Archive for the ‘Unions’ Category

Trump’s War on Workers

Thursday, June 14th, 2018

Donald Trump’s blue-collar supporters may like what they are seeing on Fox News, but when they arrive at work the MAGA revolution is nowhere to be found. Far from empowering labor, the Trump Administration’s employment policies are heavily skewed toward management.

The aspect of this I’ve been focusing on lately are wage and hour issues. Recently my colleagues and I at the Corporate Research Project and Jobs With Justice published Grand Theft Paycheck, a detailed look at wage theft by large corporations. We found that major employers in a wide range of industries continue to pay out large sums in collective action lawsuits, which indicates that they continue to violate the Fair Labor Standards Act by compelling employees to do off-the-clock work and denying them proper overtime pay.

Such litigation may soon be a thing of the past. There are signs that collective actions are failing in the wake of the U.S. Supreme Court’s Epic Systems ruling, written by Trump nominee Neil Gorsuch, affirming the right of employers to use mandatory arbitration to block group lawsuits. For example, a federal judge in California told a group of Domino’s Pizza drivers that they had to use arbitration rather than litigation to resolve their claims against franchise owners.

At the same time, instead of intensifying enforcement by the Wage and Hour Division, Trump’s Labor Department is promoting a new approach based on corporate self-audits and fewer fines. Allowing employers to operate on the honor system is just another way of weakening enforcement.

A new report from the National Employment Law Project shows that the Trump DOL is also reducing enforcement of workplace safety and health rules.  NELP found that OSHA enforcement activity in FY2017 was down compared to the previous year. The decline was even more pronounced during the first five months of FY2018, when the number of enforcement units (the measure used by OSHA) fell by more than 7 percent. This trend is likely to worsen, since NELP notes that the number of OSHA inspectors has been declining.

Federal workers are facing an assault of their own. Trump recently announced plans to overhaul rules affecting more than two million employees, making it easier to discipline and fire them. The move also includes an attack on federal unions through stricter limits on the amount of time grievance officers and other activists can spend on union activity during working hours.

The next blow will come in the Supreme Court, which is expected to issue a decision soon in the Janus case that blocks the ability of public sector unions to collect fees from employees who decline to join but still benefit from collective bargaining agreements and other protections negotiated by those unions. Such a ruling could have a devastating financial impact on public unions.

As bad as all this sounds, it could boomerang on Trump and his corporate allies. More workers may follow the example of the teacher wildcat strikes and put their faith in self-organization rather than a demagogue.

Workplace Hazards in the Tech Economy

Thursday, April 26th, 2018

The titans of the tech economy want us to believe that among their achievements is the transformation of the workplace into a more humane and nurturing environment. This accounts for the frequent stories about headquarters campuses with endless amenities and flexible work arrangements.

It’s often another story when you look beyond those glittering complexes to the more mundane sites where the routine work is done. The manufacturing, distribution and customer service facilities that prop up the tech companies have a lot in common, in a bad way, with their old economy counterparts.

The latest indication of that reality comes in the 2018 edition of the National Council for Occupational Safety and Health’s Dirty Dozen list of employers that put workers and communities most at risk. The council is a federation of local COSH groups that for nearly 50 years have been promoting safer workplace practices.

This year’s Dirty Dozen includes two new-economy corporations that work hard to portray themselves as enlightened: Amazon.com and Tesla Motors.

Amazon makes the list because of a series of fatal workplace accidents at its warehouses over the past five years. The report points out that the facilities create hazards by demanding that workers maintain a dangerously intense pace of work in order to service the company’s rapid delivery system. One Amazon center in Pennsylvania became infamous for having paramedics stationed outside full-time to deal with the frequent cases of dehydration and heat stress.

Violation Tracker’s summary page for Amazon lists 17 OSHA fines totaling $208,675 – but most of those come from its Whole Foods subsidiary. Amazon’s distribution and fulfillment centers don’t have more entries because many of their workers are technically employees of temp agencies and leasing firms.

Tesla makes the Dirty Dozen list because National COSH found that its injury rate was 31 percent higher than the rest of the automotive industry and its rate of serious injuries was 83 percent higher. The report cites a series of articles about the safety problems at Tesla, including a Los Angeles Times story stating that Tesla had an accident rate greater than notoriously unsafe industries such as sawmills and slaughterhouses, despite being much more automated.

Tesla’s reported accident rate may actually be understated. The Center for Investigative Reporting’s Reveal project found that Tesla failed to include some of its serious injuries on legally mandated reports.

Among the reasons Amazon and Tesla have been able to get away with their unsafe practices is the absence of unions in their U.S. facilities. Both companies have succeeded, so far, in beating back labor organizing campaigns by employing the argument that workers at a supposedly enlightened company do not need a third party to represent them.

The truth, of course, is that unions are not really third parties but instead an expression of the desire of workers to present a united front in dealing with management. When it comes to employers such as Amazon and Tesla, that collective action may be the only way to ensure that workers can get through the day in one piece.

The Bonus Boondoggle

Thursday, January 25th, 2018

Home Depot is the latest company to join the bonus bandwagon, announcing that it will give hourly employees one-time payments of up to $1,000 as a “reward to our associates for continuing to deliver outstanding customer service.” CEO Craig Menear added: “This incremental investment in our associates was made possible by the new tax reform bill.”

No one should begrudge a few more bucks to underpaid retail workers, but the bonuses should be regarded with a skeptical eye. It’s clear, to begin with, that the companies making these announcements are doing so to curry favor with the Trump Administration and Congressional Republicans. And the amounts being offered to employees represent a small portion of the financial benefits the corporations will enjoy from the tax giveaway. At Bank of America that portion was reported to be about 5 percent.

There’s also a problem with the way the payments are being made. The fact that many of the workers are being given one-time bonuses rather than increases in their base pay means that the impact will be fleeting and do little to address the ongoing problem of wage stagnation.

But perhaps worst of all is that employers are taking these steps on their own rather than negotiating with their workers. That’s possible because they are in almost all cases non-union. Some such as Walmart have a notorious history of anti-union animus, while others like Starbucks have resisted organizing drives in more subtle ways.

There are a few exceptions. For example, AT&T, which is extensively unionized, discussed its bonuses with the Communications Workers of America before making the announcement. Nonetheless, the CWA, which had called on telecommunications companies to provide the $4,000 wage increase Republicans claimed would result from the tax bill, vowed to negotiate for more than the $1,000 payments AT&T said it would provide.

While AT&T maneuvered to downplay the role of the CWA, most of the bonus givers need not take such steps. They can present their payments purely as an act of corporate benevolence.

They are also an affirmation of the lop-sided balance of power in non-union companies. Management gets to decide whether and how to share the tax windfall in the same way it makes all other decisions that affect the lives of their workers. This is seen in the fact that companies such as Walmart and Comcast announced their bonuses around the same time they were carrying out substantial layoffs.

Large companies are adopting the Trumpian practice of pretending to act in the interest of workers without actually empowering them. If Corporate America really wanted to help their employees, they would drop their opposition to unions and let workers bargain for real gains rather than handouts.

Foreign Investment and America First

Thursday, August 10th, 2017

Donald Trump has built an image as a champion of workers by fomenting fear of immigrants. Get rid of the foreign-born, he vows, and native workers will prosper.

What’s odd is that this misguided notion is coupled with an embrace of foreign corporations. The administration’s America First economic policy relies to a substantial degree on promoting investment from abroad.

Many of Trump’s supposed job creation achievements have involved Asian companies. Soon after the election Trump claimed that Japan’s SoftBank had promised to invest $50 billion in the United States and create 50,000 jobs. Soon thereafter, Trump and Chinese mogul Jack Ma vowed that the latter’s Alibaba e-commerce empire would create 1 million U.S. jobs. In June, Samsung said it would open an appliance plant in South Carolina.

More recently, Japanese automakers Toyota and Mazda said they would jointly build a $1.6 billion U.S. assembly plant with 4,000 jobs. With the blessing of the White House, Taiwan’s Foxconn announced plans for a $10 billion flat-screen plant in Wisconsin (probably in the Congressional district of Speaker Paul Ryan) that would purportedly employ up to 13,000 people. Foxconn is reported to be considering another plant in Michigan.

While these announcements are presented as a boon to American workers, there are reasons to be cautious. Companies such as Foxconn have made big promises in the U.S. before and failed to deliver. It and SoftBank and Alibaba may be simply currying favor with Trump and will be unable to make good on their extravagant job-creation projections. Their main aim may be to discourage some of Trump’s more aggressive protectionist tendencies.

And even if Foxconn’s projects do materialize this time, there are questions about the quality of the jobs it may create. Foxconn has a long reputation for abusive labor practices in China, where it has been a leading contractor for Apple.

Concerns about the U.S. labor practices of foreign companies are not just a matter of conjecture. In fact, while Foxconn’s plans have been all over the news, less coverage was given to what happened at the Nissan assembly plant in Canton, Mississippi: an organizing drive by the United Auto Workers was soundly defeated, with the union blaming the outcome on an aggressive management campaign of scare tactics, intimidation and misinformation.

What happened in Canton is nothing new. For the past three decades, Asian and European automakers have been opening U.S. assembly plants, focusing on states with low union density and a political climate hostile to labor organizing. Taking advantage of their non-union status, they have made excessive use of contingent labor and weakened the ability of workers to act collectively to improve their conditions.

Trump, of course, launched no tweet storms against Nissan and expressed no support for the workers in Canton. On the contrary, for a supposedly populist president, Trump has promoted a series of anti-worker policies. These include moves to shift the National Labor Relations Board in a pro-employer direction, reverse the overtime pay reforms adopted by the Obama Labor Department and weaken workplace safety and health rules.

In Trump’s worldview, workers are supposed to express solidarity not with each other but rather with their employers and their President. That’s a strange sort of populism.

Documenting NLRB Back Pay Awards

Wednesday, June 14th, 2017

Massey Energy is notorious for the 2010 Upper Big Branch disaster that killed 29 workers at a coal mine with a long history of safety violations. Yet Massey, now owned by Alpha Natural Resources, has another dubious distinction: it was responsible for the largest back pay award mandated by the National Labor Relations Board in recent years.

Massey paid out $22.8 million after the Board found it had committed unfair labor practices when it refused to recognize the United Mine Workers after it purchased a unionized West Virginia mining operation (separate from Upper Big Branch) and declined to continue the employment of most of the union members there.

The information about Massey’s payment emerges from the latest expansion my colleagues and I at the Corporate Research Project of Good Jobs First have made to the Violation Tracker database. We obtained a list of some 3,000 back pay awards through a Freedom of Information Act request to the NLRB. The awards, covering the period since the agency adopted its new NxGen database system in 2011, total more than $284 million.

This is not the complete list of unfair labor practice back pay cases during the period. The NLRB excluded from its FOIA response what are known as non-Board settlements — those reached by the parties before the NLRB has ruled on the matter. The Board said some of the awards are confidential, and since its system could not easily identify which those were, it left out all the non-Board settlements.

Among the other biggest NLRB back pay awards since 2010 are: $16.2 million paid by Midwest Generation (a subsidiary of NRG Energy), $10.7 million paid by Delphi Packard Electric (part of Delphi Automotive), $10.3 million paid by Fluor-Daniel (a unit of the engineering company Fluor), and $10 million paid by Momentive Performance Materials.

The NLRB dataset is an important addition to Violation Tracker. The Board issues press releases about only a small number of back pay awards and does not make data about other awards easily retrievable in the case information on its website. This appears to be the first time extensive NLRB back-pay award data is readily available online.

It should be noted, however, that information on back pay awards for the dozen years preceding 2011 is buried in a large NLRB dataset posted on Data.gov. My colleagues and I extracted the data. The entries for 2010 (the current starting point for Violation Tracker) are part of the new update. Earlier entries will be included in an expansion of the entire database back to 2000 that will be posted in a few months.

Those earlier entries contain some back pay awards much larger than those cited above, including $130 million paid by Lucent Technologies and Avaya Inc., and $97 million paid by CF&I Steel.

Along with the NLRB data, Violation Tracker has also been updated with recent entries from the more than 40 federal regulatory agencies already covered by the website.

Also new on the site are links on the parent-company summary pages to the pages for those companies in the Project On Government Oversight’s Federal Contractor Misconduct Database and in the list of the 100 largest federal contractors on POGO’s FedSpending site.

Violation Tracker now contains more than 161,000 entries with total penalties of more than $324 billion,  the vast majority of which is connected to some 2,460 large parent companies.

It’s good to see unfair labor practice culprits take their place alongside corporate violators of environmental, health and safety, consumer protection and other laws that protect workers and the public.

The Corporate War on Coal Miners Continues

Thursday, March 30th, 2017

The signing ceremony for Donald Trump’s executive order nullifying the climate initiatives of the Obama Administration was staged so that about two dozen miners looked on adoringly as the president claimed to be ending the so-called war on coal. Trump then repeated his promise that the regulatory rollbacks would “put our miners back to work.”

Just about every analysis concludes this is a hollow promise. Trump’s action will have little impact on the long-term decline of coal industry jobs. Even industry figures such as Robert Murray, CEO of Murray Energy, are warning: “He can’t bring them back.”

And even if there is a modest improvement, it won’t include the kind of well-paying jobs that used to characterize coal mining. According to the latest annual report on coal from the U.S. Energy Information Administration, unionized underground mining jobs are now outnumbered three to one by non-union surface mining jobs. The executive order’s lifting of the freeze on federal coal leasing, which is concentrated in Western surface mines, will increase the gap.

This did not happen by accident. The coal industry has been seeking for years to weaken the United Mine Workers by shifting work to non-union operations or by spinning off UMW-represented mines as weak stand-alone companies. The industry’s biggest producer, Peabody Energy, did this in 2007 when it shed Patriot Coal, which subsequently declared bankruptcy and was given court approval to slash wages, pensions and healthcare benefits of its workers and retirees. Today Peabody has only one operation left with a UMW presence. Anti-union animus was pronounced at various companies — especially Pittston and Massey Energy — that merged into what is now called Alpha Natural Resources.

One consequence of de-unionization is that coal managers can more easily cut corners on safety. This was seen at Peabody more than three decades ago. In 1982 the company pleaded no contest and paid a penalty of $130,000 to settle federal charges that it falsified dust-sampling reports submitted to the Mine Safety & Health Administration (MSHA) as part of the monitoring of conditions that can cause black lung disease. In 1991, after a year-long investigation by MSHA, Peabody once again stood accused of tampering with coal-dust test results. It pleaded guilty to criminal charges and was fined $500,000, the largest penalty that had ever been assessed for a non-fatal violation of federal mine safety regulations.

In 2006 a dozen miners died in a methane gas explosion at the Sago Mine in West Virginia operation, which had been cited by MSHA for “combustible conditions” and “a high degree of negligence.” During 2005 the mine (then run by International Coal Group, which later merged into Arch Coal) had received more than 200 violations, nearly half of which were serious and substantial.

Allegations of poor safety practices at a non-union mine surrounded an even worse disaster — the death of 29 miners at Massey Energy’s Upper Big Branch operation in West Virginia in 2010. The mine had been cited more than 50 times by MSHA in the month before the explosion and had racked up 1,342 violations over the previous five years. In 2011 Alpha Natural Resources, which bought Massey after the accident, had to pay $209 million to settle federal criminal charges.

If Trump really wanted to do something to help coal miners, he would beef up MSHA’s enforcement capacity and embrace labor law reforms that would help the UMW regain lost ground. Instead, he is proposing a 21 percent cut in the budget of the Labor Department, of which MSHA is a part, and staying silent on the anti-worker practices of the coal companies he is so eager to assist.

Fighting Wage Theft in the Senate Cafeterias

Thursday, July 28th, 2016

Trade deals tend to be the focus of many discussions these days about stagnant wages, but it’s important not to forget the role played by old-fashioned repressive management. Such a reminder just emerged in a case brought by the Labor Department’s Wage and Hour Division involving lousy working conditions at the very heart of U.S. policymaking.

DOL found that Restaurant Associates and its subcontractor Personnel Plus have been violating the McNamara-O’Hara Service Contract Act by improperly classifying foodservice workers in U.S. Senate cafeterias in order to pay them less than their proper wage. The employer was also found to be engaging in wage theft by requiring workers to begin their duties prior to scheduled starting times without compensation. DOL announced that hundreds of the workers will receive back pay in excess of $1 million.

Credit for the case belongs largely to the workers themselves, who for the past two years have been agitating about unfair working conditions with the help of Good Jobs Nation (which has no organizational relationship to my employer Good Jobs First).

In 2015 workers staged a series of strikes, prompting friendly senators (including Bernie Sanders) to put pressure on Restaurant Associates to agree to a modification of its contract requiring wage increases. Pay rates for job categories were boosted, but at the same time the company forced many workers into lower categories. The Washington Post reported on the underhanded practices back in January, citing as an example a cook who should have seen his pay jump to $17.45 an hour (from $12.30), but he was reclassified as a “food service worker” with a wage of $13.80.

Restaurant Associates is a subsidiary of Compass Group, one of the giants of the international foodservice industry. The UK-based corporation has been involved in numerous other controversies about its labor practices. In 2014 Compass Group USA paid $5 million to settle a wage-and-hour class action case. Earlier this year, UNITE HERE filed unfair labor practice charges against a Compass unit called Eurest for its actions during an organizing drive by foodservice workers at Intel’s headquarters in California.

There are other blemishes on its record. In 2012 New York Attorney General Eric Schneiderman announced that Compass Group USA would pay $18 million to settle allegations that it overcharged school lunch programs throughout the state. In 2015 Chartwells, a Compass company, paid $19.4 million to settle another school lunch case, this one in the District of Columbia in which the allegations included poor food quality as well as excessive costs.

Some member of the Senate are now calling for the termination of the Restaurant Associates contract. Deciding what should take its place is not easy. All of the other major foodservice companies have their own accountability challenges. And conditions were certainly not better before the Senate began contracting out the management of its cafeterias in 2008. It used to be known as the “last plantation” because of the poor treatment of workers.

At the very least, the Senate cafeteria workers need a strong union like that enjoyed by their counterparts at the House facilities. The reason they don’t is complicated and involves inter-union relationships. Good Jobs Nation deserves credit for helping bring about the DOL settlement, but a solid collective bargaining agreement would be even better.

Defending Disclosure

Thursday, July 21st, 2016

SEC2In 2012 proponents of financial deregulation managed to generate bipartisan support for a dubious piece of legislation that became the Jumpstart Our Business Startups (JOBS) Act. Among the provisions of the law was the requirement that the Securities and Exchange Commission review the provisions of Regulation S-K, which determines what publicly traded companies need to disclose about their finances and their operations.

Presumably, this process was meant to get the SEC to weaken its transparency rules, but the Commission seems to be approaching the issue in an even-handed manner. In April it issued a document called a Concept Release that reviewed the various issues and asked for comments from the public.

Quite a few progressive policy groups have responded with comments urging the SEC to tighten rules regarding the disclosure of foreign subsidiaries. In recent years, many corporations have been using a loophole in Regulation  S-K to avoid listing entities that are likely to be vehicles for engaging in large-scale tax dodging.

On the last day of the comment period, my colleagues and I at Good Jobs First and the Corporate Research Project submitted our own comments that support that position on foreign subsidiaries but also address several other disclosure issues. What follows are excerpts from those comments.

Subsidy Reporting. A key piece of information about a registrant’s finances has been missing from SEC filings, thus giving investors an incomplete picture of a company’s condition: the extent to which the firm is dependent on economic development incentives provided by state and local governments and other forms of financial assistance from the federal government.

It is estimated that companies receive a total of about $70 billion a year in state and local aid, while federal assistance is thought to total about $100 billion. Our Subsidy Tracker database contains information on more than half a million such awards with a total value of more than $250 billion.

For some companies (including their subsidiaries) the cumulative amount of such assistance is substantial. In Subsidy Tracker there are more than 60 firms that have each been awarded $500 million in assistance, and for more than half of those the amount exceeds $1 billion. The most heavily subsidized company, Boeing, has been awarded more than $14 billion. Other companies, including start-ups, may receive sums that are smaller but which account for a larger portion of their cash flow or assets. There are many cases in which a company’s total awards reach a level of materiality.

Investors should know to what extent a company is depending on subsidies — whether in the form of tax credits, tax abatements, cash grants, or low-cost loans. This is vital information for several reasons. First, many of the awards are contingent on performance requirements such as job creation and can be reduced or rescinded if the firm fails to meet its obligations. Second, investors currently face undisclosed political risk, since some state and local subsidy programs cause a significant fiscal burden and may be curtailed at times of budget stress.

We urge the SEC to use this review of Regulation S-K to correct the long-standing gap in financial disclosure relating to government assistance. Companies should be required to disclose both aggregate subsidy awards and breakdowns by type and jurisdiction.

Legal Proceedings. Like subsidies, corporate regulatory violations and related litigation have grown in size and significance. Violation Tracker, a database created by the Corporate Research Project of Good Jobs First, has collected data on more than 100,000 such cases since the beginning of 2010 with total penalties of about $270 billion. The database currently contains information on cases from 27 federal regulatory agencies and the Department of Justice.

Also as with subsidies, some corporations are significantly impacted by these penalties. In Violation Tracker there are 52 parent companies with aggregate penalties in excess of $500 million, including 26 with more than $1 billion. The most heavily penalized companies are Bank of America ($56 billion), BP ($36 billion) and JPMorgan Chase ($28 billion).

The Item 103 requirement that registrants report on material legal proceedings results in disclosure of the largest cases, but some companies fail to provide adequate details on other penalties that may not be in the billions but are still substantial. Since regulatory agencies and the Justice Department base their penalty determinations in part on a company’s past actions, companies omitting adequate data about their regulatory track record are denying investors information that may indicate a heightened risk for much larger penalties in the future.

At the very least, the Commission should do nothing to weaken the provisions of Item 103 and related provisions requiring reporting about regulatory matters and legal proceedings. It is also worth considering whether changes are needed in the Instruction 2 language allowing companies to omit cases with potential penalties that do not exceed ten percent of the firm’s current assets. Losses at or close to the ten percent level could have severe consequences for many companies and pose the kind of risk investors deserve to know about.

Current disclosures based on materiality should be expanded to also require registrants to indicate which of their cases involve repeat violations of specific regulations. Such recidivist behavior will be a matter of concern for many investors.

Subsidiaries. Good Jobs First joins with the numerous other organizations that are urging the Commission to strengthen rules regarding the disclosure of offshore subsidiaries that may be involved in risky international tax strategies.

We believe that better disclosure is necessary with regard to domestic subsidiaries as well. In the course of our work on the Subsidy Tracker and Violation Tracker databases, we have looked at hundreds of the Exhibit 21 subsidiary lists included in 10-K filings. We make extensive use of these lists in the parent-subsidiary matching system we developed to link the companies named in individual subsidy awards and violations to a universe of some 3,000 parent corporations. This enables us to display subsidy and penalty totals for the parent companies and thus provide our users, including investors, with what we think is valuable information about the finances and compliance records of these companies.

When looking at these Exhibit 21 lists we have seen a great deal of inconsistency. Using the Item 601(b)(21)(ii)  exception, some companies are listing few if any subsidiaries, whether domestic or foreign. We find it hard to believe that any large corporation has no subsidiary of significance. The omission of subsidiary names makes it more likely that we will miss an important linkage in our databases relating to a significant subsidy award or violation. It also means that investors doing their own analyses may be working with incomplete information.

In addition to making sure that all registrants provide complete subsidiary reporting, the Commission should mandate that the information is the Exhibit 21 lists be presented in a standardized format. Currently, some companies list all subsidiaries in alphabetical order, while others group them by country. Some companies list second-tier and other levels of subsidiaries under their immediate parents, while others place the various tiers in one alphabetical list or exclude the lower levels entirely. Whichever standardized format is mandated should also have to be made available in machine-readable form.

Employees. Another area of widespread inconsistency is in the reporting on employees. Numerous companies seem to be omitting this piece of information, and a larger number have abandoned the traditional practice of indicating how many of the employees are based in the United States and how many are at foreign operations. An even smaller number of firms maintain the once widespread practice of providing information on collective bargaining.

The size of a company’s workforce is information that investors deserve to know. Given the widespread discussion in the political arena about offshore outsourcing and the talk of compelling firms to bring jobs back to the United States, the foreign-domestic breakdown is of great importance to investors. They should also be told about the extent to which both types of employees are covered by collective bargaining agreements.

And given the growing controversy over employment practices and the potential for stricter regulations, companies should also be required to provide details on the composition of their labor force, including the number of workers who are part-timers, temps or independent contractors.

Manufacturing McJobs at Nissan and Elsewhere

Thursday, May 12th, 2016

Bring back manufacturing jobs: For years this has been put forth as the silver bullet that would reverse the decline in U.S. living standards and put the economy back on a fast track. The only problem is that today’s production positions are not our grandparents’ factory jobs. In fact, they are often as substandard as the much reviled McJobs of the service sector.

The latest evidence of this comes in a report by the UC Berkeley Center for Labor Research and Education, which has issued a series of studies on how the growth of poorly paid jobs in retailing and fast food have burdened government with ever-rising social safety net costs. Now the Center shows how the same problem arises from the deterioration of job quality in manufacturing.  The study estimates that one-third of the families of frontline production workers have to resort to one or more safety net program and that the federal government and the states have been spending about $10 billion a year on their benefits.

What makes these hidden taxpayer costs all the more galling is that manufacturing companies enjoy special benefits in the federal tax code and receive lavish state and local economic development subsidies, the rationale for which is that the financial assistance supposedly helps create high-quality jobs.

The Center’s analysis deals in aggregates and thus does not single out individual companies, but it is not difficult to think of specific firms that contribute to the vicious cycle. A suitable poster child, it seems to me, is Nissan. It is one of those foreign carmakers credited with investing in U.S. manufacturing, though like the other transplants it did so in a pernicious way.

First, it tried to avoid being unionized by locating its facilities in states such as Mississippi and Tennessee that are known to be unfriendly to organized labor. After the United Auto Workers nonetheless launched an organizing drive, the company has done everything possible to thwart the union.

Second, while boasting that its hourly wage rates for permanent, full-time workers are close to those of the Big Three domestic automakers, Nissan has denied those pay levels to large chunks of its workforce. Roughly half of those working at the company’s plant in Canton, Mississippi are temps or leased workers with much lower pay and little in the way of benefits.

It is significant that in the Center’s report, Mississippi — which has also attracted manufacturing investments from other foreign firms such as Toyota and Yokohama Rubber — has the highest rate of participation (59 percent) in safety net programs by families of production workers. The Magnolia State may have experienced a manufacturing revival, but many of those new jobs are so poorly paid that they are creating a burden for taxpayers.

At the same time, Mississippi is among the more generous states in dishing out the subsidies to those foreign investors. My colleague Kasia Tarczynska and I discovered that the value of the incentive package given to Nissan in 2000 will turn out to cost $1.3 billion — far more than was originally reported. Toyota got a $354 million deal in 2007, and Yokohama Rubber got a $130 million one in 2013.

There’s a lot of talk these days about bad trade deals and resulting job losses. We also need to worry about what happens when we gain employment from international investment but the jobs turn out to be lousy ones.

The Wrongs of States’ Rights

Thursday, April 14th, 2016

The publication of the Panama Papers is a bombshell, though the fallout is being felt much more in countries such as Iceland than in the United States. It’s true that the revelations about offshore tax havens have mentioned domestic counterparts such as Delaware, Nevada and Wyoming, but officials in those states don’t seem to think that any action needs to be taken. As the headline of an article in the BNA Daily Tax Report put it: STATES GIVE GROUP SHRUG TO PANAMA PAPERS.

One reason for the tepid reaction is that the criticisms have been heard before. As BNA points out, a 2006 report from the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) listed the three states as being especially appealing to those seeking to create shell companies.

Another basis for complacency by the states is that their practices are part of a long and unfortunate tradition in the United States politely called federalism, but which is really a race to the bottom when it comes to oversight of corporations and the wealthy.

This trend dates back to the 19th Century, when the efforts of tycoons such as John D. Rockefeller to create vast industrial empires came up against the fact that state laws governing corporate charters put restrictions on the size and scope of a corporation’s activities, including the ownership of out-of-state companies. Rockefeller’s flagship firm Standard Oil of Ohio tried to get around this by creating the Standard Oil trust, in which affiliates were nominally independent but were actually controlled by a centralized board chosen by Rockefeller. Similar trusts were created in a variety of other industries.

Standard Oil’s transparent effort to circumvent state law was eventually struck down by the Ohio Supreme Court, but by that time Rockefeller and other robber barons had a new tool at their disposal: the willingness of some states to water down their chartering regulations to make them more attractive to big business.

The pioneer of this practice was New Jersey, which adopted a series of legislative measures from the 1870s through the 1890s to make its regulations more business-friendly. During this period, New Jersey became the destination of choice for trusts looking to legitimize themselves by reincorporating in a state that had no problem with bigness. That position was reinforced after Standard Oil made the Garden State its new base of operations. Muckraker Lincoln Steffens took to calling New Jersey the “traitor state.”

Other states sought to get in on this action. In 1899 Delaware adopted a corporation law that was even looser than New Jersey’s and had lower incorporation fees and franchise taxes. After New Jersey later changed course and went back to stricter corporation laws, it was Delaware that became the new mecca of corporations and has remained so to the present day.

Looser chartering procedures not only helped large corporations get larger but also made it easier for both businesses and wealthy individuals to set up the kind of shell companies highlighted in the Panama Papers. The ability and willingness of states to compete with one another to offer the most corporate-friendly practices goes well beyond company formation and governance.

Two areas in which the effects have been most pernicious are economic development and labor relations. Starting in the 1930s but especially during the past few decades, states have been willing to hand over larger and larger “incentive” packages to corporations to lure investments.  For example, in 2014, following a multi-state competition, tax haven Nevada gave away nearly $1.3 billion in taxpayer revenue to get Tesla Motors to locate an electric-car battery plant in the state.

Some states also lure companies with the promise of weak or non-existent labor unions. Ever since the Tart-Hartley Act of 1947, states have had the right to enact laws outlawing union security provisions in collective bargaining agreements. These so-called right-to-work laws tend to weaken the ability of unions to organize while saddling existing unions with lots of free riders who don’t contribute to the cost of running the organization.

It’s widely understood that the notion of states’ rights is often a smokescreen for racial discrimination, but it’s also part of what enables other retrograde practices such as union-busting, corporate welfare and tax dodging.