In 2020, Illinois took an important step toward fixing this last issue, by making nonlicensed school staff eligible for unemployment insurance during the summer months. Illinois’s experience offers guidance for other states considering similar programs, like in Minnesota where a similar measure is currently under debate. We’ll discuss the Illinois experience later on, but first it’s useful to understand a little more about who nonlicensed school staff are and the pay they receive.

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Yes, last week’s jobs report was disappointing, with employment growth slowing significantly from the months before. It would be a mistake, however, to make too much of a single month’s data—the monthly jobs report data are notoriously volatile, and there are still excellent reasons to believe that coming months will see very strong job gains. Further, as disappointing as last week’s report was, there is nothing in it that demands a reorientation of the general policy stance taken by the federal government. The relief and recovery aid already passed (including the boosts to unemployment insurance) should be continued and proposed packages (like the American Families Plan and the American Jobs Plan) should be passed.

The argument that last week’s report demands a rethink of today’s policy orientation rests on claims that it contained clear evidence of damaging labor shortages induced by either too-extensive stimulus or too-generous unemployment insurance (UI).

There is not compelling evidence of either of these. In fact, nothing in last week’s jobs report calls for a wholesale change of policy course from the federal government. The key takeaways from the data are:

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One important indicator from today’s report is the job seekers ratio—the ratio of unemployed workers (averaged for mid-March and mid-April) to job openings (at the end of March). On average, there were 9.8 million unemployed workers compared with 8.1 million job openings. This translates into a job seekers ratio of 1.2 unemployed workers to every job opening. Put another way, for every 12 workers who were officially counted as unemployed, there were only available jobs for 10 of them. That means, no matter what they did, there were no jobs for 1.6 million unemployed workers.

As with job losses, workers in certain industries are facing a steeper uphill battle. In the construction industry as well as arts, entertainment, and recreation, there were more than two unemployed workers per job opening. In educational services, accommodation and food services, other services, and transportation and utilities, there were more than three unemployed workers for every two job openings.

JOLTS

There has been much bemoaning of labor shortages, particularly within accommodations and food services, even though there are no available jobs for one-third of the job seekers in that sector. Any potential shortage from the recent surge in job openings is likely to be quite short-lived, as before long many more workers will come back into job-search as it becomes increasingly safe to pursue these public facing jobs with improving public health metrics, as childcare and schooling becomes more reliable, and as wages rise to compensate for the extra risk of working in face-to-face places during the lingering pandemic. And, as we saw in the April employment data last Friday, the labor market added 241,400 more jobs in accommodation and food services, so the trend is already moving in the right direction.

It’s also important to remember that all potential workers don’t show up in the official count of unemployed, particularly in this recession as workers sheltered at home to avoid the pandemic or to care for family members. The economic pain remains widespread with 22.1 million workers hurt by the coronavirus downturn. I hope hiring picks up in coming months since the labor market continued to face a significant jobs shortfall likely in the range of 9.0 to 11.0 million jobs.

So this year, while of course we should celebrate our mothers, there’s much more to be done. Honoring our caregivers goes beyond individual gestures; it calls for a sweeping investment in care workers and services.

Care isn’t a burden for women and families to shoulder alone. It’s the foundation of our economy, and it deserves to be treated as such. For the tens of millions of workers with care responsibilities related to, for example, young children or elderly parents, having stable, high-quality care services available is what makes it possible for them to hold a job. Put simply, care services are needed for the functioning of our modern labor market.

Workers with care responsibilities need a strong care system in place in order to participate in the workforce. As it stands, our care infrastructure is fragmented and inadequate, which cuts off opportunities for millions of workers. The burdens of our inadequate care infrastructure disproportionately fall on women, who still perform the bulk of care work in this country. Those care burdens are a primary cause of low labor force participation among prime age women in the U.S. relative to our peer countries around the world, even before the pandemic. Poor care infrastructure comes at great economic costs.

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The unemployment rate ticked up in April to 6.1%, in large part due to workers beginning to return to the labor force in search of jobs. The labor force increased by 430,000 workers in April, the largest gain in six months. Likely in response to improving public health metrics and increased expectations of job opportunities, more and more workers are actively returning to the labor force in search of work. While wage growth will be the leading indicator of employers having to bid up wages to attract workers, the significant rise in the labor force runs counter to anecdotal claims of labor shortages.

As of the latest data, employment is still down 8.2 million jobs from its pre-pandemic level in February 2020. But, if we include the likelihood that thousands of jobs would have been added each month over the last year without the pandemic recession, the jobs shortfall is more likely in the range of 9.0 and 11.0 million. Now is not the time to turn off vital relief—including expanded unemployment benefits—to workers and their families.

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As of the latest March 2021 data, employment is down 8.4 million jobs from its pre-pandemic level in February 2020. In addition, thousands of jobs would have been added each month over the last year without the pandemic recession.

I consider two plausible counterfactuals for how many jobs may have been created if the recession hadn’t hit, as shown in the figure below. First, we could simply add enough jobs to keep up with population growth. There was a noticeable slowdown in ages 16+ population growth early in the pandemic; however, on average, we still would have needed a minimum of 54,000 jobs a month just to keep up with that growth.

Alternatively, we could count how many jobs may have been added if we took pre-recession growth in payroll employment and extended that forward. Average monthly job growth over the 12 months prior the recession was 202,000. Using these reasonable counterfactuals, we are now short between 9.1 million and 11.0 million jobs since February 2020. When the latest job numbers are released tomorrow, we should not only look at the difference in jobs between now and February 2020, but also what could have been if the economy continued growing over the last year.

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But in reality, the franchisees can barely survive, the company keeps the tips, the training is bogus, and the promised job is nonexistent.

Some public enforcement agencies (and even private lawyers) have recently attacked corporate misconduct of this sort by enforcing laws traditionally used to protect consumers in order to address unfair and deceptive labor market practices that target working people, often immigrants and people of color. More enforcement agencies and lawyers should follow their lead. Public enforcement agencies that focus on enforcing consumer protections, including federal agencies, attorneys general, and state and local consumer offices, should take an expansive view of their mission, and take action to protect worker-consumers in their often-complex relations with large corporations that use abusive and predatory practices.

A few recent cases provide examples of how this can be done.

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There are lots of anecdotal reports swirling around about employers who can’t find workers. Just search “worker shortages” online and a seemingly endless list of stories pops up, so it’s easy to assume there’s an alarming lack of people to fill jobs. But a closer look reveals there may be a lot less to this than meets the eye.

First, the backdrop. In good times and bad, there is always a chorus of employers who claim they can’t find the employees they need. Sometimes that chorus is louder, sometimes softer, but it’s always there. One reason is that in a system as large and complex as the U.S. labor market there will always be pockets of bona fide labor shortages at any given time. But a more common reason is employers simply don’t want to raise wages high enough to attract workers. Employers post their too-low wages, can’t find workers to fill jobs at that pay level, and claim they’re facing a labor shortage. Given the ubiquity of this dynamic, I often suggest that whenever anyone says, “I can’t find the workers I need,” she should really add, “at the wages I want to pay.”

Furthermore, a job opening when the labor market is weak often does not mean the same thing as a job opening when the labor market is strong. There is a wide range of “recruitment intensity” that an employer can apply to an open position. For example, if employers are trying hard to fill an opening, they will increase the compensation package and perhaps scale back the required qualifications. Conversely, if employers are not trying very hard, they may offer a meager compensation package and hike up the required qualifications. Perhaps unsurprisingly, research shows that recruitment intensity is cyclical. It tends to be stronger when the labor market is strong, and weaker when the labor market is weak. This means that when a job opening goes unfilled when the labor market is weak, as it is today, employers are even more likely than in normal times to be holding out for an overly qualified candidate at a very cheap price.

This points to the fact that the footprint of a bona fide labor shortage is rising wages. Employers who truly face shortages of suitable, interested workers will respond by bidding up wages to attract those workers, and employers whose workers are being poached will raise wages to retain their workers, and so on. When you don’t see wages growing to reflect that dynamic, you can be fairly certain that labor shortages, though possibly happening in some places, are not a driving feature of the labor market.

And right now, wages are not growing at a rapid pace. While there are issues with measuring wage growth due to the unprecedented job losses of the pandemic, wage series that account for these issues are not showing an increase in wage growth. Unsurprisingly, at a recent press conference, Federal Reserve Chairman Jerome Powell dismissed anecdotal claims of labor market shortages, saying, “We don’t see wages moving up yet. And presumably we would see that in a really tight labor market.”

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Elise Gould
Senior Economist
Economic Policy Institute 

Thank you, Chairman Casey, Ranking Member Scott, and members of the committee, for the invitation to participate in today’s important hearing on supporting older workers amid the COVID-19 pandemic and beyond. My name is Elise Gould, I am a senior economist at the Economic Policy Institute, a leading non-profit non-partisan think tank that analyzes the effects of U.S. economic policy on working families. Today I would like to outline the economic impacts of the COVID-19 pandemic on older workers, how it compares to the Great Recession, and how we can build a stronger, more equitable economy going forward.

In 2020, the U.S. economy took a hit like none other in recent history. Because the 2020 recession was driven by a highly unusual cause—the need to control the pandemic and keep people safe—its first-round impacts were far different than most previous recessions in terms of which sectors and workers were hit hardest and most durably. Workers across the economy, including older workers, experienced devastating job losses. 5.7 million workers 55 years old and older lost their jobs last spring—15% of total employment for this group—and remain over 2 million jobs short of their employment levels before the pandemic hit.

Labor market outcomes were far worse for older workers in this recession as compared to their experience in the Great Recession. In particular, employment losses were greater for older workers 55 years and older in the pandemic recession compared to the Great Recession while the oldest of workers (65 years and older) experienced employment gains in the Great Recession and losses in the pandemic recession. In particular, women ages 55 and older were met with a harsher economic reality in this recession than the prior one. One of the reasons the economic reality was bleaker for older workers is that they were less likely to be able to telework coming into the pandemic. They were also significantly harder hit by the pandemic itself and therefore may have left employment in greater numbers because of concerns over their own health. The economy requires continued assistance from policymakers to ensure that the economy comes back strong, and the recovery provides greater economic security and opportunity for all workers, regardless of age, race/ethnicity, gender, and educational attainment.

The U.S. economy faced devastating job losses in the pandemic recession and continues to face a significant employment shortfall

At the beginning of the coronavirus pandemic, the U.S. economy experienced losses in March and April of 1.7 million and 20.7 million jobs, respectively, losses the likes of which we hadn’t experienced in modern history. Figure A shows the monthly changes in payroll employment between January 2020 and March 2021. The labor market saw a significant bounce back in May and June with 2.8 million and 4.8 million jobs added, respectively. Unfortunately, over the remainder of 2020, job growth rapidly slowed as vital federal relief expired and the virus surged. Then, employment fell outright in December 2020, a loss of 306,000 jobs.

A solid 916,000 jobs were added in March, the strongest job growth we’ve seen since the initial bounce back faded last summer. Even with these gains, the labor market is still down 8.4 million jobs from its pre-pandemic level in February 2020. In addition, thousands of jobs would have been added each month over the last year without the pandemic recession. If we count how many jobs may have been created if the recession hadn’t hit—consider average job growth (202,000) over the 12 months before the recession—we are now short 11.0 million jobs since February. Even at this pace, it could take more than a year to dig out of the total jobs shortfall.

Figure A

The latest jobs number is certainly a promising sign for the recovery, especially as vaccinations increase and vital provisions in the American Rescue Plan (ARP) have continued to ramp up since the March reference period to today’s data. While the benefits of the ARP will continue to be captured in coming months, more can be done to continue to keep the economic recovery on track, invest in the economic infrastructure, and surpass pre-pandemic benchmarks.

Millions of older workers lost their jobs in the COVID recession

Older workers were far from spared in the COVID recession. Figure B charts the monthly employment level for workers 55 years and older between January 2020 and March 2021. Between March and April 2020, 5.7 million workers ages 55 and up lost their jobs. This represents a loss of 15% of employment among older workers. As with workers overall, older workers experienced a bit of a rebound last summer, but unlike most other workers, older workers lost ground through the fall. March 2021 was the first month since October 2020 that older workers saw positive gains in employment. Even with that more promising gain of 308,000 jobs in March 2021, older workers are still down 2.1 million jobs since February 2020.

This understates the shortfall in employment for older workers because it simply calculates what it would take to return to the February 2020 labor market. A better measure would take into account the fact that the older population has grown significantly since then. The 55+ population has increased by more than 1.5 million since February 2020. Considering what the employment level could be given the February 2020 employment rate and recent population growth, older workers are facing a job shortfall of over 2.7 million jobs.

Figure B

Older workers lost employment in greater numbers in the COVID downturn than in the Great Recession

In the pandemic recession, older workers have faced a more challenging labor market than they experienced in the last labor market downturn, also referred to as the Great Recession. The official Great Recession followed the business cycle peak in 2007 and ended in 2009, though job losses continued into 2011. Therefore, the depth of the Great Recession is best measured by comparing 2007 with 2011. Figure C reports full year data on the share of the population with a job, also known as the employment-to-population ratio (EPOP), by age group, comparing changes in EPOPs in the Great Recession (2007-2011) with changes in the pandemic recession (2019-2020). Comparing full year data for 2019 with 2020 does not capture the full extent of the worst of the pandemic recession, but it provides a sense for how the year as a whole impacts employment across age groups.

The depth and length of the recession on employment rates was worse for young workers (16-24 years old) and prime-working-age workers (25-54 years old) in the Great Recession than in the pandemic recession. EPOPs fell by 7.7 percentage points for young workers in the Great Recession and by 5.3 percentage points in the pandemic recession. Prime-working-age workers experienced less of a difference between the recessions, but they did see a slightly larger fall in EPOPs in the former recession than the latter (4.8 ppt decline versus 4.3 ppt decline).

Figure C

Older workers, on the other hand, experienced far worse labor market outcomes in the pandemic recession than the Great Recession. Workers 55-64 years old experienced more mild employment losses in the prior recession and workers ages 65 and older experienced outright gains in the prior recession.1 Job losses may have been lighter among older workers in the former recession because of where the job losses occurred as well as the fact that older workers’ retirement income may have been more compromised during the financial crisis than during the COVID recession and therefore they may have remained in the labor force longer than they otherwise would have. In addition, in the current recession, older workers may have left employment for fear of the pandemic itself.

Figure D compares the employment rates of men and women older workers, separately. Older men ages 55+ experienced greater employment losses than women in the COVID downturn, but older women experienced a bigger difference in employment between the Great Recession and the COVID recession. In particular, men ages 55-64 only saw a mild difference in their losses between the Great Recession and the COVID recession (3.0 percentage point changes versus 3.5 percentage point change in their EPOPs). Women ages 55-64 saw a much larger drop in employment in the most recent recession, 3.1 percentage points versus 0.7 percentage points. This could be due in part to additional caregiving responsibilities for this cohort of older women. They may have left the labor force to care for elderly parents who left their nursing home or assisted living facility, other ill family members, or even grandchildren when the schools shuttered.

Both men and women ages 65 and older experienced a significant swing in employment between the Great Recession and the COVID downturn. In the earlier period, both men and women saw increases in employment, while in the latter period, both experienced significant losses.

Figure D

Older workers were harder hit by the pandemic itself and therefore may have employment in greater numbers because of concerns over their own health

The data over the last year have been conclusive that older workers are at higher risk for severe illness from COVID-19. Figure E shows the disproportionate death toll borne by the population 55 years old and older. The vast majority—93%—of the deaths from COVID-19 were among those 55 years old and older. Over a half a million deaths were attributed to this older population. It would be no surprise then that many older workers may have not only lost their jobs but opted out of the work force for fears of their own health and safety. This may be particularly true for older workers of color who have been hit harder from both the health and economic aspects of the pandemic.

Figure E

Unfortunately, older workers were less likely than many other age groups to be able to telework before the pandemic hit. Figure F shows the share of workers who were able to telework before the pandemic hit, by age group. Nearly three-fourths of workers ages 65 and older—or over 5 million older workers—are unable to telecommute. And over two-thirds of 55- to 64-year-olds cannot telework either; this represents another 15 million workers. That means that these workers, who are at higher risk for severe illness from COVID-19 because of their age, could be putting themselves at risk to earn a paycheck.

The latest data from the Bureau of Labor Statistics shows that only about one-fifth of the current workforce is teleworking. That means that nearly 80% of workers are physically going to work. Not only does that include many older workers, but it’s likely that millions of younger workers who cannot telework may be putting older family members at risk by going to work themselves.

Figure F

Congress has taken important steps to protect the health and economic well-being of workers and their families during the pandemic. However, in order for the economy to grow back quickly and stronger than before, policymakers should make sure the recovery hits all corners of the labor market. This means putting significant investments in policies that meet the pressing social needs the COVID-19 pandemic made so visible and that lead to greater economic security and opportunity for workers, including but not limited to, physical infrastructure, caregiving needs for young and old, paid leave, and expanded unemployment insurance.

Thank you and I look forward to your questions.

Note

1. While the aging population—namely baby boomers reaching age 65 during the Great Recession—may be a factor in the employment increases for workers age 65+ in the Great Recession, an examination of the same data using smaller age groupings confirms that the labor market led to fewer job losses among this group and the outright gains were experienced among those 65-69, 70-74, and 75 and older when measured separately.

Introduction

The U.S. Supreme Court’s 2018 decision in Janus v. American Federation of State, County, and Municipal Employees (AFSCME) (referred to as Janus hereafter) prohibited state and local government worker unions from negotiating collective bargaining agreements with fair share fee arrangements. The court agreed with the plaintiff’s claim that the fair share fees (known also as “agency fees”) violate workers’ First Amendment rights of freedom of speech and association. This dramatic legal change makes it harder for public-sector unions to be effective.1 However, its full repercussions on membership, employment conditions, and other outcomes for public-sector workers remain to be investigated.

Because the Janus decision is relatively recent, it is too early to assess its comprehensive impacts. However, we can anticipate the direction that Janus is taking us by examining legislation that was passed by several U.S. states in the last decade that also substantially restricted public-sector bargaining rights. Though the laws in Idaho, Indiana, Michigan, Tennessee, and Wisconsin lack the scale of the Janus decision, and though they differ from one another and from the substance and the legal focus of Janus, all have—like Janus—been described as an attack on unions’ membership and strength.

In this report, we examine state collective bargaining restrictions on public-sector unions and how they impact spending on teacher compensation. Specifically, we develop a framework to estimate how spending on teacher compensation was affected by changes in the legal institutions (laws, court decisions, and other administrative mechanisms) governing public-sector unions in five states that experienced these changes early in the previous decade. There are two purposes of this study. First, our framework and the analysis, with the necessary adjustments to scale, contexts, and timelines, could be used in the near future to understand and estimate the impact on public-sector workers of the Janus decision (or of laws, court decisions, and other administrative mechanisms of a similar nature). Second, our results also set the stage for other important and broad questions regarding the affected education systems. These institutional changes that influence districts’ spending on teacher compensation may also shift the career decisions of individuals who otherwise may have chosen a teaching profession, and they may have implications for student outcomes. Thus, this study can help policymakers better grasp the role of teachers unions in the post-Janus era by exploring pre-Janus events that affected the educational sector.

We find that the pre-Janus legal changes weakening teachers unions in Idaho, Indiana, Michigan, Tennessee, and Wisconsin effectively reduced spending on total teacher compensation by about 6%, reduced teacher salaries by about 5%, and reduced teacher benefits by 9.7%. Even though it is not possible to use these results to exactly estimate the impact of Janus on union and nonunion teachers (nor to assess the impact of any other policy changes in states occurring within different contexts and under different timelines), the evidence from our study serves as an early warning of potentially negative repercussions of Janus on similar outcomes.

The legal environment for public-sector workers differs from that for private-sector workers

Legal environments and labor laws in each state play critical roles in the labor market for public-sector workers because they govern the breadth of worker rights and employment conditions. For private-sector workers, the exercise of collective bargaining rights is regulated by the country’s fundamental labor law, the 1935 National Labor Relations Act (NLRA) and the National Labor Relations Board (NLRB) established to administer and enforce the NLRA.2

For public-sector employees, there is no one national labor law or administrative body governing the entirety of collective bargaining rights. Instead, state laws and administrative bodies (1) govern whether collective bargaining (CB) among public-sector employees is mandated, legal, or prohibited, (2) govern whether public-sector employees are allowed to strike, and (3) shape the work environment and labor market outcomes. Prior to Janus, these institutions also governed whether unions were permitted to collect fair share fees from nonunion members (Winkler, Scull, and Zeehandelaar 2012; Hanushek 2020). After the Janus decision deemed public-sector agency fees unconstitutional, nonmembers were no longer required to pay fair share fees for union services, even though they are covered by the same bargaining contracts as union members.

Over half of union workers in the United States are in the public sector, and public school teachers make up the single largest group of public-sector unionized employees (Wolf and Schmitt 2018). According to a report by the National Center for Education Statistics (NCES), approximately seven in 10 (70%) of the close to 4 million public school teachers were members of a union or employee association in the 2015–2016 school year (NCES n.d.). Therefore, examining the role of legal institutions governing collective bargaining in the educational sector can also speak to the nature of public-sector unions in general and how they operate in various legal environments.

The existing research finds that the legal frameworks stipulating how teachers unions operate influence teacher well-being, teacher qualifications, and the educational landscape more broadly because the unions affect the level of revenue available to each district and how districts allocate their educational spending (Han 2019, 2020; Jones, Bettini, and Brownell 2016; Cowen and Strunk 2015; Moe 2011; Moore-Johnson et al. 2007).

The last decade brought major changes in legal institutions governing collective bargaining for public school teachers in some states

State and local governments began enacting labor laws to govern public-sector unions in the 1950s and 1960s. Some laws prohibited collective bargaining for their public-sector workers, some created a framework for a full set of collective bargaining rights (e.g., including a right to strike, a right to bargain over wages, etc.), and some created no framework but did not prohibit collective bargaining (Paglayan 2019; Keefe 2015).3

Most states established their own legal institutions for teachers unions in the 1960s, 1970s, and 1980s, and these laws changed little through the first decade of the new century.

The map in Figure A, reproduced from Han (2019), shows various legal environments in which teachers unions operated as of 2010. Based on the long-established state laws, the states are grouped into four categories according to two legal criteria: whether public school teacher collective bargaining is legal and/or mandatory for employers, and whether nonunion members can be required to pay fair share fees. (Notice that the fair share fee criterion is no longer applicable after Janus. See Han 2019 for more details).

Figure A

The “High-CB” group is composed of 23 states with “duty-to-bargain” laws (under which employers have a duty to bargain with the employee union) and allowed mandatory fair share fees for nonunion members. For example, New York and New Jersey were “High-CB” states. The second group, the “Mid-CB” group, is composed of states that also had duty-to-bargain laws but prohibited mandatory fair share fees. There were 11 states in this group. The third group, the “Low-CB” group, comprises states where local school districts are allowed to sign collective bargaining agreements but bargaining is not mandatory, and nine states, including Colorado, Louisiana, Utah, and Wyoming, are in this group. The last group, the “No-CB” group, includes states in which collective bargaining for teachers is banned, and there are seven states in this group: Arizona, Georgia, Mississippi, North Carolina, South Carolina, Texas, and Virginia.

In the last decade, however, several states have experienced significant alterations of their long-standing legislation governing the environment in which public-sector unions can operate. In 2011–2012, state legislators in Idaho, Indiana, Michigan, Tennessee, and Wisconsin launched unprecedented initiatives substantially restricting or entirely prohibiting the collective bargaining rights of public-sector employees, including public school teachers.

In 2011, Indiana enacted a law stating that collective bargaining is no longer mandatory, and only wages and wage-related items can be part of the collective bargaining process. In 2011, Tennessee passed the Professional Educators’ Collaborative Conferencing Act, making collective bargaining for teachers illegal. Wisconsin’s Act 10 enacted in 2011 eliminated fair share fees for public employee unions and restricted public-sector collective bargaining to only wage and wage-related items. It also capped the annual growth in affected public-sector workers’ base pay to the rate of inflation and required teachers unions to obtain annual recertification, a laborious process in which unions that already received enough employee votes to be created must ask their members to vote for the union again every year to retain its status. In Idaho, in 2012, teacher collective bargaining was no longer permitted unless the union could validate that at least half of a district’s teachers were union members. The new law also limited the scope of collective bargaining to teacher salaries and benefits. In 2012, the Michigan legislature passed the “Freedom to Work” law, a so-called right-to-work (RTW) law.4 Michigan’s RTW law reduced the financial strength of unions by making it illegal for a group of unionized workers to negotiate a collective bargaining contract that includes fair share fees for nonmembers covered by the contract. (Note that the Janus decision has been described as a decision that effectively made all states into RTW states for the public sector.)

These new laws became effective as early as 2012. After the laws curbing public-sector collective bargaining rights in these five states became effective, the changes were so significant that the states slid down the categorization used by Han (2019): Wisconsin moved from the High-CB group to the Mid-CB group; Michigan moved from the High-CB group to the Low-CB group; Idaho and Indiana moved from the Mid-CB group to the Low-CB group; and Tennessee moved from the Mid-CB group to the No-CB group.5

There are several ways laws curbing public-sector collective bargaining could have affected education spending in these five states

The stated motivation for these legal changes made in the states was the need to fix the holes in state budgets in the aftermath of the Great Recession.6 During the Great Recession, national public school per-pupil spending fell by roughly 7% overall—over 10% in seven states and more than 20% in two states (Jackson, Wigger, and Xiong 2018). The changes also derived from major changes in the political dominance of the states’ legislatures. For instance, for four out of five of these states (Indiana, Michigan, Tennessee, and Wisconsin), the legislative measures limiting teachers’ collective bargaining rights occurred right after a Republican governor replaced a Democratic governor. Idaho had elected Republican governors since 1994.

Surprisingly, despite the debate over the reasons, the consequences of these changes are still not well understood. In particular, research has not established how these changes impacted teachers unions and whether they impacted district spending on teacher compensation, the largest portion of school spending (NCES 2018).

There are direct and indirect ways in which the restrictions on collective bargaining in Idaho, Indiana, Michigan, Tennessee, and Wisconsin could influence district spending on teacher compensation. Directly, spending on teacher compensation could decrease as a result of some of the restrictions on collective bargaining rights over teacher salaries and benefits, such as the cap on salary increase to the level of inflation (which is about 2%, see Bureau of Labor Statistics) and the ban on unions negotiating over benefits (Freeman and Han 2013; Han 2019; Workman 2011; Lafer 2013; Goldstein 2014).

Indirectly, districts’ spending on teacher compensation would decrease as the changes in legal institutions ultimately weaken the strength of public-sector unions (Han 2020; Freeman and Han 2013). As the bargaining power of teachers unions weakens, the demand for unions is more likely to fall, as more teachers expect lower benefits from unionization. This lowered demand and reduced union membership would put pressure on the financial capability of unions, decreasing their bargaining power even more. Finally, in states where unions could no longer collect mandatory fair share fees from nonunion members, the “free-rider” problem may arise (Freeman, Han, and Rogers 2015). The free-rider problem refers to the likelihood that some teachers in the bargaining unit—knowing that the union must represent them regardless of membership—may want to enjoy the advantages conferred by union contracts without paying for them, which is likely to further undermine unions’ financial capacity (Marianno and Strunk 2018). To the extent that lower membership and dwindling financial capacity will negatively affect the bargaining power of unions, these changes in legislation may further reduce districts’ spending on teacher compensation.

Past research indicates potential consequences of changing collective bargaining laws on teacher outcomes

Given these direct and indirect ways in which changing collective bargaining laws could affect spending on teacher compensation, we expect to observe substantial adverse impacts on teachers’ labor markets in the five states in our study. Before providing the estimates, we discuss additional potential consequences of reducing collective bargaining rights on other various teacher and student outcomes, according to the existing literature.

The existing research has long found a positive relationship between teachers unions and various teacher outcomes. For instance, teachers unions increase teacher salaries, raise nonwage benefits, improve working conditions, and reduce turnover (Freeman and Medoff 1984; Hoxby 1996; Ingersoll 2001; Podgursky 2003; Hirsch, Macpherson, and Winters 2011; West 2015; Han 2019; Han 2020).7 Further, the institutional changes that may have decreased spending on teacher compensation may also lead to undesirable consequences for students, through the following channels.

Numerous studies suggest that decreases in teacher pay and educational spending have adverse effects on educational outcomes of students. For example, according to the efficiency wages theory, higher salaries lead to higher-quality students entering the education field with greater interest in becoming a teacher (Figlio 1997; Hanushek, Piopiunik, and Wiederhold 2019; Leigh 2012; Manski 1987; Podolsky et al. 2019); higher quality teachers (Britton and Propper 2016; Hendricks 2014); and reduced teacher turnover (Ronfeldt, Loeb, and Wyckoff 2013; Sorensen and Ladd 2018; Loeb, Darling-Hammond, and Luczak 2005; Podolsky et al. 2019; Katz 2018; Gray and Taie 2015; Grissom, Viano, and Selin 2015; Stockard and Lehman 2004; Murnane and Olsen 1989).8

Moreover, growing evidence points to positive effects of higher spending on short- and long-term student outcomes (Jackson, Johnson, and Persico 2016; Gibbons, McNally, and Viarengo 2018; Hyman 2017; Lafortune, Rothstein, and Whitmore-Schanzenbach 2018; Jackson 2018; Baker 2018), and also to negative effects of spending cuts on student outcomes (Jackson, Wigger, and Xiong 2018).

These bodies of research suggest that ultimately, the changes in legal institutions toward teachers unions could pose serious threats to the educational system as a whole by deteriorating both teacher labor market conditions and student performance.

The empirical analysis: States with weakened collective bargaining rights have seen a relative decline in spending on teacher compensation

To estimate the effect of weakened collective bargaining rights on spending on teacher compensation, we used two national-level data sources: the Local Education Agency (School District) Finance Survey (F-33), administered by NCES, and the Stanford Education Data Archive (SEDA) from 2009 to 2016. (More detailed characteristics of the data and the analyses are included in the Appendix.) We employ a statistical method that allows us to estimate the causal impact of the change in legal institutions weakening teachers unions by comparing district spending on teacher compensation in the five states that enacted the legal changes in the study period (our treatment group) with spending in districts in all other states (our control group).

Before we offer these estimates, we first plot the trends in spending on teacher compensation and its two main components, salaries and benefits, in the districts in the treatment and control groups. Figures B and C show the time trend for public school district spending on teacher salaries and teacher benefits, respectively.

Figure B

In both cases, we can see that spending patterns diverge after the legal changes in 2011–2012. Spending on both teacher salaries and teacher benefits continuously increases in the control group but levels off (salaries) and falls (benefits) in the states with new restrictions on collective bargaining starting in 2012.

Figure C

Next we estimate the impact of the legal changes that weakened teachers unions on spending on teacher compensation by comparing the average changes in district spending on teacher compensation in the treatment group with the changes in the control group, controlling for various district and neighborhood characteristics that could also influence spending patterns. The results are shown in Figure D. Across all districts, we find that the collective bargaining restrictions that weakened teachers unions reduced average school district spending on total teacher compensation by about 6%, with teacher salary expenditures falling by about 5% and teacher benefit expenditures falling by 9.7%.

Figure D

Additionally, we conduct similar analyses measuring district spending on teacher compensation using other variables as outcomes, such as the ratio between teacher pay expenditure and total district expenditure (i.e., the share of total district expenditure devoted to teacher compensation) and average teacher compensation. The results based on these measures are similar to what we report here.

We also test whether the impacts on spending of the restrictions on teachers unions differ across low–, middle–, and high–socioeconomic status (SES) districts.9 We expect that the legal changes governing public-sector collective bargaining rights may have greater effects on spending on teacher compensation in the high-SES districts than in the low-SES districts, because the low-SES districts are more likely to operate with greater constraints, which leaves less room for a change in teacher compensation. For instance, studies find that teacher average salaries are lower in high-poverty schools than in low-poverty schools, and that it is difficult to attract high-quality young applicants to the teaching sector and retain them, especially in low-SES districts (García and Weiss 2019; Goldhaber, Lavery, and Theobald 2015; Ingersoll and Merrill 2017). This is all occurring in a profession that has been subject to a growing total compensation penalty over time, which reached 10.2% in 2019 (Allegretto and Mishel 2020).10 Thus, further reducing spending on teacher compensation in low-SES districts may not be well received by educators and policymakers.

Table 1 shows that school district spending on teacher salaries, benefits, and total compensation fell more sharply in the high-SES districts than in the low-SES districts (relative to how much such spending fell in similar districts in states with no change to the laws). The results for spending on teacher salaries are similar across districts with different SES status. This implies that teachers in the low-SES districts were not immune to the institutional changes, suggesting that their relative position in the salary distribution might have fallen further.11 However, as we expected, the cuts to spending on teacher benefits are much larger in the high-SES districts than the low-SES districts.

Table 1

Conclusions

This analysis shows that the legislative measures restricting public-sector collective bargaining rights enacted in five states in 2011 and 2012 significantly reduced average districts’ spending on teacher compensation, including both teacher salaries and teacher benefits. The cuts in spending were sizable: In the years following the changes, average district spending on teacher compensation decreased by about 6%, with spending on teacher salaries falling by about 5% and spending on teacher benefits declining by 9.7% in the five states relative to the rest of the states in the sample. Further research would be needed to determine whether the decrease in teacher compensation grew larger over time in the absence of measures to counter the early effects.

These findings are a matter of concern for at least four reasons.

First, education policymakers and society in general should worry about the broader impact on the educational sector of changes in legal institutions governing collective bargaining for public-sector workers, given evidence that reduced education spending and lowered teacher compensation are associated with not only impaired teachers’ labor markets but also worsened student outcomes. Broadly understood, such legal changes could deteriorate the overall quality of public education and the educational systems in the states that experienced the legal changes.

Second, all teachers in the states that enacted measures explicitly targeting public-sector unions’ bargaining rights should be concerned about reduced spending on teacher compensation because such impacts affect all teachers, whether they are or are not union members. Typically, union dues or agency fees for union members are about 1–2% of a teacher’s salary, a cost which nonunion members could avoid under the new laws. But that savings is offset by salary losses: According to our estimates, legal changes weakening teachers unions reduce spending on teacher salaries by about 5%, and, equating teacher salaries to spending on teacher compensation, roughly speaking, this finding suggests that nonunion members would face a net loss of 3–4% of their salaries. This is not unexpected because, in general, the consequence of free-riding is the underprovision of public goods and services, which leads to loss in well-being of all members in the society.

Third, constituents in other states that have subsequently undergone equally drastic movements limiting public-sector workers’ collective bargaining rights should also be concerned about these findings, as it is likely that the effects can be extrapolated to them. For example, Kentucky passed an RTW law in 2017. In 2017, Iowa passed a law to significantly restrict the bargaining rights of teachers and other public employees. Then, in 2018, the Janus decision substantially diminished the financial capacity of public-sector unions by banning their collection of agency fees from nonmembers who are covered by the same union contracts, shifting the course of public-sector workers’ rights onto a different path (McNicholas 2018; Rosales 2018). Although the effects of these similar institutional changes for union and nonunion teachers in the states will need to be properly estimated, these continued movements that reduce the strength of teachers unions could have negative impacts on teachers’ labor markets and on student outcomes both locally and nationally.

Fourth, those concerned with the strength of the private-sector workforce should also be aware of the implications of this study. The legal changes affecting public-sector employees also could affect pay and working conditions of private-sector employees. The private-sector and public-sector labor markets are not mutually exclusive, so the legal environments for public-sector workers can influence the labor market in the private sector. The lower wages may push public school teachers to search for private-sector occupations, reducing wages in the private sector (union spillover effects in the opposite direction), and the weakened strength of public-sector unions may discourage private-sector workers from unionizing (the inverse of union threat effects).12 The existing evidence shows that in the wake of legal changes affecting teachers unions, a greater than normal share of teachers leave public schools through transfers across districts and by taking early retirement (Han 2020; Biasi 2018; Baron 2018; Roth 2019). Thus, changes in public-sector labor laws could have consequences for employment conditions of all workers.

Changes in legal institutions may arise in the pursuit of fundamental goals such as individual freedom, efficiency, equity, or others, but they often occur because they are ideological and politicized in nature. However, it is important to consider their ultimate repercussions. Our evidence suggests that legal changes affecting collective bargaining for teachers are more likely to be a hindrance to enhancing the educational system and improving the well-being of teachers, and they may impose costs down the road when further efforts are needed to fix their negative consequences to labor market and educational outcomes.

About the authors

Emma García is an education economist at the Economic Policy Institute, where she specializes in the economics of education and education policy. García’s research focuses on the production of education (cognitive and noncognitive skills), evaluation of educational interventions (early childhood, K–12, and higher education), equity, returns to education, teacher labor markets, and cost-effectiveness and cost–benefit analysis in education. She has held research positions at the Center for Benefit-Cost Studies of Education, the Campaign for Educational Equity, the National Center for the Study of Privatization in Education, and the Community College Research Center; she has consulted for MDRC, the World Bank, the Inter-American Development Bank, and the National Institute for Early Education Research; and she has served as an adjunct faculty member at the McCourt School of Public Policy, Georgetown University. García received her Ph.D. in economics and education from Columbia University Teachers College.

Eunice Han is an assistant professor in the Economics Department at the University of Utah. Han’s research interests include labor unions, economic inequality, intergenerational mobility, and public education. She is also a research associate with the Economic Policy Institute and a senior research associate at the Labor and Worklife Program at Harvard Law School. Han received her Ph.D. in economics from Harvard University.

Acknowledgments

The authors are grateful to EPI Publications Director Lora Engdahl for her edits. We also appreciate EPI Vice President John Schmitt’s comments on this report and on the full paper this report is based on. We acknowledge EPI Research Assistant Daniel Perez for his assistance with the tables and figures in this report and EPI’s communications staff for their work disseminating the report and their assistance with the media.

Appendix

To estimate the causal effects of the changes in collective bargaining on teacher compensation expenditures, we construct our data set by combining two data sources: the Local Education Agency (School Districts) Finance Survey (F-33), administered by NCES, and the Stanford Education Data Archive (SEDA) from 2009 to 2016.

The F-33 data include annual fiscal data for every U.S. school district providing public education to prekindergarten to grade 12 students, approximately 16,000 districts for each survey year. From these data we draw three main variables of districts’ expenditures during the school year: teacher salaries, teacher benefits, and teacher total compensation (salaries plus benefits).

The SEDA provides district-level information on schools and students for all public school districts in the country, along with descriptive information on the characteristics of families with school-age children residing in each district, derived from the American Community Survey.

We merge these two data sources to construct a national- and district-level panel data set, containing a great deal of information on districts and their surrounding neighborhoods between the 2009–2010 and 2015–2016 school years.

We examine the impact of the change in legal institutions weakening teachers unions by comparing average district spending on teacher compensation in the five states that experienced the legal changes (our treatment group) to district spending on teacher compensation in all other states (our control group). The method used, a difference-in-difference (DID) estimation, provides us with a causal estimate, computed by the difference between the average change in teacher compensation spending before and after the legal changes in 2011–2012 for districts in the treatment group and the average change in teacher compensation spending before and after 2011–2012 for districts in the control group.

To obtain more precise estimates, we control for various district and community characteristics. Our covariates for district characteristics include the following variables for grades three through eight: total enrollment, number of teachers, number of instructional aides, number of instructional coordinators/supervisors, number of elementary guidance counselors, share of students who are Hispanic students, share who are Black students, share who are Asian students, share who are Native American students, share who are eligible for reduced-price lunch, share who are eligible for free lunch, share who are English language learners, share who are special education students, and share who are public school students in charter schools. Covariates for community characteristics include median household income (in $), share of adults with a bachelor’s degree or higher level of educational attainment, share of households with children and headed by a female, share of households receiving Supplemental Nutrition Assistance Program (SNAP) benefits, share living in the same house that they lived in last year, share of adults who are unemployed, Gini coefficient, city/urban locale, suburban locale, and town locale.

In addition, we add state and year dummies to control for unobservable characteristics of each state and to allow for the effect of legal changes on teacher compensation to emerge over time, respectively (see full details in García and Han 2020).

Endnotes

1.  Labor unions and employers negotiate collective bargaining agreements that cover wages, working conditions, and other features of the employment relationship. Where allowed by the laws covering public- or private-sector collective bargaining rights, unions typically have required nonmembers who are covered by a collective bargaining contract (because they are part of the collective bargaining unit) to pay “fair share fees.” These fees are usually a percentage of regular union dues that covers only the most basic costs of union representation. The fees support things like negotiating contracts governing wages and workplace conditions or representing workers in the case of disputes, which can be costly.

2. The NLRA is also known as the Wagner Act. Under the NLRA, for instance, most groups of private-sector employees can collectively bargain and strikes are legal.

3. The first state to provide collective bargaining rights for public employees was Wisconsin, in 1958. Federal workers were not given collective bargaining rights until President John F. Kennedy signed Executive Order 10988 in 1962.

4. State RTW laws reduce the financial strength of unions by making it illegal for a group of unionized workers to negotiate a collective bargaining contract that includes fair share fees for nonmembers covered by the contract.

5. Three states have passed RTW laws since 2016: West Virginia, Kentucky, and Missouri. The laws affected different groups of workers across the states. The law in Missouri was defeated in a 2018 referendum before it could take effect. These states are not included in this analysis because our study period covers 2009–2016.

6. The public leaders backing the laws argued that they were needed to curb the growing compensation costs associated with public-sector workers. However, some scholars and economists have raised questions about the link, noting that public-sector workers were not overpaid, that the states curbing collective bargaining were not the states with the biggest budget shortfalls, and that there were many ways to balance budgets that did not involve cutting education funding (Allegretto, Jacobs, and Lucia 2011; Lafer 2013).

7. This literature finds that teachers unions are associated with higher salaries (Han 2019; Merkle and Phillips 2018; Belman, Heywood, and Lund 1997; Freeman and Valletta 1988; Ehrenberg and Schwarz 1986; Lipsky 1982). Several studies have also found that teachers unions play an important role in raising teachers’ nonwage benefits (Eberts and Stone 1984; Delaney 1985; Podgursky 2003; Cowen and Strunk 2015). Unions also improve members’ working conditions (student-teacher ratio, required hours, etc.) and general well-being (teacher morale, etc.) (Hoxby 1996; Han 2019; Han and Keefe 2020). Moreover, unionized teachers are more involved and engaged in politics when becoming aware of how legislatures impact school finances; this finding comes from research examining what happens in school districts when they are required by states to engage in collective bargaining with their teachers unions and have a larger capacity for political organization (Flavin and Hartney 2015; Paglayan 2019).

8. In general, the efficiency wages theory argues that higher wages can raise productivity in occupations or jobs that face certain challenges, making it hard to measure productivity (Katz 1986; Krueger and Summers 1988; Stiglitz 1986; Weiss 1980; Weiss 2017). Some of these challenges, such as difficulty in measuring worker productivity and monitoring worker effort, etc., are applicable to teachers.

9. We measure districts’ SES status with a composite index based on the share of children in poverty, median household income, the share of adults with a bachelor’s degree or higher level of educational attainment, the share of households with children and a female head, the share of residents living in the same house as in the prior year, the share unemployed, and the Gini coefficient. For details on how to construct the composite index for socioeconomic status of districts, see Fahle et al. 2017.

10. The teacher compensation penalty is how much less, in percentage terms, teachers are compensated relative to other professionals with similar characteristics in nonteaching careers.

11. As said, on average, teacher salaries are lower in low-SES schools and districts than in high-SES schools and districts. If the effects had been worse in high-SES districts, we could have expected some relative improvement or catching up of salaries in low-SES districts. Given the fact that the effects are similar, we would expect no relative improvement of the low-SES districts.

12. Spillover effects occur when the higher wages in the unionized sector cause unemployment. If the unemployed workers spill over into the nonunion sector, it will lead to a surplus of employment and lower wages in the nonunion sectors. Threat effects exist when the wages in the nonunion sector increase as employers react to the possibility that their workplaces could unionize.

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Workman, E. 2011. “State Collective Bargaining Policies for Teachers.” Education Commission of the States. Retrieved from: https://www.ecs.org/clearinghouse/99/78/9978.pdf.

In this testimony I will give a broad overview of the economic impact of the COVID-19 pandemic, and other members of the panels will provide much greater detail on the impact on specific groups. I will focus on the labor market in this discussion, due to the fact that for the vast majority of nonelderly households, the only source of income is the labor market, so for most people, the labor market is by far the most important manifestation of “the economy.”

The damage to the labor market as a result of the COVID-19 pandemic has been dramatic. In March and April of 2020, the labor market shed an unprecedented 22 million jobs. Since that time, jobs have been returning, but an enormous gap in the labor market remains. We still have 8.4 million fewer jobs than we did in the month before the COVID-19 recession began. And furthermore, that 8.4 million is not the total gap in the labor market. Before the recession, we were adding about 200,000 jobs per month. At that pace, we would have added 2.6 million jobs since the recession began, which means the total gap in the labor market right now is on the order of 11 million jobs (8.4 + 2.6 = 11 million jobs.)

Recessions always hit low and middle-wage workers the hardest, but the unequal impact of the COVID-19 recession has been unprecedented. As Figure A shows, in 2020, the lowest wage workers lost nearly 7.9 million jobs, while the highest-wage workers gained nearly a million.1 This disparity has a great deal to do with the types of jobs that have been lost. Due to the public health nature of this recession, sectors where the core work involves a high level of face-to-face interactions—which tend to be low wage service sectors like restaurants and bars, hotels, brick and mortar retail, and personal services—got hit extremely hard. However, research shows that the steep employment decline of low wage workers is not entirely due to these workers being concentrated in low wage sectors—even within sector, the lowest wage workers tended to see the most job loss.2

Figure A

At the beginning of the pandemic, it became clear that there was a crucial distinction between three types of workers: (1) “essential” workers—workers who could not telework and were working on-site, (2) workers who could not telework and whose jobs were not deemed essential, and (3) workers who could telework. Because of dynamics like occupational segregation, discrimination, and other labor market disparities related to structural racism and sexism, women and people of color are concentrated in the first two groups. The first group, essential workers, are those who put their health on the line and the health of the people they live with, to keep society going during the pandemic. They are often very low-paid workers, working in dangerous conditions, and are disproportionately people of color.3 The second group are workers who cannot telework and who are not deemed essential. These are the workers who were most likely to lose their job. They were often low-wage service workers and were disproportionately women and people of color. The third group, workers who can telework, were the most advantaged in this recession and the least likely to face job loss and income declines. This privileged group is relatively small; data from the Bureau of Labor Statistics (BLS) show that at its peak in May of 2020, just over one third of workers (35.4%) reported having teleworked or worked from home because of the pandemic.4 And Black and Latinx workers were much less likely to be in this group—at the peak, only 29.3% of Black workers and 23.0% of Latinx workers reported having teleworked or worked from home because of the pandemic.

Another factor that has led to greater disparities by race and gender is the fact that so many jobs were lost early on in this recession in state and local governments. Typically, these jobs are more protected, at least early on in a recession. In the COVID-19 recession, however, state and local government jobs were shed immediately. Today, we are still down 1.2 million state and local government jobs—more than two-thirds of them (863,000) in education. Given that people of color, and particularly women of color, are disproportionately likely to be in state and local government jobs, this is yet another dynamic that has generated more inequities in this recession than in prior recessions.

All of these dynamics have contributed to large disparities in unemployment by race, ethnicity, and gender, with disparities by race and ethnicity being particularly profound. As of March 2021, the overall unemployment rate was 6.0%, but the Black unemployment rate was 9.6%, the Latinx unemployment rate was 7.9%, the Asian unemployment rate was 6.0%, and the white unemployment rate was 5.4%. This recession has deeply exacerbated existing inequalities.

Further, the official unemployment rate is greatly understating weakness in the labor market, both overall and within subgroups. For example, in March, there were 9.7 million workers who were officially unemployed. But BLS has discussed at length that there have been many workers who have been misclassified as “employed, not at work” during this pandemic who should be classified as “temporarily unemployed.”5 In March, there were 636,000 such workers.6 Accounting for these workers, the overall unemployment rate would be 6.4%.

Further, some workers who are out of work as a result of the COVID-19 crisis are being counted as having dropped out of the labor force instead of as unemployed. In order for a person without a job to be counted as unemployed, they must be available to work and actively seeking work. However, during the pandemic, many people who are out of work as a result of the crisis do not meet those criteria. For example, many workers—particularly women—are out of work because of care responsibilities as a result of COVID-19 (e.g., a young child’s school being remote, or an elderly parent’s day care closing), and many workers are out of work because potentially being exposed to the virus at work is not safe for them. Workers who do not meet the definition of officially unemployed but are nevertheless out of work because of the coronavirus shock number in the millions—if the labor force participation rate had not dropped during the pandemic, there would be an additional 4.8 million workers in the labor force. Accounting for these workers, the unemployment rate would be 9.1%.

As shown in Table 1, the White House Council of Economic Advisors further broke down this “adjusted” unemployment rate by race and gender.7 The adjusted unemployment rate was still well into double digits for both Black and Latinx workers in March, at 13.4% for Black workers and 11.5% for Latinx workers. I have calculated additional breakdowns at the intersection of race and gender using BLS microdata and these calculations reveal that of all major categories, Latinx women have by far the highest adjusted unemployment rate, at 13.8%.

Fig B

Further, none of these calculations accounts for the fact that millions of workers who have kept their jobs have seen a drop in hours and pay because of the pandemic. BLS reports that 5.8 million people who were working in March had been unable to work at some point in the last four weeks because their employer closed or lost business due to the coronavirus pandemic, and they did not receive pay for the hours they didn’t work.8 This high level of underemployment represents an enormous amount of pain, and given that trends in underemployment roughly track trends in unemployment, it is undoubtedly the case that Black and Latinx, and particularly Black and Latinx women, are those who are facing the highest levels of underemployment caused by the pandemic.

One aspect of the vast inequality of the recovery from the COVID-19 recession is long-term unemployment. Right now, more than two-in-five unemployed workers (43.4%) have been unemployed for over six months, and nearly one-in-four unemployed workers (23.9%) have been unemployed for at least a year.9 Long-term unemployment is a key dynamic in the “K-recovery”—many people who lost their jobs at the start of the pandemic have been unemployed ever since. And again, given that trends in long-term unemployment roughly track trends in standard unemployment, it is undoubtedly the case Black and Latinx workers, and particularly Black and Latinx women, are those who are facing the highest levels of long-term unemployment.

The good news is that the labor market is headed in the right direction. After the recovery appeared to be stalling over the winter, more than 900,000 jobs were added in March. If virus-suppression measures work and it is safe to return much closer to economic normality in coming months, the relief and recovery measures in the American Rescue Plan will continue to drive rapid and large increases in employment. This is very welcome news. But it is worth keeping in mind that simply returning to a pre-COVID state of the world—with skyrocketing inequality,10 the unemployment rate for Black workers twice that of white workers, and the unemployment rate for Latinx workers 1.5 times that of white workers—cannot be the goal. We must seize this moment to build an economy that works for everyone.

1. Elise Gould and Jori Kandra, Wages Grew in 2020 Because the Bottom Fell Out of the Low-Wage Labor Market:

The State of Working America 2020 Wages Report, Economic Policy Institute, February 2021.

2. Michael Dalton, Jeffrey A. Groen, Mark A. Loewenstein, David S. Piccone, Jr., and Anne E. Polivka, The K-Shaped Recovery: Examining the Diverging Fortunes of Workers in the Recovery from the COVID-19 Pandemic using Business and Household Survey Microdata, Bureau of Labor Statistics, February 2021.

3. Celine McNicholas and Margaret Poydock, “Who Are Essential Workers? A Comprehensive Look at Their Wages, Demographics, and Unionization Rates,” Working Economics (Economic Policy Institute blog), May 19, 2020.

4. Bureau of Labor Statistics, “Table 1. Employed Persons Who Teleworked or Worked at Home for Pay at Any Time in the Last 4 Weeks Because of the Coronavirus Pandemic by Selected Characteristics,” In Supplemental Data Measuring the Effects of the Coronavirus (COVID-19) Pandemic on the Labor Market, accessed on April 26, 2021.

5. Bureau of Labor Statistics, Impact of the coronavirus (COVID-19) pandemic on The Employment Situation for March 2021, March 2021.

6. Note, some of these workers may not have had the option of being classified as “temporarily unemployed,” meaning they weren’t technically misclassified, but all of them were out at work because of the virus.

7. Cecilia Rouse, “The Employment Situation in March,” The White House Briefing Room, April 2, 2021.

8. Bureau of Labor Statistics, “Table 5. Persons Unable to Work at Some Point in the Last 4 Weeks Because Their Employer Closed or Lost Business Due to the Coronavirus Pandemic by Receipt of Pay From Their Employer for Hours Not Worked and Employment Status,” In Supplemental Data Measuring the Effects of the Coronavirus (COVID-19) Pandemic on the Labor Market, accessed on April 26, 2021.

9. Economic Policy Institute, “Workers Are Experiencing Longer and Longer Periods of Unemployment: Number of Workers at Each Level of Unemployment Duration, by Month, February 2020–March 2021,” April 5, 2021.

10. Lawrence Mishel and Jori Kandra, “Wages for the Top 1% Skyrocketed 160% Since 1979 While the Share of Wages for the Bottom 90% Shrunk,” Working Economics (Economic Policy Institute blog), December 1, 2020.

In this post, we highlight—in very broad strokes—what is needed to build an economy that generates faster, more sustainable, and more equitably distributed growth. We then identify where the administration has made progress in the first 100 days and where more forceful action is needed.

Building an economy that works for everyone requires the following:

• Pursuing a “go-for-growth” approach to macroeconomics that aims for labor markets where jobs are plentiful and employers have to work hard (including offering higher wages) to attract workers, so-called “high-pressure” labor markets.
• Crafting and enforcing fairer rules for markets, particularly through labor market institutions and standards that provide workers a more level playing field when bargaining with employers for better pay and working conditions.
• Constructing deeper and more protective social insurance systems that use a larger public role in providing unemployment benefits, health coverage, and retirement income security— including long-term care for older adults and people with disabilities.
• Undertaking ambitious public investments in both people and physical capital, including physical infrastructure, early child care and education, higher education, and green investments.
• Reforming taxes in a way that helps finance the needed fiscal spending in this program, curbs growing inequality, and discourages the economic “bads” of greenhouse gas emissions and financial speculation.

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To arrive at these estimates, we first estimate the state- and industry-specific shares of federal contract employment using FY2020 federal contract obligations from USA Spending and input-output tables from 2019 Bureau of Labor Statistics employment requirements data. We then combined these results with the EPI Minimum Wage Simulation Model, assuming that the state- and industry-specific wage distributions for federal contractors are similar to the state- and industry-specific overall wage distributions. Following this methodology, we project that the policy will raise wages of up to 390,000 federal contractors in 2022. We say “up to” 390,000 to account for the fact that some workers who would otherwise be affected by a $15 minimum wage will already be receiving a higher wage as a result of the Davis-Bacon Act or the Service Contract Act. An extreme lower bound for the number of contract workers affected by this executive order after accounting for these other wage standards is 226,000. (This lower bound is generated by entirely excluding the construction industry and, outside of construction, raising the underlying wage distribution by an industry-specific union wage premium.)

We are thrilled that the administration is increasing the minimum wage for workers on federal contracts to $15 per hour and raising wages for hundreds of thousands of workers, and we encourage the administration to go further to help ensure that the estimated two million total jobs held by federal contract workers are good jobs. This would include steps like ending practices that allow low-road contractors to win bids that are so low they are inconsistent with decent pay and working conditions, and banning federal government contractors from requiring contract workers to sign forced arbitration and class action waivers, which limit the ability of these workers to challenge illegal practices.

Unions also reduce racial disparities in wages and raise women’s wages, helping to counteract disparate labor market outcomes by race and gender that result from occupational segregation, discrimination, and other labor market inequities related to structural racism and sexism.

Finally, unions help win progressive policies at the federal, state, and local levels that benefit all workers. And conversely, where unions are weak, wealthy corporations and their allies are more successful at pushing through policies and legislation that hurt working people. A strong labor movement protects workers, reduces disparities, and strengthens our democracy.

Unions lower inequality

By bringing workers’ collective power to the bargaining table, unions are able to win better wages and benefits for working people—reducing income inequality as a result. As seen in Figure A, there was less income inequality in the decades following World War II than there is today. Not coincidentally, union membership was at its highest rate in 1945, just as the war was ending. But as union strength steadily declined—particularly after 1979—income inequality got worse, and it is now at its worst point since the Great Depression.

Figure A

Deunionization depressed the wages of middle-wage earners but had little impact on high-wage earners and therefore greatly increased wage inequality between these two groups. For instance, deunionization explains a third of the growth of the wage gap between high- and middle-wage earners over the 1979–2017 period.1

The erosion of collective bargaining is the second largest factor that suppressed wage growth and fueled wage inequality over the last four decades—only excessive unemployment had a larger impact.2

When unions are strong, they set wage standards for entire industries and occupations; they make wages more equal within occupations; and they close pay gaps between white workers and workers of color. The reasons unions are such a major force for equality are set out more fully below.

Unions raise wages for both union and nonunion workers

While union workers receive higher wages than nonunion workers, nonunion workers also benefit immensely from the presence of unions. This raises wages for working people and reduces wage inequality. We explain below.

Union workers earn more than nonunion workers. On average, a worker covered by a union contract earns 10.2% more in hourly wages than someone with similar education, occupation, and experience in a nonunionized workplace in the same sector.3

When union density is high, nonunion workers benefit from higher wages. When the share of workers who are union members in an industry or occupation is relatively high, as it was in 1979, wages of nonunion workers are higher than they would otherwise be. For example, had union density remained at its 1979 level, weekly wages of nonunion men in the private sector would be 5% higher (that’s an additional $2,704 in earnings for year-round workers), while weekly wages for nonunion men in the private sector without a college education would be 8%, or $3,016 per year, higher.4 Figure B shows how much more nonunion workers would earn had union density remained the same, by gender. Figure C shows the numbers for nonunion workers without a college degree.

Figure B

Figure C

In states where unions are strong, wages are higher for workers—union and nonunion alike. Wages are lower in states with low union density compared with states with high union density—$1,121.70 a week versus $942.70 a week in 2020.5

Unions bring living wages to low-wage jobs. Unions have transformed once-low-wage jobs in hospitality, nursing, and janitorial services into positions with living wages and opportunities for advancement. For example, after unionizing, dishwashers in Las Vegas hotels made $4 per hour more than the national average for that job, and they were offered excellent benefits. In Houston, a 2006 first-ever union contract for 5,300 janitors resulted in a 47% pay increase and an increase in guaranteed weekly hours of work.6

If unionization hadn’t eroded, wages for the middle class would be much higher. Recent research examining the direct effect on wages of union workers and the spillover effect on wages of nonunion workers has demonstrated that the median worker’s wages would have been much higher, and inequality between middle- and high-wage workers much lower, had there not been an erosion of collective bargaining. For instance, the “typical” or median worker would have earned $1.56 more, a 7.9% increase (0.2% annually), in 2017 had unionization not declined since 1979 (Figure D). This translates to an equivalent gain of $3,250 for a full-time, full-year worker.7

Figure D

Unions help raise wages for women and reduce racial economic disparities

Unions have played an essential role in narrowing gender and racial/ethnic pay gaps. Here’s how.

Unions help raise women’s pay. Hourly wages for women represented by unions are 4.7% higher on average than for nonunionized women with comparable characteristics.8

Unions raise wages in the female-dominated service occupations. Union-represented workers in service occupations (which include food service and janitorial services) make 52.1% more in wages than their nonunion counterparts. These occupations are disproportionately held by women.9

Unions help reduce racial economic disparities. Black and Hispanic workers get a larger boost from unionization than their white counterparts. Black workers—both men and women—are more likely than white workers to be covered by collective bargaining, and the wage boost they get from being covered by collective bargaining is 13.1%, above the 10.2% average wage boost for unionized workers overall. The result of this union wage premium—how much more union workers earn than comparable nonunion workers—is that collective bargaining lifts wages of Black workers closer to those of their white counterparts. Hispanic workers have slightly lower union coverage than white workers but have a much higher union wage advantage (an 18.8% boost in pay) and thus wage gaps between Hispanic workers and their white counterparts are also smaller because of collective bargaining.10

The phenomenon that unions narrow the Black–white wage gap isn’t new. Starting in the mid-1940s, Black workers began to be more likely to be in unions and to have a larger union premium than white workers.11 This means that the decline of unionization has played a significant role in the expansion of the Black–white wage gap in recent decades and that increasing unionization is a crucial step in reversing those trends.12

Unions support strong families with better benefits and job protections

Union workers are more likely to be covered by employer-provided health insurance. More than nine in 10 workers—95%—covered by a union contract have access to employer-sponsored health benefits, compared with just 68% of nonunion workers. When adjustments are made for other characteristics that may affect benefits coverage—such as sector (public or private), industry, region, employee status (full- or part-time), and establishment size—union workers are 18.3% more likely to be covered.13

Union employers contribute more to workers’ health care benefits. Union employers providing health insurance pay 77.4% more (per hour worked) toward their employees’ health coverage (providing better benefits for a greater share of workers) than comparable nonunion employers. Occupations with higher-than-average union impact on employer-provided health care include transportation, services, construction, extraction, and installation/maintenance/repair.14

Union workers have greater access to paid sick days. More than nine in 10 workers—93%—covered by a union contract have access to paid sick days, compared with 75% of nonunion workers. Almost all union workers—98%—in state and local government have paid sick days, compared with 86% of their nonunion peers. In the private sector, 88% of union workers have paid sick days, compared with 74% of their nonunion peers.15

Union workers are more likely to have paid vacation and holidays. In the private sector, 91% of workers covered by a union contract get paid vacation and paid holidays, whereas 78% of nonunion workers get paid vacation and 79% get paid holidays. For workers overall (in both the private and public sectors), 81% of union workers get paid holidays, while 78% of nonunion workers do.16

Employers contribute more to paid vacation and holidays for union workers than for nonunion workers. Union employers contribute 11.4% more toward paid vacation and holidays for their workers than do comparable nonunion employers. Industries and occupations with higher-than-average employer contributions toward paid vacation and holidays include production, transportation, office and administrative support, service occupations, and construction.17

Unions provide due process, protecting workers from arbitrary dismissal. Private employment in every state except for Montana is generally “at will,” meaning employers are free to dismiss workers for almost any reason, except for reasons specified by law (e.g., on account of race, religion, disability, or other identities that are protected classes). Union contracts typically have provisions that require employers to have a proper, documented, performance-related reason for disciplining or dismissing a worker (“just cause”) and generally the worker has a chance to improve performance before the employer moves to dismiss the worker. Collective bargaining agreements also typically include a grievance and arbitration process to allow workers and the union to challenge unfair discipline or terminations.

Union workers have more input into the number of hours they work. Almost half (46%) of nonunion workers say they have little or no input into the number of hours they work each week, compared with less than a quarter (22%) of union workers.18

Union workers get more advance notice of their work schedules. More than one in three workers (34.4%) who belong to a union get at least a week’s advance notice of their work schedules, whereas less than one in four nonunion workers (23.2%) do. (These calculations exclude workers whose schedules never change.)19

Unions are good for workers’ retirement security

Ninety-four percent of union workers participate in a retirement plan (of any kind), compared with 67% of nonunion workers.20 Union employers (when adjustments are made for various employer characteristics) are 22.5% more likely to offer an employer-provided retirement plan and, on average, to spend 27.7% more on retirement plans than do comparable nonunion employers.21

Unions boost civic participation

Unions communicate with their members about issues and candidates to make sure workers have information when they go to the polls on Election Day. Union members’ voter turnout is significantly higher than the general public’s. A study of union members finds they are 12 percentage points more likely to vote than voters who are not in a union.22 Other research shows that voter turnout is higher in states with greater levels of unionization (Figure E).

Figure E

Conversely, turnout is lower in states that have adopted anti-worker “right-to-work” legislation. Right-to-work laws undermine unions’ ability to collect “fair share fees” from workers whose interests they represent. Fair share fees cover the costs of bargaining, contract administration, and grievance processes that unions are required by law to undertake on behalf of all (union and nonunion) members of a collective bargaining unit. Without fair share fees, union power degrades quickly—which is exactly what anti-union employers want. According to research by Columbia University professor Alex Hertel-Fernandez and his colleagues, the passage of right-to-work laws reduced voter turnout by 2% in presidential elections. This is not insignificant considering that in right-to-work states Michigan and Wisconsin, the losing candidate lost by less than 1 percentage point in the 2016 election.23

Moreover, according to these authors, the state policy agenda becomes more anti-worker in states that adopt right-to-work laws. Right-to-work states are less likely to have minimum wages above the federal minimum wage, more likely to preempt local (city or county) minimum wages, and less likely to have prevailing wage laws.

Unions are key supporters of progressive policies that help all workers

Unions have been a key part of efforts to pass laws that provide economic security, strong communities, and dignity on the job for all workers. The labor movement helped pass and defend the Occupational Safety and Health Act, the Civil Rights Act, the Social Security Act, Medicare and Medicaid, and numerous other laws benefiting all workers and their communities.

Consider the following:

• State minimum wages are lower in states with low union density.
• The states that have passed legislation to raise their minimum wage to $15 per hour (including California, Massachusetts, New Jersey, and New York) are among the states with the highest union density and the strongest labor movements.
• Cities and states that have adopted paid sick days laws, fair scheduling laws,24 and other progressive legislation have strong labor movements.

Table 1 shows the progressive policies that exist in states with high union density.

Table 1

Notes

1. Lawrence Mishel, The Enormous Impact of Eroded Collective Bargaining on Wages, Economic Policy Institute, April 8, 2021.

2. Lawrence Mishel and Josh Bivens, Identifying the Policy Levers Generating Wage Suppression and Wage Inequality [working title]. Economic Policy Institute, forthcoming May 2021.

3. “Union Wage Premium by Demographic Group, 2011,” Table 4.33 in Lawrence Mishel et al., The State of Working America, 12th Edition, an Economic Policy Institute book (Ithaca, N.Y.: Cornell Univ. Press, 2012), updated with 2020 microdata from the Current Population Survey Outgoing Rotation Group (CPS-ORG).

4. These estimates look at what wages would have been in 2013 had union density remained at its 1979 levels. Union density is the share of workers in similar industries and regions who are union members. For the typical nonunion man working year-round in the private sector, the decline in private-sector union density since 1979 has led to an annual wage loss of $2,704 (2013 dollars). For the 40.2 million nonunion men working in the private sector, the total loss is equivalent to $109 billion annually. The effects of union decline on the wages of nonunion women are not as substantial because women were not as likely to be unionized as men were in 1979. See Jake Rosenfeld, Patrick Denice, and Jennifer Laird, Union Decline Lowers Wages of Nonunion Workers: The Overlooked Reason Why Wages Are Stuck and Inequality Is Growing, Economic Policy Institute, August 2016.

5. EPI analysis of Bureau of Labor Statistics Current Population Survey Outgoing Rotation Group (CPS-ORG) 2020 microdata. Wages are the average of the median weekly wage by state, for the top and bottom 10 states by union coverage.

6. Matt Vidal and David Kusnet, Organizing Prosperity: Union Effects on Job Quality, Community Betterment, and Industry Standards, Economic Policy Institute and UCLA Institute for Research on Labor and Employment, 2009; C. Jeffrey Waddoups, “Wages in Las Vegas and Reno: How Much Difference Do Unions Make in the Hotel, Gaming, and Recreation Industry?” UNLV Gaming Research & Review Journal 6, no. 1 (2001).

7. Lawrence Mishel, The Enormous Impact of Eroded Collective Bargaining on Wages, Economic Policy Institute, April 2021.

8. “Union Wage Premium by Demographic Group, 2011,” Table 4.33 in Mishel at al., The State of Working America, 12th Edition, an Economic Policy Institute book (Ithaca, N.Y.: Cornell Univ. Press, 2012), updated 2020 microdata from the Current Population Survey Outgoing Rotation Group (CPS-ORG) microdata.

9. Data are unadjusted for factors such as demographics and employer size. Data are as of March 2017 and are drawn from EPI analysis of Bureau of Labor Statistics, “Table 4. Median Weekly Earnings of Full-Time Wage and Salary Workers by Union Affiliation, Occupation, and Industry” (news release), last modified January 22, 2021. In 2020, women made up 57.0% of those employed in service occupations, but only 46.8% of all workers employed in 2020 (Bureau of Labor Statistics, “Household Data, Annual Averages, Employed Persons by Occupation, Sex, Age” [data table], data from the Current Population Survey). Service occupations include protective service, food preparation and serving, health care support, building and grounds cleaning and maintenance, and personal care and service.

10. EPI analysis of Bureau of Labor Statistics Current Population Survey Outgoing Rotation Group (CPS-ORG) 2020 microdata. The regression analysis producing this estimate controlled for education, experience, gender, race, citizenship status, geographic division, industry, and occupation.

11. Henry S. Farber, Daniel Herbst, Ilyana Kuziemko, and Suresh Naidu, “Unions and Inequality over the Twentieth Century: New Evidence from Survey Data,” National Bureau of Economic Research Working Paper no. 24587, published April 2021 in the Quarterly Journal of Economics, https://doi.org/10.1093/qje/qjab012.

12. Valerie Wilson and William M. Rodgers III, Black–White Wage Gaps Expand with Rising Wage Inequality, Economic Policy Institute, September 2016.

13. Bureau of Labor Statistics, Employee Benefits in the United States, “Table 2. Medical Care Benefits: Access, Participation, and Take-Up Rates, March 2020,” in Employee Benefits in the United States—March 2020, published September 24, 2020.

14. Data are as of March 2017 and come from Tables 2 and 6 in Bureau of Labor Statistics, “Employee Benefits in the United States—March 2017” (news release), U.S. Department of Labor, July 21, 2017.

15. Bureau of Labor Statistics, Employee Benefits in the United States, “Table 6. Selected Paid Leave Benefits: Access, March 2020,” in Employee Benefits in the United States—March 2020, published September 24, 2020.

16. Bureau of Labor Statistics, Employee Benefits in the United States, “Table 6. Selected Paid Leave Benefits: Access, March 2020,” In Employee Benefits in the United States—March 2020, published September 24, 2020.

17. Data are as of March 2017 and come from Tables 2 and 6 in Bureau of Labor Statistics, “Employee Benefits in the United States—March 2017” (news release], U.S. Department of Labor, July 21, 2017.

18. EPI analysis of the 2016 General Social Survey Quality of Worklife and Work Orientations supplements. “Union worker” here refers to workers who said they belonged to a union.

19. EPI analysis of the 2016 General Social Survey Quality of Worklife and Work Orientations supplements. Respondents were asked whether they or their spouses belong to a union.

20. Bureau of Labor Statistics, Employee Benefits in the United States, “Table 1. Retirement Benefits: Access, Participation, and Take-Up Rates, March 2020,” in Employee Benefits in the United States—March 2020, published September 24, 2020.

21. Adjusted data are based on analysis of fourth-quarter 1994 Employment Cost Index microdata as presented in Table 4.35 in Lawrence Mishel et al., The State of Working America, 12th Edition, an Economic Policy Institute book (Ithaca, N.Y.: Cornell Univ. Press, 2012), and drawn from Brooks Pierce, “Compensation Inequality,” U.S. Department of Labor Statistics Working Paper no. 323, 1999.

22. Sean McElwee, “One Big Reason for Voter Turnout Decline and Income Inequality: Smaller Unions,” American Prospect, January 30, 2015.

23. James Feigenbaum, Alexander Hertel-Fernandez, and Vanessa Williamson, “Right-to-Work Laws Have Devastated Unions—and Democrats,” New York Times, March 8, 2018.

24. Fair scheduling laws provide workers with greater stability, predictability, and flexibility in their work schedules.

Importantly, more than 70% of UI dollars during the pandemic have come from emergency federal programs to prop up the inadequate state-run UI systems, revealing the gross inadequacy of existing UI benefits, the scale of the ambitious but temporary federal response, and the resulting obvious need for broad structural reform of the UI system. Key findings are:

• Nationally, UI benefits as a share of total wage and salary income peaked at over 10% in the second quarter of 2020. Before 2020, UI benefits had never been as high as 3% of total wage and salary income.
• At the state level, UI benefits had never exceeded 6% of any state’s wage and salary income before 2020. But in the second quarter of 2020, four states saw UI benefits exceed 20% of state wage and salary income.
• State UI programs could not meet the needed support for an unprecedented number of unemployed workers. Two key pieces of federal legislation helped fill the gap. The Federal Pandemic Unemployment Compensation (FPUC)—mostly the extra $600 in weekly benefits included as part of the CARES Act in March 2020—contributed the most federal dollars in 2020. But the Pandemic Unemployment Assistance (PUA) program (which expanded eligibility to workers traditionally left out of UI benefits) was also hugely important. In 13 states, PUA accounted for more than 45% of total UI dollars received in the fourth quarter of 2020.
• These pandemic-related UI programs greatly equalized the protectiveness of the UI system as a whole across groups. In particular, states with a higher share of Black residents were more reliant on federal assistance to provide UI benefits. But if the pandemic programs fade with no structural reforms, the UI system will revert to being one that sees stingier benefits precisely in those states with higher Black population shares. This disparate racial impact is a key reason why reforms are needed.

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During my tenure, with the invaluable partnership of Vice President John Schmitt, EPI has grown its staff, expanded its work, strengthened its voice and impact, forged new partnerships, deepened its state policy work via the EARN network, and sharpened its focus on racial justice through expansion of the Program on Race, Ethnicity, and the Economy, as well as throughout our work.

So it is with a heavy heart that I announce that I will be leaving EPI on May 7. I have accepted a job in the Biden/Harris administration (details to come!). It is not easy to leave an organization like EPI—and the extraordinarily brilliant, insightful, and delightful staff—but I believe there is a short window that provides an opportunity for me to contribute to work I care deeply about.

I have complete, unshakable confidence in EPI, its staff, and its work. I know how valuable, timely, and thoughtful that work has been and will continue to be—especially now. EPI is well positioned to shape and inform the bold, ambitious policy agenda laid out by the new administration and Congress.

EPI’s wonderful board of directors, led by Board Chairman Richard Trumka and the executive committee, will organize a national search for the next president, who will have the good fortune to lead this stellar organization on to do the Research that builds Worker Power so we can achieve Justice. For the duration of the search, John Schmitt has generously and graciously agreed to step in as interim president. With his deep experience, John will ensure a smooth and successful transition.

I know EPI will continue to advance its mission to strengthen workers’ voice and power at the workplace and beyond and to make the world fairer and more humane. I will be eternally grateful that I had the opportunity to work alongside EPI’s amazing staff, and I look forward to staying connected in this next chapter for me and for EPI.

Federal labor law professes to protect working people against retaliation for exercising their statutory right to join together with their co-workers for the purposes of mutual aid and protection. Under the National Labor Relations Act (NLRA), private sector workers are supposed to be shielded from retaliation whether they are joining together to push for stronger safety protections, better pay, an end to harassment, or the formation of a union.1 But in reality, this right is largely hollow because of fundamental and structural weaknesses in the NLRA that make it far weaker than other labor and employment laws with regard to anti-retaliation protections. As a result, current law fails to provide an effective deterrent against employer retaliation—an all too common occurrence in organizing campaigns.2

There are several structural shortcomings in the NLRA. First, there are literally no monetary penalties against employers that illegally retaliate against workers for exercising their NLRA rights. If an employer is found guilty of illegally retaliating against workers by firing them, refusing to hire them, or demoting them to lower-wage jobs, the National Labor Relations Board—established to investigate and prosecute violations of the NLRA—cannot, under current law, award compensatory damages to the worker for the harm caused by the retaliation or impose a monetary penalty against the employer for its illegal conduct.3 The NLRB is limited to requiring the employer to pay the back wages and other benefits due to the worker, minus deductions for wages the worker earned, or could have earned, while the case was pending.4 This lack of any monetary penalties against employers or compensatory damages for workers makes the NLRA far weaker than other labor and employment anti-retaliation laws. Even the Occupational Safety and Health Act (OSH Act), which also has notoriously weak protections, provides better remedies for workers than does the NLRA.5 Anti-retaliation/whistleblower provisions in other laws (such as the OSH Act) provide for monetary damages to compensate workers for the harm they experience from illegal retaliation, as well as attorneys’ fees to compensate the worker’s attorney for the time spent bringing the case.6 The NLRA is an outlier in this regard.

A second consequential shortcoming of the NLRA’s anti-retaliation protections—and where it falls short of other anti-retaliation laws—is its lack of a mechanism for workers to pursue their cases on their own if they choose. Many other employment laws with anti-retaliation components—although again, not the Occupational Safety and Health Act—and almost all modern, 21st-century anti-retaliation/whistleblower protection laws allow workers to pursue their case before an administrative agency or federal court if the responsible enforcing agency fails or declines to act.7 Under the Federal Mine Safety and Health Act, for example, workers can bring their retaliation case before an administrative law judge if the Mine Safety and Health Administration declines to pursue the case.8 In contrast, there is no private right of action under the NLRA for workers to pursue their case before an administrative law judge or court: Workers are entirely dependent on the general counsel of the NLRB filing a complaint on their behalf. If the general counsel chooses not to act—as the Trump NLRB’s general counsel did when he decided that Uber drivers were not employees protected by the NLRA—workers have no independent recourse.9

A third shortcoming in the NLRA is that it lacks provisions for ensuring that workers with meritorious cases get their jobs back on an interim basis while their cases are pending. Under the current system, cases take many months, and sometimes years, to resolve. The NLRB investigates a worker’s charge, determines whether the charge has merit, files a complaint, and then litigates the case before an administrative law judge. The parties can then seek review of the administrative law judge’s decision by the National Labor Relations Board. In the meantime, the worker is out of work and losing pay. This creates a huge incentive for employers to drag out proceedings, especially because, as previously noted, at the end of the day, if the employer is found liable for violating the law, it faces no monetary penalties, only the requirement to deliver back pay minus deductions.10 In contrast, most anti-retaliation/whistleblower statutes, and all 21st-century anti-retaliation statutes, have a process for seeking preliminary reinstatement of workers, which shifts the economic and power dynamic from one favoring employers to one that is more fair to workers. The Federal Mine Safety and Health Act, for example, requires preliminary reinstatement at the beginning of a case unless the agency determines that a worker’s complaint is frivolous, which rarely happens.11 As a result, mine workers alleging retaliation quickly get their jobs back and cases typically settle on terms more favorable to the worker had preliminary reinstatement not been an option. Similarly, the Department of Labor has successfully pursued temporary restraining orders to win preliminary reinstatement of workers claiming they were fired in retaliation for exercising their rights under the Fair Labor Standards Act.12

The cumulative effect of these three shortcomings—no penalties or compensatory damages, no private right of action, and no preliminary reinstatement—is that workers asserting their rights under the NLRA are in a far worse position than workers alleging illegal retaliation for exercising their rights under other labor and employment laws and other whistleblower protection laws. The NLRA’s meager protections lag far behind the norm and result in substandard protections for workers exercising crucially important rights. It is a cruel irony that the two laws most important to workers being able to join together to protect their health and safety on the job—the National Labor Relations Act and the Occupational Safety and Health Act—are the two labor and employment laws with the weakest anti-retaliation protections.16 This is a situation that Congress must address.

How the Protecting the Right to Organize (PRO) Act fixes these structural shortcomings

The proposed Protecting the Right to Organize (PRO) Act (H.R. 842, S. 420) addresses each of the three fundamental shortcomings in current law described above (see Table 1). If enacted, it would close the enormous gap in protections for workers exercising their labor law rights and workers exercising their rights under other employment and whistleblower protection laws, so that exercising labor law rights will no longer have second-class status compared with rights under other laws.

First, under the PRO Act, workers facing illegal retaliation have access to full back pay without deductions for the time out of work, front pay17 if reinstatement is not feasible, consequential damages to compensate for harm caused by the violation, and double the amount of workers’ back pay as liquidated damages. (See H.R. 842, S. 420, Section 106.). The PRO Act also establishes monetary penalties against employers for violating workers’ rights under the NLRA and monetary damages for workers who face illegal retaliation. Employers that illegally retaliate against workers face a penalty of up to $50,000 per violation, and this amount is doubled if the employer has previously been found to have violated the NLRA in the prior five years. In addition, the PRO Act authorizes civil penalties against corporate officers and directors who have knowledge of violations and failed to prevent them. (See H.R. 842, S. 420, Section 109.)

Second, and importantly, the PRO Act directs the NLRB to seek preliminary reinstatement of workers through injunctive relief from a federal district court when workers file charges of illegal retaliation and the NLRB finds reasonable cause to believe that a violation has occurred (See H.R. 842, S. 420, Section 108). Currently, seeking preliminary injunctive relief is discretionary on the part of the NLRB. Preliminary relief is rarely sought, and it is slow.18

Specifically, the PRO Act directs the NLRB to give illegal retaliation cases top priority over all other cases, to promptly investigate these cases, and to bring an action for preliminary injunctive relief if it finds reasonable cause to believe a violation has occurred. Courts are directed to order interim relief unless there is no reasonable likelihood that the NLRB will prevail on the claim—a more worker-protective standard like that of the Federal Mine Safety and Health Act.

Third, the PRO Act establishes a private right of action so that workers can pursue their retaliation cases in federal district court if the agency fails to act on a timely basis (See H.R. 842, S. 420, Section 109). Workers are empowered to bring their own lawsuit if the NLRB has not sought preliminary injunctive relief within 60 days of the worker filing a charge with the NLRB. Courts are authorized to award back pay, front pay, liquidated damages, consequential damages, punitive damages, and attorneys’ fees to workers who prevail on their cases in court, similar to the provisions in most other anti-retaliation and modern whistleblower statutes.

Table 1

Taken together, these provisions would modernize and strengthen the anti-retaliation protections in the NLRA so that they more closely mirror the protections in other labor and employment and whistleblower protection laws. It would make the right to engage in protected concerted activity to improve working conditions more robust by providing real recourse to workers who face interference or retaliation for exercising their rights and real penalties against employers that illegally retaliate against workers.

Workers have lost billions of dollars because of the NLRA’s substandard protections

The substandard anti-retaliation protections in the NLRA have cost workers billions of dollars, even using the most conservative of calculations.

Each year, the NLRB obtains back pay awards and reinstatement orders for workers who suffer illegal retaliation for exercising their rights. The NLRB obtains these results largely through settlements with employers, as well as through decisions by administrative law judges and the NLRB. These awards offer a window into the money workers have lost because of the NLRA’s inferior protections, as explained below.

Table 2 shows that over the past 10 years (through fiscal year 2020), the NLRB has obtained reinstatement orders for 18,001 workers who were fired in retaliation for exercising their NLRA rights.

Over this 10-year period, the NLRB also has obtained $621.3 million in back pay for workers. This number includes back pay for workers who were illegally fired, but it also includes back pay for workers subjected to discriminatory layoffs, back pay for workers whose employers illegally made unilateral changes such as refusing wage increases, and other back pay situations. Thus, the amount of back pay recovered by the agency for workers facing illegal retaliation is only a portion of this $621.3 million. Still, using the full $621.3 million number, this represents an average of $34,515 in back pay per reinstatement order.19

Table 2

The PRO Act authorizes double back pay as liquidated damages. Had the 18,001 workers receiving reinstatement offers over the 10-fiscal-year period from 2011 to 2020 received double back pay as liquidated damages, this would have translated into an additional $1.24 billion in damages to affected workers, or $69,030 in additional damages per affected worker (i.e., in addition to the $621.3 million in back pay). This estimate is low, because the NLRB’s practice is to make deductions for interim earnings that the worker earned or could have earned, but the PRO Act provides for back pay and liquidated damages without these deductions. Thus, had the PRO Act’s provisions been in effect, the actual recovery workers would have received would be significantly higher than $1.86 billion (back pay plus the $1.24 billion in damages cited above).

This number also does not include the other monetary remedies authorized in the PRO Act, including front pay, consequential damages, punitive damages, and attorneys’ fees. These awards can be substantial. For example, the Department of Labor recently announced an award of $290,000, including $150,000 in punitive damages, for a worker who faced illegal retaliation under the Federal Railroad Safety Act.20 In another case, the Department of Labor ordered an employer to pay $23,000 in back wages and $70,000 in punitive damages under the anti-retaliation provisions of the Surface Transportation Assistance Act to two employees who were illegally fired for refusing to operate unsafe trucks. If these damages provisions had been in effect for the NLRA, as the PRO Act would authorize, workers would have recovered billions more in the past 10 years when they faced illegal retaliation for exercising their rights.21

These numbers also underestimate the true impact because the weaknesses and shortcomings in current law discourage workers from coming forward with complaints of unlawful retaliation and other unfair labor practices. Research shows that at least four in 10 workers say they do not come forward to report violations of their rights because they fear retaliation or think nothing will come of the complaint.22 If the NLRA included the more robust protections contained in the PRO Act, workers would be more willing to come forward with retaliation complaints if they believed the law and the agency provided effective and timely recourse.

Conclusion

The anti-retaliation protections and remedies in the National Labor Relations Act are much weaker than anti-retaliation and whistleblower protections in other labor and employment laws. Because of these substandard protections, workers have been shortchanged billions of dollars in back pay and damages after being illegally fired for exercising their federally protected labor law rights. The PRO Act would update and strengthen the NLRA’s anti-retaliation protections to more closely resemble modern anti-retaliation/whistleblower laws. Passage of the PRO Act would make a real difference in the pocketbooks and lives of workers who face illegal retaliation on the job when they exercise their NLRA rights.

Acknowledgments

The authors wish to thank the following individuals for providing helpful background information for this report: Tom Devine, Legal Director, Government Accountability Project; Jason Grover, Office of the Solicitor, U.S. Department of Labor; Deborah Greenfield, Office of the Assistant Secretary for Policy, U.S. Department of Labor; Richard Griffin Jr., Bredhoff & Kaiser PLLC and former General Counsel, National Labor Relations Board.

Endnotes

1. See NLRA Section 8(a)(3), 29 U.S.C. 158(a)(3).

2. One in five union election campaigns involves a charge that a worker was illegally fired for union activity. See Celine McNicholas, Margaret Poydock, Julia Wolfe, Ben Zipperer, Gordon Lafer, and Lola Loustaunau, Unlawful:
U.S. Employers are Charged with Violating Federal Law in 41.5% of All Union Election Campaigns, December 2019.

3. In Republic Steel Corp. v. NLRB, 311 U.S. 7 (1940), the United States Supreme Court held that the NLRA is a remedial statute, not a punitive statute, and that the NLRB had no authority to impose penalties, fines, or other punitive measures on employers found to have broken the law. This remedial/punitive distinction has restricted the NLRB’s ability to pursue penalties and even ordinary remedies if they are considered punitive.

4. Phelps Dodge Corp. v. NLRB, 313 U.S. 177 (1941). Deductions from back pay awards are made for wages the worker earned from the time of discharge to reinstatement. In addition, workers have a duty to mitigate (that is, try to avoid) lost wages, meaning that employers can sometimes take deductions for wages a worker could have earned but didn’t. The NLRB has at times sought through informal settlements to recover damages to compensate workers for actual economic harm related to an employer’s illegal conduct, such as the cost of medical procedures when the employee loses health insurance coverage. See National Labor Relations Board, Office of the General Counsel, Memorandum, Subject: Seeking Reimbursement for Consequential Economic Harm, July 29, 2016. From interviews with experts, this sort of relief is rarely sought or obtained. The NLRB’s view is that consequential damages are not authorized by current NLRB law. See Able Building Maintenance, 366 NLRB No. 68, at n. 8.

5. See Emily Spieler, “Whistleblowers and Safety at Work: An Analysis of Section 11(c) of the Occupational Safety and Health Act,” ABA Journal of Labor and Employment Law 32, no. 1 (2017).

6. Spieler, “Whistleblowers and Safety at Work,” 2017; see also United States Department of Labor, Whistleblower Statutes Summary Chart, accessed April 1, 2021.

7. For example, the Sarbanes-Oxley Act of 2002, which protects employees from retaliation for reporting corporate fraud, gives workers the right to bring their own case if the agency fails to act within 180 days (18 U.S.C. 1514A). This is typical of other 21st century anti-retaliation/whistleblower protection laws. See also Federal Railroad Safety Act (49 USC 20109), National Transit Systems Security Act (5 U.S.C. 1142), Consumer Product Safety Improvement Act (15 USC 2087), and Affordable Care Act (29 USC 218C), etc.

8. 22 USC 815(c)(3).

9. Lawrence Mishel and Celine McNicholas, Uber Drivers Are Not Entrepreneurs: NLRB General Counsel Ignores the Realities of Driving for Uber, Economic Policy Institute, September 2019.

10. The exception to this procedure occurs when the National Labor Relations Board decides to seek preliminary injunctive relief in federal district court to enjoin violations of the NLRA. These are known as 10(j) proceedings, and they are discretionary on the part of the general counsel and NLRB. Very few 10(j) proceedings are brought seeking preliminary reinstatement of workers who are illegally fired, and the process is very slow in these cases, typically taking months or years. For example, in 2020, the NLRB brought only eleven 10(j) cases in federal court, and only five of these cases involved allegations of illegal retaliation against workers.

11. See 22 USC 815(c): “[if the Secretary finds that such complaint was not frivolously brought, the Commission, on an expedited basis upon application of the Secretary, shall order the immediate reinstatement of the miner pending final order on the complaint.”

12. Author’s interview with Janet Herold, former Regional Solicitor, U.S. Department of Labor, February 18, 2021.

13. Lauren Kaori Gurley, “Amazon Illegally Interrogated Worker Who Led First COVID-19 Strikes, NLRB Says,” VICE News, March 22, 2021.

14. Rachel M. Cohen, “Amazon Retaliated Against Chicago Workers Following Spring COVID-19 Protests, NLRB Finds,” Intercept, March 17, 2021.

15. Olivia Solon and April Glaser, “Fired, Interrogated, Disciplined: Amazon Warehouse Organizers Allege Year of Retaliation,” NBC News, March 30, 2021. The news report noted at least 37 unfair labor practice cases filed against Amazon since February 2020, more than triple the number of cases filed in 2019.

16. As with the NLRA, the Occupational Safety and Health Act has no private right of action, i.e., no mechanism for workers being able to pursue violations of their rights before an administrative agency or federal court. Workers are wholly dependent on the Occupational Safety and Health Administration taking action to enforce their rights. Numerous reports have documented the severe shortcomings of OSHA’s actions to protect workers against retaliation, including failures to protect workers who have reported COVID-19 hazards during the pandemic. See Office of the Inspector General, COVID-19: OSHA Needs to Improve Its Handling of Whistleblower Complaints During the Pandemic, U.S. Department of Labor, August 2020; Deborah Berkowtiz and Shayla Thompson, OSHA Must Protect COVID Whistleblowers Who File Retaliation Complaints, National Employment Law Project, October 2020 (finding that OSHA resolved only 2 percent of retaliation complaints filed during the first six months of the COVID-19 pandemic); Ann Rosenthal, Death by Inequality: How Workers’ Lack of Power Harms their Health and Safety, Economic Policy Institute Unequal Power project, April 2021.

In addition, the OSH Act includes the shortest statute of limitations for bringing claims of any labor or employment law: 30 days, compared with a more typical 180 days, which is the norm for most labor and employment and modern whistleblower protection laws. See United States Department of Labor, Whistleblower Statutes Summary Chart, accessed April 1, 2021.

Both the NLRA and OSH Act’s weak anti-retaliation provisions fall far short of international best practices, which include a private right of action, back pay compensation without deductions, award of attorneys’ fees, and other compensatory measures. See Tom Devine, International Best Practices for Whistleblower Policies, Government Accountability Project, July 2016.

17. Front pay is a make-whole remedy used in lieu of reinstatement if reinstatement is not possible.

18. See endnote 10.

19. This is an approximate figure, because not all back pay cases involve a reinstatement order and vice versa, but the overlap is substantial enough to support this calculation.

20. Occupational Safety and Health Administration, “US Department of Labor Orders One of the Nation’s Largest Railway Companies to Pay More than $290K in Damages, Reinstate Whistleblower” (news release), March 10, 2021.

21. It is worth noting that there are trade-offs involved between quick preliminary reinstatement and large back pay/damages awards. To the extent workers are quickly reinstated while their cases are pending, employers’ back pay liability is reduced or eliminated.

22. Spieler, “Whistleblowers and Safety at Work,” 2017, page 3.