The Many Sins of the Tech Giants

The 400-page report just published by the Democratic leadership of the House Judiciary Committee is a damning review of the anti-competitive practices of the big tech companies—Amazon, Apple, Facebook and Google’s parent Alphabet.

The report finds that in various portions of the digital world these companies have amassed what amounts to monopoly control and have not hesitated to use it crush or absorb competitors. Comparing the tech giants to the oil barons and railroad tycoons of the late 19th century, the report calls for aggressive measures such as breaking up the companies and doing more rigorous reviews of proposed mergers and acquisitions in the future.

Among the broader consequences of the rising power of the tech giants are, the report argues: a weakening of innovation and entrepreneurship, a decline in the number of trustworthy sources of news, and an erosion of safeguards for the privacy of personal information.

One aspect of the report that has not received much coverage is the brief discussion of the power of the tech giants in the labor market. This is especially relevant for Amazon, which as the report notes has become one of the largest employers in the country and is exercising monopsony power in sectors such as warehousing and “has wage-setting power through its ability to set route fees and other fixed costs for independent contractors in localities in which it dominates the delivery labor market. These entities are dependent on Amazon for a large majority—or even 100%—of their delivery business.”

Amazon has moved into the position previously held by Walmart—a shamelessly exploitative employer that depresses wages and worsens working conditions not only for its own workers but also for the entire sector in which it operates—and to some extent for the economy as a whole.

The report’s wide-ranging recommendations do not include any remedies for these labor issues, perhaps because they are outside the scope of the Judiciary Committee.

It is worth noting that there are already efforts underway to address the labor practices of the tech giants. Several unions as well as other groups are working with Amazon employees to agitate for better conditions, a process made more difficult by Amazon’s brazen anti-union practices and its widespread use of staffing services to evade its employer responsibilities.

There are also class-action lawsuits challenging unfair employment practices by Amazon and other tech giants. For example, Facebook recently agreed to pay $1.65 million to resolve litigation alleging that it misclassified workers to deprive them of overtime pay.  A few years ago, Apple, Google, Intel and Adobe Systems together agreed to pay $415 million to resolve allegations that they conspired not to hire each other’s employees, thus suppressing salary levels.

Taking on the tech giants will require many lines of attack to address the harms they cause to users and employees alike.

The Corporate Marauder Undermining the Postal Service

Donald Trump got elected in part by selling the idea that his business experience would enable him to do a great job of running the government. We see how that turned out. And now we have another veteran of the private sector wreaking havoc on the United States Postal Service.

Louis DeJoy was named postmaster general after spending four decades in the trucking and logistics business, becoming wealthy enough in the process to join the ranks of Republican megadonors. He made his name and his fortune through the creation of a company called New Breed Logistics, which grew to prominence by securing contracts with large corporations such as Boeing as well as the Postal Service.

In 2014 he sold New Breed to the Fortune 500 company XPO Logistics, staying on to run the New Breed operation and serve as a director of XPO until 2018. If we want to get a sense of the management approach DeJoy is bringing to the USPS, we can look at the track record of New Breed and XPO.

As shown in Violation Tracker, XPO and its subsidiaries have racked up a total of $65 million in fines and settlements in more than 70 misconduct cases over the past two decades. Nearly two-thirds of that total comes from wage theft. Last year XPO paid $16.5 million to resolve allegations that for years it misclassified drivers as independent contractors to deny them overtime pay and paid breaks.

This year XPO paid another $5.5 million for wage and hour violations relating to workers at its Last Mile operations. Altogether, XPO and its subsidiaries have had to pay out some $40 million in wage theft lawsuits. Another $3.5 million settlement in a misclassification case brought against an XPO unit and the retailer Macy’s is awaiting final court approval.

Another problem area for XPO is employment discrimination. Two of the cases in this category relate to New Breed Logistics. In 2015 a federal appeals court upheld a $1.5 million jury verdict in a sexual harassment and retaliation case originally filed by the Equal Employment Opportunity Commission in 2010. Also in 2015, New Breed had to pay $90,000 to resolve allegations by the Office of Federal Contract Compliance Programs that it engaged in discriminatory practices at a facility in Texas.

XPO has also been called out for workplace safety and health deficiencies. It has been cited more than 20 times by OSHA for serious, willful and repeated violations.

Along with the mistreatment of workers, the rap sheet of XPO and its businesses includes allegations of cheating the federal government. This comes by way of Emery Worldwide, an air freight company that became part of Con-Way Inc., which was purchased by XPO in 2015.

In 2006 Emery paid $10 million to settle a False Claims Act lawsuit brought by the Justice Department concerning the submission of inflated bills to the Postal Service for the handling of Priority Mail at mail processing facilities during a multi-year contract.

Leave it to the Trump Administration to choose someone to head the Postal Service who was associated with a company linked to fraud committed against that same agency.

XPO continues to do business with the Postal Service, and DeJoy has continued to receive income from the company through leasing agreements at buildings he owns. Even if XPO had a spotless record, DeJoy’s ongoing dealings with it create a glaring conflict of interest.

DeJoy claims to be retreating, at least through the election, from the measures that threatened to create chaos for mail-in ballots.  Nonetheless, his corporate marauder’s approach to the management of the Postal Service still poses a grave threat to the future of a vital American institution.

Who Is Hogging Covid Stimulus Funds?

The main cause for the stalemate in Congress over a new round of covid stimulus funding is a belief by numerous Republicans that the federal government has been too generous to the unemployed. The enhanced jobless benefits created by the CARES Act need to be curtailed, they argue, to push people to return to work.

Those worrying about disincentives to work do not express similar concerns when it comes to assistance for businesses. Yet there are glaring examples of corporations that have exploited a variety of covid programs to the hilt.

Take the example of the aviation sector. As shown in Covid Stimulus Watch, the Payroll Support Program (PSP) has provided about $20 billion in grants and $7 billion in loans not only to the major airlines but also to smaller passenger carriers, air cargo companies, airport service providers and others.

Despite the generosity of this program, about 170 recipients also turned up on the list released in early July of companies that received awards under the Paycheck Protection Program. The PPP provided these firms more than $200 million in potentially forgivable loans on top of the $500 million in grants they got from the PSP. (The $200 million is calculated by using the midpoint of the ranges in which the PPP awards were disclosed.)

That double-dipping is not the end of the story. The Small Business Administration recently disclosed the names of companies that have gotten Economic Injury Disaster Loans (EIDL), a program that has been greatly expanded to provide another form of covid aid.

More than 70 of the companies that got PSP and PPP awards also show up among the EIDL recipients, making them triple-dippers. The largest total haul, $33 million, went to Ohio-based Champlain Enterprises, which operates CommutAir. The group as a whole received $130 million in grants and loans.

The use of multiple programs by the aviation sector is more troubling in light of evidence that some of the companies have engaged in large-scale layoffs at the same time they were receiving federal assistance. Recently, Rep. James Clyburn, who chairs the Select Committee on the Coronavirus Crisis, Rep. Peter DeFazio, chair of the House Committee on Transportation and Infrastructure, and Rep. Maxine Waters, chair of the House Committee on Financial Services, sent a letter to Treasury Secretary Steven Mnuchin about this situation.

The letter cited a dozen aviation contractors that had accepted PSP aid after engaging in layoffs. One of the firms was Constant Aviation, which in addition to a PSP grant of $23 million, received a PPP loan worth between $5 million and $10 million.

Another sector that is making use of multiple covid programs is healthcare. Hospitals, nursing homes and other medical practices have received tens of billions of dollars under the Provider Relief Fund and the Medicare Accelerated and Advance Payment Program. This assistance was certainly needed, yet dozens of the providers also got assistance from the PPP.

For example, Bronxcare Health System in New York, got more than $100 million from the Provider Relief Fund and then received two PPP loans worth between $4 million and $10 million. MidMichigan Health got $60 million from the Provider Relief Fund and then between $1 million and $2 million from PPP.

The nursing home chain SavaSeniorCare received a total of $35 million from more than 50 separate grants through the Provider Relief Fund as well as PPP loans worth $9.5 million to $21 million. This is on top of $24 million in accelerated Medicare payments.

Where is the hand-wringing over the possibility that all these payments are creating a disincentive for corporations to operate efficiently? These companies may argue that the funds are necessary for their survival, but so is expanded unemployment pay for the millions of people still left jobless by the pandemic.

Cracking Down on Modern-Day Child Labor Abuses

When the Massachusetts Attorney General announced in January that Chipotle was being fined over $1 million for child labor violations, it was a jarring reminder that a practice usually associated with the sweatshops and coal mines of the early 20th century is still with us.

The Fair Labor Standards Act of 1938 put restrictions on the employment of minors but did not abolish it entirely. Instead, it established minimum ages for various kinds of work and set restrictions on working hours.  States have child labor laws of their own.

Compliance with these rules was far from universal, but it appeared that the violators were mainly small businesses. The U.S. Labor Department’s Wage and Hour Division did its best to investigate these abuses and imposed penalties that typically amounted to around $10,000 and involved a single location, even when it was an outlet or franchise of a much larger corporation.

Massachusetts AG Maura Healey is abandoning that approach and bringing broader actions that highlight the magnitude of the problem. The Chipotle case included $1.37 million in restitution and penalties for an estimated 13,253 child labor violations and other state wage-and-hour infractions at the company’s 50 corporate-owned locations in the state. As part of the settlement, Chipotle also agreed to pay $500,000 to help create a fund to be administered by the AG’s office to educate the public about child labor and to provide training opportunities for young people.

Healey’s investigators had found that Chipotle regularly employed minors without work permits, required 16- and 17-year-old employees to work later than the law allows, and in some instances had minors working beyond the nine-hour daily limit and the 48-hour weekly maximum.

Chipotle is not the only large company targeted by Healey. In February her office announced a $400,000 settlement with Wendy’s International covering an estimated 2,100 violations at its 46 corporate-owned restaurants in the state. The infractions were similar, such as having 16- and 17-year-olds working later than allowed and beyond the nine-hour daily limit.

Last year, the Massachusetts AG reached a $409,000 settlement with Qdoba Restaurant Corporation for the same kind of violations at its 22 corporate-owned locations.

The consequences of overworking minors are the same as they were was a century ago. Long hours on the job interfere with school work and can negatively impact the health of young people. Fast food outlets may not pose quite the same physical hazards as the factories and mines where children were once employed, but they are far from risk-free.

For instance, there have been many reports of sexual harassment of young workers at restaurant chains such as McDonald’s, sometimes on the part of managers. Such harassment is a problem for workers of all ages but is particularly serious when the victims are minors.

Low unemployment rates and labor shortages are making it more common for employers to turn to young workers to fill in the gaps. Yet we should make sure that these businesses do not break the rules when they do so. Other regulators should follow the lead of Massachusetts in getting tough with employers who exploit the most vulnerable workers.

The 2019 Corporate Rap Sheet

While the news has lately focused on political high crimes and misdemeanors, 2019 has also seen plenty of corporate crimes and violations. Continuing the pattern of the past few years, diligent prosecutors and career agency officials have pursued their mission to combat business misconduct even as the Trump Administration tries to erode the regulatory system. The following is a selection of significant cases resolved during the year.

Online Privacy Violations: Facebook agreed to pay $5 billion and to modify its corporate governance to resolve a Federal Trade Commission case alleging that the company violated a 2012 FTC order by deceiving users about their ability to control the privacy of their personal information.

Opioid Marketing Abuses: The British company Reckitt Benckiser agreed to pay more than $1.3 billion to resolve criminal and civil allegations that it engaged in an illicit scheme to increase prescriptions for an opioid addiction treatment called Suboxone.

Wildfire Complicity: Pacific Gas & Electric reached a $1 billion settlement with a group of localities in California to resolve a lawsuit concerning the company’s responsibility for damage caused by major wildfires in 2015, 2017 and 2018. PG&E later agreed to a related $1.7 billion settlement with state regulators.

International Economic Sanctions: Britain’s Standard Chartered Bank agreed to pay a total of more than $900 million in settlements with the U.S. Justice Department, the Treasury Department, the Federal Reserve, the New York Department of Financial Services and the Manhattan District Attorney’s Office concerning alleged violations of economic sanctions in its dealing with Iranian entities.

Emissions Cheating: Fiat Chrysler agreed to pay a civil penalty of $305 million and spend around $200 million more on recalls and repairs to resolve allegations that it installed software on more than 100,000 vehicles to facilitate cheating on emissions control testing.

Foreign Bribery: Walmart agreed to pay $137 million to the Justice Department and $144 million to the Securities and Exchange Commission to resolve alleged violations of the Foreign Corrupt Practices Act in Brazil, China, India and Mexico.

False Claims Act Violations: Walgreens agreed to pay the federal government and the states $269 million to resolve allegations that it improperly billed Medicare, Medicaid, and other federal healthcare programs for hundreds of thousands of insulin pens it knowingly dispensed to program beneficiaries who did not need them.

Price-fixing: StarKist Co. was sentenced to pay a criminal fine of $100 million, the statutory maximum, for its role in a conspiracy to fix prices for canned tuna sold in the United States.  StarKist was also sentenced to a 13-month term of probation.

Employment Discrimination: Google’s parent company Alphabet agreed to pay $11 million to settle a class action lawsuit alleging that it engaged in age discrimination in its hiring process.

Investor Protection Violation: State Street Bank and Trust Company agreed to pay over $88 million to the SEC to settle allegations of overcharging mutual funds and other registered investment company clients for expenses related to the firm’s custody of client assets.

Illegal Kickbacks: Mallinckrodt agreed to pay $15 million to resolve claims that Questcor Pharmaceuticals, which it acquired, paid illegal kickbacks to doctors, in the form of lavish dinners and entertainment, to induce them to write prescriptions for the company’s drug H.P. Acthar Gel.

Worker Misclassification: Uber Technologies agreed to pay $20 million to settle a lawsuit alleging that it misclassified drivers as independent contractors to avoid complying with labor protection standards.

Accounting Fraud: KPMG agreed to pay $50 million to the SEC to settle allegations of altering past audit work after receiving stolen information about inspections of the firm that would be conducted by the Public Company Accounting Oversight Board.  The SEC also found that numerous KPMG audit professionals cheated on internal training exams by improperly sharing answers and manipulating test results.

Trade Violations: A subsidiary of Univar Inc. agreed to pay the United States $62 million to settle allegations that it violated customs regulations when it imported saccharin that was manufactured in China and transshipped through Taiwan to evade a 329 percent antidumping duty.

Consumer Protection Violation: As part of the settlement of allegations that it engaged in unfair and deceptive practices in connection with a 2017 data breach, Equifax agreed to provide $425 million in consumer relief and pay a $100 million civil penalty to the Consumer Financial Protection Bureau. It also paid $175 million to the states.

Ocean Dumping: Princess Cruise Lines and its parent Carnival Cruises were ordered to pay a $20 million criminal penalty after admitting to violating the terms of their probation in connection with a previous case relating to illegal ocean dumping of oil-contaminated waste.

Additional details on these cases can be found in Violation Tracker, which now contains 397,000 civil and criminal cases with total penalties of $604 billion.

Note: I have just completed a thorough update of the Dirt Diggers Digest Guide to Strategic Corporate Research. I’ve added dozens of new sources (and fixed many outdated links) in all four of the guide’s parts: Key Sources of Company Information; Exploring A Company’s Essential Relationships; Analyzing A Company’s Accountability Record; and Industry-Specific Sources.

Targeting Migrants in the Workplace

Perhaps to avoid giving the impression that the Trump Administration was getting soft on immigrants by having the president go to El Paso to console the victims of a mass shooting aimed at Latinos, Immigrations and Customs Enforcement chose the same day to carry out the largest workplace raid in more than a decade.

The more than 600 people taken into custody at several sites in Mississippi were not apprehended while engaged in criminal activity, but rather in the course of supporting their families by performing some of the most unpleasant and dangerous work in the U.S. economy: poultry processing.

There were no arrests of managers at the companies involved – which included Koch Foods and Peco Foods, whose spokespeople insisted they carefully screened new hires using the E-Verify system. This came as no surprise, as employers are rarely prosecuted for immigration offenses, whether or not they use E-Verify, or if they are lax in applying the system.

Among the more than 300,000 entries in Violation Tracker there are fewer than 50 cases of immigration-related employer penalties, and only 18 with fines of $1 million or more. Countless other companies have gotten away with employing undocumented workers, among them the Trump Organization.

They also often get away with other workplace violations, though sometimes they are caught in the job safety or wage & hour enforcement net. Koch Foods (not part of Koch Industries), for instance, has been penalized more than $4 million for its Mississippi operation, including three OSHA violations, one wage & hour violation, two environmental violations and a $3.75 million settlement with the EEOC concerning sexual harassment and national origin and race discrimination.

Peco Foods has had five violations at its Mississippi plants, including two from OSHA and three from the EPA.

Mike Elk, writing in Payday Report, notes that some advocates have speculated that workers are targeted for raids after their facilities get cited for workplace violations. He cites several examples in which that happened.

Since companies face little risk of being prosecuted for immigration offenses, it is possible that they may be the ones tipping off ICE, seeing the raids as a way of discouraging whistleblowing by workers about abusive conditions. While the raids cause temporary disruption to their production, these employers hope to discourage replacement workers from being outspoken on the job.

Trump and other immigration hardliners often claim that their aim is to help native-born workers by eliminating the supposed job competition created by migrants. If that were the case, then they would crack down on employers who hire the undocumented.

Instead, they enable those employers to maintain a business model based on worker intimidation.

Battles Over Background Reports

Credit: NELP

The Ban the Box movement seeks to remove barriers to employment for job applicants with a prior arrest or conviction. The goal is to have all candidates considered on their merits and to give those with criminal records a chance to explain their specific circumstances.

Yet there is another problem relating to employer use of criminal records and other personal background information: sometimes the information they obtain on a candidate is inaccurate or may refer to someone else with a similar name.

Employers who use such faulty information in their hiring decisions can find themselves the target of a class action lawsuit. These suits are based on provisions of the federal Fair Credit Reporting Act (FCRA), which requires employers to get written consent from a job candidate before obtaining background-check reports containing criminal records as well as credit history and other personal information. Before making an adverse decision based on data in the report, the employer must give the applicant a copy and allow time for the person to challenge any inaccuracies in the document.

You will not be surprised to learn that employers often break these rules.

I’ve been compiling information on employment-related FCRA lawsuits as part of the latest expansion of Violation Tracker. I found that over the past decade employers have paid out $174 million to resolve such cases, while companies providing those reports have paid out another $152 million when they have been sued directly.

The dollar totals derive from 146 successful class actions brought against a variety of employers in sectors such as retail, banking, logistics, security services and private prisons.

Since 2011 more than 40 employers have paid out FCRA employment settlements of $1 million or more. In one of the largest cases, Wells Fargo paid $12 million in 2016 to thousands of applicants whose FCRA rights were allegedly violated. Other large payouts by well-known companies include: Target ($8.5 million), Uber Technologies ($7.5 million), Amazon.com ($5 million), Home Depot ($3 million), and Domino’s Pizza ($2.5 million).

More cases are pending. A $2.3 million settlement involving Delta Air Lines is awaiting final court approval. In January a federal judge in California certified a class of five million Walmart job applicants.

Suits have also been brought against staffing services such as Aerotek (which paid a $15 million settlement) and temp agencies such as Kelly Services ($6.7 million).

Providers of background-check reports also have obligations under the FCRA, including a duty to employ reasonable procedures to ensure the accuracy of the information they report. The Violation Tracker compilation includes 30 provider class actions with settlements amounts as high as $28 million.

The FCRA cases are the fourth compilation of employment-related class actions to be added to Violation Tracker, following ones covering wage theft, workplace discrimination, and retirement-plan abuses. With the addition of the FCRA cases and the updating of data from more than 40 federal regulatory agencies and the Justice Department, Violation Tracker now contains 369,000 civil and criminal entries with total penalties of $470 billion.

Big Business Bias

The immediate culprits in many workplace discrimination and harassment cases are individual managers or co-workers, but in many situations the worst villain is the employer that fails to stop the abuse or engages in its own unfair practices.

The Corporate Research Project of Good Jobs First has just published a report called Big Business Bias showing for the first time which large corporations have paid the most to plaintiffs in discrimination or harassment cases based on race, gender, religion, national origin, age or disability.

As in many other things, the big banks turn out to be leading offenders. Bank of America (including its subsidiary Merrill Lynch) has paid a total of $210 million since 2000, more than any other large company. Morgan Stanley ranks fourth at $150 million and Wells Fargo ranks ninth at $68 million. The financial services industry overall has paid a total of $530 million in penalties. The retail sector has paid the same amount, so the two industries have the dubious distinction of being tied for first place.

The report, based on data collected for an expansion of the Violation Tracker database, covers private lawsuits (both class action and individual) brought in federal or state court as well as cases brought with the involvement of the Equal Employment Opportunity Commission (EEOC) and the U.S. Labor Department’s Office of Federal Contract Compliance Programs (OFCCP). It focuses on cases brought against corporations (and their subsidiaries) included in the Fortune 1000, the Fortune Global 500 and Forbes’ list of America’s Largest Private Companies.

We found that virtually every large company has paid damages or reached an out-of-court settlement in at least one discrimination or harassment lawsuit, but in the vast majority of cases the terms of the settlements were kept confidential. Our report is based on the subset of those cases with disclosed settlements as well as those with public court verdicts and EEOC or OFCCP penalties.

The report finds that since the beginning of 2000, large corporations are known to have paid $2.7 billion in penalties, including $2 billion in 234 private lawsuits, $588 million in 329 EEOC actions and $81 million in 117 OFCCP cases.

Following Bank of America in the ranking of most-penalized large companies are Coca-Cola ($200 million) and Novartis ($183 million). The corporation with the largest number of cases with disclosed penalties is Walmart, at 27. Its penalty total of $52 million would have been much higher if the U.S. Supreme Court had not ruled 5-4 in 2011 to dismiss a nationwide gender discrimination class action against the company.

Following banks and retailers, the industries with the most disclosed penalties are food/beverage products ($252 million), pharmaceuticals ($209 million) and freight/logistics ($187 million).

Race and gender cases (mainly relating to hiring, promotion and pay) account for the largest shares of discrimination penalties, with each category totaling just over $1 billion. Age discrimination cases rank third with over $240 million in penalties, followed by disability cases at $155 million and sexual harassment cases at $123 million.

Employees at all levels of the occupational hierarchy have filed discrimination lawsuits against large corporations. The report documents lawsuits whose plaintiffs range from executives, managers and professionals to blue-collar and service workers. However, it finds that managers are more likely to bring age discrimination cases while racial bias and sexual harassment suits more often are filed by blue-collar and service workers.

In addition to supporting the call by the #MeToo movement to end non-disclosure agreements and mandatory arbitration, the report endorses reforms that would require publicly-traded companies and large federal contractors to disclose how much they pay out each year in aggregate damages and settlements in discrimination and harassment cases.

Note: details on all the cases analyzed in the report can be found in Violation Tracker.

The Not-So-Mysterious Solution to Wage Stagnation

Many steelworkers thought they had hit the jackpot. Back in March, Donald Trump announced steep tariffs on metals imported from most of the world, and three months later he added close allies such as Canada and Mexico to the list. As with many of his other economic policies, Trump claimed that the move was designed to benefit U.S. workers, a few of whom were brought to the White House with their hardhats to serve as props when the measure was first announced.

Now months have passed, and steelworkers are still waiting for the payoff. As one of them recently told the Washington Post, “It’s been a little like watching the air going out of a balloon.” When it comes to steel company profits, the party is still in full swing as the industry reaps the benefits of soaring prices.

Yet the producers are resisting sharing the wealth with their workers. In fact, the big companies took such a hard line in their contract negotiations with the United Steelworkers that union members authorized strikes against United States Steel and ArcelorMittal. If a walkout were to occur, it would interrupt the labor peace that has prevailed in the industry for several decades.

It has been widely reported that Trump’s tariffs may be harming more workers than they are helping, as industries dependent on the affected imports lay people off or otherwise squeeze employees to deal with the increased costs. The situation in steel shows that even in the favored industries workers do not necessarily benefit when their employers experience a windfall. They have to fight for their share.

The same principle applies in sectors not directly affected by tariffs. Take Amazon, which has been basking in praise after setting a $15 an hour minimum wage for its growing workforce. This was not a case of corporate generosity.

The company, headed by the ridiculously wealthy Jeff Bezos, has been under increasing pressure over poor working conditions at its distribution centers. Amazon had replaced Walmart as the prime exemplar of the abusive employer. Sen. Bernie Sanders recently introduced legislation called the Stop Bezos Act to penalize large companies whose low-wage workers had to depend on government safety net programs. This, plus the Fight for $15 campaign and the community groups organizing around the company’s plans to build a massive second headquarters complex in a yet-to-be-chosen city, compelled Amazon to start to move away from the low road.

In a recent interview with the PBS Newshour, Fed chairman Jerome Powell was the latest economic analyst to call it a mystery that wages are not rising more in a tight labor market. Decades ago, when pay levels were rising rapidly, mainstream economists did not hesitate to cite unions as a key cause—and in fact blamed organized labor for being too aggressive.

Yet these same economists cannot bring themselves to acknowledge that the weakening of unions, brought about by employer animus and government restrictions, is now a major reason for wage stagnation.

The good news is that collective action, both through unions and other labor organizations, seems to be making a comeback. That—and not the bogus labor-friendly trade and regulatory policies of the Trump Administration—will be what restores the living standards of the U.S. workforce.

Is Foxconn a Con?

It’s common for governors to stage publicity events to announce major job-creating investments in their state. This allows them to take implicit credit for a project that was probably helped along with tax breaks and other financial giveaways.

When it came to the Taiwanese company Foxconn’s plan to build a $10 billion flat-screen plant in Wisconsin, the hype was taken to a new level. Gov. Scott Walker and Foxconn’s Chairman Terry Gou made the announcement not at the state capitol but at the White House, where they were joined by President Trump, Vice President Pence, Speaker Paul Ryan and a host of other high-level officials of the federal government.

As you might expect, the event quickly turned into a celebration of the Trump Administration. Walker, Pence and Ryan, in whose Congressional district the massive plant is to be sited, gushed about Trump’s economic leadership, with Pence declaring: “Under President Donald Trump, America is back.”

That apparently was not enough for Trump, who found it necessary to celebrate himself even more. Referring to Gou, the President declared: “If I didn’t get elected, he definitely would not be spending $10 billion” in the United States.

The creation of numerous new manufacturing jobs is something that will be welcomed by the working people of Wisconsin, but there are reasons, beyond Trump’s political exploitation of the deal, to remain suspicious.

The first matter of concern is the company itself. Foxconn has a long history of abusive labor practices in its overseas plants, including those used to supply Apple. Conditions in the company’s Chinese plants were so bad that in 2010 there was a rash of suicides among overworked employees. The company installed nets on its plants to discourage workers from jumping to their deaths. Foxconn later claimed to improve its labor conditions but the company is far from a high-road employer.

Then there are the claims about the terms of the Wisconsin deal. Gov. Walker claimed that the plant would directly create 13,000 jobs. That was good for generating excitement, but it is a dubious figure. Manufacturing establishments no longer employ anything close to that number of workers.

Out of curiosity, I checked with the Bureau of Labor Statistics to see how many plants currently exist with 10,000 or more workers. It turns out the BLS does not have that information because, as an analyst told me, there are so few facilities of that size. The trend, of course, is toward higher levels of automation and much smaller workforces.

Then there’s the issue of who is paying for the plant. While Trump and the others praised the deal as an example of private sector vitality, Foxconn’s plant will be underwritten in large part by the taxpayers of Wisconsin. Walker said that the state would “invest” $3 billion in the project. That would be the fourth largest economic development subsidy package ever offered by a state.

Despite the promises of public officials, extravagant subsidies rarely provide economic benefits equal to the loss of tax revenue. Wisconsin has a particularly bad record in this regard. The Walker Administration and its privatized economic development agency have been at the center of a long string of controversies about cronyism and poor job-creation outcomes.

The Foxconn deal will provide political benefits for Walker, Ryan and Trump, but it is unclear how much good it will actually do for the people of Wisconsin.