Over the past several months, conservative lawmakers and activists have carried out a concerted assault against a wide range of efforts and ideas that raise awareness about the history of racial injustice in the United States, its embeddedness in our society, and the resulting inequities observed today. Attackers have grouped and conflated all these concepts and ideas into what they are dubbing “critical race theory.” But those carrying out this campaign are not interested in what the actual academic critical race theory (CRT) says.

In fact, what is actually under attack is the reinvigorated movement across the United States to engage in dialogue about our country’s continuing legacy of racial hierarchy and oppression—and the policy choices that could finally begin to redress that legacy. And while the campaign against critical race theory is recent, it is merely the latest tool many states have wielded in order to disempower and further disenfranchise Black people as well as cut off any broad-based support for structural reform.

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Last month, we at the Economic Policy Institute submitted a public comment on the U.S. Department of the Treasury’s guidance regarding the Coronavirus State and Local Fiscal Recovery Funds. These funds are part of the American Rescue Plan (ARP) Act’s resources for state and local communities to respond to the public health and economic crisis. The funds—nearly $350 billion—may be used to support public health responses, mitigate negative economic impacts, replace public-sector revenue lost due to the pandemic, provide premium pay for “essential” workers, and make necessary investments in water, sewer, and broadband infrastructure.

The current public health and economic crisis is happening in the wake of more than a decade of underinvestment by state and local governments. During the Great Recession, cuts to jobs and state and local spending delayed a full recovery to pre-recession unemployment rates by more than four years. Public-sector job losses, especially in state and local education, were among the highest during the pandemic. Cuts to public services and staffing have been especially harmful for women and Black workers, who are disproportionately employed in the state and local public sectors.

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This year, Black Women’s Equal Pay Day arrives 10 days earlier than in 2020 (August 13). If this seems inconsistent with current realities, it is. That’s because the August 3, 2021, date is based on the comparison of median annual earnings for full-time, year-round workers reported in the 2020 Annual Social and Economic Supplement of the Current Population Survey (CPS). Since the reference year in that survey is the previous year—2019—the earlier date is more a statement about pay equity during the pre-COVID period of historically low unemployment than the impact of the pandemic. 

Based on hourly wages available for 2020, the pandemic’s effect on pay inequality in 2020 is challenging to interpret since job losses were concentrated among low-wage occupations, which has the effect of skewing the distribution toward a higher average that is less representative of the workforce as a whole. These lower-paying jobs were concentrated in leisure and hospitality and education and health services—industries that employ a disproportionate share of women.

In fact, the pandemic’s effect on pay equity during 2020 is less about a relative difference in dollars per hour and more a matter of a disproportionate share of women—and Black women in particular—becoming unemployed and thus wageless. Nearly one in five Black women (18.3%) lost their jobs between February 2020 and April 2020, compared with 13.2% of white men (see figure below). As of June 2021, Black women’s employment was still 5.1 percentage points below February 2020 levels, while white men were down 3.7 percentage points.

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The COVID-19 pandemic has exacerbated the widespread dangers and injustices that workers face every day. For too long, workers have been forced to work in unsafe conditions, suffered from excessive wage theft, and been subjected to discrimination and harassment. While laws aimed at deterring these workplace abuses already exist, enforcement efforts have been woefully insufficient because the agencies tasked with protecting workers are chronically under-resourced. As Congress and the Biden administration work on budget spending and COVID-19 recovery legislation, there is an urgent opportunity to correct these inadequacies in our labor law system and boost funding for enforcement agencies.

The Department of Labor (DOL) and the National Labor Relations Board (NLRB) enforce major worker protection laws, including the Fair Labor Standards Act, the Occupational Safety and Health Act, and the National Labor Relations Act. These statutes guarantee U.S. workers a minimum wage, a safe and healthy workplace, and the right to collective bargaining, respectively, but weak enforcement has led to pervasive and repeated violations of these laws. Despite inflation, a growing workforce, and increasingly complex workplaces, funding for agencies like the Wage and Hour Division (WHD), Occupational Safety and Health Administration (OSHA), and the NLRB has largely remained stagnant over the last decade, as shown in Figure A.

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As COVID-19 cases and hospitalizations begin to rise again across the country, some states are more vulnerable than others. Neighboring states Missouri and Arkansas are in the middle of a serious COVID-19 spike along with Louisiana, Florida, and Mississippi. The number of cases per capita in the two states—about 52 new cases daily per 100,000 residents in Arkansas and 40 per 100,000 residents in Missouri—is more than twice the national average of 19. The seven-day rolling average of deaths in the two states is rising rapidly and is three times the national average. Mercy Hospital in Springfield, Missouri, ran out of ventilators over the Fourth of July weekend. Hospitals across the state of Arkansas are already reaching maximum capacity—even as a record number of COVID-19 hospitalizations are anticipated in the coming weeks.

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Saturday marks 12 years since the last federal minimum wage increase on July 24, 2009, the longest period in U.S. history without an increase. In the meantime, rising costs of living have diminished the purchasing power of a minimum wage paycheck. A worker paid the federal minimum of $7.25 today effectively earns 21% less than what their counterpart earned 12 years ago, after adjusting for inflation.

Chart of the Week

After the longest period in history without an increase, the federal minimum wage in 2021 was worth 21% less than 12 years ago—and 34% less than in 1968. : Real value of the minimum wage (adjusted for inflation)

Notes: All values are in June 2021 dollars, adjusted using the CPI-U-RS

Source: Fair Labor Standards Act and amendments

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As a result of Congressional inaction, over two dozen states and several cities have raised their minimum wage, including 11 states and the District of Columbia that have adopted a $15 minimum wage. These higher wage standards have increased the earnings of low-wage workers, with women in minimum wage-raising states seeing the largest pay increases. In the rest of the country, however, states have punished low-wage workers by refusing to raise pay standards. As many as 26 states have gone so far as to pass laws prohibiting local governments from raising their minimum wage.

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Near the start of the pandemic in 2020, numerous work and travel restrictions were implemented in the United States to slow the spread of COVID-19. But for most workers, including farmworkers, options like remote work were either not permitted or not feasible. The more than two million farmworkers who grow, harvest, and pack the crops that end up on grocery store shelves were deemed “essential” and expected to work to keep food supply chains up and running.

Were those farmworkers ultimately rewarded and valued for their massive contributions to society? It appears not—the latest wage data show that farmworkers continued to earn far less than even some of the lowest-paid workers in the U.S. labor force, which suggests their important work continues to be undervalued. This post reviews the wages that farmworkers earned in 2020 relative to other comparable sets of workers.

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What new world of work can be built from the crisis COVID-19 created for workers and working-class communities? Some 2021 state and local policy victories are providing early answers. Across the country, workers are organizing to win policy changes aimed at strengthening labor standards, raising wages, reversing long-standing race and gender-based exclusions from labor rights, and building power to ensure these gains are not short-lived. The following examples of campaign and policy victories from recent legislative sessions are just the beginning of what is necessary to create a world where all work truly has dignity.

Building worker power and protecting the right to organize at the state level

Long before COVID-19, the right to unionize varied widely depending on a worker’s occupation, race, gender, or ZIP code. Union workers had more job security during the pandemic, and more workers are expressing interest in gaining a voice on the job through a union, yet legal exclusions and steep barriers to organizing mean that far too few workers have access to the union protections they want and need. Because federal labor law still excludes farmworkers, domestic workers, and public-sector workers from coverage, states are left to determine whether millions of disproportionately Black, Brown, immigrant, and women workers in front-line occupations will have legal rights to pursue a union contract.

This year, educators, care workers, farmworkers, and public servants acutely affected by the pandemic worked to accelerate the passage of proposals to expand labor rights and defend existing rights from ongoing state legislative attacks. Colorado enacted a groundbreaking, comprehensive Farmworker Bill of Rights extending full rights to organize unions and collectively bargain to 40,000 farmworkers across the state in a significant effort to advance worker power at the state level. The legislation also includes new workplace safety protections, rights to minimum wage and overtime pay, anti-retaliation protections, rest and meal breaks, and other minimum standards that have long covered workers in other sectors.

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The Biden administration has made large investments in care work—both child care and elder care—key planks in its American Jobs Plan (AJP) and American Families Plan (AFP). These investments would be transformative, and a greater public role in providing this care work can make the U.S. economy fairer and more efficient. The administration has also recognized the need to pay workers in these sectors higher wages—which are sorely needed—but setting a fair wage standard for care workers presents unique challenges.

For a variety of systemic reasons, including racism, misogyny, and xenophobia, there has never been a set of institutions that has managed to carve out decent wages and working conditions in care work. For example, the average hourly wages for home health care and child care workers are $13.81 and $13.51, respectively, which is roughly half the average hourly wage for the workforce as a whole. So, unlike in sectors like construction, a “prevailing wage” standard would just cement the industrywide insufficient wages currently experienced in care work.

But just because it’s challenging doesn’t mean it’s impossible to establish strong wage standards in this sector. All wages in the U.S. economy are politically and socially determined, but given that care work is heavily publicly financed, care wages are especially determined by political decisions (via commission or omission). As a result, there is a strong administrative responsibility and opportunity to set equitable wages in this sector. This research memo outlines a number of ways to improve the wage standard for care workers and is a preview to a forthcoming, more comprehensive research report.

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As Congress debates the appropriate amount of investments needed to boost the economic recovery from the COVID-19-induced recession, we can learn a lot by carefully looking at the decisions made in the aftermath of the Great Recession of 2007–2009. One of the clearest lessons of that period is that spending by the federal government largely dictated the amount of economic suffering for those hit the hardest. When that spending falls short of what is needed, some groups never fully recover.

School finance deserves a place in this discussion. Federal support to education plays a critical role in filling recession-induced fiscal gaps that open at the state and local levels, and maintaining education funding during economic downturns contributes to a faster and fuller economic recovery. As we discuss in this post, if federal investments in public education had been larger, sustained as needed, and allocated in a way that channeled further assistance to districts serving larger shares of low-income students, they would have better assisted our students, schools, and communities in the aftermath of the Great Recession.

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EPI economists offer their initial insights on the June jobs report below. They see strong growth in employment, especially in leisure and hospitality—the numbers do not signal a big labor shortage. The economy appears to be on its way to a full recovery by the end of 2022.

From economist and director of EPI’s Program on Race, Ethnicity, and the Economy (@ValerieRWilson)

Read the full Twitter thread here. 

The 850k jobs added in June reflects lifting of more COVID-19 restrictions in time for summer, no indication of labor shortage, and on pace to reach pre-COVID unemployment rate by end of 2022. 1/n

— Valerie R Wilson (@ValerieRWilson) July 2, 2021

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Today, the U.S. Supreme Court published its decision in Cedar Point Nursery v. Hassid, a case involving an employer challenge to a California regulation that allows union representatives to visit the property of agricultural employers—in narrowly tailored and time-limited circumstances—to carry out efforts to organize the hundreds of thousands of California farmworkers who work in hazardous and low-paying jobs and who suffer disproportionately high rates of wage and hour violations.

In a disappointing 6–3 decision, the Court’s conservative justices ruled that the California regulation constitutes a per se physical taking of the employer’s property, which in practical terms means union organizers will no longer have the right to access the farms where farmworkers are employed.

The vast majority of farmworkers across the country are not protected by the National Labor Relations Act—the federal law that enshrines the right of workers to join and form unions. In an attempt to fill that gap for farmworkers in California, over four decades ago the state’s legislature passed the Agricultural Labor Relations Act (ALRA), which established collective bargaining rights for farmworkers, and then-governor Jerry Brown signed it into law in 1975. The ALRA’s access regulation enables organizers to visit the properties where farmworkers are employed, allowing the law to be implemented and have real meaning for workers.

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Several very good primers were recently written on how to think about inflation in the coming months. But as the reaction to monthly price inflation numbers that ever tick above a 2% annualized rate continues to be disproportionately angst-ridden, another one may be useful.

Assessing this week’s data and the ongoing debate about inflation and economic “overheating” requires an understanding of at least four key points:

1. The source of inflationary pressure is crucial to assessing how policy should respond. Inflation coming from the labor market because workers are empowered enough to secure wage increases that run far ahead of the economy’s long-run capacity to deliver them (that is, productivity growth) is the only source of inflation that should ever spur a contractionary macroeconomic policy response (either smaller budget deficits or higher interest rates). This type of inflation is what worries about “overheating” center on.
2. Other sources of inflationary pressure are far more likely to be transitory and hence should not spur a contractionary policy response.
   • Inflation in the prices of commodities is often volatile and driven largely by global markets. Such price increases are likely to hinge on idiosyncratic drivers like weather changes, oil field discoveries, or rapid growth in large economies outside the United States. This kind of inflation should not spur a contractionary response. These price increases are not driven by economic “overheating”; engineering an economic “cooling” by reducing budget deficits or raising interest rates will not stop them—but it will cause a lot of collateral damage in slowing growth within the United States.
   • Inflation driven by very large relative price changes is also highly likely to be transitory and should not be met with a contractionary macroeconomic policy response.
3. Arguing that inflation stemming from many sources should not be met with a contractionary policy response does not mean that this type of inflation is good, or even just benign. Such inflation often does reduce typical workers’ living standards. But to be effective, anti-inflation policy must address such types of inflation with tailored measures, not across-the-board macroeconomic austerity.
4. Spillovers of inflation that begin outside the labor market but spark inflation driven by wage-price spirals are highly unlikely given the extremely weak bargaining position and leverage of typical U.S. workers in recent decades. This degraded bargaining position also suggests that unemployment rates might reach far lower levels than they did in past decades before spurring wage growth sufficient to drive excess price inflation.

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A number of high-profile Republicans in recent years have tried to claim that they have become the “party of the working class.” Nothing exposes this as false as clearly as the GOP’s unrelenting attacks on the Affordable Care Act (ACA)—legislation that was imperfect but still an enormously important advance in the U.S. welfare state.

The latest attack is another court case that made its way to the Supreme Court (California v. Texas)—which could have a ruling as soon as Thursday. Legal merits of the case aside (there were essentially none), the economic fallout of the case if it is decided in the plaintiffs’ favor would be profound, as the requested remedy is the abolition of the entire ACA.

The ACA was in some ways hugely complicated, but can be boiled down to five major undertakings:

• Strengthening employer-provided health insurance with mandates like no lifetime caps on benefits paid and an allowance for adults up to the age of 26 to be covered on parents’ plans;
• Providing needed regulation for the “nongroup” health insurance market (the market for people who can’t get insurance through their employer or through existing government programs);
• Providing subsidies to make purchasing nongroup plans more affordable for many;
• Paying for states to expand their Medicaid programs significantly; and
• Raising taxes on high incomes to pay for its spending provisions.

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Last month saw disappointing growth in payroll employment, with just 266,000 jobs added in April, when many expected a number well over 500,000 (and maybe even over a million). Ahead of tomorrow’s release of the jobs report for May, we want to put that headline number in perspective, particularly in how this relates to policy choices.

The Biden administration has clearly decided to go big on the amount of fiscal support they are going to provide the economy over the next year—passing the $1.8 trillion American Rescue Plan (ARP) on the heels of a $900 billion package passed in December. They are determined to not repeat the policy mistake that led directly to a lost decade of economic potential after the Great Recession in 2008-09, when the government provided too little fiscal support. It took 10 full years after the Great Recession just to regain the pre-2008 unemployment rate low point, and even when this unemployment rate low was regained in 2017, it was partly because labor force participation still remained depressed. All of this raises a couple of questions: Just how much faster can recovery be this time, and would another month as disappointing as April make this fast recovery impossible to attain?

We think one reasonable metric of success would be a full return to pre-COVID labor market conditions by the end of 2022. These pre-COVID conditions included an unemployment rate of 3.5% and a prime-age labor force participation rate of 82.9%. Restoring pre-COVID labor market health by the end of 2022 would require creating 504,000 jobs each month between May 2021 and December 2022. This average monthly jobs growth target starts from today’s 9.0 million “jobs gap” relative to February 2020, and includes the need to absorb growth in the working-age population over the next 20 months (this growth in the working-age population requires roughly 55,000 jobs per month on its own). Hitting this end-of-2022 goal would see the U.S. economy reach 4.0% unemployment by mid-2022.

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One of the most widely discussed data points from last month’s jobs report was the rapid acceleration in wage growth for the leisure and hospitality (L&H) sector, particularly among production and nonsupervisory workers. This sector-specific wage acceleration (not seen in other sectors), combined with disappointing economywide job growth for the month, launched a huge debate about potential labor shortages. We wrote previously about why concerns over labor shortages were largely misplaced. Among other things, the rapid wage growth in L&H was accompanied by very fast sectoral job growth, so there was no evidence that any labor shortage was impinging on overall growth.

Further, this acceleration of wages in L&H might provide less evidence of even a sector-specific labor shortage than previously thought. When economists or other analysts express concerns about labor shortages, they generally mean a shortfall of potential employees that forces employers to gouge deeper into their profit margins to raise wages to attract workers. At some point this gouging will become unsustainable and so hiring will lag.

However, there is compelling evidence that the wage acceleration in L&H in recent months is not driven by employers raising base pay to attract workers, but instead by just an increase in tips stemming from restaurants filling back closer to pre-COVID capacity. Put another way, since December 2020, the rise in tip income, not an increase in base wages, can likely entirely explain the acceleration of wages for production and nonsupervisory workers in restaurants and bars. If this is the case, the wage acceleration will stop when restaurants get back to normal capacity. The evidence that the L&H wage acceleration is largely just a resurgence in tip income is as follows:

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The COVID-19 pandemic has highlighted and exacerbated underlying disparities in the health and economic wellbeing of people across the country. Segregated cities and neighborhoods have devastated many—disproportionately Black and Hispanic communities—under the weight of the pandemic and the ensuing recession, while others have been less impacted. Some families have seen multiple family members and friends become seriously ill or lose their jobs, while others have come away relatively unscathed (and in some cases, prospered). Millions of workers have risked their health and the health of their families by going to work in-person, while others have been able to work from home and don’t regularly encounter those facing the pandemic’s wrath.

The bottom line: disparities persist between who can safely stay home and get a paycheck and who cannot.

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A person working eight hours per day with a one-hour round-trip commute—who sleeps for eight hours a night—spends over half of their waking life at, going to, or coming from their workplace. Aside from children, full-time students, and those who have lived long enough to collect Social Security benefits, Americans live their lives as workers. With the exception of the roughly 10% of U.S. workers who list themselves as self-employed1 and those who make their income from capital, that work takes place as employees.

Despite how much of American adult life is governed under employment agreements, most Americans also have little say over the terms of those agreements after they have been accepted. Most American workers are employed “at will,” meaning they can be fired by their employer at the employer’s discretion as long as the given reason does not violate federal law. If a worker is made to feel uncomfortable at work by a customer, or if the pace of work becomes stressful, or if conditions of their life change such that they need special accommodation, then in most cases solutions are up to the kindness of the employer to provide—there is nothing that requires them to do so.

Entering the workplace for most American adults can in that case represent an agreement to forfeit a degree of control over their lives in exchange for the wages necessary to live. If people do not have a voice in determining the pace and content of their time in the workplace, then in a real sense they lack control over the largest portion of their lives.

The core idea behind “civil rights” is that people should have the freedom to exist in political and social equality with one another. But under employment, an individual worker has a starkly unequal relationship with their employer. For workers to exist in the workplace without forfeiting their civil rights, they must be able to bargain on equal footing with their employers—that is, they need to have the ability to organize into unions among themselves. In this sense the movement for securing labor rights is not separate from the movement for securing civil rights—it is a fulfillment of those goals.

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The Biden administration released the president’s budget today—a proposal for tax and spending policies they would like to see become law over the next year. It includes substantial investments in traditional infrastructure, child care and early education, higher education, and elder care. It also calls for recurring cash payments to families with children. It includes money for more generous subsidies through the Affordable Care Act (ACA), substantial increases in Medicare and Medicaid coverage, and calls on Congress to undertake permanent reforms to modernize the nation’s fragmented and inadequate unemployment insurance system.

The proposal also calls on Congress to develop comprehensive legislation to strengthen and extend protections against the abusive practice of misclassifying employees as independent contractors and uses federal housing grants to incentivize inclusionary zoning practices to alleviate the nation’s housing shortage.

On the tax side, it raises taxes on realized capital gains and on corporate income, and it closes loopholes and tightens enforcement in an effort to raise revenue through greater tax compliance.

About 18 months ago, we at EPI released a blueprint for guiding fiscal policymakers. In this blueprint, we identified the main targets of fiscal policy as: ensuring high-pressure labor markets and low unemployment, reducing inequality, and then (and only then) reducing the economic obligations incurred by the public debt.

The Biden administration’s budget (particularly given the passage of the American Rescue Plan earlier this year) scores extremely high on these marks. Specifically:

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Data from large firms filing information on CEO compensation through the end of April show corporations and a strong stock market shielded CEOs from the financial impact of the pandemic.

An examination of the early filings of 281 large firms shows:

• The offer by CEOs to forgo salary increases during the pandemic was largely symbolic. Salaries were stable, but many CEOs pocketed a windfall by cashing in stock options and obtaining vested stock awards, compounding income inequalities laid bare during the past year.
• CEO compensation, including realized stock options and vested stock awards, rose 15.9% from 2019 to 2020 among early reporting firms. Growth in CEO compensation was slightly faster than last year’s strong growth—14.0% between 2018 and 2019—while the annual compensation of the average worker increased just 1.8% in 2020.
• Strong CEO compensation growth and modest growth in worker annual compensation yielded a remarkable growth in the CEO-to-worker compensation ratio, which jumped from 276.2 in 2019 to 307.3 in 2020 among early-reporting firms. In firms that retained the same CEO, the CEO-to-worker compensation ratio rose to 341.6 in 2020, up from 278.9 in 2019.

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Republican governors in 24 states—including Florida and Nebraska just this week—have indicated they will pull out from the federal unemployment insurance (UI) programs created at the start of the pandemic. Some states are ending participation in all federal pandemic UI programs, others only some of the federal supports. These actions are dangerously shortsighted.

UI provides a lifeline to workers unable to find suitable jobs, giving them time to find work that matches their skills and pays a decent wage. Moreover, the money provided through these entirely federally funded programs bolsters consumer demand and business activity in local economies, helping to speed the recovery. In many states, these federal UI programs are providing the bulk of all unemployment benefits to jobless workers. By cutting off these programs—which currently provide an extra $300 in weekly benefits, allow workers who have exhausted traditional UI to continue receiving benefits, and expand eligibility to workers typically not included in existing UI programs—governors are weakening their states’ potential economic growth.

Further, the most recent national jobs and unemployment data show that the country has not yet recovered from the COVID-19 recession. In April, the country was still down 8.2 million jobs from before the pandemic, and down between 9 and 11 million jobs since then if you factor in the jobs the economy should have added to keep up with growth in the working-age population over the past year.

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