 percent of Michigan jobs in 2009, but the percentage has to increase for these jobs to replace the declining sectors. The alternative is more low paid jobs in low productivity services.
Just three other sectors remain with 6.4 percent of Michigan jobs: natural resources, construction, and transportation with public utilities. All are in decline with fewer jobs now than in 1990 and fewer than 2000. Natural resources, which is logging and mining, has 7 thousand jobs left. Construction and transportation and utility jobs are also off from 1990 and 2000. Construction is down from a high of 210 thousand jobs to a monthly average 118 thousand for October of this year.
Michigan politicians make broad promises to create jobs that will be hard to keep. If they concentrate on health care, education, and professional services and bolster the sagging trade sector, then new jobs could generate enough income and spending to boost employment in the supporting sectors. If they review state tax incidence and the financial sector they might be able to make changes that keep more Michigan generated savings and profits in Michigan for reinvestment and job growth. If they revise Michigan labor law, especially overtime rules, they might be able to spread the work to more people and lower the unemployment rate.
Jobs are a long term problem. I deliberately reference 1990 and 2000 to emphasize that point. In our politics the Democrats promise jobs and fail to deliver, the Republicans promise jobs and fail to deliver, and back and forth. They fail because they look for a quickie solution and pursue some other agenda. Michigan could be different. Your job will depend on it.
---------
Note(1) All job and employment number citations are from the Bureau of Labor Statistics, United States Department of Labor, Current Employment Survey. No exceptions.
The dismal state of the Michigan job market continues to be a topic of news and politics. Michigan jobs trended upward through the 1990’s reaching a monthly average high of 4.68 million establishment jobs in 2000, which turned out to be the beginning of a continuous decline. Note (1) By 2009 monthly average jobs were down to 3.88 million, a drop of 70 thousand jobs from 1990 to 2009, and a drop of 800.1 thousand jobs from 2000 and 2009.
Michigan is the only state with a decline in statewide employment from 1990 to 2009. The decline between 2000 and 2009 is the biggest drop among all 50 states and the District of Columbia and the biggest percentage decline, 17.1 percent. Michigan jobs are still dropping, down 32 thousand for 2010 through October.
Given the reality of Michigan labor markets it is not surprising that candidates for state office in the November election typically discussed plans for new jobs, and sometimes in confident tones. Such a long slide makes it hard to blame one party, or one policy, but either party that holds elected office will want to improve the outlook on jobs. Let’s review their circumstance and weigh their prospects for success.
Manufacturing
Michigan had 839 thousand manufacturing jobs in 1990. In the early 1990’s manufacturing jobs dropped briefly below 800 thousand, but ended the decade with a high for manufacturing in Michigan: 898 thousand jobs. By 2009 manufacturing jobs were barely 462 thousand, a loss of 376.6 thousand jobs from 1990 to 2009 and a loss of 435 thousand jobs after 2000.
Even though Michigan suffered heavy manufacturing job losses other states had the same problem. In 1990, Michigan manufacturing employment ranked 10th among the 50 states in percentage of statewide employment with 21.3 percent of statewide jobs. North Carolina ranked first with 26.4 percent of statewide jobs in manufacturing.
Even though North Carolina began to lose manufacturing jobs sooner than Michigan, North Carolina went from 824 thousand manufacturing jobs in 1990 to 447 thousand in 2009. The North Carolina drop of 376.2 thousand jobs is almost identical to the Michigan manufacturing loss of 376.6 thousand in the same years, 1990 to 2009.
North Carolina relied on the Textile industry in similar fashion as Michigan relied on the automobile industry. North Carolina lost 240 thousand textile industry jobs between 1990 and 2009, whereas Michigan lost 208 thousand automobile jobs in the same period. Even though Michigan manufacturing job losses are severe they do not look worse than North Carolina, yet Michigan lost 800.1 thousand statewide jobs from 2000 to 2009 while North Carolina was able to maintain statewide employment in the same period at 3.9 million jobs.
High Productivity Services
Both Michigan and North Carolina need new jobs to replace their lost manufacturing jobs before they can add jobs. That means both states must have faster than average growth in service industry jobs to make up for the decline in manufacturing. Trouble is there are major sectors of the service economy where the jobs don’t grow, or grow too slowly to maintain their share of statewide jobs.
For example, wholesale and retail trade jobs in Michigan declined by 54 thousand from 1990 to a low of 604 thousand in 2009, a loss of 1.1 percent of statewide jobs. Using computer technology in trade, especially for barcodes and inventory management and for Internet sales, increases labor productivity. Retail and wholesale sales volumes per work hour are up and sometimes at rates comparable to productivity in manufacturing.
The expanded use of computers and digital technologies has raised productivity and slowed the growth of jobs in information services like newspapers, broadcasting, phone services and in financial services like banking, lending and insurance as America slowly shift to a paperless economy. The share of these jobs decline as America and Michigan gets more news from the Internet, and electronic banking replaces driving to the bank to exchange paper with a teller.
Health Care, Education and Professional Services
From 1990 to 2009 when Michigan lost 70 thousand jobs, Michigan’s declining sectors lost 475 thousand jobs. The declining sectors guarantee that the difference of 405 thousand jobs shifted to other sectors of the Michigan economy, especially health care, education and professional and technical services.
Health care including social services in the national economy continues to create more jobs month after month where it now has 12.5 percent of America’s establishment jobs. The recent expansion of health care insurance passed by Congress will help the states generate new jobs. Michigan health care has 160 thousand new jobs since 1990 with 13.7 percent of statewide jobs, above the national average and up from 9.4 percent.
Education employment for public and private elementary, secondary and post secondary education continued to grow from 1990 to 2009. Michigan reached a peak of 437 thousand jobs in the years from 2003 to 2005 and then dropped back to 421 thousand in 2009. The share of education in statewide jobs continued to go up reaching 10.9 percent in 2009, even though 2009 education totals are up only 61 thousand jobs since 1990.
Professional and technical services have jobs in law, accounting, architecture, engineering, computer design, management consulting, scientific research, advertising, and veterinary services. Michigan increased professional services jobs between 1990 and 2009 going from 202 thousand to 221 thousand jobs. The 2009 total is 5.7 percent of statewide employment, just equal to the national average in professional services jobs. Michigan needs to expand these services but professional service jobs are down from a high of 276 thousand in 2000 to 221 thousand in 2009.
Low Productivity Services
Health care, education and professional services accounted for 240 thousand of the 405 thousand of the jobs that shifted from declining sectors from 1990 through 2009. The remaining 165 thousand of the 405 thousand replacement jobs shifted into local business support services and leisure and hospitality services, where low productivity helps maintain jobs that pay modest wages.
There were 92 thousand replacement jobs shifted to business support services with jobs in administrative and facilities services, employment services, temporary help services, telemarketing, security, janitorial maintenance, landscaping and a few more. These new jobs are a 2.5 percent increase in the share of Michigan jobs between 1990 and 2009.
An additional shift of Michigan jobs were scattered into leisure and hospitality services such as accommodations, restaurants, performing arts, spectator sports, amusement parks, casinos, golf and country clubs, fitness and recreation centers, selected personal services, and a broad category of non-profit associations that includes foundations, advocacy and civic groups, professional associations and a few more. The total of these replacement jobs come to 73 thousand from 1990 to 2009.
Michigan vs. North Carolina
North Carolina avoided a general decline in statewide employment that plagues Michigan. North Carolina and Michigan had about the same performance in jobs from 1990 to 2000. Differences show up in the period from 2000 to 2009 when North Carolina did better in health care adding 131 thousand jobs and better in education adding 79 thousand jobs. Michigan added only 83 thousand health care jobs and 8 thousand jobs in education. North Carolina did better in professional services adding 31 thousand jobs; Michigan was down 55 thousand professional service jobs in the 2000 to 2009 period.
Otherwise North Carolina maintained itself with local services jobs and by adding 48 thousand jobs in state and local government, excluding education. Michigan had a decline of 14 thousand state and local government jobs excluding education from 2000 to 2009 and much bigger losses in trade, which dropped 141 thousand jobs compared to a loss of only 13 thousand jobs in North Carolina. Even though Michigan has gambling and gambling jobs and North Carolina does not, Michigan lost 19 thousand jobs in leisure and hospitality; North Carolina gained 66 thousand leisure and hospitality jobs.
North Carolina has 448 thousand manufacturing jobs left after losses every single year since 1995; 462 thousand manufacturing jobs remain in Michigan. Both states needs these jobs, but other states want them, the Federal government continues to ignore manufacturing moving abroad and rising labor productivity continues to limit jobs. In the last decade, North Carolina did better than Michigan generating more service jobs buying and selling within their state than Michigan was able to do. In spite of the difference both states have a declining share of manufacturing jobs and a growing share of jobs in local services.
Reality Check
The reality of shifting jobs between service sectors together with the long term decline in manufacturing limits the options for Michigan jobs. As of 2009 35.2 percent of Michigan jobs remain in manufacturing and the service sectors decimated by higher labor productivity and the use of computer technologies. Even though jobs in wholesale and retail trade are restricted from higher labor productivity, the Michigan loss of 141 thousand trade jobs between 2000 and 2009 is especially high. Michigan must do better in trade to have a chance at job growth.
Politicians seldom advocate government jobs as a solution to job needs, but Michigan cannot afford to sit by and let these jobs decline, no matter how unpopular taxes and spending come to be. Government jobs are spread out geographically and help maintain a core of jobs in many communities. If these jobs decline, other jobs will decline with them.
In Michigan and North Carolina, like other states all over the country, jobs are shifting out of high productivity industries and into low productivity industries like leisure and hospitality and personal services. Low productivity is the friend of jobs, but few politicians want to brag about new jobs in leisure and hospitality as waiters, waitresses, maids, cashiers, ushers and ticket takers. Low productivity jobs tend to have low pay and families need two or three of these jobs to pay the bills and survive.
The state legislatures and the governors of Michigan and all states will need to support health care expansion and concentrate on producing as much health care within their respective states as possible if they expect to meet the needs of new jobs. Think of more health care and job growth as the same.
Public education has helped provide new jobs in Michigan for nearly 20 years, which needs to continue if Michigan wants jobs. In the last few years private schools have added jobs while local public school are down more than 40 thousand jobs since just 2004. Private schools and all the state’s colleges have a chance to bring in out of state students and create jobs.
Professional services give a chance to promote services and jobs that brings in spending from outside the state to support jobs with exported services. Health care and education tend to be local services, whereas professional services are increasingly produced and delivered by computer in the global economy. Michigan must expand professional services if it expects to have more jobs.
Combine the 35.2 percent of high productivity sectors where jobs decline with the low productivity sectors where the wages are low, add in government jobs excluding education, and the total comes to 63.3 percent of Michigan jobs. Jobs in health care, education and professional services account for another 30.3 percent of Michigan jobs in 2009, but the percentage has to increase for these jobs to replace the declining sectors. The alternative is more low paid jobs in low productivity services.
Just three other sectors remain with 6.4 percent of Michigan jobs: natural resources, construction, and transportation with public utilities. All are in decline with fewer jobs now than in 1990 and fewer than 2000. Natural resources, which is logging and mining, has 7 thousand jobs left. Construction and transportation and utility jobs are also off from 1990 and 2000. Construction is down from a high of 210 thousand jobs to a monthly average 118 thousand for October of this year.
Michigan politicians make broad promises to create jobs that will be hard to keep. If they concentrate on health care, education, and professional services and bolster the sagging trade sector, then new jobs could generate enough income and spending to boost employment in the supporting sectors. If they review state tax incidence and the financial sector they might be able to make changes that keep more Michigan generated savings and profits in Michigan for reinvestment and job growth. If they revise Michigan labor law, especially overtime rules, they might be able to spread the work to more people and lower the unemployment rate.
Jobs are a long term problem. I deliberately reference 1990 and 2000 to emphasize that point. In our politics the Democrats promise jobs and fail to deliver, the Republicans promise jobs and fail to deliver, and back and forth. They fail because they look for a quickie solution and pursue some other agenda. Michigan could be different. Your job will depend on it.
---------
Note(1) All job and employment number citations are from the Bureau of Labor Statistics, United States Department of Labor, Current Employment Survey. No exceptions.
Wednesday, January 5, 2011
Overtime Rules
The Fair Labor Standards Act includes overtime rules that define overtime pay at wages not less than one and half times regular pay rates after 40 hours of work in a workweek. Any use of overtime means more work for some that could go for more jobs to others. Requiring higher overtime pay for employers gives financial incentive to avoid the added expense of overtime and hire more employees at regular pay, which helps spread available work to more people. The incentives will be more effective if overtime rules apply to all employment. Instead the Fair Labor Standards Act as amended provides exemptions from overtime requirements for broad categories of employees employed in a bona fide executive, administrative, or professional capacity, selected computer employees, outside sales employees, motion picture employees, and other more narrowly defined categories. (1)
Exemptions from overtime rules go back to the 1940’s but changes drafted during the Bush administration and adopted in August 2004 revised Fair Labor Standards Act rules with new language referred to as white collar rules. The new regulations in Title 29 Code of Federal Regulations Part 541 define an employee’s salary and duties to determine exempt work that qualifies for an exemption from overtime pay.
Executive Employees
The general rules for executive employees that qualifies for an overtime pay exemption under white collar rules means an employee “compensated on a salary basis not less than $455 a week, exclusive of board, lodging or other facilities, whose primary duty is the management of the enterprise or a customarily recognized department or subdivision, who customarily and regularly directs the work of at least 2 or more full time employees, who has authority to hire and fire other employees, or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.” (2)
The definition of management and primary duty in the regulations that establishes exempt work incorporates the traditional managerial prerogatives like hiring, firing, paying, promoting and disciplining as primary duties if they are the principal, main, major or most important duties. (3) Nevertheless, executive employees can be exempt from overtime if they have other non-exempt duties because the regulations allow an employer to exempt an employee who does some exempt work and other activities directly and closely related to exempt work.
The phrase ‘directly and closely related’ means tasks that are related to exempt duties and that contributes to or facilitate performance of exempt work. “Thus, ‘directly and closely related’ work may include physical tasks and menial tasks that arise out of exempt duties, and the routine work without which the exempt employee's exempt work cannot be performed properly.” (4)
The 40-hour work week continues to be the standard full time workweek as it has been for more than eighty years, but exempting executive managers from overtime pay converts three managers working 40 hour weeks into two managers working 60 hour weeks. Using overtime rules to turn three jobs into two makes it easier for employers to economize on wage costs, especially in high wage occupations like executive managers. A lower wage cost with exempt overtime hours also assures fewer jobs in exempted occupations like management.
Occupational Employment Survey data reported by the Bureau of Labor Statistics shows managerial jobs in decline from 1999 to 2009. Managerial occupations were 6 percent of America’s jobs in 1999 with employment just over 8 million. By 2009 managerial occupations were down to 6.1 million jobs and 4.7 percent of the total of occupational employment. The job totals in managerial occupations are for establishment employment, meaning they are jobs at firms, non-profit associations or government.
Undoubtedly the decline in managerial jobs resulted from a combination of factors. It is common now for business to issue laptop computers, cell phones, and Blackberry’s to employees, which makes them available to work overtime in the evening, weekends, or the middle of the night. There are few reports business treats these additional hours of work as time and a half for overtime, but using new technology helps reduce jobs in management anyway.
Administrative Employees
Second on the list of overtime exemptions are the general rules for administrative employees. Any employee employed in a bona fide administrative capacity must be “compensated on a salary or fee basis at a rate of not less than $455 per week, exclusive of board, lodging or other facilities, whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers, and whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.” (5)
“In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered. The term ‘matters of significance’ refers to the level of importance or consequence of the work performed. The phrase ‘discretion and independent judgment’ must be applied in the light of all the facts involved in the particular employment situation in which the question arises.” (6)
The regulations include a list of example decisions that an employee might make to satisfy the requirement to exercise discretion and independent judgment and also summary wrap up. “The exercise of discretion and independent judgment implies that the employee has authority to make an independent choice, free from immediate direction or supervision. However, employees can exercise discretion and independent judgment even if their decisions or recommendations are reviewed at a higher level. Thus, the term ‘discretion and independent judgment’ does not require that the decisions made by an employee have a finality that goes with unlimited authority and a complete absence of review.” (7)
Section 541.203 of the regulations explains specific example occupations that generally meet the requirements for the administrative exemption: insurance claims adjusters, employees in the financial services industry, executive assistant or administrative assistant, human resources managers, and purchasing agents. A description of the usual duties and decisions for these occupations provides the nature of decision making that will allow exemption from overtime status. For example, “An executive assistant or administrative assistant to a business owner or senior executive of a large business generally meets the duties requirements for the administrative exemption if such employee, without specific instructions or prescribed procedures, has been delegated authority regarding matters of significance.” (8)
Educational establishments also come under rules for administrative employees. Employees qualify as exempt from overtime at educational establishments when “compensated for services on a salary or fee basis at a rate of not less than $455 per week exclusive of board, lodging or other facilities, or on a salary basis which is at least equal to the entrance salary for teachers in the educational establishment by which employed; and whose primary duty is performing administrative functions directly related to academic instruction or training in an educational establishment or department or subdivision thereof.” (9)
These educational employees are cited as generally meeting the requirements for overtime exemption: superintendent, assistants with educational duties, principals and vice principals, department heads, academic counselors and other employees with similar responsibilities.
Professional Employees
The general rules for professional employees apply to the learned professions, creative professions, teaching, law and medicine. “To qualify for the learned professional exemption, an employee's primary duty must be the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.” (10)
Having an academic degree is cited as prima facie evidence of meeting the requirement of learning customarily acquired by a prolonged course of specialized intellectual instruction. “However, the word ‘customarily’ means that the exemption is also available to employees in such professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction.” (11)
The regulations have a list of example professions and a selection of occupations that meet the requirements for the learned professions exemption. Exemptions apply to professions of law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, and various types of physical, chemical and biological sciences and pharmacy. Some example jobs signal how far employers can push the definition of learned professions. Jobs that generally meet the requirements for exemption are listed in the regulations: certified medical technologists, registered nurses, dental hygienists, physician assistants, chefs, athletic trainers, funeral directors and embalmers.
Chefs?
“To qualify for the creative professional exemption, an employee's primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical or physical work.” (12)
Creative professionals that generally meet the requirements for overtime exemption are listed in the regulations: actors, musicians, composers, conductors, and soloists; painters, cartoonists, essayists, novelists, short-story writers and screen-play writers and journalists.
There are some stipulations for journalists. “Journalists may satisfy the duties requirements for the creative professional exemption if their primary duty is work requiring invention, imagination, originality or talent, as opposed to work which depends primarily on intelligence, diligence and accuracy.” (13)
Teacher exemptions apply to “Any employee with a primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge and who is employed and engaged in this activity as a teacher in an educational establishment by which the employee is employed.” (14)
Teachers at public or private schools who are permanent, conditional, standard, provisional, temporary, emergency, or unlimited, or certified or not certified, or doing extracurricular activities such as coaching athletic teams or acting as moderators or advisors in such areas as drama, speech, debate or journalism have exempt status for overtime. (15)
The exemption for law and medicine applies to “Any employee who is the holder of a valid license or certificate permitting the practice of law or medicine or any of their branches and is actually engaged in the practice thereof; and any employee who is the holder of the requisite academic degree for the general practice of medicine and is engaged in an internship or resident program pursuant to the practice of the profession.” (16)
Three additional exemptions close out the white collar rules. A computer industry exemption applies to any computer employee compensated on a salary or fee basis not less than $455 a week, and to any computer employee compensated on an hourly basis at a rate not less than $27.63 an hour. (17) Exemptions apply to outside sales employees who make sales or obtain orders or contracts for services and customarily and regularly work away from the employer’s place or places of business. (18) An employee in the motion picture producing industry who is compensated at a base rate of at least $695 a week is also exempt. (19)
Hourly pay and the State of Exemptions
Exempt status eliminates the financial incentive to spread work and hire more people.
Salary and fee basis requirements defining the white collar rules in Title 29 Code of Federal Regulations part 541 does not permit exempt status for most hourly paid jobs. There are exceptions but as a practical matter hourly pay will be preferred for some jobs, especially where work fluctuates, or work has intermittent weeks with less than forty hour schedules.
The Current Population Survey reports the number and percentage of wage and salary workers paid at hourly rates. (20) In 2006, hourly rated employees were 76.5 million and 59.7 percent of wage and salary workers. By 2009 the numbers were down to 72.6 million and 58.3 percent. Having 58.3 percent paid hourly rates leaves 41.7 percent paid on a salary, fee or other basis, which comes to 51.9 million jobs.
Since few hourly paid employees are eligible for white collar exemptions the 51.9 million wage and salary workers not on hourly pay gives a number that meets the first criteria for exempt status: pay on a salary or fee basis. Pay by the hour or by salary continues to be the sole discretion of the employer and as my summary of overtime rules suggests, the new language in the regulations allows more discretion to adjust primary duties to meet the duty tests for exemption from overtime pay.
No agency has a count of salary or fee based employees with exempt status, but the 51.9 million total is big enough to include all employment reported for management, business operations, financial administration, and professional occupations reported by the Bureau of Labor Statistics.
A little over 12 million work in managerial occupations, business operations and other financial administration and the broad wording in the regulations give reason to believe they all qualify, or could easily be adjusted to qualify, for exempt status. Since the regulations specifically include 1.4 million executive secretaries and administrative assistant as exempt administrative employees, financial administration occupations like accountant, loan officer and financial analyst could be expected to meet at least one of the requirements for executive, administrative or professional exemptions as well.
The Bureau of Labor Statistics defines seven major groups of occupations as professional employment with 27.5 million jobs in 2009. (21) Education has the most jobs in professions with 8.5 million in teaching or the exempt duties related to teaching. Health care has another 7.2 million practitioners, which includes 15 thousand athletic trainers specifically cited as an exempted occupation.
Given that embalmers and chefs are not defined in the Standard Occupational classifications as professional jobs but specifically included as learned professions in the overtime rules, we can expect the generous definition of learned professions includes more than the 27.5 million jobs.
Millions of business and professional jobs that support middle class and career minded Americans have no legal right to overtime. Truth is these are just the white collar rules; there are many more overtime exemptions in other parts of Title 29 of the Code of Federal Regulations. Airline employees, seasonal and recreational employees and firefighters working in small public fire departments with less than 5 firefighters are three of many more exemptions from overtime pay.
The Fair Labor Standards Act gives Americans the legal right to the minimum wage and overtime pay beyond 40 hours a week. That comes up at the beginning of the Fair Labor Standards as amended and its regulations. By the end of the regulations millions and millions of Americans have no legal right to overtime pay.
The rules that regulate exempt status for overtime pay are in addition to Fair Labor Standards rules for compensable work. (22) Employees are legally entitled to be compensated for hours worked. Exempt status means exemption from overtime pay at time and half, not exemption from pay for time worked.
Compensable time has a definition and a regulation because disputes can arise over compensable time as well as overtime. If an employee is asked to do an errand on the way to work reasonable people might disagree whether errands on the way to work are compensable time. When disputes occur new and amended definitions are drafted, adopted and published as they have been over the years for many different work disputes under the Fair Labor Standards Act. However, employers are still expected to pay wages and salary for compensable time worked up to and over forty hours if that occurs. Employers cannot legally expect employees to work for free or to work free overtime hours.
Still we have to expect free overtime hours happen anyway. In education, for example, phrasing in teacher contracts makes no allowance for over time: “Teacher shall perform such duties as deemed necessary, shall attend all assigned meetings, shall be present at school during school hours, shall be present at school or other location outside school hours as directed in connection with school events or activities.”
Teacher work days fill up with student contact hours, emails and calls from parents and assigned meetings that leave little time for grading or preparation. Grading and preparation occur in the evenings and weekends. Millions of America’s public school teachers work beyond 40 hours a week, but I am unaware they receive additional compensation for overtime hours. Their overtime appears to be free work; a donation or part of their dedication.
In office based occupations pressure to get the job done and be part of the team make it easy to ignore some extra hours. Salaried employees are not typically encouraged to clock their overtime hours and those who do might be reluctant to request additional pay. Just like unpaid interns, salaried employees may choose not to complain about free overtime as bad for career advancement. Legal rules mean nothing when employees choose to go along or feel good at being dedicated, even without pay.
Economizing on wage costs is a universal practice. Even though laptop computers and overtime rules help save labor costs and reduce jobs there is a difference between them. The former is applied technology; the latter applied politics. When the Bush administration expanded overtime exemptions by writing new overtime rules, they made it easier to economize on wage cost by eliminating the financial incentive to restrict overtime and spread work to more people. Exemption from overtime pay for millions of jobs and free overtime for others helps to build America’s surplus of labor.
Notes
(1) Title 29 Code of Federal Regulations, part 541, available at http://ecfr.gpoaccess.gov
(2) 29 CFR part 541.100
(3) 29 CFR part 541.102
(4) 29 CFR part 541.703
(5) 29 CFR part 541.200
(6) 29 CFR part 541.202
(7) 29 CFR part 541.202
(8) 29 CFR part 541.203
(9) 29 CFR part 541.204
(10) 29 CFR part 541.301
(11) 29 CFR part 541.301
(12) 29 CFR part 541.302
(13) 29 CFR part 541.302
(14) 29 CFR part 541.303-541.304
(15) 29 CFR part 541.303
(16) 29 CFR part 541.304
(17) 29 CFR part 541.400
(18) 29 CFR part 541.500
(19) 29 CFR part 541.709
(20) Bureau of Labor Statistics, U.S. Department of Labor, Characteristics of Minimum Wage Jobs
(21) Data here are from Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment Survey, May 2010.
(22) Title 29 Code of Federal Regulations part 785
Exemptions from overtime rules go back to the 1940’s but changes drafted during the Bush administration and adopted in August 2004 revised Fair Labor Standards Act rules with new language referred to as white collar rules. The new regulations in Title 29 Code of Federal Regulations Part 541 define an employee’s salary and duties to determine exempt work that qualifies for an exemption from overtime pay.
Executive Employees
The general rules for executive employees that qualifies for an overtime pay exemption under white collar rules means an employee “compensated on a salary basis not less than $455 a week, exclusive of board, lodging or other facilities, whose primary duty is the management of the enterprise or a customarily recognized department or subdivision, who customarily and regularly directs the work of at least 2 or more full time employees, who has authority to hire and fire other employees, or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.” (2)
The definition of management and primary duty in the regulations that establishes exempt work incorporates the traditional managerial prerogatives like hiring, firing, paying, promoting and disciplining as primary duties if they are the principal, main, major or most important duties. (3) Nevertheless, executive employees can be exempt from overtime if they have other non-exempt duties because the regulations allow an employer to exempt an employee who does some exempt work and other activities directly and closely related to exempt work.
The phrase ‘directly and closely related’ means tasks that are related to exempt duties and that contributes to or facilitate performance of exempt work. “Thus, ‘directly and closely related’ work may include physical tasks and menial tasks that arise out of exempt duties, and the routine work without which the exempt employee's exempt work cannot be performed properly.” (4)
The 40-hour work week continues to be the standard full time workweek as it has been for more than eighty years, but exempting executive managers from overtime pay converts three managers working 40 hour weeks into two managers working 60 hour weeks. Using overtime rules to turn three jobs into two makes it easier for employers to economize on wage costs, especially in high wage occupations like executive managers. A lower wage cost with exempt overtime hours also assures fewer jobs in exempted occupations like management.
Occupational Employment Survey data reported by the Bureau of Labor Statistics shows managerial jobs in decline from 1999 to 2009. Managerial occupations were 6 percent of America’s jobs in 1999 with employment just over 8 million. By 2009 managerial occupations were down to 6.1 million jobs and 4.7 percent of the total of occupational employment. The job totals in managerial occupations are for establishment employment, meaning they are jobs at firms, non-profit associations or government.
Undoubtedly the decline in managerial jobs resulted from a combination of factors. It is common now for business to issue laptop computers, cell phones, and Blackberry’s to employees, which makes them available to work overtime in the evening, weekends, or the middle of the night. There are few reports business treats these additional hours of work as time and a half for overtime, but using new technology helps reduce jobs in management anyway.
Administrative Employees
Second on the list of overtime exemptions are the general rules for administrative employees. Any employee employed in a bona fide administrative capacity must be “compensated on a salary or fee basis at a rate of not less than $455 per week, exclusive of board, lodging or other facilities, whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers, and whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.” (5)
“In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered. The term ‘matters of significance’ refers to the level of importance or consequence of the work performed. The phrase ‘discretion and independent judgment’ must be applied in the light of all the facts involved in the particular employment situation in which the question arises.” (6)
The regulations include a list of example decisions that an employee might make to satisfy the requirement to exercise discretion and independent judgment and also summary wrap up. “The exercise of discretion and independent judgment implies that the employee has authority to make an independent choice, free from immediate direction or supervision. However, employees can exercise discretion and independent judgment even if their decisions or recommendations are reviewed at a higher level. Thus, the term ‘discretion and independent judgment’ does not require that the decisions made by an employee have a finality that goes with unlimited authority and a complete absence of review.” (7)
Section 541.203 of the regulations explains specific example occupations that generally meet the requirements for the administrative exemption: insurance claims adjusters, employees in the financial services industry, executive assistant or administrative assistant, human resources managers, and purchasing agents. A description of the usual duties and decisions for these occupations provides the nature of decision making that will allow exemption from overtime status. For example, “An executive assistant or administrative assistant to a business owner or senior executive of a large business generally meets the duties requirements for the administrative exemption if such employee, without specific instructions or prescribed procedures, has been delegated authority regarding matters of significance.” (8)
Educational establishments also come under rules for administrative employees. Employees qualify as exempt from overtime at educational establishments when “compensated for services on a salary or fee basis at a rate of not less than $455 per week exclusive of board, lodging or other facilities, or on a salary basis which is at least equal to the entrance salary for teachers in the educational establishment by which employed; and whose primary duty is performing administrative functions directly related to academic instruction or training in an educational establishment or department or subdivision thereof.” (9)
These educational employees are cited as generally meeting the requirements for overtime exemption: superintendent, assistants with educational duties, principals and vice principals, department heads, academic counselors and other employees with similar responsibilities.
Professional Employees
The general rules for professional employees apply to the learned professions, creative professions, teaching, law and medicine. “To qualify for the learned professional exemption, an employee's primary duty must be the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.” (10)
Having an academic degree is cited as prima facie evidence of meeting the requirement of learning customarily acquired by a prolonged course of specialized intellectual instruction. “However, the word ‘customarily’ means that the exemption is also available to employees in such professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction.” (11)
The regulations have a list of example professions and a selection of occupations that meet the requirements for the learned professions exemption. Exemptions apply to professions of law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, and various types of physical, chemical and biological sciences and pharmacy. Some example jobs signal how far employers can push the definition of learned professions. Jobs that generally meet the requirements for exemption are listed in the regulations: certified medical technologists, registered nurses, dental hygienists, physician assistants, chefs, athletic trainers, funeral directors and embalmers.
Chefs?
“To qualify for the creative professional exemption, an employee's primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical or physical work.” (12)
Creative professionals that generally meet the requirements for overtime exemption are listed in the regulations: actors, musicians, composers, conductors, and soloists; painters, cartoonists, essayists, novelists, short-story writers and screen-play writers and journalists.
There are some stipulations for journalists. “Journalists may satisfy the duties requirements for the creative professional exemption if their primary duty is work requiring invention, imagination, originality or talent, as opposed to work which depends primarily on intelligence, diligence and accuracy.” (13)
Teacher exemptions apply to “Any employee with a primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge and who is employed and engaged in this activity as a teacher in an educational establishment by which the employee is employed.” (14)
Teachers at public or private schools who are permanent, conditional, standard, provisional, temporary, emergency, or unlimited, or certified or not certified, or doing extracurricular activities such as coaching athletic teams or acting as moderators or advisors in such areas as drama, speech, debate or journalism have exempt status for overtime. (15)
The exemption for law and medicine applies to “Any employee who is the holder of a valid license or certificate permitting the practice of law or medicine or any of their branches and is actually engaged in the practice thereof; and any employee who is the holder of the requisite academic degree for the general practice of medicine and is engaged in an internship or resident program pursuant to the practice of the profession.” (16)
Three additional exemptions close out the white collar rules. A computer industry exemption applies to any computer employee compensated on a salary or fee basis not less than $455 a week, and to any computer employee compensated on an hourly basis at a rate not less than $27.63 an hour. (17) Exemptions apply to outside sales employees who make sales or obtain orders or contracts for services and customarily and regularly work away from the employer’s place or places of business. (18) An employee in the motion picture producing industry who is compensated at a base rate of at least $695 a week is also exempt. (19)
Hourly pay and the State of Exemptions
Exempt status eliminates the financial incentive to spread work and hire more people.
Salary and fee basis requirements defining the white collar rules in Title 29 Code of Federal Regulations part 541 does not permit exempt status for most hourly paid jobs. There are exceptions but as a practical matter hourly pay will be preferred for some jobs, especially where work fluctuates, or work has intermittent weeks with less than forty hour schedules.
The Current Population Survey reports the number and percentage of wage and salary workers paid at hourly rates. (20) In 2006, hourly rated employees were 76.5 million and 59.7 percent of wage and salary workers. By 2009 the numbers were down to 72.6 million and 58.3 percent. Having 58.3 percent paid hourly rates leaves 41.7 percent paid on a salary, fee or other basis, which comes to 51.9 million jobs.
Since few hourly paid employees are eligible for white collar exemptions the 51.9 million wage and salary workers not on hourly pay gives a number that meets the first criteria for exempt status: pay on a salary or fee basis. Pay by the hour or by salary continues to be the sole discretion of the employer and as my summary of overtime rules suggests, the new language in the regulations allows more discretion to adjust primary duties to meet the duty tests for exemption from overtime pay.
No agency has a count of salary or fee based employees with exempt status, but the 51.9 million total is big enough to include all employment reported for management, business operations, financial administration, and professional occupations reported by the Bureau of Labor Statistics.
A little over 12 million work in managerial occupations, business operations and other financial administration and the broad wording in the regulations give reason to believe they all qualify, or could easily be adjusted to qualify, for exempt status. Since the regulations specifically include 1.4 million executive secretaries and administrative assistant as exempt administrative employees, financial administration occupations like accountant, loan officer and financial analyst could be expected to meet at least one of the requirements for executive, administrative or professional exemptions as well.
The Bureau of Labor Statistics defines seven major groups of occupations as professional employment with 27.5 million jobs in 2009. (21) Education has the most jobs in professions with 8.5 million in teaching or the exempt duties related to teaching. Health care has another 7.2 million practitioners, which includes 15 thousand athletic trainers specifically cited as an exempted occupation.
Given that embalmers and chefs are not defined in the Standard Occupational classifications as professional jobs but specifically included as learned professions in the overtime rules, we can expect the generous definition of learned professions includes more than the 27.5 million jobs.
Millions of business and professional jobs that support middle class and career minded Americans have no legal right to overtime. Truth is these are just the white collar rules; there are many more overtime exemptions in other parts of Title 29 of the Code of Federal Regulations. Airline employees, seasonal and recreational employees and firefighters working in small public fire departments with less than 5 firefighters are three of many more exemptions from overtime pay.
The Fair Labor Standards Act gives Americans the legal right to the minimum wage and overtime pay beyond 40 hours a week. That comes up at the beginning of the Fair Labor Standards as amended and its regulations. By the end of the regulations millions and millions of Americans have no legal right to overtime pay.
The rules that regulate exempt status for overtime pay are in addition to Fair Labor Standards rules for compensable work. (22) Employees are legally entitled to be compensated for hours worked. Exempt status means exemption from overtime pay at time and half, not exemption from pay for time worked.
Compensable time has a definition and a regulation because disputes can arise over compensable time as well as overtime. If an employee is asked to do an errand on the way to work reasonable people might disagree whether errands on the way to work are compensable time. When disputes occur new and amended definitions are drafted, adopted and published as they have been over the years for many different work disputes under the Fair Labor Standards Act. However, employers are still expected to pay wages and salary for compensable time worked up to and over forty hours if that occurs. Employers cannot legally expect employees to work for free or to work free overtime hours.
Still we have to expect free overtime hours happen anyway. In education, for example, phrasing in teacher contracts makes no allowance for over time: “Teacher shall perform such duties as deemed necessary, shall attend all assigned meetings, shall be present at school during school hours, shall be present at school or other location outside school hours as directed in connection with school events or activities.”
Teacher work days fill up with student contact hours, emails and calls from parents and assigned meetings that leave little time for grading or preparation. Grading and preparation occur in the evenings and weekends. Millions of America’s public school teachers work beyond 40 hours a week, but I am unaware they receive additional compensation for overtime hours. Their overtime appears to be free work; a donation or part of their dedication.
In office based occupations pressure to get the job done and be part of the team make it easy to ignore some extra hours. Salaried employees are not typically encouraged to clock their overtime hours and those who do might be reluctant to request additional pay. Just like unpaid interns, salaried employees may choose not to complain about free overtime as bad for career advancement. Legal rules mean nothing when employees choose to go along or feel good at being dedicated, even without pay.
Economizing on wage costs is a universal practice. Even though laptop computers and overtime rules help save labor costs and reduce jobs there is a difference between them. The former is applied technology; the latter applied politics. When the Bush administration expanded overtime exemptions by writing new overtime rules, they made it easier to economize on wage cost by eliminating the financial incentive to restrict overtime and spread work to more people. Exemption from overtime pay for millions of jobs and free overtime for others helps to build America’s surplus of labor.
Notes
(1) Title 29 Code of Federal Regulations, part 541, available at http://ecfr.gpoaccess.gov
(2) 29 CFR part 541.100
(3) 29 CFR part 541.102
(4) 29 CFR part 541.703
(5) 29 CFR part 541.200
(6) 29 CFR part 541.202
(7) 29 CFR part 541.202
(8) 29 CFR part 541.203
(9) 29 CFR part 541.204
(10) 29 CFR part 541.301
(11) 29 CFR part 541.301
(12) 29 CFR part 541.302
(13) 29 CFR part 541.302
(14) 29 CFR part 541.303-541.304
(15) 29 CFR part 541.303
(16) 29 CFR part 541.304
(17) 29 CFR part 541.400
(18) 29 CFR part 541.500
(19) 29 CFR part 541.709
(20) Bureau of Labor Statistics, U.S. Department of Labor, Characteristics of Minimum Wage Jobs
(21) Data here are from Bureau of Labor Statistics, U.S. Department of Labor, Occupational Employment Survey, May 2010.
(22) Title 29 Code of Federal Regulations part 785
Saturday, December 18, 2010
Health Care and Choice
Shortly before the passage of new health care bill the Washington Post reported a stinging, sustained broadside against health insurance rate increases by President Obama.
A health insurance industry spokesman was quoted as saying “All health plans are in the same situation in trying to deal with the steadily increasing costs in the delivery system, which are not sustainable.” In other words the health insurance industry is only responding to cost increases beyond its control.
To the individuals and families who pay the premiums for insurance, their premiums cover costs that include the delivery system and the burden of supporting separate industry bureaucracies with a separate set of transactions. Outside of the health care industry in other sectors of the economy, bills tend to be a two party transaction between a customer and a vender, but seldom so in health care.
One illness or injury starts a billing shuffle through separate bureaucracies at hospitals, laboratories, clinics, imaging centers, Preferred Provider Organizations(PPOs), Independent Panel Association’s, but also private insurance companies, independent billing agencies and bureaucracies at Medicare, Medicaid, Social Security, workmen’s compensation or the Veterans Administration. Medicare, Medicaid and workmen’s compensation are federal programs with federal bureaucracy, but also administered by the states through 50 separate bureaucracies.
Private insurance companies accept premiums paid into a risk pool that generates a reserve fund to pay losses. Insurance companies analyze actuarial data on accidents, sickness, disability and other risks to construct probability tables that will determine the premiums that will generate reserves to pay future losses.
Otherwise though insurance companies do not provide health care; that is left to doctors, hospitals and medical venders. All those separate entities in medicine have an incentive to bill higher amounts; all the insurance companies have an incentive to pay lower amounts. The two sides maintain bureaucracies with staff to argue and negotiate over the bills from millions of transactions nationwide.
But we can ask our selves what does the insurance industry do that the health care industry cannot do for itself?
The actuarial data for health insurance policies comes from the medical industry so they could employ their own actuaries and do the necessary risk assessment without insurance companies. If the medical venders were organized together as regional or metropolitan entities setting their own premiums to provide their own health care, then millions of transactions would be eliminated, along with the perverse incentives to overcharge and underpay.
If the health care industry was organized with its separate components brought together into comprehensive health care providers, the insurance industry would be unnecessary. It would become a redundant component.
You may recognize the combination I mentioned above as an HMO, or a health maintenance organization, but that is the rub. Many Americans have the idea, aided by the health insurance industry, that health maintenance organizations restrict choice or might deny treatment, even though they have the facility and staff to provide it.
The private insurance industry exists because enough people believe private insurance gives them more choices and better choices. It is a very expensive choice, which is why President Obama is going easy on the health insurance industry when he attacks their increase in premiums. If he was going to get tough he would tell us how we can rid ourselves of the health insurance industry.
A health insurance industry spokesman was quoted as saying “All health plans are in the same situation in trying to deal with the steadily increasing costs in the delivery system, which are not sustainable.” In other words the health insurance industry is only responding to cost increases beyond its control.
To the individuals and families who pay the premiums for insurance, their premiums cover costs that include the delivery system and the burden of supporting separate industry bureaucracies with a separate set of transactions. Outside of the health care industry in other sectors of the economy, bills tend to be a two party transaction between a customer and a vender, but seldom so in health care.
One illness or injury starts a billing shuffle through separate bureaucracies at hospitals, laboratories, clinics, imaging centers, Preferred Provider Organizations(PPOs), Independent Panel Association’s, but also private insurance companies, independent billing agencies and bureaucracies at Medicare, Medicaid, Social Security, workmen’s compensation or the Veterans Administration. Medicare, Medicaid and workmen’s compensation are federal programs with federal bureaucracy, but also administered by the states through 50 separate bureaucracies.
Private insurance companies accept premiums paid into a risk pool that generates a reserve fund to pay losses. Insurance companies analyze actuarial data on accidents, sickness, disability and other risks to construct probability tables that will determine the premiums that will generate reserves to pay future losses.
Otherwise though insurance companies do not provide health care; that is left to doctors, hospitals and medical venders. All those separate entities in medicine have an incentive to bill higher amounts; all the insurance companies have an incentive to pay lower amounts. The two sides maintain bureaucracies with staff to argue and negotiate over the bills from millions of transactions nationwide.
But we can ask our selves what does the insurance industry do that the health care industry cannot do for itself?
The actuarial data for health insurance policies comes from the medical industry so they could employ their own actuaries and do the necessary risk assessment without insurance companies. If the medical venders were organized together as regional or metropolitan entities setting their own premiums to provide their own health care, then millions of transactions would be eliminated, along with the perverse incentives to overcharge and underpay.
If the health care industry was organized with its separate components brought together into comprehensive health care providers, the insurance industry would be unnecessary. It would become a redundant component.
You may recognize the combination I mentioned above as an HMO, or a health maintenance organization, but that is the rub. Many Americans have the idea, aided by the health insurance industry, that health maintenance organizations restrict choice or might deny treatment, even though they have the facility and staff to provide it.
The private insurance industry exists because enough people believe private insurance gives them more choices and better choices. It is a very expensive choice, which is why President Obama is going easy on the health insurance industry when he attacks their increase in premiums. If he was going to get tough he would tell us how we can rid ourselves of the health insurance industry.
Wednesday, November 10, 2010
Replacement Jobs for Manufacturing
America’s high unemployment rate will come down as total spending picks up and the economy recovers. Some of the unemployment is the result of the recession but some is the result of long term trends. Many know that manufacturing jobs have a downward trend with jobs off 5.4 million since 2000. When the economy comes back manufacturing jobs will not recover much if at all. Other jobs in service industries will replace the jobs lost in manufacturing, but the new jobs we are taking are different from the jobs we are losing.
The 20 year evolution of America’s eating habits is a good illustration of the differences in the new jobs. In the production-marketing chain of food, restaurants help to have more jobs and probably more than most people realize. Start on the farm and let’s count America’s farmers. Next add all the jobs in pesticide, fertilizer and agricultural chemicals, and all of the jobs in agricultural implement manufacturing. Add in the jobs at farm supply wholesalers, and farm raw material wholesalers.
Then move on to food manufacturing. Add all the manufacturing jobs milling, canning, freezing, bottling, refining, slaughtering, baking, brewing, distilling, fermenting and packaging. Add them to grocery store merchant wholesaler jobs and all the jobs at grocery stores, convenience stores, liquor stores and food stores. The total comes to 6.7 million jobs.
There are 9.3 million jobs in the restaurant business including fast food outlets, bars, and caterers. That was for 2009 a recession year, but there was a monthly average of 9.6 million jobs in 2007 and 2008. The total does not include food service workers at school cafeterias, hospitals, retail stores or ball parks, museums and other recreation facilities. Add them to the total and it comes to almost 11.4 million food service jobs.
Worse, jobs from the farm to the supermarket continue to decline due to productivity growth and imports in the global economy. Restaurants are the only part of the food chain Americans can count on for more jobs.
Gambling is another area like restaurants where Americans spend themselves into jobs as gaming dealers, gaming cage workers, slot key persons, and sports book writers and runners. Gambling employment reached a high of 426 thousand in the private gambling industry in 2007, including casino hotels. Gambling jobs dropped 8 percent in the recession, after nearly two decades of rapid growth.
Work in gambling and restaurants is not the high tech and high wage employment the politicians keep promising for the future, but they are becoming the replacement jobs for manufacturing. The 5.4 million jobs lost in manufacturing are up to 4 percent of America’s jobs, but the jobs people are finding pay less and drop faster in recessions than the manufacturing jobs they replace.
The politicians expect more spending to bring more jobs and restore full employment, but they are ignoring the trend to a higher percentage of jobs in restaurants, gambling, fitness centers, pet care, landscaping, temp work, security, prisons, business and personal services that take the place of manufacturing employment and support millions of jobs.
Politicians are good at counting jobs, but they act like the new jobs are as good as the old ones. The next time you hear the unemployment rate went down; remember the trends in replacement jobs and wonder if we are better off.
The 20 year evolution of America’s eating habits is a good illustration of the differences in the new jobs. In the production-marketing chain of food, restaurants help to have more jobs and probably more than most people realize. Start on the farm and let’s count America’s farmers. Next add all the jobs in pesticide, fertilizer and agricultural chemicals, and all of the jobs in agricultural implement manufacturing. Add in the jobs at farm supply wholesalers, and farm raw material wholesalers.
Then move on to food manufacturing. Add all the manufacturing jobs milling, canning, freezing, bottling, refining, slaughtering, baking, brewing, distilling, fermenting and packaging. Add them to grocery store merchant wholesaler jobs and all the jobs at grocery stores, convenience stores, liquor stores and food stores. The total comes to 6.7 million jobs.
There are 9.3 million jobs in the restaurant business including fast food outlets, bars, and caterers. That was for 2009 a recession year, but there was a monthly average of 9.6 million jobs in 2007 and 2008. The total does not include food service workers at school cafeterias, hospitals, retail stores or ball parks, museums and other recreation facilities. Add them to the total and it comes to almost 11.4 million food service jobs.
Worse, jobs from the farm to the supermarket continue to decline due to productivity growth and imports in the global economy. Restaurants are the only part of the food chain Americans can count on for more jobs.
Gambling is another area like restaurants where Americans spend themselves into jobs as gaming dealers, gaming cage workers, slot key persons, and sports book writers and runners. Gambling employment reached a high of 426 thousand in the private gambling industry in 2007, including casino hotels. Gambling jobs dropped 8 percent in the recession, after nearly two decades of rapid growth.
Work in gambling and restaurants is not the high tech and high wage employment the politicians keep promising for the future, but they are becoming the replacement jobs for manufacturing. The 5.4 million jobs lost in manufacturing are up to 4 percent of America’s jobs, but the jobs people are finding pay less and drop faster in recessions than the manufacturing jobs they replace.
The politicians expect more spending to bring more jobs and restore full employment, but they are ignoring the trend to a higher percentage of jobs in restaurants, gambling, fitness centers, pet care, landscaping, temp work, security, prisons, business and personal services that take the place of manufacturing employment and support millions of jobs.
Politicians are good at counting jobs, but they act like the new jobs are as good as the old ones. The next time you hear the unemployment rate went down; remember the trends in replacement jobs and wonder if we are better off.
Saturday, October 9, 2010
Banks and Favors
The new credit card rules will make it difficult for banks and credit card processors to be tricksters, which is my word for their erratic and arbitrary fees and penalties. Despite the hostile opinions toward banks reported in the popular media they continue to have their way in financial matters.
Take the student loan program where Congress decides that banks will get special favors to make student loans in the student loan program. Starting the early 1990s, college financial offices have been able to choose between a direct government loan and private lending by banks with a government guarantee against default. Summary reports indicate that private loans are now more than half of student loans. In 18 years private lenders jumped from nothing to more than half of student loans.
For the government to make loans the original principal for the loans has to come from a Department of Education appropriation. However, when the government is the lender they receive the interest and principal payments which can then be recycled as new loans.
With principal and interest returned to the government the student loan program can be a self sustaining program without the need of a yearly appropriation. The interest payments received as students pay their loans can be added to the principal to make more loans, reduce interest rates in the future, or fund grants for especially needy students.
With private sector loans the Federal Government accepts the financial risk of default to private lenders, but the interest payment and principal goes to the bank. That means more than half of student loans can generate losses but no revenue for more student loans.
The Obama administration wants to make student loans a self perpetuating program and eliminate student loan guarantees to private banks. A House bill that would make the switch to direct government lending passed in early 2010 over strong industry and Republican opposition. Industry spokesmen say the bill is a government takeover that would squelch competition, diminish services to students and cost jobs.
The use of the word takeover is ironic since the student loan program goes back just over 40 years, but the subsidy for banks was introduced and passed in 1992 with the support of the President Clinton, a democrat. The Obama proposal suggests a take back, but hardly a take over.
Competition in student loans suggests bank offers of discounted interest rates to students to get their business from other banks. Instead, Congress sets the interest rates for both subsidized and unsubsidized student loans with rates reset June 30th of each year. The published interest rate implies a maximum rate, but it serves as a minimum rate.
I say minimum rate because I do not hear of banks offering a rate lower than the published rate. Having one rate and treating it as the rate for student loans eliminates competition that is a normal part of banking. There should be evidence of competition if there is competition.
Judging from the opposition, the subsidy banks want to keep must be larger than I would have guessed. Nearly two years after a banking collapse America has some new rules for credit card users, but nothing else. The media keeps reporting Americans are angry with banks and bankers, but if that is true there is little reform to show for it.
Take the student loan program where Congress decides that banks will get special favors to make student loans in the student loan program. Starting the early 1990s, college financial offices have been able to choose between a direct government loan and private lending by banks with a government guarantee against default. Summary reports indicate that private loans are now more than half of student loans. In 18 years private lenders jumped from nothing to more than half of student loans.
For the government to make loans the original principal for the loans has to come from a Department of Education appropriation. However, when the government is the lender they receive the interest and principal payments which can then be recycled as new loans.
With principal and interest returned to the government the student loan program can be a self sustaining program without the need of a yearly appropriation. The interest payments received as students pay their loans can be added to the principal to make more loans, reduce interest rates in the future, or fund grants for especially needy students.
With private sector loans the Federal Government accepts the financial risk of default to private lenders, but the interest payment and principal goes to the bank. That means more than half of student loans can generate losses but no revenue for more student loans.
The Obama administration wants to make student loans a self perpetuating program and eliminate student loan guarantees to private banks. A House bill that would make the switch to direct government lending passed in early 2010 over strong industry and Republican opposition. Industry spokesmen say the bill is a government takeover that would squelch competition, diminish services to students and cost jobs.
The use of the word takeover is ironic since the student loan program goes back just over 40 years, but the subsidy for banks was introduced and passed in 1992 with the support of the President Clinton, a democrat. The Obama proposal suggests a take back, but hardly a take over.
Competition in student loans suggests bank offers of discounted interest rates to students to get their business from other banks. Instead, Congress sets the interest rates for both subsidized and unsubsidized student loans with rates reset June 30th of each year. The published interest rate implies a maximum rate, but it serves as a minimum rate.
I say minimum rate because I do not hear of banks offering a rate lower than the published rate. Having one rate and treating it as the rate for student loans eliminates competition that is a normal part of banking. There should be evidence of competition if there is competition.
Judging from the opposition, the subsidy banks want to keep must be larger than I would have guessed. Nearly two years after a banking collapse America has some new rules for credit card users, but nothing else. The media keeps reporting Americans are angry with banks and bankers, but if that is true there is little reform to show for it.
Thursday, September 16, 2010
Unemployment
The President and the Congress continue to worry about unemployment and with good reason. The recent unemployment rate had to drop to reach 9.6 percent. Seasonally adjusted unemployment rings in at 14.9 million. However, if we look at labor force and employment trends of the Bureau of Labor Statistics Current Population Survey back to 2000, the employment situation looks even worse.
The civilian labor force drifts upward but at a lower rate than population growth. The adult population keeps growing at annual rates around 1.2 percent while the labor force grows at annual rates around .9 percent. The difference is small for a year or two but gets significant over time.
Those employed and the unemployed who are looking for work are classified as in the labor force. Otherwise people are classified as not in the labor force. The employed are up since 2000, but at much lower growth rate than the labor force; and at a much lower growth rate than those not in the labor force; and at a much lower growth rate than the unemployed.
The unemployed jumped from an average of 7 million in 2007 to 8.9 million in 2008 to 14.3 million in 2009, but those years were recession years. Part of the spike in unemployment results from the recession, but the glacial pace of growth in the employed back to 2000 suggests that some of the unemployed come from longer term decline unrelated to the business cycle.
In the years from 2000 through 2009 the annual growth rate for the employed averaged .24 percent; from 2000 to 2008 it averaged .75 percent; from 2000 to 2007 it averaged .93 percent. The year 2007 had the highest average for employment of any year of published data, but still with slow growth going back to 2000.
Other questionable trends from 2000 to 2009 include the rapid growth of the part-time employed. Part-time employment was up over 4 million from 2000 to 2009, while the full time employed dropped about a million.
Those employed from the ages of 16 to 54 dropped from 2000 to 2009. Those employed for ages over age 55 were up 8.9 million. Those leaving high school and college can’t find jobs partly because there are not enough of them but also because more of their parents continue to work and maybe because they cannot afford to retire or they need health care from a job.
The recession will end and employment will pick up, but the changes of the last decade point to a trend of a rising share of America’s labor force remaining unemployed or out of the labor force.
When America spends its way out of recessions Americans assume there will be jobs for those who need them. If employment lags behind we hear suggestions for a business tax break or two like we have now, or the great cry sounds to “Get some training” but that is about it for policies on jobs.
The 40 hour work week, eight hours a day with time and a half for over time continues to be the federally mandated work week as it has been for nearly 90 years. If someone suggests a 35 hour work week it might spread the work around to some of those now unemployed. Business hates the idea and politicians won’t touch it, but if the ominous trends in employment continue someone will need to have a new idea. Right now that sounds like a revolution.
The civilian labor force drifts upward but at a lower rate than population growth. The adult population keeps growing at annual rates around 1.2 percent while the labor force grows at annual rates around .9 percent. The difference is small for a year or two but gets significant over time.
Those employed and the unemployed who are looking for work are classified as in the labor force. Otherwise people are classified as not in the labor force. The employed are up since 2000, but at much lower growth rate than the labor force; and at a much lower growth rate than those not in the labor force; and at a much lower growth rate than the unemployed.
The unemployed jumped from an average of 7 million in 2007 to 8.9 million in 2008 to 14.3 million in 2009, but those years were recession years. Part of the spike in unemployment results from the recession, but the glacial pace of growth in the employed back to 2000 suggests that some of the unemployed come from longer term decline unrelated to the business cycle.
In the years from 2000 through 2009 the annual growth rate for the employed averaged .24 percent; from 2000 to 2008 it averaged .75 percent; from 2000 to 2007 it averaged .93 percent. The year 2007 had the highest average for employment of any year of published data, but still with slow growth going back to 2000.
Other questionable trends from 2000 to 2009 include the rapid growth of the part-time employed. Part-time employment was up over 4 million from 2000 to 2009, while the full time employed dropped about a million.
Those employed from the ages of 16 to 54 dropped from 2000 to 2009. Those employed for ages over age 55 were up 8.9 million. Those leaving high school and college can’t find jobs partly because there are not enough of them but also because more of their parents continue to work and maybe because they cannot afford to retire or they need health care from a job.
The recession will end and employment will pick up, but the changes of the last decade point to a trend of a rising share of America’s labor force remaining unemployed or out of the labor force.
When America spends its way out of recessions Americans assume there will be jobs for those who need them. If employment lags behind we hear suggestions for a business tax break or two like we have now, or the great cry sounds to “Get some training” but that is about it for policies on jobs.
The 40 hour work week, eight hours a day with time and a half for over time continues to be the federally mandated work week as it has been for nearly 90 years. If someone suggests a 35 hour work week it might spread the work around to some of those now unemployed. Business hates the idea and politicians won’t touch it, but if the ominous trends in employment continue someone will need to have a new idea. Right now that sounds like a revolution.
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