Archives for category: Economy

Jonathan Pelto is a veteran political analyst in Connecticut and a former legislator. He is concerned about the rise of Donald Trump, and he understands that Trump taps into middle-class and working-class anger. Why are they angry? Connecticut has seen little economic growth, jobs are not increasing, the gap between rich and poor is getting wider.

This is an important article about Uber and the new “sharing economy.” It is great for the entrepreneurs, whose companies are valued in the billions. But not good at all for the workers, who don’t earn minimum wage and have no health insurance or any benefits. The article was written by Strphen Greenhouse, who covered labor issues for the Néw York Times for many years.

“AT ANY GIVEN MOMENT in recent American history, one corporation has stood out as the “it” company, the symbol of the new and the cool—think of IBM, then Microsoft, Apple, Google, Facebook, Amazon—now it seems to be Uber’s moment. In just six years, Uber has gone from start-up to upstart to juggernaut, pushing its way into 250 cities and 53 countries. Boasting 1.1 million drivers worldwide and 400,000 in the United States, Uber is one of the fastest-growing start-ups in history, with an eye-popping valuation of $62.5 billion, more than that of General Motors. Uber has probably done more to transform—its executives would say “disrupt”—urban transportation around the world than any other company in the last half-century. Its investors include such heavyweights as Goldman Sachs, Microsoft, and Jeff Bezos.

“Uber has also become the foremost symbol of the on-demand economy, with a super-convenient app that consumers love because it often gets them a car faster than it takes to find a taxi. The company sees and depicts itself as offering a cool, new, flexible employment model that is being copied by other companies, including Lyft, Handy (housecleaning), Caviar (food delivery), Postmates (on-demand delivery), Washio (dry cleaning), and Luxe (parking your car).

“To many, however, Uber has become the foremost symbol of something else—something unlawful. Many labor advocates view Uber as the leading practitioner of illegal worker misclassification because it insists that its 400,000 U.S. drivers are independent contractors rather than employees. Uber says its drivers—it calls them “partners”—are their own bosses who have the flexibility to drive whatever hours they want and even drive for competitors like Lyft and Sidecar.

“Indeed, with its clout, cachet, and big-name backers, Uber has sought to redefine what an employee is. No way, it says, should its drivers be considered employees, asserting that its relationship with them is attenuated—even though the company hires and fires the drivers, sets their fares, takes a 20 percent commission from fares, gives drivers weekly ratings, and orders them not to ask for tips. For Uber, there are manifold advantages to treating its drivers as independent contractors. Not only does it avoid being covered by minimum wage, overtime, and anti-discrimination laws, but it sidesteps having to make contributions for Social Security, Medicare, workers’ compensation, and unemployment insurance. It also escapes the employer obligations of the Affordable Care Act. By some estimates, all this cuts Uber’s compensation costs by more than 20 percent per driver.

“Uber’s aggressive expansion and unusual employment model—almost all driver interactions with the “boss” are through Uber’s smartphone app—have raised questions about what a 21st-century company’s responsibilities are to workers in—whatever you want to call it—the gig economy, the on-demand economy, the crowdsourcing economy, the sharing economy, or perhaps the unsharing economy. (I’m flummoxed why anyone, except for public relations reasons, would call Uber and Lyft part of a sharing economy when they are in essence little different from a taxi or any other livery service that picks up riders and charges a fare.)

“Uber’s critics say the company is shrewdly seeking to evade all of an employer’s traditional legal responsibilities and obligations, while enjoying all the benefits of being an employer—including taking a hefty percentage of what its workers earn. But many champions of Uber argue that the nation’s employment laws have grown obsolete and need to be updated because, in their view, Uber’s employment model is so different from, so much looser and less structured than, the models at traditional companies like General Motors and Procter & Gamble. In response, labor advocates often argue that the nation’s employment laws are not outmoded and that the problem is that many people simply fail to recognize that Uber has a fairly traditional employer-employee relationship (with its newfangled app and boasts of being a master disrupter confusing matters).”

This is a clear and direct explanation of the Friedrichs v. CTA case. Many observers think the unions will lose because of the conservative majority in the Court. Ironically, unions hope that Scalia might decide in their favor. The article explains why. 
Somehow it doesn’t seem especially “conservative” to issue a ruling that not only overturns precedent but disrupts labor relations. 
One important issue is free riders, people who don’t pay dues but get benefits. Friedrichs’ lawyers say a ruling in their favor wouldn’t hurt unions, but it is demonstrable that it will.

“The free-rider problem is real and significant. In California and most other jurisdictions, even in right-to-work states where unions operate, unions have a duty to represent and enforce the contractual rights of all employees in a bargaining unit, both members and nonmembers alike.
“Such services don’t come cheap. The fair-share fee for the estimated 9.7 percent of California teachers who, like Rebecca Friedrichs and her co-plaintiffs, have opted not to join their union comprises about 68 percent of full membership dues.
“There is little question that in return they receive a handsome payout. According to figures compiled by The Century Foundation, unionized teachers on average earn an hourly wage 24.7 percent higher than their nonunion counterparts.
“Should Friedrichs and her cohorts prevail in their quest to topple the fair-share system, more teachers no doubt would leave the CTA, reasoning that they could retain the gains of union contracts without paying a dime for them. Public employees in other occupations probably would do the same, believing that they too could free ride without adverse consequences.
“During the oral arguments, attorney Carvin sought to assure the justices that the loss of fair-share fees would have a minimal impact on union membership. The evidence, however, shows that he is dead wrong.
“If the recent labor strife in Wisconsin is any bellwether, a plaintiffs’ victory in Friedrichs could be disastrous for unions and the benefits they deliver. In the aftermath of Gov. Scott Walker’s 2011 assault on public unions and the state’s subsequent implementation of right-to-work policies, for example, the declines in public union membership and dues collected have been monumental.
“The Madison local of the American Federation of State, County and Municipal Employeeshas lost 18,000 of its previous 32,000 members and has seen its annual revenue fall from $10 million to $5.5 million. The state’s largest teachers union, the Wisconsin Education Association Council, has lost more than a third of its members. As the Wisconsin experience shows, free riding isn’t free.”
In the past, Scalia has expressed distaste for free riders, but there is no way of knowing how he will rule now. 
What we can say with some certainty about this case is that it will cripple unions if Friedrichs wins. It will be a blow to a hurting middle class. And it will deepen the economic inequality that is deepening class divisions and harming millions. 

This week, the Supreme Court will hear a case called Friedrichs vs. California Teachers Association. The plaintiffs represent teachers who not want to pay union dues. They say that the requirement to pay dues violates their free speech rights. Friedrichs is backed by political, financial, and ideological groups who hope to cripple the last bastion of organized labor. If the plaintiffs win, labor’s resources and political clout will be severely reduced. This case will be a milestone in the survival or destruction of public sector unions.


In the article linked above, Richard Kahlenberg argues that diminishing the power of public sector unions diminishes our democracy. In our society, money buys political influence and voice. If labor’s voice is stilled, only the rich will have political power. There will be no organized countervailing voice to prevent them from controlling everything.


Friedrichs is a teacher who objects to paying dues to the CTA. However, she is not required to pay for political activities, because of an earlier Supreme Court decision called Abood.


The current legal framework in which courts weigh cases such as Friedrichs is narrowly constrained, balancing the free speech rights of dissenting union members against the state’s interests in promoting stable labor relations with its public employees.
In the 1977 case of Abood v. Detroit Board of Education, the U.S. Supreme Court reached a sensible compromise that properly balanced these two sets of interests by splitting union dues into two categories: those that support political speech, and those that support bread–and-butter collective bargaining. Because the First Amendment’s free speech clause provides a right to not be compelled by the state to subsidize speech with which one disagrees, dissenting public employees cannot be required by the state to join a union, or to subsidize the union’s political and lobbying efforts to promote certain positions of public concern….


According to the counsel for Friedrichs, annual dues to the CTA amount to approximately $1,000 per teacher, of which nonmembers receive a refund of roughly $350 to $400 for expenses unrelated to collective bargaining. In other words, Friedrichs is happy to accept increases in wages and benefits the union negotiates hard to win, but does not want to pay the $600 to $650 per year that other members contribute in order to make those wage gains possible. Will she give back her raises, forgo health care benefits, give up the right to pursue grievances, and agree to teach larger classes that the union negotiated? The amicus brief of the American Federation of Teachers and the American Association of University Professors put it well: there is no “constitutional right to a free ride.”


Kahlenberg notes:


All unions—including, and perhaps especially, public sector unions—also contribute to one of the most important foundational interests of the state: democracy. And they do this in many different ways. Unions are critical civic organizations that serve as a check on government power. They are important players in promoting a strong middle class, upon which democracy depends. They serve as schools of democracy for workers. And teacher unions, in particular, help ensure that our educational system is sufficiently funded to teach children to become thoughtful and enlightened citizens in our self-governing democracy….


Strong unions helped build the middle class in America after the Great Depression, and continue to have a positive effect on ameliorating extreme inequalities of wealth. By bargaining for fair wages and benefits, unions in the public and private sector help foster broadly shared prosperity. Research finds, for example, that unions compress wage differences between management and labor. According to one study, “controlling for variation in human resource practices, unionized establishments have an average of 23.2 percentage point lower management-to-worker pay ratio relative to non-union workplaces.”


Kahlenberg documents that the decline in union membership parallels the decline in the middle class.  Extremes of wealth and poverty are not good for democracy.


This is an excellent overview of the potential damage that this Supreme Court decision might do to unions and to democracy. It occurs to me as I read it that the contentious battle over school choice, funded amply by billionaires, is intended to divert attention from crucial economic issues. Billionaires would have us believe that they are advancing the economic opportunities for black and Hispanic children even as they use their political clout to destroy the jobs and economic security of their families, as well as the economic prospects for the “scholars” in their charter schools.



Paul Buccheit writes in the Nation of Change that three industries have actively contributed to the collapse of well-paying middle-class jobs in America. Corporations that kill middle-class jobs, contribute to inequality.


The pharmaceutical industry is notable for tax avoidance.


The high-tech industry eliminates jobs and outsources jobs:


Just 25 years ago GM, Ford, and Chrysler generated a combined $36 billion in revenue while employing over a million workers. Today Apple, Facebook, and Google generate over a trillion dollars in revenue with just 137,000 workers. Apple makes over a half-million dollars per employee; Facebook and Google are both over $300,000….


The insidious rise of “philanthrocapitalism” has allowed tech titans like Bill Gates and Mark Zuckerberg to reduce their taxes — thus depriving society of infrastructure and education funds — while they assume the right to make high-level decisions about GMO agriculture, charter schools, and Internet usage. Much of this lost tax money actually goes to partner corporations that do the bidding of their billionaire benefactors.


The new “sharing economy,” such as firms like Uber and AirBNB, has also killed jobs.



Free-market enthusiasts look to the sharing economy (or “gig” economy, or “day labor” economy) for salvation, with companies like Uber and Airbnb and TaskRabbit enabling the dreams of Millennials, who, according to Time’s Rana Foroohar, “want to be their own boss…any Uber driver will tell you that having totally flexible hours is the best part of the gig.” But at the same time, Uber workers have no pensions, no health care, and no worker rights protection. Thus, says Foroohar, “the company also captures all the fear of the broken social compact in America.”



Uber, with a market valuation of $50 billion, has 4,000 employees along with 160,000 drivers who are not considered by the company to be employees. This is not a horizontal sharing process, but rather a hierarchical control structure, with tens of thousands of American workers denied the traditional employee support system.

In an earlier post, I cited a New York Times article saying that 158 families had contributed about half of the money raised thus far for the 2016 presidential campaign. 138 support Republicans. 20 support Democrats.

I asked readers if anyone was willing to calculate what % of American families these 158 are.

I got similar responses.

“Diane, I did the math and the 158 families you mentioned comprise 0.000130321% of the population of the U.S. I guess we can call them the “10 thousandth percenters.”

“There are about 115 million families in the US. So these 178 families are roughly one-and-a-half out of a million. Wow. Not the one percent. But one-and-a-half of a percent of a percent of a percent.” –G.F. Brandenburg

“To answer the question at the beginning of Diane’s post, if the NY Times is correct that there are 120 million households, then the 158 families represent “The 0.0013166%”.
–P. Garrity

“Diane, I did the math and the 158 families you mentioned comprise 0.000130321% of the population of the U.S. I guess we can call them the “10 thousandth percenters.”–Michael

All these comments appear following the post.

So forget about the 1%. Think instead of the ten-thousandth of 1%. If the people turn out to vote, we can take back our government. We can have a Supreme Couurt that overturns Citizens United (which allows plutocrats to buy elections), a Supreme Court that does not threaten the rights of working people, and a Congress that writes a tax code to reduce income inequality and wealth inequality.

The key to change: Vote. Get your neighbors to vote. This is what really terrifies the ten-thousandth of 1%: A large turnout of informed voters. The 99.999% have power if they use it.

Yes, we do need a rebirth of labor unions.

A new study shows that the workers who make the least money have experienced the biggest decline in their take-home pay since the recession of 2008.

Despite steady gains in hiring, a falling unemployment rate and other signs of an improving economy, take-home pay for many American workers has effectively fallen since the economic recovery began in 2009, according to a new study by an advocacy group that is to be released on Thursday.

The declines were greatest for the lowest-paid workers in sectors where hiring has been strong — home health care, food preparation and retailing — even though wages were already below average to begin with in those service industries.

“Stagnant wages are a problem for everyone at this point, but the imbalance in the economy has become more pronounced since the recession,” said Irene Tung, a senior policy researcher at the National Employment Law Project and co-author of the study.

The economy is recovering, but not everyone is benefitting.

One explanation may lie in the findings of another study released on Wednesday by the Economic Policy Institute, also a liberal research group. Its report showed that even as labor productivity has improved steadily since 2000, the benefits from improved efficiency have nearly all gone to companies, shareholders and top executives, rather than rank-and-file employees.

A good society provides opportunity for all, not luxury for the few and misery for the bottom quarter.

Wendy Lecker, civil rights attorney, notes that the release of Common Core test scores proved the adage that the tests measure family income.

“Decades of testing evidence show that the only stable correlation that exists, whether it is the CMTs or the SATs and likely the SBACs, is between test scores and wealth. Researchers such as Sean Reardon at Stanford note that wealthy parents not only can provide basic stability, nutrition and health care for their children, but also tutoring and enrichment that gives affluent children an edge over poorer children.

“The wealth advantage extends beyond test scores. Two studies, by St. Louis Federal Reserve and by the Boston Federal Reserve, demonstrate that family wealth is a determining factor in life success. The St. Louis report, published in August, revealed a racial wealth gap among college graduates. A college degree does not protect African-Americans and Latinos from economic crises as it does for whites and Asians. Employment discrimination figures into the disparity, but a major role is played by family wealth. Without a safety net of family assets, graduates of color must make more risky loan and other financial decisions. Last year’s Boston Fed study noted that wealthy high school drop-outs stay in the top economic rung as often as poor college graduates remain in the bottom economic rung. As a Washington Post article put it, rich kids who do everything wrong are better off than poor kids who do everything right. These reports, coupled with the fact that most job openings in the United States are for low-skilled workers, expose the uncomfortable truth that education is not the great equalizer.”

Instead of providing poor kids with smaller classes and other supports, we spend billions on testing.

“Education reformers deflect attention from the supports poor kids need and tell us that all kids have to do is develop some “grit” to succeed. In his best-selling book, “How Children Succeed,” Paul Tough claims there is “no antipoverty tool we can provide for disadvantaged young people that will be more valuable than the character strengths” like grit. Connecticut policy makers are trying to develop tests to measure the degree of “grit” our kids have. We are even told that if students have enough “grit” to get high test scores, our economy will be more competitive….

“Robber-baron education reformers such as Gates fight to protect their wealth to pass on their success to their children. For other people’s children their message is clear, as teacher/blogger Joe Bower remarked: “Let ’em eat grit.””

Jersey Jazzman reviews the economic mess in Puerto Rico. The Commonwealth was burdened by billions of dollars in debt that it could not repay. Much of the debt was held by hedge funds that speculated on the chances of repayment. The government decided to default on its crushing debt.

Hedge funds offered advice. Close schools, fire teachers, cut university spending. What about the future? Not their problem.

JJ, also known as Mark Weber, does some cAlculations about school spending in P.R. He also discovers this fact:

“Here’s a quick-and-dirty graph showing the differences in school-aged poverty rates between the 50 states, DC, and Puerto Rico. Not even Mississippi or DC come close to matching Puerto Rico’s 55 percent student poverty rate. It’s extraordinary, and it’s probably underreported. The entire island’s child poverty rate is as high as Camden, NJ, America’s poorest city.

“But these guys want to cut funds to Puerto Rico’s schools. Think about that….

“I’m always hearing from reformy types that education is the pathway to the middle class (all others doing necessary work that doesn’t require college are left hanging, however). Why, then, would hedge-fundies, who subsidize charter schools on this very premise, think it was a good idea to slash education in Puerto Rico when it really does return higher wages for the island’s citizens? If you want to grow Puerto Rico out of its debt, why slash the one thing — education — that we know will grow the island’s wages?

“I know next to nothing about macroeconomics, but I understand that governments should not borrow with abandon without a clear plan for repayment, and without using their borrowings for investments that will generate economic growth. I actually don’t think it’s fair to shift the entire blame for Puerto Rico’s woes on Wall Street, although they certainly deserve some of it.

“It’s clear to me, however, that forcing Puerto Rico to fully repay the hedge funds while cutting school spending is both stupid and immoral. This is an island that desperately needs a high-quality education system as part of a program of social rebuilding. From all early indications, Puerto Rico has been inexcusably stingy in funding its schools and paying its teachers.”

The New York Times writes about the workplace and culture of

It is an unsparing portrait of a brutal, competitive, heartless work environment.

No excuses!

“At Amazon, workers are encouraged to tear apart one another’s ideas in meetings, toil long and late (emails arrive past midnight, followed by text messages asking why they were not answered), and held to standards that the company boasts are “unreasonably high.” The internal phone directory instructs colleagues on how to send secret feedback to one another’s bosses. Employees say it is frequently used to sabotage others. (The tool offers sample texts, including this: “I felt concerned about his inflexibility and openly complaining about minor tasks.”)”

“Many of the newcomers filing in on Mondays may not be there in a few years. The company’s winners dream up innovations that they roll out to a quarter-billion customers and accrue small fortunes in soaring stock. Losers leave or are fired in annual cullings of the staff — “purposeful Darwinism,” one former Amazon human resources director said. Some workers who suffered from cancer, miscarriages and other personal crises said they had been evaluated unfairly or edged out rather than given time to recover.

“Even as the company tests delivery by drone and ways to restock toilet paper at the push of a bathroom button, it is conducting a little-known experiment in how far it can push white-collar workers, redrawing the boundaries of what is acceptable. The company, founded and still run by Jeff Bezos, rejects many of the popular management bromides that other corporations at least pay lip service to and has instead designed what many workers call an intricate machine propelling them to achieve Mr. Bezos’ ever-expanding ambitions.”

Sound familiar?

A modern version of Fritz Lang’s “Metropolis,” a classic silent film?


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