By Stephen Herzenberg, Third and State

Weakening unions could be trouble for the middle class.

There’s a good deal of crowing in conservative circles this week about the new 2012 numbers on union membership. Union membership nationally fell by about 400,000, to 14.4 million. Union membership in Pennsylvania declined 45,000, including 59,000 in the private sector.

Of course, for anyone who cares about, say, the American Dream, democracy, and rising living standards, the newest numbers are bad news. A simple chart put together by the Center for American Progress shows that unions are vital to the middle class. As unions have weakened, so has the share of income going to middle-income workers — and the gap between the 1% and the 99% has mushroomed.

As this blog has noted, inequality undermines not only economic opportunity, but it also slows economic growth and makes our democracy less responsive to typical families and the public good (and too responsive to rich special interests).

One silver lining in the new numbers is the great variation that exists across states. Unions are growing in some places. Another silver lining is that the weaker unions get, the more evidence we get that this is a bad thing. Evidence such as the fact that the top 1% of the population took home 93% of the increase in income in the United States in the last year for which we have data. And evidence such as the skills shortage in U.S. manufacturing: surprise, surprise, if you pay workers poorly and don’t invest in them, you can’t attract and retain the factory talent you need.

Fifteen years ago, we outlined why America needs “new unions for a new economy” — and noted that we couldn’t see how to restore widely shared prosperity without a revival of unionism. The evidence for our position grows with each day.

But beneath the overall numbers, even in Pennsylvania and even in manufacturing, there are signs of revival. Take, for example, a unionized Schott Glass plant near Scranton, which is pioneering a new labor-management apprenticeship program.

To paraphrase Mark Twain, the reports of unions’ death are greatly exaggerated.

Read the rest of this entry →

This is Oracle's headquarters.

By Jamar Thrasher, Third and State

A few weeks ago, the Pennsylvania General Assembly fast-tracked a bill in the waning days of the legislative session to allow certain private companies to keep most of the state income taxes of new employees. News reports to follow indicated the new tax giveaway was designed to lure California-based software firm Oracle to State College.

Well, it turns out the CEO of Oracle, which will benefit from the largess of Pennsylvania taxpayers, recently bought his very own Hawaiian island, as CNN reported back in June.

Oracle CEO Larry Ellison, the third richest man in the U.S., purchased about 98% of Lana’i, the sixth largest of the Hawaiian islands. Forbes reported that the deal was rumored to be worth $500 million.

As CNN tells us:

The island includes two luxury resorts, two golf courses, two club houses and 88,000 acres of land, according to a document filed with the Public Utilities Commission.

Which bring us back to Pennsylvania, where Governor Corbett recently signed House Bill 2626, allowing qualifying companies that create at least 250 new jobs within five years to pocket 95% of the personal income taxes paid by the new employees.

Legislative sources told The Philadelphia Inquirer that “the bill was designed to lure California-based Oracle, the world’s third-largest software maker with $37 billion in revenue last year, to open a facility in the Penn State region, which would provide a pool of highly educated job seekers.”

We’ve already blogged about why this bill is a bad deal for Pennsylvanians, but Larry Ellison’s island provides us with yet another reason.

Oracle should not be pocketing the withholding taxes of new employees in State College, especially at a time when the state is cutting investments in schools and underfunding infrastructure.

And especially when the boss is doing well enough to afford an island in the sun.

Photo by Alamagordo under Creative Commons license.

By Mark Price, Third and State

Room 148 of the State Capitol might as well double as a Capitol broom closet. That’s where the House Consumer Affairs Committee this morning rushed out amendments to House Bill 2191, which legalizes predatory payday lending in Pennsylvania.

The amendments to HB 2191 were misleadingly pitched as adding more consumer protections to the bill. Even the Navy Marine Corps Relief Society took a look at these amendments and said they do “nothing to mitigate the already harmful aspects of HB 2191,” and that one amendment “actually worsens the problem it claims to solve.”

What is Payday Lending? Payday lending encompasses small loans, usually for two weeks or less, that require a post-dated check or electronic access to a borrower’s bank account as a condition of the loan. Fees and interest in states that allow payday lending typically total $15 to $17 for every $100 borrowed — amounting to an effective annual percentage rate of more than 300 percent for a loan due in full in 14-days.

One focus of the amendments this morning was language banning renewals or rollovers of a payday loan, as if that was a solution to stopping the long-term cycle of debt. It is not.

Payday lenders support amendments that ban renewals and rollovers because they know how to circumvent them. To avoid appearing to “rollover” or “renew” the debt, lenders ask the borrower to pay off the old loan and take out a new loan by paying a new fee and writing another check. Also, in a practice called “touch and go,” lenders take a cash “payoff” for the old loan that they immediately re-loan with new loan funds the next day.

Here’s how it works: To repay the first loan, the borrower lets the lender cash the original post-dated check or pays the lender $300 in cash to tear up the check. In either case, they borrow again immediately or as soon as allowed by law. Read the rest of this entry →

By Chris Lilienthal, Third and State

U.S. funding of infrastructure has declined dramatically since the 1960s, and Congress appears to be moving in the direction of even more cutbacks in the years ahead.

There is a bit of irony to this. With borrowing costs still very low and the market still somewhat depressed, now would be an ideal time for government to step up investment in infrastructure. In other words, it costs a lot less to build roads and bridges today than it might down the road if we hold off on the billions of dollars in needed repairs.

Sam Pizzigati laments this irony in a recent op-ed in The Star Ledger of Newark, N.J. And he has an interesting take on why infrastructure is getting short shrift: blame income inequality:

The cost of borrowing for infrastructure projects has hit record lows — and the private construction companies that do infrastructure work remain desperate for contracts. They’re charging less.

Yet our political system seems totally incapable of responding to the enormous opportunity we have before us. Center for American Progress analysts David Madland and Nick Bunker blame this political dysfunction on inequality.

The more wealth concentrates, their research shows, the feebler a society’s investments in infrastructure become. Our nation’s long-term decline in federal infrastructure investment — from 3.3 percent of GDP in 1968 to 1.3 percent in 2011 — turns out to mirror almost exactly the long-term shift in income from America’s middle class to the richest Americans.

Pizzigati notes that middle-class families rely on good roads and mass transit more than wealthy families, but the middle class tends to be weaker in unequal societies:

That leaves Americans with a basic choice. We can press for greater equality. Or spend more time dodging potholes.

By Mark Price, Third and State

The Pennsylvania Department of Labor and Industry released new data for March on Pennsylvania’s employment situation. According to the household survey, the unemployment rate edged down slightly to 7.5%, and the survey of employers showed healthy growth in nonfarm payrolls of 7,800 jobs.

As always, caution should be exercised in interpreting a month change in employment statistics.

In terms of levels, there were big gains in Leisure and Hospitality (7,000), Trade Transportation and Utilities (4,000) and Manufacturing (2,100). We will not have full information until the fall whether the job losses in the public sector will put a drag on employment growth in 2012, but the March data shows we are off to an uncomfortable start, with 2,500 jobs lost.

Over the last several months, Pennsylvania nonfarm payroll counts have been particularly volatile, showing big one-month gains and losses thanks to a combination of unusually warm weather and some technical issues. On average over the last six months, Pennsylvania has added just under 6,000 jobs a month. We need about 10,000 jobs a month to move back to full employment by March 2015 (three years from now).

While unemployment remains high today and for the foreseeable future, the distance between CEO pay and the pay of the typical worker reached an all time high in 2011.

• Ann Belser, Pittsburgh Post-Gazette – Report: Pay gap at record high between U.S. CEOs, workers:

Corporate CEOs are now making 380 times the salary of the average American worker, a record high and the biggest pay gap in the whole world, according to the 2011 AFL-CIO’s Executive Paywatch.

By Michael Wood, Third and State

In the news today, a couple of instances of CEOs being taken to task by shareholders over excessive pay.

Citigroup Centre in London. Photo by Harshil Shah.

USA Today reports that at Citigroup, 55% of shareholders rejected or abstained from rubberstamping a $25 million payday for their CEO Vikrom Pandit. The vote is only advisory, unfortunely, but is still described as being “historic” for Wall Street firms in the aftermath of the recession. The report notes:

Wall Street’s massive compensation packages have raised the ire of shareholders for years, especially when they appear to have little relation to the performance of specific executives. …

“Citigroup is one of most egregious example of disconnect between incentives of top management and value creation of shareholders,” said Mike Mayo, bank analyst at brokerage firm CLSA and author of the book “Exile on Wall Street.”

“The owners of the big banks, namely the shareholders, are finally taking a greater amount of responsibility by speaking up.”

Closer to home, the Pittsburgh Post-Gazette has a story this morning about discontent at Pittsburgh-based EQT’s annual shareholder meeting. Again, executive compensation seems to be at the heart of this dispute — as well as unease about natural gas production.

Even though the Buffett Rule failed to get a vote in the U.S. Senate earlier this week, it seems that income inequality is on the minds of many Americans right now — as it should be. (In case you missed it, check out the Keystone Research Center and Pennsylvania Budget and Policy Center’s fact sheet on the Buffett Rule and what it means to Pennsylvania.)

By Jheanelle Chambers, Intern, Third and State

While many middle-class Americans are still struggling in a down economy, the 1% is doing quite well.

The Center on Budget and Policy Priorities has an eye-popping chart (right) showing that in 2009, despite the weak economy, the top 1% of households captured $1.32 trillion in gross income while the bottom 50% earned $1.06 trillion.

Economist Chuck Marr explains further at Off the Charts:

The long-term trend in the United States has been towards much greater income concentration at the top. But the trend isn’t perfectly smooth: high-income people tend to benefit more from economic expansions than other income groups but tend to get hit harder by recessions. The swings are particularly pronounced in financial booms and busts…

At the height of the previous expansion, in 2007, the top 1 percent had 87 percent more total [adjusted gross income] than the bottom 50 percent. But even the 2009 gap of “only” 25 percent — the difference between the $1.32 trillion earned by the top 1 percent and the $1.06 trillion earned by the bottom 50 percent — is pretty staggering.

The news gets even better for the 1% in 2010, as the Center on Budget and Policy Priorities’ Chad Stone explains in another Off the Charts post. After seeing a dip in income in 2009, the 1% was well on the road to recovery a year later, Stone writes, citing new data compiled by economists Thomas Piketty and Emmanuel Saez:

The Piketty-Saez data paint a clear picture of faster income growth and rising income concentration at the top over the past few decades. The dot-com collapse proved to be nothing more than a speed bump, and the financial crisis and Great Recession may turn out to have had similarly transitory effects.

With Tax Day approaching next week, maybe it’s time to call on lawmakers to take a page from the 1930s and 1940s and enact tax policies to slow down the growing income gap between the 1% and the rest of us that is so common today even in the worst of economic conditions.

A blog post by Mark Price, originally published at Third and State.

Paul Krugman this morning caps off a series of blog posts over the last week with a column comparing government spending in the recovery following the deep 1981 recession and government spending in the recovery following the 2007 recession. The bottom line: the employment situation now would have been much better if the federal government had done more to provide aid to state and local governments.

• Paul Krugman, The New York Times — States of Depression:

One way to dramatize just how severe our de facto austerity has been is to compare government employment and spending during the Obama-era economic expansion, which began in June 2009, with their tracks during the Reagan-era expansion, which began in November 1982.

Start with government employment (which is mainly at the state and local level, with about half the jobs in education). By this stage in the Reagan recovery, government employment had risen by 3.1 percent; this time around, it’s down by 2.7 percent.

Next, look at government purchases of goods and services (as distinct from transfers to individuals, like unemployment benefits). Adjusted for inflation, by this stage of the Reagan recovery, such purchases had risen by 11.6 percent; this time, they’re down by 2.6 percent.

And the gap persists even when you do include transfers, some of which have stayed high precisely because unemployment is still so high. Adjusted for inflation, Reagan-era spending rose 10.2 percent in the first 10 quarters of recovery, Obama-era spending only 2.6 percent.

Why did government spending rise so much under Reagan, with his small-government rhetoric, while shrinking under the president so many Republicans insist is a secret socialist? In Reagan’s case, it’s partly about the arms race, but mainly about state and local governments doing what they are supposed to do: educate a growing population of children, invest in infrastructure for a growing economy.

Economist Emmanuel Saez has updated his time series (PDF) on top incomes with new data for 2010, which has just been released by the IRS. Mike Konczal walks you through the new data. The most shocking figure in the new data is the following from Saez:

The top 1% captured 93% of the income gains in the first year of recovery.

The Delaware County Daily Times this morning explores the impact of the end of Pennsylvania’s adultBasic program a little over a year ago.

• Patti Mengers, Delaware County Times — Ex-adultBasic customers still searching for insurance:

One year after 42,000 working Pennsylvanians lost adultBasic, a state program designed to provide low-cost health insurance for low-income residents ages 19 through 64, many are still struggling to get health care, according to health care access advocates.

“Unfortunately I have heard countless stories over the last year from people across the state unable to gain access to the care they need. It’s been especially troubling for people with chronic conditions,” said Athena Ford, spokesperson for the Pennsylvania Health Access Network.

More than 1,700 Delaware County residents relied on adultBasic before the program ran out of money Feb. 28, 2011 and more than 17,400 Delaware County residents were on the waiting list for the low-cost health insurance.

The figure above comes from a new report by John Schmitt, Health-insurance Coverage for Low-wage Workers, 1979-2010 and Beyond (PDF):

The last three decades have seen substantial erosion in employer-provided coverage across workers at all pay levels. Low-wage workers saw the biggest decline in own-employer coverage – about 17.0 percentage points between 1979 and 2010. But, coverage losses were almost as large for workers in the second quintile (down 13.8 percentage points) and the top quintile (down 13.3 percentage points).

A blog post by Mark Price, originally published at Third and State.

One of the factors driving the increase in inequality prior to 2000 was the growing gap between the wages of colleges graduates and everyone else.

Therefore, a straightforward policy to limit the rise in inequality would open the door to college attendance for the children of low-income adults. However, as the figure to the right illustrates, gifted but low-income children are much less likely to complete college compared to similarly gifted but high-income children. In fact, these gifted, low-income children are as likely to complete college as the least academically gifted, high-income children.

The Pittsburgh Post-Gazette reports this morning that proposed budget cuts by the Corbett administration are likely to lead to fewer courses offered at satellite locations of the State System of Higher Education. Satellite locations are more likely to serve students from low-income families.

• Laura Olson, Post-Gazette — Satellite, branch campuses vulnerable in Pa. budget: State cuts would hurt access for students, university leaders say:

One portion of the University of Pittsburgh and the other state-related college campuses that will look different if state funding continues to decrease is their branch campuses, testified top administrators on Wednesday.

Those satellite locations provide a valuable public service in sparsely populated areas, often serving lower-income students who may not have other opportunities, said Pitt chancellor Mark Nordenberg and Penn State University president Rodney Erickson.

“They would be the most vulnerable units of the university if we are pushed to privatization,” Mr. Nordenberg told state senators during a second budget hearing.

Afterward, when pressed on the future of Pitt’s branches in Johnstown, Bradford, Titusville and Greensburg, Mr. Nordenberg declined to speculate as to whether any may need to be closed. But he did say private universities do not usually offer branch options and that many more minor changes to achieve cost savings already have been implemented. Read the rest of this entry →

A blog post by Mark Price, originally published at Third and State.

What a difference an election year makes. Last year was full of pointless brinksmanship over federal policy issues that will take several decades to solve. Those battles at times looked like they threatened the near term health of the economy.

The New Year is shaping up to be very different. The New York Times reports this morning that a deal has been struck to extend the payroll tax reduction and extended unemployment benefits through the end of the year. Tentatively, it looks as if efforts to weaken the unemployment insurance system have been blocked. Both the payroll tax reduction and extended unemployment benefits were set to expire at the end of February, and the failure to extend them was on most economists’ lists of things that could weaken the economy in 2012.

• Jennifer Steinhauer, The New York Times — Tentative Deal Reached to Preserve Cut in Payroll Tax

The Allentown Morning Call reports that an effort to weaken Pennsylvania’s prevailing wage law appears to have stalled. There is little evidence that the presence or absence of prevailing wage laws raise public construction costs. There is, however, abundant evidence that repeal of these laws lowers the wages of construction workers. Read more here.

So why the effort to weaken the law? It is about catering to owners and executives of contractors who pad their pockets by paying workers’ poorly.

• John Micek, Allentown Morning Call — Prevailing Wage Bill Collapses In The House: Republicans Can’t Muster Votes

Governor Tom Corbett, meanwhile, is touring the state to promote his 2012-13 budget.

• Kathy Boccella, The Philadelphia Inquirer — Corbett defends cuts in Pa. higher-education budget

Corbett insisted to reporters during his tour of the high-tech Siemens Medical Solutions plant that his 2012-13 plan for a steep new cuts in state aid to higher education — including 30 percent less money to state-backed schools such as Pennsylvania State and Temple Universities — could be dealt with by reducing campus operating costs, not by raising tuition…

“A lot of people are upset at spending at that level, but that’s all the money that we have,” he said, reiterating his vow not to raise taxes…

He argued that the state had to be run more like a private business — like Siemens, in fact — to create more jobs and cut costs.

“We can’t continue to raise our prices,” he said, referring to college costs. “If Siemens kept increasing prices, they would make themselves uncompetitive.”

Speaking of “all the money that we have” and running the government like a “private business” that gives away its services for free even when it has no idea whether the benefits of that policy exceed the costs … Governor Corbett has signed into law an extension of Keystone Opportunity Zones.

• Kent Jackson, Scranton Times-Tribune — Governor approves KOZ extension

Gov. Tom Corbett on Monday signed a bill extending for 13 years the Keystone Opportunity Zones program that exempts businesses from paying many state and local taxes.

Exemptions run for up to 10 years, but the bill lets companies enroll through the end of 2015 so the program now will run through 2025…

While KOZs started in 1999 to promote the use of distressed lands and run-down properties, lawmakers and observers noted instances in the early years of the program where companies enjoyed the tax benefits without investing in properties or creating jobs.

Finally this morning, we have lots of news on the impact of economic austerity around the state. For starters, school districts in Cumberland County are moving to balance their budgets by raising fees, and the Lancaster School District faces a budget shortfall.

• Roger Quigley, The Patriot-News — Mechanicsburg schools enact fees for extracurricular activities
• Ed Komenda, The Patriot-News — Cumberland Valley School District considers making students pay to play sports
• Brian Wallace, Intelligencer Journal/Lancaster New Era — School District of Lancaster faces up to $6M in cuts

The Philadelphia City Controller has issued a grim warning about the Philadelphia School District’s financial future.

• Martha Woodall, The Philadelphia Inquirer — Butkovitz report warns of schools’ funding problems:

As expected, City Controller Alan Butkovitz included a warning Tuesday about the Philadelphia School District’s finances in a report that could result in higher borrowing costs for the district.

The comprehensive annual report, sent to bond-rating agencies and bondholders, includes a paragraph expressing reservations about the district’s financial viability.

The school district, the controller’s office said, “has experienced continued operating funds losses, is projecting significant budget shortfalls for fiscal years 2012 and 2013, and is uncertain about its ability to achieve cost savings and obtain additional funding to overcome these budget shortfalls. These conditions raise substantial doubt about its ability to continue as a going concern.”

And social service agencies in Northeastern Pennsylvania are bracing for cuts.

• David Singleton, Scranton Times-Tribune — Agencies stewing over budget cuts:

The week that area social services agencies have had to chew on the cuts in Gov. Tom Corbett’s proposed 2012-13 budget has not made them any easier to swallow.

Amid still-unanswered questions over how a 20 percent smaller pool of funding within a revamped Human Services Development Fund will be distributed at the local level, critics say the one certainty is children and people with disabilities will be among those bearing the brunt of the cuts.

“It’s going to take through the year to find out who really are going to be the victims here,” Michael Hanley, executive director of United Neighborhood Centers of Northeastern Pennsylvania, said Tuesday. “Certainly, what we do know is it is going to be the most vulnerable. That is a given.”