Reuters blog archive

from Breakingviews:

U.S. is minimum-wage laggard given its prosperity


By Martin Hutchinson
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

America is a minimum-wage laggard – at least relative to its economic prosperity. With Washington considering a higher pay floor and Peru’s prime minister losing his job over the issue, a Breakingviews analysis shows that minimum wages as a percentage of local income levels are still low in the United States and, for instance, in neighboring Mexico.

Most decent-sized economies feature minimum wages, though Germany, Scandinavian countries and South Africa are notable exceptions. Legal pay floors vary widely compared to per-capita GDP in 2012, as measured by the World Bank – outliers aside, from around 20 percent of output per head to 60 percent. Some places, like China and the Philippines, also have different pay rules for wealthy urban regions and poorer hinterlands.

A minimum wage to average prosperity ratio – call it a MAP score – at a very high 80 percent or more of reported GDP per head occurs in Nigeria and Pakistan, where the informal economy is large and official figures may be understated. More credibly generous regimes arise in New Zealand, with a MAP score of 60 percent, and some European countries. That’s consistent with the idea that higher wage floors are more sustainable where incomes are already relatively equal and the minimum pay level affects only a tiny proportion of employees.

from Edward Hadas:

AOL, solidarity and health insurance

The head of the American internet company AOL managed to say something really stupid a few weeks ago, and to sound callous at the same time. It’s a shame Tim Armstrong came off so badly, because he was trying to deal with a serious topic.

Armstrong was trying to justify the company’s decision, since reversed, to trim its employees’ retirement benefits. He started out at a disadvantage, because the chosen cutback was sneaky. A change that sounds innocuous, moving from monthly to annual employer payments into employee pension savings accounts, is actually a way to eliminate payments to employees who leave before the end of the year. It’s hard to look honest and upfront when explaining that.

from Breakingviews:

Return to U.S. workforce of old a mixed blessing


By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The recent decline in the U.S. jobless rate to 6.7 percent is flattered by low labor participation. A return to the 2006 level of workforce involvement would mean 8 million more job-seekers and unemployment running over 11 percent. But as a Breakingviews calculator shows, that dramatically overstates the scale of the problem.

from The Great Debate:

Pennsylvania as the new Wisconsin in union fights


The Wisconsin state capitol was the site of massive protests in 2011 during the fight to pass Republican Governor Scott Walker’s labor reforms. The following year Big Labor staged demonstrations in Michigan against Republican Governor Rick Snyder’s right-to-work bill, which ultimately passed. Now Pennsylvania’s state capitol is set to reach fever pitch, as unions plan to bus in hundreds of protestors this week to fight legislation that, if bad for union bosses, could be a boon to rank-and-file workers.

Pennsylvania is a longtime labor stronghold. Consider that a plaque directly across from the state capitol commemorates the unionization of government workers. But Pennsylvania lawmakers are now poised to pass a law to end automatic deduction of union dues from government employee paychecks.

from Full Focus:

Living on minimum wage


As U.S. fast-food workers strike in a bid to raise wages in the service sector, Reuters photographers in 10 countries document the lives of workers living on their country's minimum wage.

from MacroScope:

For workers, the long run has arrived in Latin America

The outlook for emerging market economies over the next decade looks more challenging as long-term interest rates start to bottom out in the United States. Here is another complicating factor: ageing populations.

That problem is not as serious as in Japan or Europe, of course. Still, investors probably need to cut down their expectations for economic growth in Latin America over the next years, according to a report by BNP Paribas.

from MacroScope:

U.S. job openings rise, but nobody’s hiring?

It’s a good news, bad news story: The U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover (JOLTS) survey in June showed an increase in job openings, but a decline in new hires. The ratio of unemployed Americans to each open job fell in June to its lowest level in over four years.

The number of job separations (government code for layoffs) also fell, mainly due to fewer layoffs. The June numbers suggest some retracing of the gains of the previous month or two, but does not erase them, says Stone & McCarthy Research Associates economic analyst Terry Sheehan.

from The Great Debate:

Rebuilding America’s high-wage economy


Good for President Barack Obama for emphasizing the need to restore America’s middle class. However, the actual proposals in his new summer offensive would not go very far toward that worthy goal.

America is moving, at an accelerating pace, toward an economy with tens of millions of poorly paid service jobs at one end, and a relatively small number of astronomically compensated financial jobs at the other. In between the fast food workers, who demonstrated this week for a living wage, and the hedge fund billionaires is a new creative class heavily based on the Internet. But the web entrepreneurs are too narrow a segment on which to rebuild a broad middle class.

from Alison Frankel:

Case sparked by plaintiffs lawyer? Nothing wrong with that: 7th Circuit

Until fate, in the person of a private investigator, brought her together with a Mississippi whistle-blower lawyer named Timothy Matusheski, Debra Leveski didn't even know she could sue her former employer, the for-profit university ITT Educational Services, for supposedly duping the federal government. Leveski spent about 10 years working at ITT's campus in Troy, Michigan, first as a recruitment officer, then in the financial aid office. She left the company in 2006 as part of the settlement of a sexual harassment suit she brought against ITT. Less than six months later, Leveski received a letter from an investigator working for Matusheski, who at the time specialized in False Claims Act suits against for-profit universities, which had come under scrutiny for allegedly enrolling students simply to receive federal student aid funding. Intrigued, Leveski called the investigator and eventually met with Matusheski.

The Mississippi lawyer told me that when his investigator first reached out to Leveski, his intention was just to find out something from her about ITT's financial aid procedures. (He knew from public records in her harassment suit that she had worked in the company's financial aid office.) "After listening to her talk," he said, "I said she had a potential claim under the False Claims Act and she should ask her attorney about it." According to Matusheski, Leveski consulted her lawyer, who sent her back to him. Leveski then did some research on FCA cases, including a previously dismissed FCA case against ITT, and on Matusheski. In July 2007, the Mississippi lawyer filed an FCA case against ITT in federal court in Indianapolis, naming Leveski as the relator.

from Felix Salmon:

Wage deflation charts of the day

NELP, the National Employment Law Project, has taken a detailed look at what happened to wages during the recovery -- specifically, between 2009 and 2012. They looked at the annual Occupational and Employment Statistics for three years -- 2007, 2009 and 2012 -- and created a list of wages for 785 different occupations. They then split those occupations into five quintiles, according to income; the lowest quintile made $9.49/hr, on average, last year, while the highest quintile averaged $40.23/hr.

But let's not look at averages, let's look at the actual disaggregated data. Here are some charts which Ben Walsh laboriously constructed, and which need a little bit of explanation. Each thin line is one occupation, with nominal wages rebased to 2007=100. As a result, these charts show increase in wages, rather than absolute wages: the lines which rise the most are the ones with the biggest pay raises, not the ones with the highest pay. (Although, as you'll see, the two are highly correlated.)